Packages Limited (PKGS): 4Q2018 LPS Rs4.8 vs. EPS Rs45 in 4Q2017; 2018 EPS Rs10, -91% YoY DPS Rs15/sh (Below expectations)
- Packages Limited (PKGS) announced 4Q2018 consolidated loss of Rs469mn (LPS Rs4.8/share vs. EPS of Rs45 in 2017). The result came in below our expectations as PKGS posted operating loss of Rs96mn (vs. Profit of Rs404mn in 4Q2017) mainly on the back of lower gross margins (due to higher raw material costs on the back of PKR devaluation against US$ we believe).
- Also note, PKGS had abnormal earnings in 4Q2017 due to a one time gain of Rs2.5bn (Rs25/sh) on the back of business combination gain that came out of acquisition of Bulleh Shah Packaging (unlisted). Total gain in 2017 clocked-in at Rs5bn.
- Net revenues were up 25% YoY during the outgoing quarter. We attribute this to higher sales from 1) packaging and paper & paper board division and 2) Packages Mall.
- Investment income in 4Q2018 fell by 86% YoY to Rs288mn. We believe that PKGS did not receive any dividend income from Tetra Pak (our expectation was Rs1.2bn). We await management clarity in this regard.
- We flag 1) BSPL’s higher cost of production 2) delay in filling up the vacuum left from Tetra Pak dividend income (to recall, Tetra Pak was expected to cease distributing dividend to PKGS by the end of 2018, as per initial contract and 3) higher than expected fuel & energy costs as key risks for PKGS.
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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