Morning Call about Result Previews – Arif Habib Limited

Karachi: PTC and HUBC for FY11

PTC; Profitability to drop by 34% YoY in FY11

The Board of Directors of Pakistan Telecommunication Company Limited is scheduled to meet on September 07, 2011 to approve the financial results for FY11.

According to Arif Habib Limited, on standalone basis, Arif Habib Limited expects the company to post an earnings of PKR 6,142mn (EPS: PKR 1.20) in FY11 as compared to PKR 9,294mn (EPS: PKR 1.82) in same period last year, depicting a decline of 34% YoY. This is primarily due to depleting fixed line revenue and raising employment cost. Moreover due to competitive environment company’s selling and marketing expenses jumped by 7% YoY. Other Income is expected to increase by 8% YoY to PKR 5,540mn on the back of higher interest earned on loan to Pak Telecom Mobile Limited (Ufone).

 

PTC – Financial Highlights (PKR mn)FY11EFY10A% Chg.
Revenue 53,94957,175 -6%
Cost of Services40,05138,2595%
Gross Profit13,89718,916-27%
Admin & General Expenses 7,477 7,2244%
Selling and Marketing Expenses2,2842,1427%
Other Operating Income5,5405,1358%
Operating Profit 9,67614,684-34%
Finance Cost226403-44%
Profit After Tax6,1429,294-34%
Earning Per Share1.201.82 -34%

 

Source: AHL Research

 

HUBC is expected to earn PKR 4.98 per share in FY11

HUBC is scheduled to announce its FY11 financial result on September 08, 2011. According to Arif Habib’s expectation, company will post a profit after tax of PKR 5,760mn (EPS: PKR4.98) for FY11 as against of PKR 5,556mn (EPS: PKR4.80) in FY10, depicting an increase of 4%. On QoQ basis, Arif Habib Limited expects the company net income to rise by 2% QoQ to PKR 1,475mn (EPS: PKR 1.28) in 4QFY11 as against of PKR 1,442mn (EPS: PKR1.25) in 3QFY11. This jump in bottom line is due to higher load factor and interest earned on overdue amount receivable from WAPDA. Arif Habib Limited expects that company will also announce a final dividend of PKR 2.5/share, taking the total dividend for the year to PKR 5.0/share.

 

Financial Highlights (PKR mn)4QFY113QFY11%Chg.FY11EFY10A%Chg.
Turnover25,845 31,126-17%106,17399,6946%
Operating Cost23,57328,892-18%97,41992,006 6%
Gross Profit2,2712,2352%8,7557,68814%
General and Admin Expenses12410915%43839112%
Finance Cost6956852%2,5951,79445%
Profit Before Tax1,475 1,4422%5,7605,5564%
Earnings per share (PKR)1.281.252%4.984.804%
Source: AHL Research

 

Recommendation

Based on Dividend Discount Model (DDM) Arif Habib’s target price for Dec 2011 works out to PKR 50.0/share, which offers an upside potential of 25% from its last closing price of PKR 39.94/share. Beside attractive upside potential, the stock offers FY11F dividend yield of 12.5%. Thus Arif Habib Limited recommends BUY.