BMA Today for May 14, 2019 
 
     TUESDAY 14 May 2019 
 
 

 

   

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At a Glance

Previous Market Session

Local Market    
 KSE 100 N.A N.A
 KSE T. Value PKRbn N.A N.A
 10YR PIB N.A N.A
 6M KIBOR N.A. N.A.
 PKR/USD N.A. N.A.
Asia Pacific    
 BSE SENSEX 30 N.A N.A.
 NIKKEI 225 N.A N.A.
 STRAITS TIMES INDEX N.A N.A.
 KUALA LUMPUR N.A N.A.
 JAKARTA COMP. N.A N.A.
 THAI SET 50 N.A N.A.
Middle East    
 DFM GENERAL N.A N.A.
 TADAWUL ALL SHARE N.A N.A.
 MSM30 INDEX N.A N.A.
 KUWAIT SE WEIGHTED N.A N.A.
 DSM 20 INDEX N.A N.A.
Global Markets    
 OIL (NYMEX) N.A. N.A.
 US 10YrBOND N.A. N.A.
 LIBOR6MTH N.A. N.A.
 FTSE 100 N.A N.A.
 DOWJONES N.A N.A.
 S&P 500 N.A N.A.
       
 
In Focus
Kot Addu Power Company Limited: Sharp correction has opened up valuations; reinstate with Buy

   We reinstate coverage on KAPCO with a Buy rating and DDM based TP of PKR48/sh. Our liking for the scrip is primarily premised on its attractive valuations (FY20F P/E of 2.4x vs. 6.3x for the market) and high dividend yield (25%). Though we acknowledge uncertainty surrounding KAPCO’s PPA, which is set to expire in 2021, correction in KAPCO’s stock price seems overdone (down 27% in past six months on absolute basis), in our view. We believe there is strong likelihood of government extending PPA of KAPCO; however, at a hard bargain, in our view. Our sensitivity analysis indicates that KAPCO’s EPS may reduce to ~PKR6.5 in post PPA period whereas the Fair value of PPA extension period (10yrs) comes in at PKR14.7/sh. WAPDA has raised invoices for LD to KAPCO amounting to ~PKR28bn on account of short supply of electricity. Though we believe KAPCO has strong legal grounds against WAPDA’s claims (hearing ongoing in ICC), levy of LDs represents a high impact but low probability risk to KAPCO (PKR21.9/sh after tax impact). Key risks to our call include (i) worsening of circular debt and cut in dividend payout, (ii) govt. deducting LDs against KAPCO’s receivables, and (iii) lower than anticipated PKR weakness.

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Media Watch

Sectoral: Car sales tap brakes in first 10 months of FY19 / The News
Sectoral: OGDCL discovers gas condensate in Sindh / The News
Sectoral: 20 percent hike in power tariff agreed with IMF /Business Recorder
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DISCLAIMER
This memorandum is produced by BMA Capital Management Limited and is only for the use of their clients. While the information contained herein is from sources believed reliable, we do not represent that it is accurate or complete and should not be relied upon as such. Opinions expressed may be revised at any time. This memorandum is for information only and is not an offer to buy or sell, or solicitation of any offer to buy or sell the securities mentioned.