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#746
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Posted 22 February 2012 - 05:36 PM
Price hike: Petrol bomb expected in 7 days
ISLAMABAD: Secretary Petroleum and Natural Resources Muhammad Ejaz Chaudhry on Wednesday revealed that petroleum prices will see a major hike in seven days, Express News reported.
Chaudhry was briefing the parliamentary committee on oil prices. The meeting was chaired by Rana Tanveer, who later walked out in protest over the upcoming price hike.The petroleum secretary had informed the committee that keeping in view global prices, the government will have to raise the rates accordingly.
Tanveer said that the government gave them “lollipops” every time and the prices would still keep going up. He walked out of the meeting in protest.
Finance Minister Hafeez Sheikh then arrived and tried to take the committee into confidence over the decision.
The session is still underway.
ISLAMABAD: Secretary Petroleum and Natural Resources Muhammad Ejaz Chaudhry on Wednesday revealed that petroleum prices will see a major hike in seven days, Express News reported.
Chaudhry was briefing the parliamentary committee on oil prices. The meeting was chaired by Rana Tanveer, who later walked out in protest over the upcoming price hike.The petroleum secretary had informed the committee that keeping in view global prices, the government will have to raise the rates accordingly.
Tanveer said that the government gave them “lollipops” every time and the prices would still keep going up. He walked out of the meeting in protest.
Finance Minister Hafeez Sheikh then arrived and tried to take the committee into confidence over the decision.
The session is still underway.
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#747
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Posted 23 February 2012 - 12:14 PM
Family Ties - Current Account and Oil prices
Runaway oil prices continue to cast a shadow on country’s current account (C/A) figures. The 7MFY12 ended with a C/A deficit of USD ~3bn, substantially larger than USD 96mn recorded in corresponding period last year. Widening of C/A deficit is a direct result of appreciation in international oil prices and greater demand for import goods in the economy. Although the inward earnings both from exports and remittances has remain relatively stable, with 12M-trailing sum of USD ~26bn and USD ~12bn (close to our initial targets), respectively but specific risks - namely the sustained increase in oil prices, a weaker-than-expected European economy, and a downturn in global risk sentiment - remain present.
External account performance
As for the month of Jan-12, the C/A posted in a deficit of USD 305mn higher than that of Dec-12 USD 14mn (revised). This was favoured partially by 17%YoY rise in import as oppose to 6MFY12 average rise of 19%YoY. While export witnessed the thickest fall of 3%YoY during the month compared to an average of +10%YoY rise in 6MFY12. On the flip the total remitted amount during the month jumped by almost +34%YoY to USD ~1bn, bring the total FY12YTD remittances at USD ~7bn (+22%YoY).
Increasing macro-economic stability
Rising oil prices have substantially augmented macro-stability risks in the form higher C/A deficits, increased fuel subsidy and inflation expectations. As per our estimates a USD 10/bbl rise in Arab light pushes the C/A deficit by USD 0.5bn on a full-year average basis. With our base case assumption of oil at USD 110/bbl for FY12, we expect C/A deficit will likely be contained at USD 3.3bn or 1.4% of the GDP, which in our view is sustainable in the medium-term.
Downside risks to GDP growth
The increased prices of Arab light hovering at around USD 123/bbl, as of Feb 22nd, 12 (or USD 110/bbl FY12YTD average has increased the downside risks to overall GDP growth – high subsidy, inflation and cost of debt financing. In FY08 higher oil prices averaging USD ~93/bbl brought down the 4YR average growth rate of 7% to 3.7%. If oil prices remain considerably higher for longer the downside risks to GDP growth are inevitable. Currently the oil imports directly accounts of almost 7% of the GDP (USD 136bn, 7MFY12), hence further push of USD 10/bbl from our base case price of USD 110/bbl will likely trim the GDP growth by 0.06% for the current FY12, as per our calculations.
