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IPPs in limelight as caretakers release funds to ease circular debt
May 27, 2013
LAHORE - After breaching the 20,000 mark the equity market closed the week at 21,284, up 3.6 per cent WoW. Investors remained in a buoyant mood with active participation witnessed as average daily volumes remained firm at 439 million share, up 29 per cent WoW. Oil & Gas (up 8.2 per cent WoW) and IPPs (up 4.8 per cent WoW) remained in the lime light as the care taker government released funds to ease the circular debt issue while Gas, Water and Multi-utilities (up 13.5 per cent WoW) outperformed the market on the news of potential gas price hikes by the government.
Moreover, Fertilizer Manufacturers Pakistan Advisory Council issued a statement that all SNGPL based fertilizer plants have planned to invest $100 million for development of low BTU gas fields to ensure better gas supply. On the macro front, rumours circulated that the incoming government might not take up new IMF programme as Saudi Arabia is expected to extend a bailout package of $15 billion to Pakistan.
As per experts, the need of the hour is to contain the fiscal deficit by compressing (current) expenditures and making extra efforts to improve revenue collections. However, with a month remaining for FY13 to end, experts see the overall deficit going up to 6.8 per cent since the caretaker government has put a freeze on the electricity pass-on with no retrospective impact. This is expected to have an additional subsidy impact of about Rs200 billion. The tax revenue at the same is expected to miss target of Rs2.05trn and reach up to Rs1,985 billion, as per expectations.
The official numbers released by the Ministry of Finance reported a budget deficit of Rs1.05trn for 9MFY13 or 4.4 per cent of GDP, against last years 4.3 per cent. Understandably, higher deficit came on the back of higher current expenditures and lower-than-targeted revenue collections during 9MFY13. Observing fiscal deficit for 9M that has already come quite close to the budget deficit of 4.7 per cent, all eyes are now on the full-year deficit that our economy will register with FY13 coming to an end soon.
The governments tax side increased to Rs 1.5trn, from Rs 1.4trn in the same period a year despite the absence of any new revenue measures. However, the government, as per the revised estimates, is hoping to collect PKR 2.05trn worth taxes in FY13. So far, the collection stands at PKR 1.5trn, thus the target collection for 4QFY13 reaches PKR 523 billion. The direct taxes amounted to PKR 0.5trn in 9MFY13 where as indirect taxes totaled PKR 1.03trn during the period.
As far as the government expenditures side is concerned, it surged to a whopping Rs 3.2trn in 9MFY13 compared to last years Rs 2.6trn, marking a rise of 22 per cent YoY. This rise is attributable to a huge 24 per cent jump in current expenditures, courtesy higher subsidies and lower pass-on of the backlog electricity prices. Under the current expenditures head, domestic debt servicing also surged to PKR 724 billion due to heavy domestic borrowing by the government, which was evident from SBPs auction details.
Experts said that Pakistan has always provided huge opportunities to the consumer firms due to its large customer base, rising purchasing power and huge untapped market. Moreover rapid urbanization, improving rural economy and media explosion are the added stimulus to the demand of consumer goods. As a result, consumer firms have posted decent sales and profits growth in Pakistan over the last many years. Investors in stock market are now eager to have few attractive consumer stocks in their portfolios. According to our analysis, profits of our listed sample consumer firms have increased by 31 per cent in 2012. Resultantly, sample consumer stocks have yielded 78 per cent return in 2012 and 41 per cent in 2013TD, outpacing the overall market return .Going forward, we expect the consumer glory to sustain and profits are likely to increase by 23 per cent in 2013.
For performance evaluation, Topline Securities experts in a report have selected a diversified sample of 27 consumer firms with the aggregate market capitalization of Rs797 billion (US$8.1 billion), 16 per cent of total market cap of Karachi stock exchange. Sample includes food, beverages, pharmaceuticals, tobacco, footwear and personal care items producers.
The sample excludes soon to be delisted FMCG giant Unilever Pakistan. In 2012, sales of these firms have increased by 17 per cent to Rs334 billion while profits grew by 40 per cent to Rs24 billion.
