PPL: End of impairment saga; remain Neutral
We have lifted PPL’s TP by 4% to PkR190; our FY17/18F estimates are up 7/8% to PkR17.35/24.50, which reflect PPL fully booking the impairment (related to MND Europe E&P) and improved outlook for production in certain fields. Remain Neutral.
PPL posted FY16 EPS of PkR8.15, down 58% YoY, and lower than expectations. Final payout of PkR3.50 was, however, greater than expected. 4Q EPS was almost completely eroded, turning out at PkR0.11, due to effective tax rate of 96%, where we think the company booked a final tax adjustment in the last quarter.
Production trends in large mature assets, Sui and Kandhkot, are fairly promising, where success of recent development efforts have improved outlook thereof. Additionally, we think growth in Gambat South and Adhi has legs. Therefore, upside potential can emanate from improved production guidance, in our view.
Pakistan Petroleum Limited (PPL) is a supplier of natural gas. The Company is principally engaged in conducting exploration, prospecting, development and production of oil and natural gas resources. The Company operates nine producing fields, which include Sui, Kandhkot, Adhi, Mazarani, Chachar, Adam, Adam West, Shahdadpur and Shahdadpur West. It has working interests in approximately 20 partner-operated producing fields. Its partner-operated fields include Qadirpur Gas Field, Tal Block, Miano Gas Field and Sawan Gas Field. The Company, along with its subsidiaries, has a portfolio of approximately 40 exploration blocks, of which over 20 are operated by the Company, including Block-8 in Iraq, while approximately 20 blocks consisting of three offshore leases in Pakistan and two onshore concessions in Yemen are operated by joint venture partners. Its gas production from its operated and partner-operated fields is approximately one billion cubic feet of gas per day.
Intermarket Securities Limited (IMS) is a full service corporate brokerage firm based in Karachi, Pakistan. We service both domestic and international clients. IMS was ranked #2 Best Local Brokerage and #3 Best for Overall Country Research for 2016 by AsiaMoney.
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