OMCS: Smog could cloud an otherwise sunny picture
In its frenzy to address environmental concerns, the GoP abruptly ordered the closure of 4,149MW of FO fired power plants, constituting ~21/61% of total nameplate/FO generation capacity. This policy action (enacted 3rd Nov) has had far reaching implications for the nation's energy chain, which materially they are: 1) reduced drawdown of FO has rendered ~300,000mtons (3.33/13.8% of expected quarterly/annual sales) as unsold product during the two weeks, clogging storage capacity, 2) major importers (62.8% of FO volume imported FYTD) forced to bear contingent fees for inability to offload shipments, and 3) refinery closures from degraded refining capacity as well as storage constraints (total FO refinery storage at 161,242mtons enough for ~7days sales as of FY16) keeping pressure on local upliftment for other products. Additionally, mid-stream constraints may impose blowback on additional downstream segments, where lower throughput levels could hurt local sourcing of additional products. In this context we find it prudent to reduce FO volumetric assumptions by an additional 7% for full year sales (assuming sales for the Nov'17 are impeded), where the earnings impact on PSO/APL/HASCOL are -2.2%/-1.1/-2.5% for FY18E/CY17E/FY18E results. Minute changes in fair value keep our bullish thesis on PSO alive, where our June'18 TP of PkR413.3 offers 19% upside to last close.
Pakistan State Oil is a petroleum group based in Pakistan. Co.'s principal activities are the procurement, storage and marketing of petroleum and related products. Co. also blends and markets various kinds of lubricating oils.
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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