HUBC_Surviving in a hostile environment
Implication of GoP's stance to limit power generation on FO based plants has been mixed for HUBC, as it operates a blend of both: an efficient and a relatively inefficient plant. While its base plant is an inefficient one, placed at no. 8 in the merit order list for FO based plants, Narowal is 4 notch up on the list, making it eligible to operate in these times of distress. In this regard, our calculations suggest that GoP might keep an average of ~1,300MW of power plants operational to let the domestic refineries run smoothly. This effectively makes room for Narowal to operate at 60-70% load factor, however, base plant's load factor should drop to ~50% over the next 2 years. Moreover, the tie-in of new hydel and coal based plants in 2019 will further exert pressure on bringing load factor down to 30% before being completely shut in FY21 - 6 years prior to the official end of its PPA. We believe that as long as the base plant remains operational, the company should not face issues with regard to its CPP payments. Subsequently, we see no serious concerns on cash flows until FY20, with HUBC's D/Y standing at 9.5/9.0% for FY18F/19E. Our TP of PkR133/sh offers an upside of 44.3%, where its investments in TEL, CPHGC and SECMC contribute PkR32/sh towards its TP.
Hub Power Company is a holding company. Through its subsidiaries, Co. is engaged as a power producer in Pakistan that focuses on developing, owning, operating and maintaining power stations. Co. supplies electricity to Water and Power Development Authority and National Transmission and Despatch Company under long term Power Purchase Agreements for its Hub and Narowal plants respectively.
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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