By: Ameet Daulat
KASB Securities Limited
+92 21 111 222 000
The recent surprise extension in additional 60mmcfd of gas for another 12-mth adds to the list of strong catalysts for EFERT and raises our conviction in the stock which trades at an undemanding CY15E P/E of 5.73x.
We lift our estimates for EFERT by 25%/6%/4% over CY15/16/17E and raise our PO by 19% to PRs86.0 (27% upside from current levels) from PRs72 earlier.
We reckon additional production will likely accelerate debt repayment and raises the downside cushion in case of materialization of different risks.
Among other stock price catalysts, we eye that (1) final approval of concessionary gas price, (2) CY15 results and first cash payout by EFERT, (3) likely Shariah compliance in 1Q15 are expected to bode well for the company.
Market excitement in EFERT is likely to reflect in Engro Corp as well, where our preliminary estimates suggest CY15E EPS of PRs24-25 after a dismal 2014 as a result of failures in the rice business.
Multiple positive developments raise PO to PRs86/sh; reiterate Buy!
On the back of positive developments on the micro and macro level in the shape of Guddu gas extension and dip in risk free rate to 10% on expectation of another 50bps DR cut, we raise our PO by 19% from PRs72/sh to PRs86/sh. Moreover, we have also lifted our earnings estimates by 25%/6%/4% to PRs11.82/10.89/PRs11.60, for CY15/16/17E respectively. The latest development further increases our liking for the script which trades at an undemanding 2015 P/E of 5.73x and offers potential upside of 27% from current levels.