By: BMA Capital Management Limited
Oil and Gas Development Company Limited: 1QFY16 EPS estimated at PKR4.2/sh; The board meeting of OGDC is scheduled on Friday 16th October, 2015 to declare its 1QFY16 financial results. We expect the company to start FY16 on a subdued note as we foresee 1QFY16 NPAT to decline by 36%YoY to PKR18.2bn (EPS: PKR4.2) compared to PKR28.3bn (EPS: PKR6.6) in the corresponding period last year. The result announcement is also expected to accompany an interim dividend of PKR1.75/sh. The notable downtick in earnings can be attributed to the steep downward slide in oil prices (down on average 51%YoY) while 8%YoY decline in oil production will further dent the earnings. In addition to 19%YoY fall in oil production from Makori East (technical issues), slowdown in oil production from operated fields mainly from Chanda, Bobi, Rajian, Sono and Pasakhi North (down cumulative 35%YoY) will remain the prime reason behind lackluster trend in production. Gas production is also expected to decline by 8%YoY to 1,122 mmcfd on account of 20%YoY lower output from Qadirpur. Other income of the company is expected to clock in at PKR4.8bn (down 24%YoY) owing to 75%YoY decline in exchange gains to PKR0.4bn on lower foreign currency deposits. Exploration cost is expected to decrease by 33%YoY to PKR2.5bn as only one dry well is expected to be written‐off in 1QFY16 compared to three wells in 1QFY15. At our TP of PKR201/sh, the stock offers an upside of 46% ‐ ‘BUY’.
The Searle Company Limited (SEARL): 1QFY16 EPS estimated at PKR6.5/sh; The board meeting of The Searle Company Limited (SEARL) is scheduled on Friday 16th October, 2015 to declare its 1QFY16 financial results. We expect the company to post a robust growth of 19%YoY in its profitability to PKR557mn (EPS: PKR6.5) compared to PKR468mn (EPS: PKR5.4) in the corresponding period last year. The growth in earnings can be attributed to introduction of new high margins drugs introduced by the company. We expect the top‐line of the company to register a growth of ~18%YoY to PKR2.5bn while the gross margins are also likely to stay strong at 48%. The uptick in margins of the pharmaceutical companies in recent quarters can be traced to the crackdown being made on spurious drugs, as the incumbent government comes down hard on the manufacturers of unregulated herbal drugs. The scrip has outperformed the market by a significant 27% in last three months and therefore the positives have largely been priced in. At our TP of PKR437/sh, the stock offers an upside of 8%.