Results Season – POL and NBP Earnings Forecast

POL to post EPS of PKR10.48 in 1QFY11: POL’s board meeting for announcement of 1QFY11 results is scheduled on October 28, 2010. We expect the company to declare profit after tax of PKR2.5bn (EPS: PKR10.48), up 74% YoY (+35% QoQ) driven primarily by 89% YoY growth in volumes. Despite higher oil and gas wellhead prices, average realized price for POL shall be down 10% YoY due to higher contribution of gas in product mix.

NBP’s 9MCY10 net earnings to jump by 22% YoY: The board meeting of NBP is scheduled on October 29, 2010 to announce 9MCY10 results. We expect the bank to post healthy growth of 23% QoQ during 3QCY10, with net profit of PKR4.4bn (EPS: PKR3.30), taking 9MCY10 net earnings to PKR12.3bn (EPS: PKR9.12), up 22% YoY. Growth in profit is expected to emanate from expected increase of 11% YoY in income from core operations and 30% YoY likely decline in overall provisioning during the 9-month period.

POL to post EPS of PKR10.48 in 1QFY11

1QFY11 profit for POL is likely to clock in at PKR2.5bn (EPS: PKR10.48), up 64% YoY, driven primarily by 89% YoY growth in volumes. POL’s gas production for 1QFY11 will likely rise 133% YoY whereas oil volumes shall be up 21% YoY. Despite higher oil and gas wellhead prices on YoY basis, average realized price for POL shall be down 10% YoY due to higher contribution of gas in product mix. We expect other income to budge up by 11% YoY due to higher cash balances whereas exploration cost for 1QFY11 is expected at a mere PKR50mn as POL acquired only 7 line km of 2D seismic during the quarter. On QoQ basis, 1QFY11 earnings shall reflect an increase of 35%, primarily due to 93% QoQ reduction in exploration cost, further helped by 4% QoQ growth in volumes.

At yesterday’s closing, POL trades at FY11E PER of 5.9x, dividend yield of 12.8%, and offers an upside of 32% to our June-2011 PT of PKR320/share. BUY.

NBP’s 9MCY10 net earnings to jump by 22% YoY

National Bank of Pakistan’s (NBP) net earnings are expected to exhibit 23% QoQ hike during 3QCY10 with a PAT of PKR4.4bn (EPS: PKR3.30). Key earnings drivers include:

1) 3% QoQ likely decline in operating expenses, as admin expenses during 2QCY10 were high due to adjustment of yearly increase in salaries and

2) 33% QoQ expected decrease in total provisioning charge.

During 9MCY10 NBP’s net profit is estimated to grow by 22% YoY to PKR12.3bn (EPS: PKR9.12). In addition to some relief on provisioning front (provisioning charge expected to fall by 30% on YoY basis during 9MCY10), expected 11% YoY growth in net interest income will also support the bottom line of the bank during 9MCY10. Furthermore, non-interest income is expected to witness a surge of 19% YoY to PKR12.7bn primarily due to comparatively higher fee, commission and brokerage income. Operating expenses nevertheless, are anticipated to remain high during the period, with 27% YoY hike.

At yesterday’s closing of PKR67.1/share, the scrip is trading at CY10E P/E and P/BV of 5.4x and 0.7x respectively and offers upside potential of 4% to our Jun-2011 PT of PKR70/share. HOLD!

Economic & Political News

Govt borrowing from banking sector rises to PKR198.25bn

Government borrowing for budgetary support from the banking sector increased to PKR198.25bn during the period ended on October 15, the State Bank of Pakistan (SBP) said. The central bank said that the borrowing registered a phenomenal increase of three-time higher than the previous figures of PKR46.65bn for the period ended on October 17, 2009. “The only way this can be avoided is the fiscal consolidation in the form of austerity in government spending and efforts in generation of tax revenues,” the SBP said in a report.
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