Hub Power Company Limited sustainable higher dividend stream ahead – FS Research
By: Mohammad Fawad Khan,
92 21 5612290-94 Ext 338
Foundation Securities (Pvt.) Limited
Hub Power Company Limited (Hubco) FY13 earnings of PKR8.11/sh undershot expectation (FS: PKR8.24/sh) though final dividend of PKR4.5/sh (cumulative PKR8.0/sh) came in nominally above our expectation. On YoY basis, Hubco standalone earnings have dropped by 15%. Importantly, DPS in FY13 has jumped 33% YoY. We believe Hubco can easily maintain higher dividend in future.
Post results, we tweak down our earnings by 2-7% but lift our DPS estimates by 6-7%. Maintain our Outperform rating on Hub Power Company Limited (Hubco), our preferred pick among IPPs.
4Q earnings drop 25%: Hubco’s standalone earnings in 4Q have slipped 25% QoQ. We attribute the decline in earnings to absence of efficiency gains from Narowal project. Latest industry reports show load factor on the plant has slipped below 6% due to circular debt. Energy sector debt has also impacted generation on its base plant where load factor dropped to 62% in 4Q. Situation has significantly improved post settlement of energy debt in June.