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Morning Briefing for Jan 17, 2012 – Standard Capital

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by January 17, 2012 Brokerage

Karachi: Potpourri report on equities

PSO outstanding dues mount to Rs164bn; MoF releases Rs25bn
Ministry of Finance (MoF) did release Rs 25bn to PSO out of its huge dues pack of Rs 164bn.

According to Standard Capital, this release from federal government may fail to address the issue of power outages as MoF release of the above amount to biggest defaulter WAPDA ostensibly for PSO may not resolve the bigger crisis. PSO is undervalued despite cash flow constraints.

Meezan Bank in the limelight
Meezan Bank (MEBL) has been awarded ‘Best Islamic Bank in Pakistan’ for 2011 by Islamic Finance News of RED money Group, Malaysia. Standard Capital considers MEBL to be ‘deposit led growth’ due to its consistent branch increase in country’s business areas. Even though bank’s asset growth too is phenomenal despite tougher economic conditions prevailing in Pakistan.

MEBL is at present yielding very attractive PE of 5x and thus in Standard Capital’s radar of
‘good buys’.
Engro Corp. coming in limelight
We advise investors to look into best options in fertilizers such as Engro Corp. which may report Rs 21 /sh EPS for CY11 along with final dividend announcement of Rs 4/sh (already paid Rs 4/sh in CY11). The surge in 4QCY11 is in the wake of increasing urea prices.

Banks’ deposits up 14.6% at Rs5.87tn during CY11.
SBP released combined balance sheet of all banks in as at December 31, 2011. According to the data, total deposits in the CY11 (January to December), increased by 14.64% to Rs5.87 tn as compared to Rs 5.12 tn on at the beginning of year 2011. Similarly, in 4QCY11 the deposits surge by 8.4% QoQ compared to decline of 3.2% in the previous quarter (July‐September‐11).

Gross advances remained flat at Rs3.49 tn as at December 31, 2011.However, provisioning grew by 11.9% to staggering Rs 380bn vs. Rs 339bn recorded at the beginning of the year 2011. Net advances marginally fall by 1.33% to Rs 3.11 tn from Rs 3.15 tn during the period.

Due to bad quality of assets, where NPL at higher level, banks preferred to grow their investment portfolio rather than lending the money to borrowers. This is evident from the fact that investment grew by hefty 41.3% to Rs 3.0tn compared to Rs 2.10 tn in CY10.

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