Pakistan State Oil Company Limited (PSO) has announced its full year FY12 result, beating ours as well as consensus expectations. The company posted NPAT of PkR9.06bn against NPAT of PkR14.78bn in the corresponding period last year. The result translates into an EPS of PkR52.80 versus EPS of PkR86.17 in FY10, a decline of 39%YoY. The result beat street as well as our expectations where we forecasted NPAT of PkR7.98bn (EPS: PkR48.09).
While we are awaiting management guidance for clarity on the deviation, we believe this could be due to PSO holding off on including inventory mark down for the month of Jul’12, leading to lower inventory losses against our expectations. Despite a slight slip in volumes, revenues crossed PkR1tn, up 25%YoY due to higher product prices.
Furthermore, PSO surprised on payout announcing a 20% bonus issue alongside a PkR2.5/share dividend. This has provided stock price reason to rejoice with the stock closing up 4.9% today. At current market price, we recommend a Buy stance on PSO with a target price of PkR330/share
PSO: 39% decline in earnings but bonus cherished the market
By: Furqan Punjani
BMA Capital Management Ltd
Pakistan State Oil (PSO) reported lower than expected decline in profits (39%) to PKR9bn (EPS PKR52.8) compared to PKR14.7bn (EPS PKR86.2/sh) in corresponding period last year. Moreover better than expected payout primarily by stock dividend (20%) cherished the market sentiment.
The company also announced final cash dividend of PKR2.5/sh cumulating the FY12 cash payout to PKR5.5/sh.
Alone in 4QFY12 the company posted meager profit of PKR82mn (EPS PKR0.48) compared to PKR5.5bn (EPS PKR32.2) in same period last year.
Lower than expected inventory and FX losses seem to have made company to post above expected results.
We maintain our ‘Buy’ rating on the stock providing hefty capital gains of 54% to our FY13 target price of PK371/sh.