AKD Securities Limited – PTC: VSS costs to weigh down on earnings ?

Karachi, February 06, 2015 (PPI-OT): PTC is scheduled to announce its CY14 financial results on Tuesday, Feb 10’15 where AKD Securities Limited expects the company to post consolidated NPAT of PkR9.9bn (EPS: PkR1.95) vs. NPAT of PkR12.7bn (EPS: PkR2.49) in CY13; down 22%YoY. Revenues are expected to witness muted growth of a nominal 1%YoY to PkR132.1bn in CY14 against PkR131.2bn in CY13 as the company’s cellular arm struggled against competition (Ufone’s market share down to 16% in Dec’14 from 17.2% in Jul’14).

While LDI revenues have continued to slide on account of consistently falling international incoming traffic (average CY14 minutes at 414mn/month), AKD Securities Limited expects some support to have come from the commercial availability of 3G services since May’14 alongwith new product launches from the broadband segment. Additionally, VSS offered by the company in Nov’14 is also expected to weigh down on earnings where AKD Securities Limited’s estimations suggest an EPS impact of PkR0.29 if ~4.5k employees opt for the scheme.

In 4QCY14 alone, AKD Securities Limited expects PTC’s consolidated NPAT to improve to PkR1.9bn (EPS: PkR0.38) against a loss of PkR0.4bn in 3QCY14 (one-off fire loss) However, higher depreciation expense (3G license acquired in May’14), jump in finance cost (Ufone availed ~PkR30bn loan during 2QCY14) and VSS costs are expected to restrict earnings growth.

While AKD Securities Limited expects the company to payout PkR1.0/sh as a final dividend, in addition to the PkR1.0/sh given out in 1HCY14, AKD Securities Limited believes higher than estimated VSS cost may hamper the payout accordingly. Having shed 19% CYTD on the back of a not-so encouraging CY14E result, AKD Securities Limited advises timing entry post result announcement as the company gears up to benefit the most out of the 3G era in CY15. AKD Securities Limited’s TP of PkR25.1/share implies Neutral stance alongside a 7.8% D/Y.

EFERT: CY14E Earnings to go up by 48%YoY

EFERT is scheduled to announce its CY14 financial results on Monday Feb 9’15, where AKD Securities Limited expects the company to post NPAT of PKR8.15bn (EPS: PkR6.19) in CY14E versus NPAT of PkR5.6bn (EPS: PkR4.23) posted in CY13; up by a robust 48%YoY. As with other fertilizer players increase in GIDC levied on both feedstock (up by 52% to PkR300/mmbtu) and fuel stock (up by 50% at PkR150/mmbtu) hurt EFERT’s margins (average GM: 37% in CY14E vs. 44% in CY13).

Despite the dip in GMs however, sales went up by 22%YoY to PkR61.1bn as EFERT posted its highest ever volumetric sales at 1.82mn tons (+17%YoY). Although EFERT is still not working under full capacity, the additional 60mmcfd gas originally diverted from Guddu Thermal Power plant allowed the company to operate both its Enven and Base plant at approx. 80% capacity utilization levels. The company also benefitted from increased urea prices sold at a higher rate of PkR1,875/bag (+5.3%YoY) which are at their all-time high levels.

On a sequential basis, AKD Securities Limited expects the company to post NPAT of PKR 2.6bn (EPS: PKR 1.96) in 4QCY14, up significantly by 21% QoQ as seasonality (wheat sowing season) is expected to play its part in pushing up earnings. Additionally, with the company meeting its debt covenants in 1HCY14, EFERT is expected to commence dividend payouts from 4QCY14E to the tune of PkR0.7-1.0/sh.

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