Results Season – FFBL and NPL earnings preview

FFBL – 1QCY11 EPS expected at PKR1.5; DPS at PKR1.25: FFBL is expected to announce its 1QCY11 financial result on April 25th, 2011, where the company is expected to post PAT of PKR1,405mn (EPS: PKR1.50), up 74% YoY. We expect the company to announce first interim cash dividend of PKR1.25/share. YoY growth in earnings shall stem from 28% YoY increase in top line and strong gross margins.

NPL to post 3QFY11 EPS at PKR1.41: NPL’s board meeting to consider 3QFY11 results is scheduled on 25th April, 2011. We expect the company to post PAT of PKR498mn (EPS: PKR1.41) for 3QFY11, down 57% QoQ due to base effect as prior period revenues were booked in 2QFY11 post notification of modified tariff in official gazette. 9MFY11 PAT is expected at PKR1,709mn (EPS: PKR4.83). Fuel and O&M savings are expected to contribute PKR1.06/share to 3Q EPS.

FFBL – 1QCY11 EPS expected at PKR1.5; DPS at PKR1.25

FFBL is due to announce its 1QCY11 financial result on 25th April’11, where we expect the company to post PAT of PKR1,405mn (EPS: PKR1.50), up 74% YoY. Earnings growth will primarily emanate from 1) 28% YoY jump in top-line to PKR8.4bn along with 540bps jump in gross margins to 33% and 2) 86% YoY increase in other income on the back of share of profit of PKR50mn from PMP, as against a loss of PKR92mn last year. Increase in gross margins will most likely be the main driver of earnings during the quarter, as DAP primary margins averaged at USD350/ton during 1QCY11. On QoQ basis however, earnings shall be down 61% YoY, mainly due to the usual seasonal earnings bonanza for FFBL during 4Q due to high DAP off takes. We also expect the company to announce an interim dividend of PKR1.25/share.

At last closing price of PKR41.7/share, FFBL offers an upside potential of 8% to our December-11 PT of PKR45/share and CY11E dividend yield of 16%. BUY

NPL to post 3QFY11 EPS at PKR1.41

Nishat Power Limited is expected to post PAT of PKR498mn (EPS: PKR1.41) for 3QFY11, down 57% QoQ due to base effect as prior period revenues were booked in 2QFY11 post notification of modified tariff in official gazette by Federal Government. 9MFY11 PAT is expected at PKR1,709mn (EPS: PKR4.83). Monthly generation data released by NEPRA depict high utilization during Jan-11 and Feb-11, at 97% and 84% respectively. We thus anticipate load factor of 85% for 3QFY11, which translates into generation of 359Gwh. With high load factor assumption, we expect no overhauls during the quarter which is expected to limit O&M cost up to 20% of allowed cost as per tariff. We expect O&M savings for 3QFY11 to stand at PKR265mn (PKR0.75/share). Fuel savings for 3Q are expected at PKR111mn (PKR0.31/share) with assumed savings rate of 6.7gms/kwh, which is in line with 2Q savings rate of 6.74gms/kwh. We expect ROE and ROEDC component to remain at similar to last quarter’s levels at PKR171mn. PKR/USD indexation applicable for 3QFY11 as notified by NEPRA was down a mere 0.3% QoQ.

We expect NPL to pay full year dividend of PKR2/share, which translates into FY11 dividend yield of 12%. Due to rise in receivables, we have cut our DPS for FY11-13 by 22% to 35%, however maintain our PT. At current levels, the scrip is trading at FY11 P/E of 2.7x offering real USD IRR of 15% over the term of Power Purchase Agreement and an upside of 22% to our Dec-11 PT of PKR20/share. BUY

Economic & Political News

The government restored gas supply to Engro’s new fertiliser plant on Wednesday evening, but the company remains far from achieving commercial production, officials said on Thursday. The supply of 80mn cubic feet per day (MMCFD) from state-run Sui Northern Gas Pipelines Limited (SNGPL) is still less than the promised 100 MMCFD, they said. Engro has raised the price of urea by PKR250/bag in 2010/11 to PKR1,245/bag, she said. “Imported urea is still more expensive at PKR1,800/bag. But the price gap shrank in recent months because international urea prices have fallen.”
Analyst Certification:
The research analyst(s) denoted AC on the cover of this report, primarily involved in the preparation of this report, certifies that (1) the views expressed in this report accurately reflect his/her personal views about all of the subject companies/securities and (2) no part of his/her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
Disclaimer

The report has been prepared by Elixir Securities Pakistan (Pvt.) Ltd and is for information purpose only. The information and opinions contained herein have been compiled or arrived at based upon information obtained from sources, believed to be reliable and in good faith. Such information has not been independently verified and no guaranty, representation or warranty, expressed or implied is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be construed as, an offer, or solicitation of an offer, to buy or sell any securities or other financial instruments.
Research Dissemination Policy
Elixir Securities Pakistan (Pvt.) Ltd. endeavors to make all reasonable efforts to disseminate research to all eligible clients in a timely manner through either physical or electronic distribution such as mail, fax and/or email. Nevertheless, not all clients may receive the material at the same time.
Company Specific Disclosures
Elixir Securities Pakistan (Pvt.) Ltd. may, to the extent permissible by applicable law or regulation, use the above material, conclusions, research or analysis in which they are based before the material is disseminated to their customers. Elixir Securities Pakistan (Pvt.) Ltd., their respective directors, officers, representatives, employees and/or related persons may have a long or short position in any of the securities or other financial instruments mentioned or issuers described herein at any time and may make a purchase and/or sale, or offer to make a purchase and/or sale of any such securities or other financial instruments from time to time in the open market or otherwise. Elixir Securities Pakistan (Pvt.) Ltd. may make markets in securities or other financial instruments described in this publication, in securities of issuers described herein or in securities underlying or related to such securities. Elixir Securities Pakistan (Pvt.) Ltd. may have recently underwritten the securities of an issuer mentioned herein.
Other Important Disclosures
Foreign currency denominated securities is subject to exchange rate fluctuations which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk. Foreign currency denominated securities is subject to exchange rate fluctuations which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk.

Contributed By