Risk of price contamination
A USD 10/bbl rise in Arab light prices directly upticks the headline CPI inflation by 0.7% based on our calculations. Hence the recent proposal to increase POL prices in the range of PKR 1.8 to PKR 7.3 per litre on account of rising international oil prices is deem to raise inflationary expectations. Although current inflation levels provides just enough legroom to squeeze in further hikes in oil prices, but will also raise the prospects of hikes in policy rates. Nevertheless a cascading effect of similar amount will be felt albeit with a lag even if the government decides not to pass the rising oil prices on domestic consumer, total subsidy in terms of electricity prices and oil companies will likely shoot-up, causing a considerable drag on fiscal side.
Outlook: Keep those flows coming in
The government ability to counter the downside risks of oil prices especially those emanating on the external side lies in attracting capital inflows. The proceeds of 3G licence auction and other uni/bilateral funding will be crucial in altering the trend cycle and hence stimulating the growth pattern. Although, the fetching another USD 600mn from Islamic Development Bank (IDB) – in order to partially repay upcoming IMF debt obligations – may not seem a popularist decision, but in current time this is certainly what’s needed in our view.
(AH)
Runaway oil prices continue to cast a shadow on country’s current account (C/A) figures. The 7MFY12 ended with a C/A deficit of USD ~3bn, substantially larger than USD 96mn recorded in corresponding period last year. Widening of C/A deficit is a direct result of appreciation in international oil prices and greater demand for import goods in the economy. Although the inward earnings both from exports and remittances has remain relatively stable, with 12M-trailing sum of USD ~26bn and USD ~12bn (close to our initial targets), respectively but specific risks - namely the sustained increase in oil prices, a weaker-than-expected European economy, and a downturn in global risk sentiment - remain present.
External account performance
As for the month of Jan-12, the C/A posted in a deficit of USD 305mn higher than that of Dec-12 USD 14mn (revised). This was favoured partially by 17%YoY rise in import as oppose to 6MFY12 average rise of 19%YoY. While export witnessed the thickest fall of 3%YoY during the month compared to an average of +10%YoY rise in 6MFY12. On the flip the total remitted amount during the month jumped by almost +34%YoY to USD ~1bn, bring the total FY12YTD remittances at USD ~7bn (+22%YoY).
Increasing macro-economic stability
Rising oil prices have substantially augmented macro-stability risks in the form higher C/A deficits, increased fuel subsidy and inflation expectations. As per our estimates a USD 10/bbl rise in Arab light pushes the C/A deficit by USD 0.5bn on a full-year average basis. With our base case assumption of oil at USD 110/bbl for FY12, we expect C/A deficit will likely be contained at USD 3.3bn or 1.4% of the GDP, which in our view is sustainable in the medium-term.
Downside risks to GDP growth
The increased prices of Arab light hovering at around USD 123/bbl, as of Feb 22nd, 12 (or USD 110/bbl FY12YTD average has increased the downside risks to overall GDP growth – high subsidy, inflation and cost of debt financing. In FY08 higher oil prices averaging USD ~93/bbl brought down the 4YR average growth rate of 7% to 3.7%. If oil prices remain considerably higher for longer the downside risks to GDP growth are inevitable. Currently the oil imports directly accounts of almost 7% of the GDP (USD 136bn, 7MFY12), hence further push of USD 10/bbl from our base case price of USD 110/bbl will likely trim the GDP growth by 0.06% for the current FY12, as per our calculations.
Risk of price contamination
A USD 10/bbl rise in Arab light prices directly upticks the headline CPI inflation by 0.7% based on our calculations. Hence the recent proposal to increase POL prices in the range of PKR 1.8 to PKR 7.3 per litre on account of rising international oil prices is deem to raise inflationary expectations. Although current inflation levels provides just enough legroom to squeeze in further hikes in oil prices, but will also raise the prospects of hikes in policy rates. Nevertheless a cascading effect of similar amount will be felt albeit with a lag even if the government decides not to pass the rising oil prices on domestic consumer, total subsidy in terms of electricity prices and oil companies will likely shoot-up, causing a considerable drag on fiscal side.
Outlook: Keep those flows coming in
The government ability to counter the downside risks of oil prices especially those emanating on the external side lies in attracting capital inflows. The proceeds of 3G licence auction and other uni/bilateral funding will be crucial in altering the trend cycle and hence stimulating the growth pattern. Although, the fetching another USD 600mn from Islamic Development Bank (IDB) – in order to partially repay upcoming IMF debt obligations – may not seem a popularist decision, but in current time this is certainly what’s needed in our view.
