Pakistan Strategy: Seeking value in a gloomy market/Market PE of 5x and Div Yield 9%
- After falling 46% (64% in US$ terms) from its May 2017 peak, Pakistan market now trades close to forward PE of 5x with Dividend yield of 9% and price to book of less than 1x
- These valuation numbers are not seen since the infamous market closure in 2008.
- Resultantly, Pakistan now trades at a 60% discount to average Asian Emerging Markets PE of 13x as compared to last 10 year average discount of 33%
- We think market has over reacted to bad headlines on the economic and political fronts.
- Any positive news on the political (settlement with India or opposition parties) or economic front (Eurobonds, Carry Trades) will help in a 5-10% market recovery in the short run.
- In the medium term, reduction in political and economic uncertainties can take market close to its historic PE avg. of 8x.
- We believe that interest rate cycle is now close to its peak and we may see interest rates coming down in next 12 to 18 months. Moreover with falling imports Pakistan currency may not show major fluctuations going forward.
- We have filtered out 9 companies with low PE/high dividend yield. These companies, in our view are attractively placed on our valuation matrix.
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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