PSO & HASCOL: Result Previews, (AKD Daily, Aug 27, 2019)
PSO – inventory gains to uplift the gross profit by 76%QoQ: We expect PSO to post an EPS of PkR27.85 for FY19, down 30%YoY despite expected inventory gains of PkR863mn for FY19 being higher than PkR294mn for FY18 as higher exchange losses and significant volumetric decline of 38%YoY took their toll. For 4QFY19, an EPS of PkR12.70 is expected, up 1.96/1.22x QoQ/YoY, on the back of substantial inventory gains after ex-refinery prices of MS/HSD went up by 30/21% on the back of increase in oil prices and PkR depreciation. FE-25 provides protection to PSO against PkR depreciation resulting in expected exchange loss of PkR1.3bn for 4QFY19 despite PkR depreciating by a significant 14% during the quarter. Also, finance cost for 4QFY19 is expected to decline after company was able to decrease its balance of short term borrowings to PkR102bn as of Mar'19 against PkR149bn as of Dec'18 after first tranche of Energy Sukuk was released. Along with the result, we expect PSO to announce DPS of PkR3 – in addition to PkR5 already paid.
HASCOL – exchange losses to weigh heavily: HASCOL looks set to post a dismal result for 2QCY19 on the back of PkR depreciation inflicting exchange loss of PkR791mn while short term borrowing of PkR18.7bn is expected to keep the finance cost elevated. However, inventory gains of PkR836mn on the back of MS/HSD prices increasing by 30/21%QoQ will provide some respite. For 2QCY19, we expect an LPS of PkR4.78 against an EPS of PkR3.39/1.50 recorded in 1QCY19/2QCY18. Higher than expected inventory gains remain a possibility where sourcing prowess (timings of shipments) could deliver upside to our estimate. During the quarter, company faced a tough time with MS/HSD volumes declining by 52/55%QoQ and 70/60%YoY taking the market share to 5.1/5.7% in 2QCY19 from 12.5/15.4% in 2QCY18. The decline came on the back of new entrants eating into HASCOL’s market share while company also held back its sales to reduce exposure to PkR depreciation. Given an expectation of loss before taxation, we expect turnover tax for the company to come into play. For 1HCY19, LPS is expected to clock in at PkR1.39 against an EPS of PkR5.16 in 1HCY18.​
AKD Research
Hascol Petroleum Limited is a Pakistan-based company, which is engaged in procurement, storage and marketing of petroleum and related products. The Company is involved in the sale of petroleum products, such as fuel oil, high speed diesel, gasoline, Jet A-1, liquefied petroleum gas (LPG) and lubricants. The Company offers products, such as Tiger Super, Rocket Diesel and Furnace Oil. The Company offers Fuchs Lubricants products, which include corrosion preventives, quenching oils, industrial lubricants, open gear lubricants, greases, automotive oil and metal working fluids. The Company also markets LPG as an automotive fuel through its retail network. The Company is engaged in owning, leasing and renting oil storage facilities, as well as importing petroleum products. The Company has storage facilities at Machike, Shikarpur and Daulatpur. The Company sells its product to dealers, government agencies and autonomous bodies, independent power project and other corporate customers.
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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