FFBL: Liquidity woes to worsen , (AKD Daily, Sep 09, 2020)
AKD Daily FFBL: Liquidity woes to worsen · Following the Supreme Court’s recent decision on GIDC, we foresee FFBL’s liquidity situation to continue to worsen, where even a potential right issue of PkR8bn (400mn shares at an attractive PkR20/sh issue price) as opposed to GIDC payables outflow of PkR2.75bn per quarter may only be a short term respite. · Meanwhile, the company already has PKR21bn of short term borrowing on its books (D/E: 15.2x), along with PkR5bn cash, as per the latest financial statements. Continued losses on core operations as well as loss making associates may push equity into negative zone, hindering further leveraging (equity as of Jun’20: PkR2.6bn). · FFBL’s 1HCY20 results underscore our bearish sentiment, where the company posted a loss of PkR4.2bn in 1HCY20 (LPS: PkR4.50), despite GIDC elimination and respite on DAP PMs. Higher loss on YoY basis was driven by impairment charge of PkR1.2bn booked on FML (PkR1.30/sh) and 28% YoY higher finance cost. · Our SoTP based TP of PkR30/sh includes PkR6/sh from the loss making ventures. This does not include the impact of PkR22bn (PkR24/sh) outflow with respect to GIDC payments. We await for further clarity in this regard before updating our investment case on the scrip. AKD Research
Fauji Fertilizer Bin Qasim Limited is a Pakistan-based holding company. The Company manufactures, purchases and markets fertilizers. It is involved in meat, dairy and coal based energy generation sectors. It has identified its potential business segments and has undertaken investments in the areas of food, financial, power sector and wind energy projects. Its products include Granular Urea, such as Sona Urea, and Di Ammonium Phosphate (DAP), such as Sona DAP. Sona Urea is a synthetic organic compound containing nitrogen in amide form available in the form of white solid prills. It is applied to soil and also suitable in solution form as spray application. Sona DAP contains nutrient element, phosphorous besides nitrogen available in flowing granular form Granules are stronger, harder and of uniform size. It is suitable for various crops and soils recommended for initial application. It produces over 791,260 metric tons (MT) of DAP and approximately 433,610 MT of Urea.
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