KARACHI, May 20: Arif Habib Securities Limited (AHSL) would buy-back to the maximum of 5 million shares of the company at Rs360 per share. The board which met on Friday announced that the company had decided to recommend to the Extraordinary General Meeting (EOGM) of members to consider and pass the following resolution: “The company be authorized to buy back to the maximum of 5 million shares of the company at a price of Rs360 per share as per procedure laid down in the Company’s (buy-back of shares) Rules 1999 as amended up to date”.
The repurchase of its own shares by the company is not the same as the buy-back of minority stakes in companies by their sponsors as has been happening in case of dozens of lame duck companies. Such companies eventually seek de-listing from the stock exchanges. The company chairman, Arif Habib, who along with the family owns almost three-quarters of AHSL, had explained that the buy-back by AHSL was ‘treasury stock’ and the company would remain listed on the stock exchanges. The company’s call of maximum 5 million shares, chairman Arif Habib told Dawn amounted to 25 per cent of the equity, since the total outstanding shares in the company stood at 20 million.
The public interest in the company’s buy-back of shares is considerable, not only because AHSL is just the third company to seek ‘treasury stock’ in five years (the other two being Alhamd Textile Mills and Siemens Engineering) since the SECP rules first came into force in 1999, but also due to the fact that AHSL is an immensely profitable company. In the last reported quarter (Jan-March 2005), AHSL made a phenomenal sum of Rs 1.2 billion in after tax profit and earned a staggering amount of Rs1.5 billion in net capital gain on investment.
The performance could not have been better, since the reported period included the two week stock market crisis (from March 15 to 28) that saw the KSE-100 index plunge by 2,595 points. But intelligent stock investment is not perhaps as much as when to enter, but when to seek an exit. With its long standing experience, AHSL, being the flagship company of the Arif Habib Financial Services Group and the main sponsor of Arif Habib Investments — one of country’s leading fund managers, AHSL may have adopted the best possible strategy, which chairman Arif Habib had explained was: “When everyone was running greedily after the over-valued oil and gas stocks, we kept ourselves out of it”.
Another news relating to the group was that an Extraordinary General Meeting (EOGM) of the certificate holders in Pakistan Capital Market Fund (PCMF) would be held on Saturday to seek approval for conversion of closed to open-end Mutual Fund. Managed by Arif Habib Investments, the company proposes to convert PCMF -— a closed-end mutual fund to an open-end fund — the first such conversion in Pakistan. The management had explained that the conversion was meant to allow investors to benefit from full value of the Net Asset Value (NAV) whenever they wished to cash out. “Currently investors cannot benefit from the full value of the fund as the market price is at a discount to the Net Asset Value”, Nasim Beg, CEO of Arif Habib Investments had told the press last month.