OMCS_FY18 cash flows reflect industry expansions
In the midst of a strong rebound in OMC earnings, we look at the asset and liability relationships underpinning the industry through the frame of their free cash flows. In this regard, listed OMC players (HASCOL, PSO & APL) underwent a reversal in cash flows where 1HFY18 net change in cash position was at PkR33.8bn vs. outflow of PkR9.21bn during 1HFY18, not due to OCF health (PkR20.3bn outflow from OCF, largely from PSO's worsening net-working capital additions) but due to PIB redemption (PkR46.0bn inflow in CFI for PSO) where ex-PSO the net change in industry's cash was an outflow of PkR0.04bn. Liability and equity related flows remained measured, remaining in line with long term trends. Hastening CAPEX was a bright spot with the three raising long term operational assets by PkR3.54bn over 1HFY18 vs. PkR1.71bn during 1HFY17, marking a rush to expand retail network infrastructure. Valuations for PSO remain appealing, where market share sustainability in the retail segment is key for sustainable growth.
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