KAPCO & HUBC_3QFY18F Result Previews, (AKD Daily, Apr 19, 2018)
KAPCO: 3QFY18F Result Preview
In its 3QFY18 meeting on Apr 24’18, we expect KAPCO’s BoD to announce its interim (3QFY18) profitability of PkR2.63bn (EPS: PkR2.99), up by 1.8ppts over 3QFY17. Aggregate earnings for 9MFY18 are estimated to clock at PkR7.03bn (EPS: PkR7.99), higher by 4.0%YoY. Despite the plant operating at 57% load factor, gross profitability is anticipated to tread higher to PkR3.51bn as shifting fuel mix (RLNG at ~89% this quarter) coupled with devaluation of PkR (~5% in Dec’18) would bring gross margins at 17.76% vs. 17.21% previously. Other operating income would largely be in the company’s favor (+22.5%YoY) with widening differential between payables and receivables. Additionally, finance cost is expected to hover around ~PkR1bn as we believe a temporary cash injection by the GoP towards the end of the period would have been insignificant in reducing the burden of short term borrowings. Our TP of PkR63.85/sh provides a capital upside of 7.14%, while the stock offers an impressive FY18E/19F D/Y of 15.5/15.1%.
HUBC: 3QFY18F Result Preview
HUBC is estimated to post a net profit of PkR2.39bn (EPS: PkR2.07) in 3QFY18 vs. PkR2.56bn (EPS: PkR2.21) in 3QFY17. Profitability is expected to shrink (down 6.3%YoY) as we estimate the company to have resorted to higher repair and maintenance expenditure on its boilers and engines during the review period to prepare for peak load period, effectively nullifying the positive impact of PkR devaluation. To note, load factor for the base plant remained at just 26% while that of Narowal plant was likely at 66%. Additionally, finance cost is expected to go up by 19.8%YoY to PkR1.22bn on the back of short term financing requirements (to keep up with the required fuel availability) and previous mark ups. Tax expense due to income from other subsidiaries is further expected to drag earnings down to post an aggregate net profit of PkR7.69bn (EPS: PkR6.64) for the 9MFY18 period. Along with the results, we expect company to declare an interim dividend of PkR3/sh despite having commitments for upcoming projects. We currently have a buy stance on the company with a TP of PkR142.7/sh (37.7% upside), while its D/Y for FY18E/19F stands at 7.23% each.
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.
Kot Addu Power Co Ltd. Kot Addu Power Company Limited is a Pakistan-based power generation company. The Company's principal activities are to own, operate and maintain a multi-fuel fired power station with approximately 15 generating units with a nameplate capacity of 1,600 megawatts (MW) in Kot Addu, District Muzaffargarh, Punjab, Pakistan. The Company also sells the electricity produced therefrom to a single customer, the Pakistan water and power development authority. The power plant is a multi-fuel gas-turbine power plant using three fuels to generate electricity: gas, light sulfur furnace oil and high speed diesel. The plant's combined cycle technology enables it to use the waste heat from the gas turbine exhaust to produce steam in the heat recovery steam generator, which in turn is used to run the steam turbines.
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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