FFBL: Much needed improvements in core operations
Post dismal CY16 earnings performance on account of weak industry dynamics, CY17 has so far turned out to be a good year for FFBL. While the company is still in a loss (NLAT of PkR0.30/sh in 9MCY17 against a loss of PkR1.13/sh in 9MCY16), the increase in topline and margins has been encouraging. This improvement is likely to continue in 4QCY17 as well on the back of ongoing Rabi season (3yr avg. offtake during Oct-Dec: 407k tons or 54% of annual offtake) and the recent uptrend in local DAP prices (up 8% since Mar'17) with the company recently increasing DAP prices by PkR50/bag in Nov 15'17. In this backdrop, we feel prices can go further up in 4QCY17 citing: 1) anticipated strong demand in Rabi reason, 2) lower inventory levels (down 19%YoY) and 3) reversal in int'l DAP prices (up 9% since Aug'17 levels). Having lost 34%CYTD mainly on account of weak fundamentals further exaggerated by not-so-impressive performance by the portfolio companies (FFL & FML incurred cumulative loss of PkR2.88bn in 9MCY17). That said, we feel turnaround in core operations and strong 4QCY17F earnings will keep FFBL in limelight. Maintaining our Marketweight stance on the sector, we currently have a buy stance on FFBL with our rolled forward Dec'18 SOTP-based target price standing at PkR48.1/sh (40% upside).
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.
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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