KARACHI, Sept 5: Hub Power Company Limited (Hubco) announced final dividend at Rs3.60 per share (36 per cent), which fell slightly short of market’s expectations of Rs4 (40 per cent). The dividend and financial figures for the year ended June 30, 2002 were declared by the board at a meeting in London on Wednesday. But because of the time difference, these were received and announced first thing in the morning at the Karachi Stock Exchange on Thursday.

Having already disbursed interim dividend at Rs4 per share (40 per cent) on April 4 this year, the total payout for the year stood at Rs7.60 or 76 per cent. Last year, the company had made aggregate payout of Rs3.90 (39 per cent).

In a statement released on Thursday, Hubco said that the Annual General Meeting (AGM) of the company would be held on October 8, in Islamabad to approve the accounts and declare the total dividend.

The power company’s stock shed 55 paisa during trading on Thursday, to close at Rs28. The share had galvanized almost 19 per cent during August as punters backed the stock in anticipation of higher dividend. But most analysts continued to hand out bullish notes on the Hubco stock. “On the full year dividend, the stock price translates into 28 per cent dividend yield, which is the best among key stocks at the KSE,” analysts at IP Securities said. First Capital calculated the dividend yield at 25 per cent over the next six months (based on Rs3.60 per share current dividend and Rs3.50 per share (expected) first interim dividend). First Capital said that it looked forward to another Rs3.50 per share dividend in Jan-2003 along with the company’s first half 2003 results. “This higher than usual payout would be on account of Rs1.2 billion payment by Wapda, due on September 30, 2002,” First Capital reasoned.

InvestCap calculated Hubco stock’s fair value at Rs31 (inclusive of Rs3.60 final dividend). The brokerage said that Hubco’s cash stream was fairly known to all, therefore, the only thing that could affect current value calculations was the ‘required rate of return’. It said that the US inflation and the rupee-dollar parity in the next 25 years would also impact valuation of Hubco stock in rupee terms. Taking 17 per cent discount rate, average 2 per cent US CPI and 2 per cent rupee weakening, InvestCap arrived at the company’s share fair value of Rs31. The brokerage, however, cautioned: “Going forward, Hubco’s relationship with Wapda in the new political set-up and the fate of interest rates in Pakistan will affect our 17 per cent assumed required rate of return and thereby Hubco’s fair worth”.

For the year ended June 30, 2002, the company posted turnover at Rs21 billion, which was 26.5 per cent lower than Rs29 billion of previous year. Lower capacity utilization, analysts said, had resulted in lower sales for the company. Gross margins, nonetheless, took a quantum jump to 46 per cent against 29 per cent in 2001, which some analysts suggested was mainly due to extraordinary ‘one-time gain’ of improved rupee parity viz-a-viz the US dollar. Gross profit increased 16 per cent to Rs9.8 billion from Rs8.5 billion the earlier year. Operating costs stood reduced by 44 per cent to Rs11.5 billion, from Rs20.6 billion and analysts noted that the closure of a generator (that accounted for 25 per cent of total capacity) for some time during the year, did not hamper operating costs. Hubco’s profit before interest expenses was down 27.6 per cent to Rs10.5 billion for the year under review, from Rs14.5 billion the year ago.

Interest expenses amounted to Rs3.7 billion last year and Rs3.2 billion for the year under review. Net profit was down 32.9 per cent to Rs7.3 billion, from a year ago net profit at Rs10.9 billion. But in their pre-result reminder, brokerage KASB & Co, stated that the earning figure was ‘immaterial’ in Hubco’s case, though, investors needed to look at the company’s cash flows. InvestCap said that the Hubco’s stock price could come under some pressure, before settling down, due to slightly lower-than-market expected dividend and supply overhang of its stock, reflected by some 63 million shares in COT or ‘badla’ markets at Karachi and Lahore.