Specialized Financial Institutions: PAK OMAN INVESTMENT COMPANY LIMITED - Year Ended December 31, 2006 (Audited)
"If you want the world to change, don't complain about it. Do something". Pak Oman Investment Company Limited has introduced its eye-catching and very informative Annual Report 2006 with this quotation from Wayne W. Dyer.
Change is rarely easy; but an evolving and dynamic organisation such as PakOman Investment hopefully understands that change is part and parcel of growth and progress.
PakOman Investment was incorporated as a private limited company on July 23, 2001 and was converted into a public limited company on March 17, 2004. It is a joint venture on 50:50 bases between the Government of Pakistan and the Government of the Sultanate of Oman. The company's objectives interalia include promotion of the economic growth of Pakistan and Oman through industrial development and agro-based industries on commercial basis and to carry on the business of finance and/or investment bank.
Pak Oman Micro Finance Bank Limited (33.40% holding) and Japan Power Generation Limited (effective holding - 17.33%) are the associated companies whereas Pak Oman Asset Management Limited is a subsidiary (51% holding). However, the Overview hereunder is that of PakOman Investment alone, without consolidation with its subsidiary.
Authorised capital of PakOman Investment as on December 31, 2006 was Rs 3 billion, comprising 300 million shares of Rs 10 each. As on December 31, 2006 the paid up capital at Rs 3 billion was held equally by the Government of Pakistan and the Government of the Sultanate of Oman. The company has been assigned, by JCR-VIS, a medium to long term rating of "AA+" (Double A Plus) and short term rating of "A1+" (A One Plus).
The company operates a branch at Lahore and other representative offices at Islamabad, Gawadar and Muscat. Staff strength as on December 31, 2006 was 92 employee (including 15 outsourced employees (2005: 80 employees including 10 outsourced employees).
Total assets of PakOman Investment increased by 28% to Rs 15 billion on December 31, 2006 compared to Rs 12 billion on December 31, 2005. Increase in assets has occurred in Lending to Financial Institutions (60%), Advances (31%) and Cash balances. The increase in assets has been largely financed through increase in Borrowing from Financial Institutions and increase in Equity. In the meantime, Deposits have decreased by 24% to Rs 3.010 billion (20% of Total Assets) as on December 31, 2006 compared to Rs3.977 billion (33% of TA) as on December 31, 2005.
The company has invested Rs 222 million in associate companies and Rs 51 million in the acquisition of 51% interest in a subsidiary company. Of the total investments PakOman Investment now has 12% in Held to Maturity Securities (2005: 11%) and 71% in Available for Sale Securities (2005: 82%).
PakOman Investment's Advances as on December 31, 2006 at Rs 6.136 billion are 40% of Total Assets (2005: 39% of TA). On this date, gross NPLs are Rs 130 million. In percentage terms gross NPLs on this date are 2.1% of gross Advances (2005: 0.1% of GA). PakOman Investment has made full provision against gross NPLs according to the SBP criteria.
Very low level of NPLs as shown above could possibly be due to the fact that the company is relatively new in the lending business; though it could also be the result of its capability to lend only to the right type of customers. However, as some doubtful loans have the tendency to stay under cover for sometime due to different reasons, a prudent policy for PakOman Investment would be that the management remains extra vigilant in the appraisal and monitoring of all loans.
According to note 38 to the financial statements, Capital Adequacy Ratio of the company as on December 31, 2006 was 37.14% (2005: 28.04%) as against prescribed minimum equivalent to 8% of the risk weighted assets of the banking company. PakOman Investment's equity including Surplus on Revaluation of Assets on December 31, 2006 stood at Rs 4.006 billion (26% of TA) compared to Rs 2.360 billion (20% of TA) as on December 31, 2005. There are no subordinate loans.
Total mark up/interest income of PakOman Investment for the year ended December 31, 2006 increased by 51% to Rs 1,209 million compared to Rs 799 million for 2005. Total mark up-interest expense represented 69% of total mark up income for 2006, compared to 59% for 2005.
Non-mark up income for 2006 was slightly lower at Rs 220 million as against Rs 228 million for 2005. The year 2006 was closed with After-Tax Profit at Rs 306 million, registering an increase of 27% over net profit for 2005 at Rs 241 million. ROE for the year at 7.6% (2005: 10.2%) is on the lower side. Performance statistics are given below.
The Chairman in his Review states that five years excellent performance and accelerated growth have geared PakOman Investment towards setting itself even more ambitious targets for the coming years. Its broad objectives are: (i) to grow through investment in subsidiaries; and (ii) to facilitate and foreign investment and trade flow.
