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Morning Briefing for December 12, 2011 – Standard Capital

Karachi: Low priced PE explanation

Earlier Standard Capital has trumpeted that Pakistan market PE ranges between 7x – 8x and thus offers room for appreciation.

According to Standard Capital, now if Standard Capital refers to Standard Capital’s portal’s low expected PE stocks then it provide some interesting readings; see link http://www.scstrade.com/ksetats/sectorinfo.aspx?sectorid=‐13


Ibrahim Fibres 1.5x
Arif Habib Corp. 1.8x
Nishat Chunian Power  2.1x
Lotte-pta 2.3x
Mari-gas  2.6x
Nishat Power 2.6x
Attock Refinery  2.8x
Nishat Mills  3.5x
Soneri Bank 3.6x
Faysal Bank  3.6x
Bank Alfalah 4.0x
Pakistan State Oil  4.2x
Indus Motor 4.2x
Lucky Cement  4.3x


Among the top of the list include Ibrahim Fibres (IBFL) which is ostensibly in the wake of Allied Bank (ABL) dividend. IBFL is the beneficial owner of ABL (total group ownership is above 77%) and hence dividend payment is salvaging lot of pride for IBFL despite unfavourable business climate in the main polyester fibre business that has suffered given the fact that cotton prices have plunged. Arif Habib Corp. is the best holding company model in the pattern of Engro Corp. since it is the beneficial owner of unlisted Pak Arab Fertilizer and also high flying Fatima Fertilizer (FATIMA). Lotte‐Pta (LOTPTA) is also undervalued yet still suffering from falling ‘primary margins’ syndrome. Standard Capital also sees LOTPTA’s supplies of PTA may have gone down since PSF sales plus PET bottles have decreased. Three low priced banks are also in the limelight such as Bank Alfalah who is now seeing earnings increase in CY11.

Pakistan State Oil (PSO) is also underpriced. PSO is suffering from stuck up receivables which is in the vicinity of Rs 172 bn as per newspaper reports. Hence company’s balance sheet has suffered given piling up of short term loans which is created to run cash cycle.

Lucky Cement (LUCK) is one of the main cement manufacturers which is good based on improved fundamentals such falling international coal prices and firmed up prices.

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