KARACHI, July 6: Everyone was taken by surprise when the share in Pakistan Petroleum Limited (PPL) opened on Monday, on the provisional counter, at Rs103 and climbed as high as Rs116.50.

The best of market pundits had put their reputation on an opening price of Rs70. But perhaps it is this uncertainty that is the romance of the great game of stocks.

A week ago, when the Privatization Commission announced that the Initial Public Offering (IPO) of 10+5 per cent of government holding in PPL would be at Rs55 a share, the tone of its letter to the lead managers betrayed signs that PC had possibly made an upward revision of offer price from what was originally intended in the 'Offer for sale' document. PC was possibly encouraged by the public response in Bank Al-Falah; Oil and Gas Development Company (OGDC) and even the lame duck, PIA.

If similarities were drawn between OGDC and PPL, the OGDC was priced too low at Rs32 per share while PPL was perhaps fairly valued. Marketmen recall that shares in Mari Gas Company operating under the same business environment as that of PPL, was offered for public subscription in 1994 at Rs25 per share.

The scrip had opened at Rs48 per share, registering appreciation of 92 per cent on the first day of trading. The OGDC share offered in November 2003 at Rs32 per share had started the first day at Rs34.40, got to a high of Rs43.90 and closed at Rs42.60 (33 per cent first intra-day gain).

Now, looking at an overwhelming investors' response on the first two days of provisional trading in PPL, PC officials may be wondering if they should have asked for more.

Mohammed Sohail, head of research at InvestCap admitted: "The first day price was beyond any one's expectations. There was a general consensus that provisional trading would start in the range of Rs70-80 per share." But in terms of different valuation techniques, most analysts including those at InvestCap; Elixir Securities, Jahangir Siddiqui Capital Markets; Taurus and others were sending out 'subscribe' notes, indicating target price to range between Rs90 to Rs120.

The energy sector analysts' reasoning was that OGDCL was trading on FY05 forecast PE of 10x, PPL based on FY05 estimated EPS of Rs12.4 must trade atRs120. Who could be more happier at 111pc jump on the very first day of PPL trading, than its lead managers, the Elixir Securities.

The stock brokerage firm says: "PPL stock is an ideal target of cornering by speculators as only 102.9 million shares (15 per cent) are being offered in the market. As per rules there is no conventional 7.5 per cent upper circuit breaker on the stock during the first day and this stock is bound to rock the market big time."

Analysts observed that PPL was among the large E&P companies operating in Pakistan. The government had dismantled the Gas Pricing Agreement (GPA) of PPL under the Petroleum Policy 2001.

Resultantly, gas prices of Sui and Khandkhot were revised upwards every year, which was likely to more than compensate for any production decline from Sui fields. With an original recoverable reserve of 9.1tcf, Sui gas field has been one of the biggest gas discoveries made in Pakistan.

The field commenced commercial operations in the 1950s and has been one of the major sources of gas for the country. However, the production trend from the Sui gas field has been declining. The company is aggressively pursuing oil and gas exploration through out the country to replace its reserves and supplement its production.

The public subscription of PPL would be open between July 19-22. Government is offering a total of 102.9 million shares (including the green shoe option). Since PC has already announced priority to investors in the minimum lot of 500 shares, as many as 205,751 small applicants are likely to succeed at the balloting, in case more than the required number of applications are received.

The OGDC experience where only 98,000 applicants turned up -and made 100 per cent gains in 6 months - instead of the 215,000, who would have been offered the stock without balloting, has made investors, all but crazy about the fairly priced IPOs of fundamentally sound companies.