Power: Same old story, different cover
Citing various structural issues and policy impediments, NEPRA's state of industry report for FY17 paints a not-so-good picture of Pakistan's current power supply structure. Low efficiency levels of GENCOs (<28% on avg.), poor recovery rates (~92.65%), high transmission & distribution losses (~ 17.95%), use of imported fuels and inadequate dispatches (resulting in high capacity payments) are some of the major issues prevalent in the sector. Additionally, policy inaction by the relevant Ministry and slow processing by other stakeholders have aggravated the problems. Moreover, the report explicitly blames KEL for under-utilizing its generation facilities and failing to add sufficient transformation capacity. That said, the regulator targets a shift in power mix to alternates including coal, gas and hydro though uncertainties exist with regards to hydropower projects. Even so, our back of the envelope calculation suggests that shift of power mix can reduce average cost of generation by ~PkR0.9/unit by FY21. Going by NEPRA's statement, while furnace oil based generation will soon be phased out, coal (both indigenous and imported) will form a major part of the generation slate, and hence we believe HUBC is perfectly placed to reap the benefits of oil (base/Narowal plants), coal (CPHGC, TEL) and Hydro (Laraib) based facilities. The scrip provides a capital upside of 47%%, and its D/Y for FY19F stands at 9.2%.
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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