(AH)
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#748
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Posted 23 February 2012 - 02:16 PM
E&P Sector - Profits reached PKR67.86bn, up by 27% in 1HFY11... (Flash Note)
Synopsis…
The E&P (OGDC, PPL & POL) sector has posted a cumulative PAT of PKR67.86bn in 1HFY12 as compare to PKR53.42bn in the same period last year, showing a robust growth of 27% YoY. The strong increase in profits was mainly driven by improved oil and gas production, higher realized oil & gas prices and Pak Rupee deprecation against the US Dollar. In addition to this, a massive growth of 147% YoY in other income due to higher interest rates on deposits also played a pivotal role to support profits positively.
OGDC – PAT grew by 32%...
OGDC has earned PAT of PKR41.57bn, translating into an EPS of PKR9.67 in 1HFY12 against PAT of PKR53.42bn [EPS of PKR7.35] in 1HFY11, showing a mammoth increase of 32% YoY.
This positive increase in bottom line was mainly due to higher realized oil & gas prices and US dollar appreciation against Pak Rupee in the reporting period. Above all, 386% increase in other income mainly due to higher interest rates on deposits also impacted positively in profits.
Based on the current market price, expected earnings and dividend, OGDC is trading at a FY12 and FY13 prospective PE of 8.0x and 7.1x respectively and prospective dividend yield of 4% and 5% respectively. Currently, we recommend a Hold stance on the scrip
PPL- PAT grew by 21%...
PPL has announced PAT of PKR20.11bn and EPS of PKR15.30 as compare to PAT of PKR16.62bn [EPS of PKR12.64] in the corresponding period last year, posting a substantial growth of 21% YoY.
This sharp rise in bottom line was owing to increased oil and gas production. In addition to this, Pak Rupee depreciation against the US$ and higher realized oil & gas prices also played a vital role in supporting the bottom line positively.
Other operating income of the company also witnessed a growth of 79% YoY to PKR3.47bn in 1HFY12 as compare to PKR1.93bn in 1HFY11. The mammoth growth in other operating income is mainly due to higher interest rate as the PPL’s short term investment and cash forming almost 20% of the balance sheet footing.
Based on the current market price, expected earnings and dividend, PPL is trading at a FY12 and FY13 prospective PE of 5.8x and 5.0x respectively and prospective dividend yield of 7% and 8% respectively. Our Fair Value of the scrip is PKR250, the scrip is currently offering an upside potential of 40% based on the current market price. Therefore, we recommend a BUY stance on the scrip
POL- PAT grew by 19%...
POL has announced a PAT of PKR6.17bn, translating into an EPS of PKR26.08 as compare to PAT of PKR5.20bn [EPS of PKR21.99] in the corresponding period last year, posting a substantial growth of 19% YoY.
As far as 2QFY12 results are concerned, the company has posted PAT of PKR2.71bn [EPS of Rs11.47] at the end of 2QFY12, posing a significant decline of 21% QoQ. In addition to this, the company also announced first cash dividend of PKR17.50 along with the result. This huge decline in the profitability in 2QFY12, was primarily because of amortization of development and decommissioning cost which has increased by a massive 150% QoQ coupled with higher realized effective tax rate of 41.11% versus 27.72% in 1QFY12.
Other operating income of the company also witnessed a gigantic growth of 163% QoQ to PKR1.13bn in 2QFY12 as compared to PKR0.43bn in 1QFY12. The upsurge in other operating income was mainly owing to realization of dividend income from NRL and APL.
Based on the current market price, expected earnings and dividend, POL is trading at a FY12 prospective PE and dividend yield of 6.8x and 13.50% respectively. Our Fair Value of the scrip is PKR462, therefore, we maintain BUY stance.
(SC)
Synopsis…
- Total profits of the E & P sector rose by 27% YoY in 1HFY12.
- Earnings of OGDC, PPL and POL grew by 32%, 21% and 19% YoY, respectively in 1HFY12.
