The subdued market participation in the first four T-bills auctions conducted in the 3Q CY13 doesn’t imply that bankers are wary of this lucrative investment avenue. The resounding comeback in the last T-bills auction held on September 18, bears testament to this (refer to article titled “T-bills revive lost charm” published in this section on September 20, 2013).
While T-bills enticed huge investor traffic after the discount rate hike, PIBs are still crying in the corner. Despite an increase of 54, 50 and 60 basis points in the cut-off yields of 3-year, 5-year and 10-year government papers, respectively, the auctions could barely attract bankers’ interest.
According to a market source, the hike in the cut-off yields in the current PIB auction has already accounted for a discount rate hike of 150 basis points. Further, the hike in the cut-off yields of PIBs widened the spread between 10-year PIB and 6-month T-bills to over 300 basis points.
Despite the steepening yield curve, participation in the long-term government papers remained highly subdued. Against the target of Rs50 billion, participation stood at Rs28.89 billion and that too is highly skewed towards 3-year paper. It is a no-brainer that another rate hike is on the cards.
Out of the placed bids of Rs28.89 billion, the government could hardly muster Rs16 billion—reason being the bids placed on the higher-end which led to their rejection.
With the inflation target of 11-12 percent by the end of current fiscal, a hike in the discount rate is inevitable if real interest rates are to remain in positive territory. The soon-to-come rate hikes will surely dent the investment portfolio of the successful bidders with massive unrealized losses.
Given the backdrop, what triggered the participants to sneak-in?
Industry insiders assert that a substantial portion of the PIB participants comprises of non-competitive bidders, i.e. the insurance and pension funds. Given their long-term liability structure, long-term risk-free investment avenues such as PIB and NSS remain their favorite picks. Devoid of other long-term investment avenues, these participants are conservative bidders.
With the IRR on corporate TFCs ranging between 14–15 percent, perhaps a cut-off yield of 12.5–13 percent would trigger competitive bidders to swarm in. Nonetheless, long-term inflation outlook remains a major driver. No sane investor would lay his money on the line for a minimal real return.
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PIB AUCTION PROFILE (26-SEPTEMBER-2013)
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Bond Tenure Auction Participation Acceptance Cut-off
Target Ratio Ratio Yield
Rs (mn)
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3-year 15,000 90% 37% 11.692%
5-year 15,000 44% 29% 12.151%
10-year 15,000 59% 41% 12.600%
20-year 5,000 No bids received
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Source: State Bank of Pakistan
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ELAHI COTTON MILLS LIMITED
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Rs (mn) FY13 FY12 Chg
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Sales - net 256 211 21%
Cost of sales 252 206 22%
Gross profit 3.8 5.2 -27%
Operating profit 0.2 2.1 -88%
Other income 3.2 0.6 461%
Profit before tax 3.3 2.5 30%
Profit after tax 2.8 1.0 175%
EPS (Rs) - basic 2.17 0.79
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Source: KSE notice
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MURREE BREWERY COMPANY LIMITED
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Rs (mn) FY13 FY12 Chg
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Sales - net 4335 3629 19%
Cost of sales 2861 2496 15%
Gross profit 1474 1133 30%
Operating profit 1007 730 38%
Profit before tax 1054 803 31%
Profit after tax 718 525 37%
EPS (Rs) - basic 34.26 25.05
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Source: KSE notice
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QUALITY TEXTILE MILLS LIMITED
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Rs (mn) FY13 FY12 Chg
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Sales 2557 2075 23%
Cost of sales 2245 1863 20%
Gross profit 312 212 47%
Other operating income 4 5 -23%
Profit before tax 196 86 128%
Profit after tax 166 66 150%
EPS (Rs) - basic 10.39 4.16
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Source: KSE notice
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HUM NETWORK LIMITED
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Rs (mn) FY13 FY12 Chg
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Revenue - net 2291 1742 32%
Cost of production
& transmission cost 1296 1096 18%
Gross profit 996 646 54%
Other operating income 66 43 53%
Profit before tax 565 262 115%
Profit after tax 388 196 97.98%
EPS (Rs) - basic 7.76 3.92
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Source: KSE notice
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FAZAL TEXTILE MILLS LIMITED
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Rs (mn) FY13 FY12 Chg
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Sales 5909 4698 26%
