Flash Note: Descon Oxychem Limited - Preference Shares Redemption to do Away with Inadvertent Dilution!
- As per the notification sent to Pakistan Stock Exchange (PSX), Descon Oxychem Limited (DOL) has decided to fully redeem 110mn preference shares of the company, at par value (i.e. PKR10/share).
- We believe the company can redeem its Preference Shares (PKR1.1bn) by taking a long term loan which will result in additional after tax financial charges of PKR77mn. Since dividends on Preference Shares are not booked on the Income Statement, the additional charge may dent the annualized EPS by PKR0.75 – however the positives emanating from the development will more than mitigate this impact.
- Starting with Cash Flows, the tax deductible nature of financial charges and likely lower cost of capital (~10% on loan vs 12% on preference shares) has the potential to save an estimated PKR55mn in annual cash flows for the Company.
Descon Oxychem Limited is engaged in manufacture, procurement and sale of hydrogen peroxide and allied products. The Company produces hydrogen peroxide with the Swedish firm Chematur. The Company's brands of Hydrogen Peroxide include FOOROX 35, ASEPTOX 35, DOLOX 35, TEXTOX 50, PRINTOX 50, DOLOX 50, PRINTOX 60 and DOLOX 60. The Company's services include applied technology, engineering and customer service. The Company's applications include chemical pulp, mechanical pulp, paper recycling, textile and specialty bleaching. The textile application is categorized into textile animal fibers, textile artificial fibers or regenerated cellulose, textiles-dye oxidation and textiles-synthetic fibers. The Company has distributors internationally in India and Sri Lanka and national distributors in Sindh and Punjab. The Company's production capacity is 28,000 tons per annum. The Company's parent company is Descon chemical business.
Elixir Securities Pakistan is a Corporate Member of the Pakistan Stock Exchange & Pakistan Mercantile Exchange and is one of the leading securities brokerage & investment banking firms in Pakistan, established since 1994. Our principal business activities include all aspects of Pakistan’s Capital Markets covering Securities Brokerage (Equities, Fixed Income and Commodities), Corporate Finance & Capital Markets Advisory (M&A, ECM, DCM) and Investment Research (Economics & Securities). We are one of the most active & aggressive Broker-Dealers in Pakistan executing trades for most of the Top 20 Global Brokers with unmatched corporate access credentials and have successfully advised and closed on some landmark ECM transactions in the history of Pakistan including the largest deal in frontier Asia (USD 1.02 billion). Our Clients include foreign and domestic financial institutions (Banks, Asset Managers, Insurance Companies, Pension Funds) corporates, HNWI’s and retail investors. This is supported by a very strong and independent research capability, which is quoted regularly in both local and international media.
Elixir Securities Pakistan is the proud recipient of many awards & recognitions including AsiaMoney’s Brokers Poll 2017, FinanceAsia’s Pakistan Best Investment Bank and Best Broker 2017, The Asset’s Best Brokerage House in Pakistan 2016, Asiamoney’s “Best Domestic Equity House 2015 in Pakistan”, The Asset Triple A Country Awards 2015 - Pakistan “Deal of the Year” and “Deal of the Year-Highly Commended”, CFA Society of Pakistan Awards for Year 2015 “Best Research Analyst (1st Rank), CFA Society of Pakistan Awards for Year 2014 “Best Research Analyst (1st Rank)”, “Best Trader” 2nd Runner-up (3rd Rank), The Asset Triple A Country Awards 2014’s “Best Deal in Pakistan” and Capital Finance International’s nomination for “Best Equity Research in Pakistan 2010”.
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