Packages Limited (PKGS): 2QCY19 LPS Rs4.94 vs. EPS of Rs8.19 (Lower than our expectations)
- Packages Limited (PKGS) announced 2Q2019 consolidated loss of Rs413mn (LPS Rs4.9/share vs. EPS of Rs8.19 in 2Q018). The result came in below our expectations mainly on the back of 1) higher operating expenses, 2) loss on investment under equity method and 3) high effective taxation.
- Operating cost of the company was up by 170% to Rs807mn owing the exchange losses after appreciation of US$ by 14% in 2Q2019.
- Furthermore, the company has booked an impairment provision on its associates to the extent of Rs500mn, as per our channel check.
- Investment income in 2Q2019 fell by 88% YoY to Rs230mn which is in-line with our expectations as dividend income from Tetra Pak remained absent.
- Net sales were up 13% YoY during the outgoing quarter. We attribute this to higher sales from 1) packaging and paper & paper board division and 2) Packages Mall.
- Financial charges increased significantly by 84% YoY owing to hike in policy rate and debt borrowings.
- Effective tax rate of the company during 2Q2019 clocked in at 71% (vs. 37% in SPLY) owing to reversal of tax credit, as per the new Finance Act.
- Key risks for the stock includes 1) BSPL’s higher cost of production 2) higher than expected appreciation of US$ against rupee, and 3) higher than expected fuel and energy costs.
Topline Securities is one of the fastest-growing brokerage houses in Pakistan. It has strong Equity Brokerage, Economic/ Equity Research, Commodity Trading and Corporate Finance & Advisory functions.
Topline Securities has been endowed with numerous awards by renowned international financial organizations. The highlights of which consists of the award for ‘Best Local Brokerage House of Pakistan’ by Asiamoney Brokers Poll (the largest Asia-focused equity services provider poll) in 2016 and ‘Best Equity Brokerage House’ by CFA Society Pakistan in 2015.
Previously, Topline Securities held the title for ‘Best Brokerage House’ for 4 consecutive years (2011-2014) by Asiamoney Brokers Poll. Other awards include the ‘Best Salesperson’ award by Asiamoney for 6 consecutive years (2011-2016), the ‘Arabia Fast Growth 500’ award and ‘Pakistan Fast Growth 100’ award in 2012 and 2013 by AllWorld Network.
JCR-VIS, a credit rating agency providing independent rating services in Pakistan has assigned initial rating of “A-2” for short term and “A” for long term to Topline Securities. Topline Securities is registered as Underwriter, Book Runner and Research Entity with Securities & Exchange Commission of Pakistan (SECP).
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