AHCML - Pakistan Investment Strategy 2011

Pakistan Investment Strategy, 2011
ALHabib Capital Markets (Pvt) Ltd

Table of Contents
AHCML Strategy, 2011
Pakistan economy
Pakistan political landscape
Karachi Stock Exchange
Disclaimer
Contact

Pakistan economy, 2011 –
Set to face a challenging & turbulent economic environment

Table of Contents
Pakistan economy during 2011
GDP Growth
Circular Debt
Subsidy
IMF
Foreign Exchange Reserves
PKR/US$
International Oil
Remittances
Inflation & Discount Rate
Currency in circulation
NSS Rates
PIBs, MRTBs & Sukuk
Key economic indicators

GDP Growth
In 2011, Pakistan may face more difficulties due to supply side shortages – resulting
in an increase in food prices in the domestic market - and surging oil prices in the
international market.
Food and POL imports are likely to put pressure on the Balance of Payments despite
record remittances. Depleting foreign inflows and slow export growth may lower the
forex reserves.
While remittance are expected to rise to a record high (US$10.52bn – US$11.02bn),

a small jump may be seen in the import figure due to higher oil and food prices,
which are projected to surpass the US$35bn mark.
The Current Account deficit is projected at 5.25% - 5.50% while fiscal deficit is
forecasted at close to the PKR1,150bn - PKR1,250bn mark (6.75% - 7.25% of GDP).
With no positive sign of reversing the rising fiscal deficit, SBP is persisting with its
tighter monetary policy stance to tame rising inflation while allowing growth to come
down. We believe this present trend would continue!
We foresee GDP growth hovering between 2.50% to 2.70% stemming from an

agriculture sector growth of (2.17%) to (2.41%), Industrial Growth at 2.93% to
3.13% and Services Sector growth of 3.80% to 4.10%.

Circular debt
We do not see any quick settlement of the energy sector inter-corporate circular debt
even in 2011 because of low revenue collection and rising prices of crude in the
international market.
The latest figure of power sector payables stands at PKR275bn while receivables
have jumped to PKR305bn. A quick price adjustment is the only answer to this
problem, which is politically a tough decision to make.

Subsidy
In certain areas, such as energy, it is unavoidable due to current price structuring.

Time lag is the main cause, because petroleum prices are quoted on a daily basis in
the international market, but in our country prices are fixed on a monthly basis.
Monthly oil subsidy ranges up to around PKR12bn, which is annually roughly

PKR230bn - PKR240bn. Another PKR50bn annual subsidy is required for wheat and
sugar for warehouse cost and wastage, which can be minimized with better
management.

International Monetary Fund (IMF)
Pakistan has just received a 9-month extension in the IMF’s SBA of Nov 2008
implying that unless Pakistan fulfills all of the following conditions it is not going to
receive the last two tranches of a cumulative value of US$3.4bn from the IMF:
Widen the tax base (raise the tax to GDP ratio) by imposition of the Reformed
General Sales Tax;
Completion of gradual implementation of a Single Treasury Account;
Limiting govt. borrowings from the Central Bank; and
Implementing power sector reforms;
Given the current precarious political situation that the govt. finds itself in, we doubt
any serious forward movement on the above ‘Condition Precedents’ of the IMF.
This, in turn may push Pakistan’s credit rating down in 2011 and loans from other
multilateral lending agencies such as the World Bank and Asian Development Bank
may even dry down.

Foreign exchange reserves
On books, Pakistan has a forex reserves position of US$17.2bn, out of which

commercial bank deposit is US$3.7bn.
SBP has Fx reserves of US$13.4bn, out of which it owns a little less than US$6bn and
the remaining part is IMF money. There is no other major source of inflow in CY2011.
Hence, surging global oil and food prices could pose a big threat to Balance of
Payments and could even start eating away IMF’s money!

PKR/US$
The secret of the PKR's current stability is largely based on IMF's stabilization
support, higher inflow of remittances and SBP's willingness to hold rupee at current
levels.
Based on the Relative Purchasing Power Parity Concept, we foresee the PKR settling
in the range of PKR86.71-86.92 against the greenback by June 30, 2011, down
1.25%-1.50% from its Dec 31, 2010 close of PKR85.64.
However, in 2HCY11, the PKR could come under increasing pressure due to
deteriorating economic indicators and then settle to PKR88.44-88.88 against the USD
by Dec 31, 2011, down 2.00%-2.25% from its June 30, 2011 close.

International Oil
The Western economies are witnessing a slowdown, but they are still the largest
consumer of oil.
Despite lower growth, demand for global oil inched up in 2010, rising by 2m barrel to
88.1m barrel. The global growth projection for 2011 is better than last year's that
argues for more demand for oil.
Opec supply was 40% of the global oil. It has already stated that they are
comfortable with the current price level and they do not think that increase in oil
production is necessary.
Production fundamentals, of the industry and demand indicate that oil production will
not increase and gradual price hike will be seen. Energy sector experts foresee the
US Crude averaging around US$95-100/barrel levels.