- Net sales of OGDC, PPL and POL posted a growth of 9%, 21% and 25% YoY, respectively in 1HFY12.
- BUY PPL and POL and HOLD OGDC.
The E&P (OGDC, PPL & POL) sector has posted a cumulative PAT of PKR67.86bn in 1HFY12 as compare to PKR53.42bn in the same period last year, showing a robust growth of 27% YoY. The strong increase in profits was mainly driven by improved oil and gas production, higher realized oil & gas prices and Pak Rupee deprecation against the US Dollar. In addition to this, a massive growth of 147% YoY in other income due to higher interest rates on deposits also played a pivotal role to support profits positively.
OGDC – PAT grew by 32%...
OGDC has earned PAT of PKR41.57bn, translating into an EPS of PKR9.67 in 1HFY12 against PAT of PKR53.42bn [EPS of PKR7.35] in 1HFY11, showing a mammoth increase of 32% YoY.
This positive increase in bottom line was mainly due to higher realized oil & gas prices and US dollar appreciation against Pak Rupee in the reporting period. Above all, 386% increase in other income mainly due to higher interest rates on deposits also impacted positively in profits.
Based on the current market price, expected earnings and dividend, OGDC is trading at a FY12 and FY13 prospective PE of 8.0x and 7.1x respectively and prospective dividend yield of 4% and 5% respectively. Currently, we recommend a Hold stance on the scrip
PPL- PAT grew by 21%...
PPL has announced PAT of PKR20.11bn and EPS of PKR15.30 as compare to PAT of PKR16.62bn [EPS of PKR12.64] in the corresponding period last year, posting a substantial growth of 21% YoY.
This sharp rise in bottom line was owing to increased oil and gas production. In addition to this, Pak Rupee depreciation against the US$ and higher realized oil & gas prices also played a vital role in supporting the bottom line positively.
Other operating income of the company also witnessed a growth of 79% YoY to PKR3.47bn in 1HFY12 as compare to PKR1.93bn in 1HFY11. The mammoth growth in other operating income is mainly due to higher interest rate as the PPL’s short term investment and cash forming almost 20% of the balance sheet footing.
Based on the current market price, expected earnings and dividend, PPL is trading at a FY12 and FY13 prospective PE of 5.8x and 5.0x respectively and prospective dividend yield of 7% and 8% respectively. Our Fair Value of the scrip is PKR250, the scrip is currently offering an upside potential of 40% based on the current market price. Therefore, we recommend a BUY stance on the scrip
POL- PAT grew by 19%...
POL has announced a PAT of PKR6.17bn, translating into an EPS of PKR26.08 as compare to PAT of PKR5.20bn [EPS of PKR21.99] in the corresponding period last year, posting a substantial growth of 19% YoY.
As far as 2QFY12 results are concerned, the company has posted PAT of PKR2.71bn [EPS of Rs11.47] at the end of 2QFY12, posing a significant decline of 21% QoQ. In addition to this, the company also announced first cash dividend of PKR17.50 along with the result. This huge decline in the profitability in 2QFY12, was primarily because of amortization of development and decommissioning cost which has increased by a massive 150% QoQ coupled with higher realized effective tax rate of 41.11% versus 27.72% in 1QFY12.
Other operating income of the company also witnessed a gigantic growth of 163% QoQ to PKR1.13bn in 2QFY12 as compared to PKR0.43bn in 1QFY12. The upsurge in other operating income was mainly owing to realization of dividend income from NRL and APL.
Based on the current market price, expected earnings and dividend, POL is trading at a FY12 prospective PE and dividend yield of 6.8x and 13.50% respectively. Our Fair Value of the scrip is PKR462, therefore, we maintain BUY stance.
(SC)
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#749
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Posted 24 February 2012 - 12:30 PM
E&P Sector - Profits reached PKR67.86bn, up by 27% in 1HFY12...
- Total profits of the E & P sector rose by 27% YoY in 1HFY12.
- Earnings of OGDC, PPL and POL grew by 32%, 21% and 19% YoY, respectively in 1HFY12.
- BUY PPL and POL and HOLD OGDC.
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#750
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Posted 27 February 2012 - 02:56 PM
Updated at 1340 PST
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