PakOman Investment was established at a time when the practice of granting of tax exemption had been abolished. In the year 2006, the company's contribution to the national exchequer was Rs 72 million. The company, therefore, deserves generous funding support in concessionary and other forms from the stakeholders to be able to satisfactorily discharge its development responsibilities and at the same time earn satisfactory ROE on sustained basis.
========================================================
Performance Statistics (Audited)
(Rs million)
========================================================
Balance Sheet (As on Dec. 31,) 2006 2005
========================================================
Total Assets: 15,376 11,990
Cash, balances with banks: 1,744 558
Investments-Net: 4,172 4,703
Advances-Net: 6,136 4,669
Borrowing from fin. Institutions: 7,869 5,250
Deposits, other accounts: 3,010 3,977
Total Liabilities: 11,370 9,630
Net Assets: 4,006 2,360
Share Capital: 3,000 1,500
Reserves & Un-app. Profit: 1,100 906
Equity: 4,100 2,406
Surplus on Revalue, Assets: -94 -46
Equity incl. Revalue Surplus: 4,006 2,360
Advances-Gross: 6,182 4,672
Gross NPLs: 130 3
Total Provision: 46 3
Conting. & Commitments: 4,267 1,400
--------------------------------------------------------
Ratios: 2006 2005
--------------------------------------------------------
Cash & bank/Total Assets: 11% 5%
Investments/Total Assets: 27% 39%
Advance-Net/Total Assets: 40% 39%
NPLs/Advances-Gross: 2.1% 0.1%
NPLs Prov./Advances-Gross: 0.7% 0.1%
Deposits/Total Assets: 20% 33%
Total Liabilities/Total Assets: 74% 80%
Total Equity/Total Assets: 26.1% 19.7%
Deposits/Equity: 75% 169%
Advances/Deposits: 204% 117%
Investments/Deposits: 139% 118%
Conting.& Comm./Equity: 107% 59%
Book Value Per Share: 13.35 15.73
--------------------------------------------------------
Income Statement 2006 2005
--------------------------------------------------------
Markup-interest earned: 1,209 799
Markup-interest expensed: 830 472
Net Markup-interest income: 379 327
Provisions and write offs: -45 -3
Net mark up income (aft. Prov.): 334 324
Total non-markup income: 220 228
Income bef. Admn. Exp.: 554 552
Admin Expenses, etc: 223 273
Profit before Taxation: 331 279
Current & deferred tax: 25 38
Profit after taxation: 306 241
--------------------------------------------------------
Ratios: (Annual Basis) 2006 2005
--------------------------------------------------------
Markup earned/Total Assets: 7.9% 6.7%
Net Markup Income/TA: 2.5% 2.7%
Net markup (aft. Prov.)/TA 2.2% 2.7%
Non-Markup Income/TA: 1.4% 1.9%
Income before AE/TA: 3.6% 4.6%
Admin Expenses/TA: 1.5% 2.3%
Profit before Taxation/TA: 2.2% 2.3%
Profit after taxation/TA: 2.0% 2.0%
Profit after tax/Total Equity: 7.6% 10.2%
EPS- (year-end paid up) - Rs: 1.02 1.61
--------------------------------------------------------
Cash flow Summary 2006 2005
--------------------------------------------------------
Net Cash flow, Operations: -955 1,379
Net Cash flow, Investing: 581 -820
Net Cash flow, financing: 1,375 -7
Change in Net Liquidity: 1,001 552
Net Liquidity at beginning: 893 341
Net Liquidity at end: 1,894 893
========================================================
COMPANY INFORMATION: : Chairman: H.E. Yahya Bin Said Bin Abdullah Al-Jabri; Managing Director & CEO: Zafar Iqbal; Director: Mustafa Bin Ali Sulaiman; Chief Financial Officer: M. Jamal Nasir; Company Secretary: S. Zia ul Hasan; Head Investment Banking Division: Ms. Sumbul Munir; Head Treasury & Capital Markets: S. Miftah ul Azim Azmi; Head Credit & Marketing Department: Shahbaz Jameel; Auditors & Tax Consultants: A.F. Ferguson & Co, Chartered Accountants; Registered & Head Office: First Floor, Tower A, Finance & Trade Center, Sharae Faisal, Karachi; Legal Advisors: 1- Mandviwala & Zafar; 2- Mohsin Tayebaly & Co Web Address: www.pakoman.com
Comments
Comments are closed.