Remittances
These would continue their upward journey to touch an all time high and settle in the
range of US$10.521bn to US$11.021bn during FY11 thereby supporting the Balance
of Payments position.

Inflation and discount rate
We foresee CPI inflation hovering in the range of 15.50% - 16.00% by June 30, 2011
with the result that the SBP’s money growth target of 12% may be breached.
Therefore, we foresee another 100bps rate hike in CY2011 with the Policy Rate
settling at 15% by June 30, 2011.

Currency in circulation
Standing currently at PKR1577.814bn and hence contributing to growth in Broad

Money (M2), it appears to be beyond anyone's control.
The fast pace of growth in currency in circulation is caused by weakening of rupee,

surge in food prices as a result of sharp hike in governmental support price and
excessive govt. borrowings from the SBP.

NSS Rates
Moving in tandem with relative PIB yields, we foresee SSC and SSA yield at around
14.00%-14.50%, DSC at 14.30%-14.80%, RIC at 14.25%-14.75% and PBA and BSC
at 16.25%-16.75% as at June 30, 2011.
While we understand that a surge in NSS yields would undoubtedly help in attracting
cash money; increase the domestic savings ratio; check bourgeoning M2 growth;
contain liquidity and reduce excess demand in the economy with a view to restoring
financial stability in the Country, help the govt. to rely more on non-bank sources of
financing and lower its dependence on the banking system the same would, however,
increase the debt servicing of the govt. thus putting the fiscal position under further
pressure.

PIBs, MRTBs and Sukuk
Banks & FIs are enjoying hefty returns on investments in govt. securities.
Investment in MRTBs has reached PKR1,450bn; PIB holding is PKR516.5bn and

Sukuk has jumped to PKR131.3bn. Total investment in govt. securities has reached
40% while cash reserve money placed with SBP is 5%, NPLs blocked money is 10%,
which means tighter credit for private sector.
Caution is required when buying govt. securities, as excessive purchase of govt.

security is turning out to be a new problem. Against quarterly maturities, Ministry of
Finance comes up with fresh target of 10% increase, meaning target is rolled over
with (P + Return) and new higher target is offered. In 1QCY11 alone, the auction
target for MRTBs stands at PKR980bn, PIBs at PKR35bn and Sukuk at PKR45bn!
Recent downgrading of major Pakistani banks by global rating agencies is due to

excessive investment by banks in govt. securities. The reason is that when banks buy
govt. securities their exposure is on Govt. of Pakistan, which is already struggling on
many economic fronts such as circular debt and loss-making state-owned entities.
The risk is that if revenue collection falls, govt. borrowing targets would be revised
upwards and so would the yields

PIBs, MRTBs and Sukuk
We foresee 3-month MRTBs yield settling in the range of 14.00% - 14.25%; 6-month
MRTBs at 14.25% - 14.50% and 12-month MRTBs at 14.60% - 14.80% by June 30,
2011.
Likewise, we foresee 3-Years PIBs settling between 15.10% - 15.25%, 5-Year PIBs at
15.20% - 15.45% and 10-Year PIBs in the range of 15.30% - 15.55% by June 30,
2011.

Key economic indicators - FY2011
Key monetary data From To

PKR/USD 86.71 86.92 GDP growth 2.50% 2.70%
CPI-General 15.50% 16.00% Agriculture -2.17% -2.41%
Policy rate 15.00% 15.00% Industry 2.93% 3.13%
3-Yrs PIBs 15.10% 15.34% Services 3.80% 4.10%
5-Yrs PIBs 15.20% 15.44% C/A deficit 5.25% 5.50%
10- Yrs PIBs 15.29% 15.55% Fiscal deficit 6.75% 7.25%
3-M MRTBs 14.00% 14.25% Fiscal deficit (PKR bn) 1,150.00 1,250.00
6-M MRTBs 14.25% 14.50%
12-M MRTBs 14.60% 14.85%
SSC & SSA(3-Yrs) 14.00% 14.50%
RIC (5-Yrs) 14.25% 14.75%
DSC (10-Yrs) 14.30% 14.80%
BSC & PBA (10-Yrs) 16.25% 16.75%
Remittances (US$ bn) 10.52 11.02

Int’l oil (US$/bbl) 95.00 100.00

Pakistan political landscape, 2011

Table of Contents
Pakistan political landscape, 2011
Law & Order
Judiciary
Pakistan in committee of nations
Retirement of key public office bearers – 2011
Domestic political scenario
Its all about the numbers!

