The massive fall at Karachi Stock Exchange (KSE) has made several scrips attractive as their dividends yield are about to hit the double-digit deck, but investors would take time to build their portfolios again as the decline has made them jittery, analysts said. A sudden tidal wave at the KSE that began on March 16, 2005, where the index plummeted by 2364 points, washed away all gains which were nurtured in a long honeymoon during February and first 15 days of March.
Investors also fretted over this decline that overly prolonged at the local bourses bringing the index to the depths of despair. Still, the sustenance of the psychological barrier of 7500 stands as a question mark in the coming days due to already provoked selling pressure, and investors are sitting in vain for a 'white knight'.
Although the market has created tremors for everyone, Humaira Zaheer, head of research at Capital One Equities, was of the opinion that one should focus on the fundamentally strong and growth stocks, which pay regular dividends and have been discounted with a very high margin.
Looking at the key stocks Fauji Fertiliser remains the pick on the back of strong financial base and hefty payouts. Affected by the heat waves at the KSE, FFC has been slashed down by Rs 31 per share in the bearish rally, which started on March 16, 2005. Currently, the fertiliser stock is standing at a prospective P/E multiple of 10.7 multiple and offering a cash yield of 8 percent. The long-term prospects of the company are bright due to the growing demand of fertiliser on account of better water availability, which would improve the agri base in the country.
She said that it was time to say 'Enough'... There is a dire need to resolve all matters pertaining to local stock exchanges. Volatility in the market would continue until the internal issues of the members coupled with investors who are currently incurring mammoth losses, are appeased by the KSE. Despite all odds, hopes still spring that the market would revert to its norms in the wake of upcoming results of key companies which can bring the market out of the troubled waters.
Ali Farid Khawja, economist at Alfalah Securities, said that the market has come down quite a bit and the fall of the big four stocks has pulled down the rest of the scrips along with them as well. As a result of this collapse, what has happened is that stocks like Hub Power (Hubco) and Kot Addu Power (Kapco), which offer dividend yields of 13.4 percent and 17 percent, respectively, and fundamentally growth stocks like Askari Bank (ACBL), Pak Oilfields (Pako), Fauji Fertiliser (FFCL) and Maple Leaf Cement (MLCF) have become attractive. For example, ACBL, with a fair value of Rs 97 is trading at a discount of 20 percent, at a price per book value (P/BV) of 1.34 multiples, while in the region, banks mostly trade at P/BV of 2X. Similarly, at current prices, Hubco and Kapco trade at profit earning ratio (PER) of 5.83 multiples and 5.94 multiples respectively, Pako is trading at a PER of 10.7 multiples at a discount of 16 percent to our fair value of Rs 302. Fauji Fertiliser is trading a discount of 20 percent to fair value (PkR160).
Is this the time to enter the market?
"We think after the crisis is over, the investors should take advantage of the attractive prices of the yield plays and growth stocks and start accumulating in a staggered manner", he said. We advise caution to the investors that in the desire to wait for the market to bottom out they might miss a good buying opportunity (just like many investors missed the opportunity to make profits by waiting for the market to peak out earlier).