omc: no mention; hence safe - BMA Capital Management

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BUY Fair Value: PKR 242 Current Price: PKR 192 Stock Statistics Ticker MCB 3-month High/ Low 216.3/ 174.9 Mkt Cap USD mn 1,730 12M ADT mn 1.5 Beta 1.22 MCB vs. KSE Relative Graph 200 180 160 140 120 100 80 Volume mn(RHS) MCB KSE100 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 MCB profile: MCB is one of the leading banks of Pakistan. Incorporated in 1947, MCB was nationalized along with all other private sector banks in 1974. During the last fifteen years, the Bank has concentrated on growth through improving service quality, utilizing its extensive branch network & developing a large and stable deposit base 30 12 10 8 6 4 2 0 MCB Bank: Always a safe bet! Investment Summary June 7, 2010 � Strong fundamentals: Despite tough conditions faced by the banking sector during the year, MCB has been able to maintain the highest NIMs in the sector at ~8%. This is thanks to an extensive branch network (3 rd largest) and highest CASA over its peers. Going forward as well, the bank can leverage this advantage with an aim to mobilize low cost deposits and hence maintain its NIMs. In addition, CASA is high at 83% which suggests lower risk to incremental pressure over deposits cost due to liquidity constraints. � Comfortable CAR & roomy ADR: MCB has extremely comfortable CAR at 19.1% (Dec09) and roomy ADR at ~73% (Dec09) which bodes well for balance sheet growth going forward. Although we do not see double digit growth in its loan book for CY10; better position for the same as credit risk subsides and high exposure to govt. securities ensure better asset quality and profitability compared to peers. � Winner on asset quality: Amongst top tier banks MCB has one of the best asset quality given relatively lower NPLs to gross loans at ~8.9% compared to BMA universe sector average of ~10%. Moreover, MCB has also witnessed considerable deceleration in its NPL accumulation on a quarterly basis. The full impact of this will be seen in CY10 where we expect provisions against NPLs to come off considerably resulting in significant bottom-line growth. � Maintained ROE: MCB also carries one of the highest ROEs (24%) amongst the Pakistani banks. Therefore, comfort is maintained for investors with respect to continued dividend payouts. � Pension fund reversals: MCB continues to benefit from pension fund reversals. The management forecasts a three year timeline for complete reversals to take place which will continue to provide relief through lower administrative expenses and relatively better cost to income ratio. Financials CY09A CY10E CY11E CY12E EPS(PKR) 20.55 23.16 24.88 29.39 Price to book (x) 2.08 1.84 1.62 1.43 Dividend Yield (%) 5% 6% 6% 8% EPS Growth (%) 13% 7% 18% 13% Return on Equity (%) 24% 23% 22% 23% Return on Assets (%) 3% 3% 3% 3% Source: BMA Research
BUY Fair Value: PKR 282 Current Price: PKR 221 Stock Statistics Ticker POL 3-month High/ Low 249.9/216.3 Mkt Cap USD mn 618 12M ADT mn 1.9 Beta 1.13 KSE vs POL Relative Graph 200 180 160 140 120 100 80 Volume mn(RHS) POL KSE100 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 POL Profile: Pakistan Oilfields (POL) is engaged in oil and gas exploration in the country and has been investing independently and in joint ventures with various other exploration and production companies. In addition, it is also manufactures LPG, solvent oil and sulphur. The company is part of The Attock Oil Company Limited (OCAC) and holds 25% ownership stake in National Refinery Limited. 31 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Pakistan Oilfields: Growth at its best Investment Summary June 7, 2010 � Amidst materialization of production growth from TAL Block: POL’s performance over FY07-09 has stayed lacklustre as it posted dismal production data over the period, primarily on account of concerns in one of its key fields, Pindori (POL ownership stake: 35%). As a result, oil production for the company declined from 6.0kbpd in FY07 to 3.7kbpd in FY09 while gas production declined from 47mmcfd to 38mmcfd during the same time period. � However with POL accounting for 21% stake in Tal Block, the ongoing production additions are projected to turn around the company’s profile. Central Processing Facility has already come online (during 2QFY10) at Manzalai field, enhancing its oil and gas production to 200+mmcfd (up 4x) and around 4,000bpd (up 7x), respectively. Moreover Mamikhel and Maramzai being relatively recent discoveries are projected to come online during 1HFY11 with cumulative oil and gas production addition of 85mmcfd of gas and 3,000bpd of oil. As a result, we project POL to deliver an impressive oil and gas production growth of 18% and 89% respectively in FY10 while complete annualized impact of production additions will translate into further double-digit growth in FY11-12. � Benefits of Attock’s oil conglomerate: POL being the exploration arm of the Attock group’s portfolio derives part of the strength of its business model through an inherent shield against the system’s circular debt. Supplying a substantial portion of its production to the group’s refineries (Attock Refinery and National Refinery), the company has been able to sustain itself better than its peers (PPL and OGDC) in the current liquidity starved environment. � Moreover, POL owns 20mn shares (25% stake) of National Refinery Limited (NRL). Hence dividend income from the refinery arm will continue to add to cash flows and earnings for the company. � Double-digit EPS growth; Prospective Dividend Yield of 9% for FY11E: Offering robust EPS growth of 16% and 28% for FY10E and FY11E respectively, we project the company to post an EPS of PKR42/share for FY11. Moreover, backed by its rich cash reserves current prices also reflect prospective dividend yield of 9% for FY11E – the highest amongst its peers! Financials FY09A FY10E FY11E FY12E EPS(PKR) 23.8 27.5 35.3 41.9 Price to Earnings (x) 9.3x 8.0x 6.3x 5.5x Dividend Yield (%) 8.1% 8.1% 9.1% 10.0% EPS Growth (%) -35% 16% 28% 19% Return on Equity (%) 20% 21% 23% 25% Return on Assets (%) 26% 17% 17% 20% Source: BMA Research
Page 1 and 2: 65 Federal Budget 2010-11 Cautious
Page 3 and 4: 3 TABLE OF CONTENTS Budget FY11: No
Page 5 and 6: 5 June 7, 2010 package will have li
Page 7 and 8: 7 June 7, 2010 against an average o
Page 9 and 10: 9 Sector wise Budget Impact and BMA
Page 11 and 12: ECONOMY Budget Impact Positive Abdu
Page 13 and 14: 13 June 7, 2010 announced in the bu
Page 15 and 16: 15 KEY MEASURES Income tax June 7,
Page 17 and 18: E&P MARKETWEIGHT Budget Impact Neut
Page 19 and 20: OMC OVERWEIGHT Budget Impact Neutra
Page 21 and 22: 21 June 7, 2010 Moreover, seemingly
Page 23 and 24: CEMENTS OVERWEIGHT Budget Impact Ne
Page 25 and 26: CHEMICALS MARKETWEIGHT Budget Impac
Page 27 and 28: 27 Outlook FY11E June 7, 2010 Incre
Page 29: 29 Top Investment Ideas June 7, 201
Page 33 and 34: BUY Fair Value: PKR 409 Current Pri

omc: no mention; hence safe - BMA Capital Management

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