Law & Order
Possible operation in North Waziristan Agency and its repercussions on the overall
law and order situation in the Country;
Ability of the govt. to hold on to its strategic gains in Swat, South Waziristan, Dir,
Orakzai, Bajaur, Khyber etc;
Impact of USA withdrawal plan from Afghanistan on Pakistan, its economic, political
and military future;
Growing religious militancy - in F.A.T.A., most of N.W.F.P., Southern Punjab –

political violence in Karachi & Balochistan issue etc;
Ability of local law enforcement agencies to uproot domestic terror groups;
With the Army having pushed inside ‘terrorist dens’ there is evidence that many
terrorists have fled and may be regrouping somewhere else. This could disperse
terrorism throughout the Country;
Resettlement of violence, terror and flood hit people & property in a timely manner;

Judiciary
Future of the 19th Amendment;
Various cases against President, senior ministers & bureaucrats;
Missing persons’ cases;
President of Pakistan holding dual offices etc;

Pakistan in committee of nations
Pakistan’s foreign relations especially:
Pak-USA (War Against Terror, Drone Strikes inside Pakistan, USA proposed
withdrawal from Afghanistan etc),
Pak-EU;
Pak-Iran (Balochistan & Gas Pipeline);
Pak-Middle East;
Pak-India relations (Kashmir, Water, Siachen, Sirkreek, Mumbai Attacks etc);
Pak-Afghan relations (Especially in case of an operation in North Waziristan);
US-Iran & Middle Eastern Countries-Iran relations and its impact on Pakistan;
Global concerns regarding Pakistan’s nuclear and missile program (Sino-Pak Nuclear
Deal);\

Retirement of key public office bearers - 2011
Name Designation Retirement Date

Judge Supreme Court of July 31, 2011
Hon. Justice Javed Iqbal Pakistan
Judge Supreme Court of May 31, 2011

Hon. Justice Raja Pakistan
Muhammad Fayyaz Ahmad
Judge Supreme Court of (Adhoc Justice Supreme

Justice Khalil-ur-Rehman Pakistan Court for One Year)
Ramday
Lt Gen Ahmad Shuja Pasha DG Inter-Services March 18, 2011

Intelligence
Lt Gen Jamil Haider Commander, Army Strategic September 21, 2011

Forces Command

No joint leader of opposition expected during the year thus preventing any ‘No
Confidence’ move against the prime minister;
Given the inherent legal weakness in the ruling coalition, it would be quite difficult to
execute the following:
Passage of a Money Bill – Federal Budget, Imposition of RGST and Flood Tax?
Implementation of the IMF program in letter and spirit;
Building consensus on North Waziristan Agency Operation;
Taking any unpopular decision(s) that may be beneficial in the long-term;
Change in political situation in the following provinces:
Sindh: No major change expected;

Punjab: PML-N may force the PPP to quit the coalition govt. in Punjab & PPP may
form a coalition govt. with PML-Q;
Balochistan: PML-Q and JUI-F may form a coalition govt.;
NWFP: No major change expected;

Demands from various opposition parties to:
Conduct free and fair Local Bodies’ elections;

Levy agricultural income tax prior to imposition of RGST;
Address the issue of rising inflation, poverty, job loss etc;
Cap prices of petroleum products, cost of utilities etc;
Set-up an independent National Accountability Bureau & Election Commission to
check corruption;
Appoint key office bearers of PSEs through a parliamentary committee;
Adopt austerity measures at all govt. levels;
A possible mid-way change in the Cabinet and even the slot of Prime Minister can not
be ruled-out;

Its all about the numbers!
Party position in National Assembly

Ruling Coalition Opposition
PPP 127 PML-N 91
ANP 13 PML-Q 50
PML-F 5 MQM 25
BNP-A 1 JUI-F 8
NPPP 1 FATA 3
PPP-S 1
IND.+FATA 15
Total 163 Total 177

KSE - Reach for the stars!

Table of Contents
KSE - Reach for the stars
KSE
MTS
Cheap Valuations
LUCK
DGKC
HUBC
KAPCO
PSO
APL
POL
PPL
NRL
INDU
PTCL
ENGRO
FFBL
NML
ICI

KSE
Balancing risks & rewards
We foresee the KSE-100 Index at the 13,400 level by June 2011 driven by:
Forecasted better corporate earnings;
Surge in FIPI on the back of strong global liquidity, cheap regional valuations of
the KSE and no barriers to entry and exit in Pakistan’s capital markets;
Introduction of Margin Trading System;
Mergers & Acquisitions, especially in banking, energy, fertilizer & telecom sectors;
International Public Offerings & listings – OGDCL bonds - & privatization of PSEs;
Impediment to this forward march of the KSE-100 Index could stem from:
Weak macro-economic fundamentals;
Imposition of Flood Tax, Wealth Tax and R.G.S.T.;
Rising energy sector inter-corporate circular debt, subsidies & cost of utilities;
Issuance of rules for Capital Gains Tax;
Rising political instability;

