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 Result Previews POL and APL Tuesday January 27, 2015 POL ‐ BUY Pakistan Oilfields Limited (POL): 1HFY15 EPS estimated at PKR29.0/sh Target Price: PKR 524 The board meeting of POL is scheduled on Tuesday 27th January, 2015 to declare its 1HFY15 financial results. We expect the company to post NPAT of PKR6.8bn (EPS: PKR29.0) in 1HFY15 compared to PKR6.9bn (EPS: PKR29.2) in the corresponding period last year, down by a nominal 1%. The result announcement is also expected to accompany a cash dividend of PKR20/sh. The flattish trend in earnings can be attributed to 18%YoY lower oil prices and 14%YoY decline in gas production in 1HFY15 which will offset the impact of 15% higher oil production and 27% lower amortization expense. The notable increase in oil production to 6,330bpd can be attributed to 34% higher production from JV operated TAL block (67% of total oil production) driven by 85%YoY and 7%YoY increase in production from Makori East and Maramzai field, respectively. However, production from operated wells continued to decline (down 15%YoY) due to persistent fall in production from Pariwali and Balkassar fields (down 11%‐23%YoY). On the flip side, gas production remained lackluster (down 14%YoY) at 68mmcfd on account of 48%YoY and 37%YoY decline in production from Manzalai and Mamikhel fields, respectively. Slowdown in gas production coupled with 18% lower oil prices is expected to drag sales of the company by 3%YoY to PKR17.3bn. Moreover, other income will also remain under pressure at PKR1.1bn (down 23%YoY) primarily due to absence of payout from NRL. However, 27%YoY decline in amortization cost to PKR1.5bn in 1HFY15 due to high base effect (1HFY14 included one‐time write‐offs) will offset the impact of lower dividend income. We maintain our conviction on the stock with a TP of PKR524/sh (upside: 42%) where i) outcome of drilling in ME‐4, ii) direction of oil prices and iii) interim payout in 1H will remain the primary valuation drivers. We still await the outcome of drilling result at Balkassar X‐1 and Pinodri‐9 (both completed) where any dry‐well, if declared, will remain key downside risk to our estimates. Current Price: PKR 369 POL Performance 1M 3M 12M ‐7%
Absolute % Relative to KSE % Bloomberg POL.PA
Reuters PKOL.KA
MCAP (USD mn) 870
12M ADT (USD mn) 1.6
Shares Outstanding (mn) 237
APL ‐ BUY Target Price: PKR 641 Current Price: PKR 565 Attock Petroleum Limited (APL): 1HFY15 EPS estimated at PKR20.0/sh APL Performance 1M 3M 12M Absolute % ‐30%
Relative to KSE % ‐38%
Bloomberg APL.PA
Reuters APL.KA
MCAP (USD mn) 467
12M ADT (USD mn) 0.2
Shares Outstanding (mn) 83
Muhammad Affan Ismail, CFA [email protected] +92 111 262 111 Ext: 2058 The board meeting of APL is scheduled on Tuesday 27th January, 2015 to declare its 1HFY15 financial results. The company is expected to post 38%YoY decline in NPAT to PKR1.7bn (EPS: PKR20.0) in 1HFY15 compared to PKR2.7bn (EPS: PKR32.2) in the same period last year. In 2QFY15, we expect profitability of the company to decline by 68% to PKR4.8/sh. The decrease in profitability can primarily be attributed to inventory losses of PKR957mn in 2QFY15 on account of 13%‐21% reduction in HSD and MOGAS prices. On a recurring basis (excluding the impact of inventory gains/losses), APL is expected to post ~9%YoY growth in profitability primarily driven by 15%YoY and 26%YoY growth volumetric sales of MOGAS and FO respectively. The notable growth in MOGAS sales can be attributed to i) addition of 54 new outlets (up 13%) during FY14 and ii) increased gas outages to CNG stations. Also increased imports of FO by APL to meet improving demand from private sector amid falling FO prices lifted the FO sales in 1HFY15. We expect net other income of the company to remain steady at PKR692mn, up 7%YoY. At last closing, we maintain our ‘BUY’ call on APL with a TP of PKR641/sh, offering a total return of 22%. Going forward, we believe above expected growth in market share of MOGAS on i) accelerated additions in outlets and storage capacities and ii) petrol shortages at fuel stations of the largest OMC will remain a key upside trigger to our valuations. BMA Capital Management Ltd. 801 Unitower, I.I.Chundrigar Road, Karachi, 74000, Pakistan For further queries, please contact: [email protected] or call UAN: 111‐262‐111 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.11