IPPs in limelight as caretakers release funds to ease circular debt
May 27, 2013
LAHORE - After breaching the 20,000 mark the equity market closed the week at 21,284, up 3.6 per cent WoW. Investors remained in a buoyant mood with active participation witnessed as average daily volumes remained firm at 439 million share, up 29 per cent WoW. Oil & Gas (up 8.2 per cent WoW) and IPPs (up 4.8 per cent WoW) remained in the lime light as the care taker government released funds to ease the circular debt issue while Gas, Water and Multi-utilities (up 13.5 per cent WoW) outperformed the market on the news of potential gas price hikes by the government.
Moreover, Fertilizer Manufacturers Pakistan Advisory Council issued a statement that all SNGPL based fertilizer plants have planned to invest $100 million for development of low BTU gas fields to ensure better gas supply. On the macro front, rumours circulated that the incoming government might not take up new IMF programme as Saudi Arabia is expected to extend a bailout package of $15 billion to Pakistan.
As per experts, the need of the hour is to contain the fiscal deficit by compressing (current) expenditures and making extra efforts to improve revenue collections. However, with a month remaining for FY13 to end, experts see the overall deficit going up to 6.8 per cent since the caretaker government has put a freeze on the electricity pass-on with no retrospective impact. This is expected to have an additional subsidy impact of about Rs200 billion. The tax revenue at the same is expected to miss target of Rs2.05trn and reach up to Rs1,985 billion, as per expectations.
The official numbers released by the Ministry of Finance reported a budget deficit of Rs1.05trn for 9MFY13 or 4.4 per cent of GDP, against last years 4.3 per cent. Understandably, higher deficit came on the back of higher current expenditures and lower-than-targeted revenue collections during 9MFY13. Observing fiscal deficit for 9M that has already come quite close to the budget deficit of 4.7 per cent, all eyes are now on the full-year deficit that our economy will register with FY13 coming to an end soon.
The governments tax side increased to Rs 1.5trn, from Rs 1.4trn in the same period a year despite the absence of any new revenue measures. However, the government, as per the revised estimates, is hoping to collect PKR 2.05trn worth taxes in FY13. So far, the collection stands at PKR 1.5trn, thus the target collection for 4QFY13 reaches PKR 523 billion. The direct taxes amounted to PKR 0.5trn in 9MFY13 where as indirect taxes totaled PKR 1.03trn during the period.
As far as the government expenditures side is concerned, it surged to a whopping Rs 3.2trn in 9MFY13 compared to last years Rs 2.6trn, marking a rise of 22 per cent YoY. This rise is attributable to a huge 24 per cent jump in current expenditures, courtesy higher subsidies and lower pass-on of the backlog electricity prices. Under the current expenditures head, domestic debt servicing also surged to PKR 724 billion due to heavy domestic borrowing by the government, which was evident from SBPs auction details.
Experts said that Pakistan has always provided huge opportunities to the consumer firms due to its large customer base, rising purchasing power and huge untapped market. Moreover rapid urbanization, improving rural economy and media explosion are the added stimulus to the demand of consumer goods. As a result, consumer firms have posted decent sales and profits growth in Pakistan over the last many years. Investors in stock market are now eager to have few attractive consumer stocks in their portfolios. According to our analysis, profits of our listed sample consumer firms have increased by 31 per cent in 2012. Resultantly, sample consumer stocks have yielded 78 per cent return in 2012 and 41 per cent in 2013TD, outpacing the overall market return .Going forward, we expect the consumer glory to sustain and profits are likely to increase by 23 per cent in 2013.
For performance evaluation, Topline Securities experts in a report have selected a diversified sample of 27 consumer firms with the aggregate market capitalization of Rs797 billion (US$8.1 billion), 16 per cent of total market cap of Karachi stock exchange. Sample includes food, beverages, pharmaceuticals, tobacco, footwear and personal care items producers.
The sample excludes soon to be delisted FMCG giant Unilever Pakistan. In 2012, sales of these firms have increased by 17 per cent to Rs334 billion while profits grew by 40 per cent to Rs24 billion.
IPPs in limelight as caretakers release funds to ease circular debt
