LUCK: Expanding All-Around
​We revisit our investment case on LUCK, rolling forward our Jun'18 SOTP based TP to PkR1,180/share (offering 22% upside), implying a BUY stance. Our recommendation is based on: 1) cost savings through new 10MW WHR (achieved COD in Jan'17), 2) doubling capacity of Iraq's JV to 1.742mn tpa (expected to come online in 1QFY18), 3) 1.18mn tpa Greenfield cement plant in DR Congo that started operations in Dec'16 and 4) earnings growth potential via 1.25mn tpa capacity expansion (expected to come online in 2QFY18). Additionally, LUCK as a conglomerate enjoys indirect exposure to the pharmaceutical business through its subsidiary, ICI that continues to grow (acquisition of certain assets of Wyeth Pakistan Ltd and Pfizer Pakistan Ltd). The setting up of greenfield manufacturing plant of Kia motor vehicles (25-30K p.a. capacity), approval for which is expected soon by BoI, remains a key upside earnings trigger. The stock has returned 11%CYTD in anticipation of inclusion in MSCI EM index with valuations standing at FY18F PE of 20.6x. While trading at a premium of 77% to the AKD cement universe's FY18F PE, we feel it remains justified given LUCK's strong earnings profile (5yr forward earnings CAGR of 14% vs. 12% of AKD cement universe) and various diversification projects, boosting consolidated earnings.
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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