PSO: Looking high and low for ways to grow, (AKD Daily, Sep 30, 2019)
- Assessing key aspects of information disclosed in PSO’s FY19 analyst briefing, we highlight improved profitability during 4QFY19 arising from other income through late payment surcharges in addition to a PkR2.8bn gain booked in consolidated accounts based on PRL’s acquisition
- While guidance on additional circular debt clearance remains tepid, PSO management has erred on the side of caution, refraining from delivering guidance on any additional payments, while disclosed break up of payments and receipts show RLNG remaining the next major income stream prone to receivable accretion
- Remaining dependent on policy direction from GoP functionaries, CPI indexation of retail fuel margins remains relatively straight forward, while clearance of hurdles to increase offtake from PRL (dismantling of current demand forecasted mechanism) are key as the state OMC improved domestic refinery product upliftment to mitigate FX risks
- Moving forward, management expects the quantum of volumetric decline to decrease as smuggled fuel is believed to have imparted its full impact on volumes while PSO continues to leverage its dominant retail positioning to hold on to market shares. Based on similar expectations, our TP of PkR189/sh implies 20% upside and a BUY stance.
AKD Research
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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