KARACHI, April 22: On Thursday, Hub Power Company Limited (Hubco) announced results for the third quarter ended March 31, 2004 (Q32004) posting after tax profit of Rs1.529 billion.
The earnings came quite close to expectations of market pundits: KASB Securities had forecast taxed profit for Q3 to amount to Rs1.5 billion and about the same was estimated to be the company's 3Q net profit by InvestCap; Jahangir Siddiqui Capital Markets and Capital One Securities. Elixir Securities placed the figure slightly lower at Rs1.4 billion and Global Securities a little higher at Rs1.6 billion.
In the ongoing rally at the stock market, the share in Hubco has under performed the market. On Thursday, the stock shed 55 paisa and closed at Rs35.75. On the earning per share (eps) of Rs1.32, the share is trading at premium of 8 times the full year 2004 earnings, compared with the sector p/e of 7.2x. The market p/e, nonetheless is around 10 times.
The Board had already declared an interim dividend at Rs1.60 per share and full year pay out was projected to be around Rs3.40 per share. That would produce a high dividend yield of 9.4 per cent, which looks attractive on the current market dividend yield of 8 per cent.
The company plans to invest considerable sums on turbine blades over the next three years. Short- to medium-term investors who might want to accumulate Hubco scrip would possibly do so more for cash yield than capital gains for the share is not likely to take a sudden flight to the skies.
The report released by the directors along with the 3Q 2004 results stated that during the quarter the power plant was dispatched at a low load factor mainly due to increased availability of hydel power in the country.
The plant was stated to have maintained high availability for the core customer - Wapda, with the running capability available at 98 per cent during the quarter. "On March 31, the station completed 1,841 days without a lost time accident", directors said.
The rumour that a major generator fault had occurred at Hubco, had sparked the stock market plunge by 160 points on Wednesday. But it wasn't as bad as was made to look by the market manipulators.
Directors say that on April 18, unit no.4 tripped due to the activation of Generator Stature Earth Protection Circuit. There was no external damage or personnel injury associated with that technical failure.
"At present the damage is being ascertained and active measures are being taken to bring the unit back into operation", said the directors. But the important thing was that the property was covered under the company's insurance.
Net profit of the company for nine months (July-March 2003-4) amounted to Rs4.1 billion, which reflected 8.6 per cent decline from net earnings of Rs4.6 billion earned in the corresponding period of the previous year. The drop attributable to the structure of Hubco's guaranteed return tariff formula.
Turnover for the quarter under review amounted to Rs4,171 million and operating costs were Rs2,089 million. The figures were lower mainly due to the decreased load factor. Net profit for the quarter which amounted to Rs1,529 million, was lower than the corresponding period of last year, which the directors attributed to "less interest income earned in the current period".
The company had posted "other income" in the sum of Rs74.3 million for the 3Q2003, which stood reduced to Rs15.0 million for the quarter under review. Disinvestment of 5 per cent stake and conversion of another 5 per cent shares into CDS form by the parent company - International power - had fuelled some concerns about the long-term commitment of Hubco's sponsors to Pakistan.
But International Power last month acquired 40 per cent equity stake in the 586 MW Uch Power project. Besides, Hubco's application for setting up two gas- fired power generation plants at Karachi is still pending with Private Power Investment Board (PPIB).
If and when the government finds enough gas to ensure uninterrupted supply to Hubco-2 and allows it to set up the two new plants, the company will possibly invest and estimated $650 million. And all of that could be taken to show that Hubco is here to stay.
