Fiscal year 2012 results on August 8: PPL likely to announce impressive earnings of Rs 32.78 per share

Pakistan Petroleum Limited (PPL) is scheduled to announce its FY12 result on August 08, 2012. PPL is expected to announce impressive earnings of Rs 32.78 per share for FY12, up 37 percent on year-on-year basis, though fourth quarter is likely to report a decline of 11 percent on quarter-on-quarter basis owing to lower international oil prices, analysts said.
"Our base case final cash payout stands at Rs 7/share (taking cumulative dividend for the year to Rs 12/share); however we flag that the company may somewhat cut back its dividend announcement due to plans to acquire MND Pakistan assets and proposed investments in Iraq", Atif Zafar, an analyst at JS Global Capital said.
Hence, the company may opt for a 10-20 percent bonus issue, he added. He said PPL's overall revenues are expected to be augmented by 22 percent on year-on-year basis in FY12. Revenues from oil production are likely to increase by 35 percent mainly on the back of 19 percent higher average international crude oil prices and production growth of 15 percent led by additions from the Tal and Nashpa fields. Revenues from gas production are also anticipated to expand by 19 percent owing to an average increase of 16 percent in well-head gas prices, while growth in production is expected to be muted at 2 percent.
Arab light crude oil prices averaged at $108/bbl in the fourth quarter against an average of $119/bbl in the preceding quarter, down 9 percent. As a result, the overall revenues of the company are likely to contract by 7 percent.
"Hence, we expect earnings to clock in at Rs 8.23/share for the fourth quarter, down 11 percent on quarter-on-quarter basis", he said. However, a superior production profile vis-à-vis last year is likely to result in a growth of 53 percent on year-on-year basis.
"We positively view PPL's aggressive strategy to improve its production profile through acquisition of MND Pakistan assets and proposed investments in Iraq", he said. While drilling has commenced in Nashpa-4, favourable test results from Naspha-3 (presently in testing phase) are likely to act as a trigger for the stock in the near term. Meanwhile, recovery in oil prices (Arab Light up by 15 percent from its recent bottom) is also likely to keep investors interest intact as share of revenues from oil production in the company's overall revenues is growing. The stock trades at an FY13F PE of 6.0x (cheapest in the local E&P space) and offers a dividend yield of 7 percent.