KARACHI, Nov 8: The golden rule for investment in equities, often touted by the best of stock picking gurus: “Buy on rumours; sell on news”, couldn’t have been more convincingly demonstrated than in the case of Pakistan Telecommunication Company Limited (PTCL).
The financial figures unveiled by the telecom on Thursday posted an after tax profit of Rs18.2 billion and the Board announced a full year cash dividend at 24 per cent.
On both counts, the punters who were throwing around numbers were proved correct while the stock analysts, feverishly working on their calculators — forecasting taxed profit between 12 to 16 billion and a dividend of up to 23 per cent — ended up, in varying degrees, off the mark.
The results and payout were greeted by the market with 40 paisa improvement in the price of PTCL stock, which closed on Thursday at Rs17.85, from Rs17.45 with a huge volume of 77 million shares. The company also announced that the shareholders’ annual meeting would be held on December 29 (place and time not specified).
A statement released by PTCL in the evening quoted chairman Akhtar Ahmed Bajwa, as pointing out that the Rs62 billion revenue earned by the company during the year was the highest ever; that it was Rs1 billion more than the budget and Rs3.4 billion higher than the earlier year’s figures of Rs58.6 billion.
After tax profit at Rs18.16 billion was also stated to be the highest in company history and reflected 36 per cent growth over the 1999-2000 tax holiday period earnings of Rs13.33 billion. Domestic revenue contributed Rs42.9 billion and international revenue Rs19 billion to the aggregate revenue of Rs62 billion for the latest year. The company stated that the domestic revenue had recorded growth of 13 per cent whereas international revenue declined (the company did not say how much), due to declining trend of settlement rates. “Despite a general slowdown in the economy, the increase in revenue amounting to Rs3.4 billion is mainly attributable to tariff rationalization, expansion/digitalization of the PTCL network, value added services, increase in tariff due to NWD price reductions, introduction of CPP and overall growth of Internet, Cellular and IT industries”, the company said.
Operating costs decreased by Rs1.8 billion, to Rs31.5 billion, from Rs33.3 billion. The item that had been a subject of analysts’ speculation — and on which much of the analysts’ forecast was based — was in respect of the amount of provisioning. The financial year 2000 earnings had been dominated by non-tax deductible provisioning charge of Rs1.9 billion on account of employees benefits in line with International Accounting Standard (IAS) 19. Some analysts also said that last year, the impact of a prior year adjustment of Rs7.6 billion was taken directly on the retained earnings.
“This year, however, there are indications from within the company that the amount provisioned last year may have been overstated in the accounts and would therefore require an adjustment”, wrote one brokerage house in its daily briefing, adding that provisions for retirement benefits this year, that were originally estimated at Rs2 billion, may be closer to Rs1.5 billion, which would directly impact the bottomline.