Pakistan Oilfields Ltd (POL) has announced a 3 percent jump in after-tax profit for FY04 as compared to last year, declaring a cash dividend of Rs 12.5 per share. The top-line reported a growth of 4 percent, which is lower than expectations owing to lower production levels. Lower than expected exploration costs and tax resulted in a 3 percent jump in bottom-line, according to a report prepared by Shahab Farooq, an analyst from First Capital Equities.
POL announced an improvement of 2.7 percent in its bottom-line for the year ended June 30, 2004. The company posted after-tax profit of Rs 2,495 million (EPS Rs18.99) as against a PAT of Rs 2,428 million (EPS Rs18.48) of last year, which is 3.4 percent above expectations.
The company has also announced final cash dividend of Rs 12.5 per share. Deviation from expectations was mainly on the back of lower than expected levels of production, which resulted in a 4.1 percent growth in sales revenue on account of higher international oil prices.
Operating costs registered an increase of 8.1 percent owing to higher amount of royalties on oil and gas sales. Exploration write-offs amounted to Rs 903.9 million against Rs 490.1 million of last year.
The increase in exploration write-offs was mainly on account of increased activities for exploration and development of oil and gas in Pindori and other joint venture fields.
Another factor which positively affected the bottom-line was lower than expected effective tax rate of 26 percent as against expected 28 percent.
The crystal ball: POL stock has been largely speculative on expectations regarding a bonus issue in recent days.
The under-performance of the scrip was mainly on account of falling market and non-materialisation of bonus expectations despite better than expected earnings.
Going forward, Shahab expects POL to continue its sterling performance in the years to come. Tal block would be a great addition to the portfolio of the company and fuel the bottom-line growth along with the sustainable international oil prices.
POL continues to be a buying opportunity at current levels with a dividend yield of 7 percent and the scrip is trading at a PER of 9 multiple of FY05E earnings.
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