Pakistan Oil & Gas Marketing: Growth deceleration kicked in; margin outlook improves
- OMC sales grew by 7% YoY (ex-FO) during FY18 driven by strong demand fundamentals. However, the same has failed to translate into market performance where the sector underperformed the index by 12% on relative basis in 12-mth.
- A key highlight of FY18 was a steep drop in FO demand (down 25% YoY) owing to change in power generation mix post commissioning of new RLNG and coal based power plants.
- HASCOL outperformed with 65% YoY growth in volumes and 4.8ppt jump in market share to 12% (claiming 2nd position in industry) while PSO lagged behind with sixth consecutive drop in overall market share to 51% in FY18.
- The recent revision in MS and HSD margins for OMCs although much anticipated, bodes well for the sector where above-expected jump in HSD margins provides an upside of 2-3% for BMA OMC universe. Any development on revision in LNG margins by 50% may benefit PSO (12-13% bottom-line impact).
- Looking ahead, we expect the pace of industry demand growth to slow down. PSO may continue to struggle on its market share. We have a Neutral rating on PSO with TP of PKR360 (blended valuation).
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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