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Morning Call about MCB and LUCK for quarter ending September 2012 – Arif Habib Limited

Karachi: MCB; Earnings are likely to register a rise of 30.5% during 9MCY11 The board meeting of MCB Bank (MCB) is scheduled to announce its 9MCY11 results on October 24, 2011.

According to Arif Habib Limited, in 3QCY11 alone MCB is estimated to post PAT of PKR 5,740mn (EPS: PKR 6.86), an earnings growth of 3.5% QoQ. This will push the bank’s 9MCY11 net earnings to PKR 16,312mn (EPS: PKR 19.51) compared to PKR 12,497mn (EPS PKR 14.94) in the corresponding period last year. This expected bottom-line YoY growth of 30.5% is primarily emanating from:

•             26% YoY anticipated growth in net interest income as the bank’s average earnings assets are estimated to augment by 25% YoY and 81bps YoY higher KIBOR (6-month) during the period. The bank continues to maintain CASA deposits of 81% which consequently is ensuring cost funds remain in check.

•             Noninterest income is expected to rise by 34.7% to PKR 6,183mn as fee & commission income, contributing approximately 50%, rises by 19% YoY.

•             Bank’s provisioning is expected to stand at PKR 3,516mn, up by 74% YoY mainly due to reversal against NPLs were booked in 3QCY10. By end of 2QCY11, the bank’s NPLs accretion in NPLs were mere 3.6% (since December 2010) while coverage ratio has improved to 86%.

Arif Habib expects the bank to announce a 3rd interim cash dividend of PKR 3.5/share along with the results, accumulating total payout by 9MCY11 to PKR 9.5/share.


Financials 3QCY11E 2QCY11A YoY 9MCY11 9MCY10  YoY
Net Interest Income 11,835 11,304 4.7% 34,062 26,989 26.2%
Total Provisions 1,077  1,242 -13.3%  3,516  2,025 73.6%
Total Non-Interest income  2,030  2,145 -5.3% 6,183  4,591 34.7%
Operating Expenses 3,957 3,881 1.9% 11,736 10,193 15.1%
Profit before tax 8,831 8,326 6.1% 24,993 19,363 29.1%
Net income 5,740 5,548 3.5% 16,312 12,497  30.5%
EPS 6.86 6.63   19.51  14.94
Source: Company financials and AHL Estimates


LUCK; Strong retention price may yield a 74% YoY earnings growth

Lucky cement 1QFY12 board meeting is scheduled for October 24, 2011. Arif Habib expects the company to post a healthy YoY growth of 74% in net earnings to PKR 1,266mn (EPS: PKR 3.91) in 1QFY12 compared to PKR 727mn (EPS: PKR 2.25) in 1QFY11. This exuberant growth is expected on account of strong jump of 28% in average retention price during the quarter under review, which is expected to expand gross margin to 33% in 1QFY12. Arif Habib expects 1% YoY recovery in the volumes, as the company suffered volumetric contraction on the domestic front due to an extended monsoon season. Finance cost of the company is expected to drop by 30%YoY due to gradual drop in its expensive long term finance.


Financial Highlights
PKR mn 1QFY12 1QFY11  YoY
Net Sales  7,240 5,584 30%
Cost of Sales 4,887  3,852 27%
Gross Profit  2,353 1,732 36%
Distribution Costs 703 688 2%
Operating Profit 1,572 985   60%
Finance Cost  101  144  -30%
Profit after tax 1,266  727 74%
Earnings per share (PKR) 3.91 2.25
Sources: Company financials and AHL Research

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