Report

Pakistan Strategy: OGRA’s decision on two Suis; -ve for industries, +ve for E&Ps

  • Details in Oil & Gas Regulatory Authority’s (OGRA) decision for Estimated Revenue Requirement (ERR) 2018-2019 for the two Suis (SNGPL & SNGP) are Positive for E&Ps, Negative for Industries (Chemical, Cement, Steel, Textile &Ferts) and broadly Neutral for Suis.
  • While OGRA has proposed a steep 200-300% rise in consumer prices, the proposed hike also includes the partial impact of revenue shortfall faced over 2017-2018 due to lack of price hike.
  • OGRA’s proposal is not binding on the government and as such the govt. is expected to notify price hikes within 40 days. We believe hike in consumer price may come ahead of our earlier estimates of 7% to 15-20% in Jul-Dec’18.
  • The anticipated increase in wellhead gas price based on OGRA’s data used in ERR suggests 11-23% hike in wellhead gas prices in FY19, ahead of our estimates. We estimate 11/9/3/2% earnings sensitivity for PPL/MARI/POL/OGDC for FY19E.
  • We reiterate our Buy rating on PPL, MARI, EFERT, LOTCHEM, EFERT, FFC (pricing power), FATIMA, LUCK, ASTL & ISL (margin pressure broadly built-in).
Underlyings
Sui Northern Gas Pipelines

Sui Northern Gas Pipelines is engaged in the purchase, transmission, distribution and supply of natural gas. Co. also expanded its activities to undertake the planning, designing and construction of pipelines, both for itself and other organizations.

Sui Southern Gas Co. Ltd.

Co. is a holding company and is engaged in the following activities: purification of natural gas ex-Sui Field and its transmission along with gas from Sari Hundi, Badin, Kandhkot, Mari, Daru and Kadawari gas fields; distribution of natural gas in Sindh and Balochistan provinces; manufacturing and sale of gas meters; sale of gas condensate as a by-product; and construction contracts for laying of pipelines.

Provider
BMA Capital Management Limited
BMA Capital Management Limited

​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.

Analysts
Fawad Khan

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