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Result Previews DGKC and ABL Tuesday October 21, 2014 DGKC ‐ BUY DGKC: 1QFY15 Earnings Preview Target Price: PKR 114 D.G. Khan Cement is expected to announce its 1QFY15 results on Oct24’14 where we expect the company to post earnings of PKR1,248mn (EPS:PKR2.85) as compared to PKR1,067mn (EPS: PKR2.44), representing a growth of 17% YoY. The growth in earnings can be attributed to an 86% decline in finance cost to PKR30mn due to consistent deleveraging. Local dispatches indicated a 10%YoY growth in 1QFY15 while exports declined 25%YoY thus keeping total dispatches flat. On a QoQ basis earnings are expected to decline by 38% primarily due to 1) an adjustment of PKR270mn in the preceding quarter relating to reversal of GIDC adjustment and 2) 12%QoQ decline in total dispatches due to seasonal slowdown. Current Price: PKR 76 DGKC Performance 1M 3M 12M Absolute % ‐1%
‐2%
38%
Relative to KSE % ‐3%
‐12%
‐22%
Bloomberg DGKC.PA
Reuters DGKH.KA
MCAP (USD mn) 323
12M ADT (USD mn) 3.5
Shares Outstanding (mn) 438
Re‐enforcement of GIDC through an ordinance passed by the parliament was expected to be re‐booked (reversed in the previous quarter). Following a stay order issued by the Sindh court restraining the govt. to collect GIDC, we expect the matter has been deferred till further notice. Financial Summary Dispatches Sales Gross Profit Gross Margins ABL ‐ BUY Target Price: PKR 146 4QFY14 QoQ 1QFY14 YoY 897 1,014 ‐11.5% 920 ‐2.5% 6,004 6,936 ‐13.4% 5,854 2.6% 2,084 2,885 ‐27.8% 1,995 4.5% 34.7% 41.6% ‐6.9% 34.1% 0.6% PBT 1,726 2,610 ‐33.9% 1,546 11.6% PAT 1,294 2,022 ‐36.0% 1,067 21.3% EPS 2.95 4.64 ‐36.3% 2.44 21.1% Current Price: PKR 119 1QFY15 Source: BMA Research ABL Performance 1M 3M 12M Absolute % ‐1%
‐2%
38%
Relative to KSE % 12%
0%
38%
Bloomberg ABL.PA
Reuters ABL.KA
MCAP (USD mn) 12M ADT (USD mn) Shares Outstanding (mn) Sajjad Hussain [email protected] +92 111 262 111 Ext: 2065 1,325
0.2
1,145
ABL: 9MCY14 Earnings Preview Allied Bank Limited (ABL) is scheduled to announce financial results for 9MCY14 on Oct 23’14. We expect the bank’s earnings to clock in at PKR11.2bn (EPS: PKR9.8) in 9MCY14, up by a notable 34%YoY. The robust growth in earnings is primarily due to i) higher net interest income at PKR21.2 bn (up 31.8%YoY) on account of margin expansion due to higher investment in PIBs and 78bps increase in average 6M KIBOR to 10.2% during the period, and ii) sturdy non‐funded income of PKR8.7bn, up 20%YoY led by a 15%YoY increase in fee and commission to PKR2.6bn. On a quarterly basis, we expect the bank to post earnings of PKR4.0bn (EPS: PKR3.6), registering a growth of 5.8%QoQ. Along with the results, we also expect the board to announce third interim dividend of PKR1.5/sh taking cumulative 9MCY14 dividends to PKR4.25/sh. Going forward, the strategic shift in asset mix with higher PIB holdings along with a gradual uptick in the demand for private sector credit in the long run is likely to boost future earnings where we expect a 5yr bottom line CAGR of 13%. Thus, we continue advocating a Buy call on the scrip with a TP of PKR146/sh. At yesterday’s close, the stock is offering an upside of 16.6% alongside dividend yield of 4.5%. ABL currently trades at CY14F P/B and P/E of 1.9x and 10.0x, respectively. Iqbal Dinani [email protected] +92 111 262 111 Ext: 2059 BMA Capital Management Ltd. 801 Unitower, I.I.Chundrigar Road, Karachi, 74000, Pakistan For further queries, please contact: [email protected] or call UAN: 111‐262‐111 This memorandum is produced by BMA Capital Management Limited and is only for the use of their clients. While the information contained herein is from sources believed reliable, we do not represent that it is accurate or complete and should not be relied upon as such. Opinions expressed may be revised at any time. This memorandum is for information only and is not an offer to buy or sell, or solicitation of any offer to buy or sell the securities mentioned.11
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