KARACHI, Aug 26: Thursday was another day to rejoice for more than 200,000 small share holders who had been lucky to win 500 shares each in the recently divested 15 per cent equity in Pakistan Petroleum Limited (PPL).
At its board meeting held on Thursday, the Board of Directors of PPL announced an after tax profit amounting to Rs6.6 billion for the year ended June 30, 2004. That translated into earnings per share of Rs9.65.
The actual numbers beat the best of analysts' expectations, almost all of whom were projecting lower taxed profits of around Rs5.7 billion. In a sample of four brokerage houses, after tax profit of Rs6.2 to Rs6.5 billion projected by Abdul Rasheed, analyst at Invest Cap, looked to have come closest to the real numbers.
The PPL board also recommended final cash dividend at Rs2.50 per share, which was what most analysts expected. Including the interim cash dividend at Rs2 per share already paid by the company with the first-half results, the aggregate cash payout stood at Rs4.50.
The better-than-expected results boosted market sentiments and the KSE-100 index closed up by 25.87 points to 5381.09 on Thursday, which offered the market relief after last few sessions of despondency.
The share in PPL gained Rs3.30 to close at Rs108.70, from the opening price of Rs105.40. On Thursday's market value, the price-to-earnings (PER) of PPL worked out at 11.2x and the dividend produced yield of 4.2pc.
Stock brokerage firm Elixir Securities noted that the period for provisional trading was also expected to be extended by two weeks. The company has called annual shareholders' meeting on October 18. Dividend will be paid to shareholders whose names will appear in the Register of Members on October 18.
The results released on Thursday showed that sales at PPL rose by 45.1pc to Rs17.7 billion, from Rs12.2 billion the earlier year. After deduction of field, prospecting and development expenditure amounting to Rs6.3 billion and royalties of Rs2.0 billion, net sales grew 13.5pc to Rs8.2 billion, from Rs7.2 billion in FY03.
Operating profit rose 91.3pc to Rs9.5 billion, from a year ago operating profit at Rs4.9 billion. Pre-tax profit shot up by 87pc to Rs9.1 billion, from Rs4.8 billion the previous year.
Earlier in their forecasts, First Capital Securities had projected a top-line growth by around 40 per cent owing to gas pricing revision of Sui and Kandhkot fields and commencement of production from Sawan field.
"Sawan field alone is likely to offset the decline in production from Sui field," said the analyst and added the commencement of production from Tal block and increase in production capacity of Adhi field in 2006 was also likely to mitigate production losses of the company from Sui.
Abdul Rasheed said in a pre-result report that Sawan field, in which PPL held 26.2pc non-operating stake, had started commercial product from September 2003 and was operating at an average of 360 mmcfd since January 2004.
Analyst said that Under the GPA 1982, PPL shareholders were guaranteed fixed return. This was replaced with the market-based pricing mechanism under which Sui and Kandhkot prices would gradually be raised to 50pc of other fields' well-head prices, by 2HFY07.
The analyst said that international prices of oil were expected to average $35 per barrel during FY05 and $30 per barrel, afterwards. "Since PPL is primarily a gas producing company and gas prices increase at declining rate, PPL will not significantly benefit from higher crude oil prices," said Mr Rasheed, adding that on the positive side, in case global prices fall drastically, PPL profitability would not decline significantly in the future.
In his pre-results review, Mohsin Ahsan at Global Securities said that the earnings increase of 35pc would mainly come from revision in Sui and Kandhkot gas prices and start of production in three new JV fields in FY04.
"Moreover, start of new higher priced fields will also push up net selling price," said the analyst, adding that, lastly, the strong oil prices would benefit earnings as gas prices were benchmarked with oil and were revised every six months on January and July.