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Todays Daily
We re-initiate coverage on DAWH with a 'Buy' recommendation
where our SoTP based Dec'13 end TP of PkR68/share offers 31%
upside from current levels. We have assumed a 40% holding company
discount (HCD) to arrive at out SoTP based TP. Our Buy stance for
DAWH is underpinned on expectations of a sustainable long-term
gas supply scenario for the fertilizer sector, particularly for ENGRO,
where DAWH's 38% holding in the company accounts for 74% or
PkR50/share of our TP. From an investment perspective, every
PkR5/share price increase in ENGRO represents a ~2ppt increase
in DAWH's SOTP value, while HUBC's value for DAWH (14% stake)
clocks in at PkR21/share (PkR12.5/share after accounting for HCD).
Previous
100.55
Chg.
103.3%
26-Mar-13 299.63
0.53%
4,447 / 45.19
Previous
4,406 / 44.77
Chg.
0.94%
204.39
Current
4,972 / 50.53
Previous
2,554 / 25.95
Chg.
94.7%
1.04
500
400
300
200
100
Volume (LHS)
Jan-13
Nov-12
Mar-13
(Index)
19,500
18,500
17,500
16,500
15,500
14,500
13,500
12,500
11,500
10,500
(mn)
600
Sep-12
FBR has pointed out a conflict in sales tax legislations pertaining to dairy
tea whiteners, where sales tax exemption is currently being provided on
both dairy whitener inputs and the final product itself. In this regard, FBR
believes the Sales Tax Act will prevail and dairy whitener will not be
entitled for benefit of zero rating on its inputs and raw materials. In related
news,
17,947.76
Chg.
Jul-12
18,043.31
Previous
May-12
SBP on Friday announced that the refinance rate under the Export
Finance Scheme (EFS) will be increased by 20bps to 8.4%p.a. w.e.f.
Apr 1'13.
Current
Mar-12
AKD Daily
KSE-100 Index
Raza Hamdani
raza.hamdani@akdsecurities.net
UAN:111-253-111 Ext: 646
Important disclosures, including investment banking relationships and analyst certification at end of this report. AKD Securities does and seeks to do business with
companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of the
report. Investors should consider this report as only a single factor in making their investment decision.
Find AKD research on Bloomberg
(AKDS<GO>), firstcall.com
and Reuters Knowledge
UAN: 111-253-111
Copyright2013 AKD Securities Limited. All rights reserved. The information provided on this document is not intended for distribution to, or use by, any person or entity in any jurisdiction
or country where such distribution or use would be contrary to law or regulation or which would subject AKD Securities or its affiliates to any registration requirement within such jurisdiction
or country. Neither the information, nor any opinion contained in this document constitutes a solicitation or offer by AKD Securities or its affiliates to buy or sell any securities or provide any
investment advice or service. AKD Securities does not warrant the accuracy of the information provided herein.
01
AKD Daily
6M
21.9
60.6
31.4
54.1
-1.7
52.5
19.6
12.4
19.3
Absolute (%)
12M CYTD
59.3
ENGRO @ PkR207/share
84
HUBC @ PkR61/share
21
40%
DAWH TP
68
Source: AKD Research
DH Fertilizers Snapshot
CY13F
Cap. Utilization
Urea sales (k tons)
NPAT (PkR mn)
CY14F CY15F
20%
50%
89
223
70%
312
(448)
409
1,525
ENGRO
2,801
3,865
HUBC
1,039
1,076 1,113
DH Fertilizers
5,081
(448)
409 1,525
NPAT
3,392
5,350 7,718
EPS
7.05
11.12 16.04
02
AKD Daily
In this regard, while the preceding government approved ENGRO's existing DAWH Listed PF value at
current market price (PkR/share)
Mari gas allocation to SNGP for onwards supply to Enven, we still await
ENGRO
53
clarity on the price for feedstock gas and the long-term gas supply from HUBC
17
dedicated fields, which could result in production from both plants. Value Listed Portfolio Value
70
of listed portfolio of DAWH (ENGRO and HUBC) at current market price Holding Company Discount
40%
arrives at PkR70/share, 35% higher than DAWH's market price. It is LPV after Discount
42
Source: AKD Research
noteworthy to mention that DAWH is subject to two layers of discount in
the form of discount of ENGRO subsidiaries (particularly EFOODS) on
ENGRO's share price and the second layer of discount of ENGRO on
DAWH's share price. Every PkR5/share price increase in ENGRO
represents a ~2ppt increase in DAWH's SoTP value. Additionally, HUBC's
portfolio value for DAWH at the current 14% stake clocks in at PkR21/share
(PkR12.5/share after 40% HCD) where we expect the company to benefit
from the steady stream of dividends from HUBC. Importantly, cost of
HUBC is at only PkR33/share compared with current market price of
PkR50/share, implying an unrealized gain of PkR2849mn(EPS Impact of
PkR5.92). Uncertainty over gas additional supply to ENGRO as well risks
to non-materialization of the fertilizer industries long term gas supply plan
are key risks to our call.
I, Raza Hamdani, hereby certify that the views expressed in this research
report accurately reflect my personal views about the subject securities and
issuers. I also certify that no part of my compensation was, is/or will be, directly
or indirectly, related to the specific recommendations or views expressed in
this research report. I further certify that I do not have any beneficial holding
.
of the specific securities that I have recommendations on in this report.
.
Rating Definitions
Buy
Accumulate
Neutral
Reduce
Sell
www.akdsecurities.net
03