Mari Petroleum Company Ltd: Brace for strong 2H earnings; Buy
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We cut our earnings estimates for Mari Petroleum Company Ltd (MARI) by 10/2/1% over FY18/19/20E post below expected 2QFY18 results. We reiterate our Buy on MARI with TP of PKR1,850/sh.
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Despite earnings revision, our liking for MARI, one of our top ten picks in BMA Universe, has not subsided.
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MARI unveiled below expected earnings of PKR29.05/sh, down 11% QoQ with surprise driven by exploration cost and operating exp (higher amortization cost). We reiterate our view of pick-up in earnings momentum in 2HFY18.
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The spotlight on government’s plans to divest 18.4% stake has intensified in the backdrop of fast approaching elections. We see reduced overhang, from a major liquidity event, on MARI’s valuation.
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Three key triggers for MARI are; (i) clarity on production of Mari field, (ii) Budget FY19 where relief on tax on stock bonus could be a big price mover, and (iii) results of ongoing exploration and drilling.
Mari Petroleum Company Limited is a Pakistan-based exploration and production company. The Company is engaged in managing and operating Pakistan's gas reservoir at Mari Field, District Ghotki, Sindh. Its segments include Exploration and Production; Mari Seismic Unit, and Mari Drilling Unit. The Exploration and Production segment includes various upstream business activities. The Mari Seismic Unit segment includes two-dimensional (2D)/three-dimensional (3D) seismic data acquisition. The Mari Drilling Unit segment includes onshore drilling services. In addition to Mari Gas Field, it holds development and production leases over Zarghun South and Sujawal Gas Fields, and has operatorship of eight exploration blocks (Ziarat, Harnai, Sukkur, Sujawal, Karak, Ghauri, Peshawar East and Khetwaro). Its other products include crude oil, condensate and liquefied petroleum gas (LPG). Its exploration and production assets are spread across Pakistan in all four provinces.
BMA is amongst the leading financial groups in Pakistan. BMA Capital’s core areas of business include Capital Markets, Corporate Finance & Advisory, Asset Management, and Financial Products Distribution. BMA Capital is the leader in privatisation advisory in Pakistan, having successfully advised on over 50% of all privatisations in Pakistan, by value, in transactions valued in excess of US$4 billion. Recent transactions include joint lead managing the $813 million GDR Offering of 10% of OGDCL on the London Stock Exchange in 2006-07, and advising Etisalat on their successful acquisition of a 26% strategic stake in Pakistan Telecommunications Company Limited (PTCL) for US$2.6 billion, the largest M&A transaction and foreign direct investment in Pakistan’s history. The firm is among the top brokers in the Pakistan equity and treasury markets, and is among a handful of firms that comprehensively cover all segments of the capital markets. This is supported by a very strong and independent research capability, which is quoted regularly in both local and international media. BMA Capital’s retail brokerage brand, BMA Trade, has launched a nationwide network of branches as well as a comprehensive online trading platform, enabling investors across Pakistan to take part in the capital markets.
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