Pakistan Strategy: Screening stocks on liquid assets depicts steep undervaluation
- We screen stocks based on Net Liquid Assets (NLA) to understand the extent of undervaluation post 15% correction in KSE-100 index since Jan’17.
- Our work throws up interesting insights where our top ten picks based on NLA/market cap screening are PSMC, THALL, ATLH, HINO, KOHC, PPL, MTL, INDU, HABSM, & AKZO.
- We make three important observations: (i) most of the companies in the list are either under-researched or under-owned (six out of ten are well covered while four stocks are rated Buy at BMA), (ii) earnings visibility for the group is not significantly low, and (iii) valuations (in terms of P/E, P/BV) appear exciting.
- Most of the auto stocks rank highly on the yardstick with NLA accounting for as much as 41-64% of market cap of the stocks. We particularly highlight PSMC, THALL, ATLH, & HINO which occupy top four positions with NLA of 64/44/41/41% of market cap.
- KOHC represents an interesting case with significant investment in Investment Property (real estate investment, IP). KOHC’s ranking improves to #2 if we include IP.
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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