Cost of sales 5089 4304 18%
Gross profit 821 395 108%
Other income 7.1 5.6 28%
Operating profit 648 186 249%
Profit before tax 458 163 181%
Profit after tax 436 132 231%
EPS (Rs) - basic 70.50 21.29
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Source: KSE notice
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ALLAWASAYA TEXTILE & FINISHING MILLS LIMITED
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Rs (mn) FY13 FY12 Chg
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Sales 2039 2066 -1%
Cost of sales 1876 1903 -1%
Gross profit 219 163 34%
Profit before tax 121 65 88%
Profit after tax 87 42 110%
EPS (Rs) - basic 108.99 51.97
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Source: KSE notice
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FECTO CEMENT LIMITED
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Rs (mn) FY13 FY12 Chg
=============================================
Sales- net 4588 4343 6%
Cost of sales 3334 3377 -1%
Gross profit 1255 966 30%
Profit before tax 706 297 138%
Profit after tax 583 347 68%
EPS (Rs) - basic 11.63 6.91
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Source: KSE notice
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PROSPERITY WEAVING MILLS LIMITED
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Rs (mn) FY13 FY12 Chg
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Sales - net 6600 5382 23%
Cost of sales 5934 5008 18%
Gross profit 667 375 78%
Other income 2 4 -55%
Operating profit 478 215 122%
Profit before tax 396 108 266%
Profit after tax 343 78 342%
EPS (Rs) - basic 18.54 4.20
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Source: KSE notice
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ECOPACK LIMITED
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Rs (mn) FY13 FY12 Chg
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Sales - net 1770 1922 -8%
Cost of sales 1518 1780 -15%
Gross profit 252 142 78%
Other operating income 15 18 -14%
Operating profit 158 62 155%
Profit/(loss) before tax 42 -62
Profit/(loss) after tax 2 -79
EPS (Rs)-basic 0.11 -3.43
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Source: KSE notice
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NAGINA COTTON MILLS LIMITED
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Rs (mn) FY13 FY12 Chg
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Sales 4452 3675 21%
Cost of sales 3515 3058 15%
Gross profit 937 617 52%
Other income 31 47 -33%
Operating profit 702 466 51%
Profit before tax 625 364 72%
Profit after tax 605 329 84%
EPS (Rs) - basic 32.36 17.60
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Source: KSE notice
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BYCO PETROLEUM PAKISTAN LIMITED
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Rs (mn) 9M-FY13 9M-FY12 Chg
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Sales - net 44454 11662 281%
Cost of sales 44109 12614 250%
Gross profit / (loss) 344 -952 -136%
Other income 756 1458 -48%
Profit / (loss) before tax -2022 -2348 -14%
Profit / (loss) after tax -2107 -2261 -7%
EPS (loss) (Rs) - basic -2.16 -2.31
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Source: KSE notice
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ELLCOT SPINNING MILLS LIMITED
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Rs(mn) FY13 FY12 Chg
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Sales - net 4858 4025 21%
Cost of sales 4204 3593 17%
Gross profit 655 433 51%
Other income 4 13 -66%
Operating profit 504 329 53%
Profit before tax 422 200 111%
Profit after tax 352 148 137%
EPS (Rs) - basic 32.16 13.37
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Source: KSE notice
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B. F. MODARABA
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Rs (mn) FY13 FY12 Chg
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Operating income 12.4 16.0 -22%
Profit before tax 2.2 6.6 -66%
Profit after tax 2.0 6.3 -68%
EPS (Rs) - basic 0.27 0.84
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Source: KSE notice
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RUPALI POLYESTER LIMITED
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Rs (mn) FY13 FY12 Chg
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Sales 6092 6391 -5%
Cost of sales 6317 6176 2%
Gross profit -226 215 -205%
Other operating income 92 53 74%
Operating profit / (loss) -276 125
Profit / (loss) before tax -358 82
Profit / (loss) after tax -437 21
EPS (Rs) - basic -12.82 0.61
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Source: KSE notice
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POWER CEMENT LIMITED
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Rs (mn) FY13 FY12 Chg
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Sales - net 3512 2930 20%
Cost of sales 2789 2683 4%
Gross profit 723 297 143%
Operating profit 817 695 18%
Profit before tax 434 293 48%
Profit after tax 370 154 141%
EPS (Rs) - basic 1.01 0.42
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Source: KSE notice
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