MTS
Key highlights
As per media reports, SECP approved the concept of Margin Trading System (MTS)
on Sep 08, 2010 whose key features are:
Settlement of MTS market transaction shall be linked and netted-off with ready
market such that settlement obligation shall be shifted from or to AF & financee;
Default of MTS market & ready market will not be inter-mingled;
All client codes used in the MTS market will be registered on UIN database;
All transaction executed in MTS market will be based on FPR% being higher of
VaR estimate or 25% for financee;
On settlement date of first leg transaction, broker financee shall be require to pay
FPR% & AF to pay rest of amount of contract price;
FPR% shall be maintained at all time after settlement of first leg transaction
through MTM adjustment;
Offer of finance on MTS market shall state the number of shares required to be
financed & required rate of return;
Required rate of return shall be determined by each AF & shall not be greater
then 1-month KIBOR+800bps;

MTS
Key highlights
Financees will accept AFs’ offer directly through MTS terminals & be able to place
their own bid for acquiring financing which any AF may accept;
Trading will be done on an undisclosed basis in MTS Market;
Each new contract will be max. for 60 calendar days;
Broker financee may release availed fund at any time during 60 calendar days on
selling his position in ready market or wanting to take delivery;
Broker financee shall release contract on day of its execution. This will cause a
one day charge of funds on value of financed shares to be paid to AF by financee.
In case of holidays, compulsory release date will be adjusted accordingly;
MTS contract period shall be limited to 60 days subjected to compulsory release

by NCCPL at 1/4th of original quantity of contract i.e. at every 15th calendar day.
In case of holidays, the compulsory release date will be adjusted accordingly;
Where broker financee releases his open position before force release by NCCPL
such released shares shall not be available for fresh financing in MTS market;
Broker financee may before expiry of the original contract partially or totally
release the contract to enable him to settle his sales position in Ready Market;
Settlement of MTS contract will be on T+2 basis;

MTS
Key highlights
Following reports shall be made public:
Top 15 AFs & financees in MTS market;
Name of financiers in MTS market & amount of financing for MTS scrips;
Total disbursements in the market & per eligible scrips;
Total funds to be released in next 3-days on expiry at every 15th calendar

day which may be refinanced;
Total amount of MTS released in the day & for each MTS eligible shares;
Total funding provided in each share;
Percentage of MTS funds invested in each of eligible share;
Amount of MTS funds released during day & refinanced;
Weighted average interest charged in each of eligible scrips for the day;
Amount availed by financee & number of financees in the market;

MTS
The concluding remark
SECP is currently treading a fine line between provision of additional liquidity & risk
management. Resultantly, the SECP has subjected approval of MTS to introduction of
‘additional risk mitigating measures,’ to be incorporated in the Rules;
It needs to be seen how financiers would react to MTS. Given poor liquidity in the
system, relatively high yields being offered on risk free govt. paper, higher risk
associated with equities market and cap on financing charge that can be charged by
financiers, we foresee low interest by financiers;
The problem of low volumes can be addressed by laying down a clear roadmap to
strengthen standards, build confidence of all including small investors, and attract
sustainable business flows that will put the stock exchanges at the centre of capital
raising efforts and attract genuine long term investment. This will warrant
strengthening of the system as opposed to short-term plays which increase risks;
The need of the day is to protect smaller investors. The prime objective of SECP
should be investors' protection and to take all possible measures to restore investors'
confidence. There must also be an increased emphasis on adherence to Rules and
accountability for violations thereof by the Exchange itself;
Given the legal formalities surrounding the launch of the product, we foresee formal
launch of MTS in CY2011. With macro-economic fundamentals of Pakistan weak, we
ironically do not see the MTS pushing the market to the claimed new highs!

Cheap Valuations!
Equities offering value!
Companies Fair Value Rating

LUCK 81.05 Accumulate
DGKC 31.79 Neutral
HUBC 45.71 Buy
KAPCO 48.21 Accumulate
PSO 334.49 Accumulate
APL 348.80 Neutral
POL 334.20 Neutral
PPL 233.91 Neutral
NRL 278.57 Neutral
INDU 252.39 Neutral
PTCL 22.25 Accumulate
ENGRO 246.05 Buy
FFBL 33.81 Reduce
NML 67.97 Neutral
ICI 145.37 Neutral

LUCK
Hedging costs, reducing leverage & going global
Eroding macro-economic fundamentals, a weak political govt., deteriorating law &

order situation and energy crisis along with a weak infrastructure affected negatively
by Floods 2010 have virtually choked construction activity in the Country;
Indications of substantial cuts in the PSDP program in FY2011 & FY2012 will affect
cement demand in the public sector - negative sign for domestic cement dispatches;
However, massive reconstruction is required for rehabilitation of flood affected areas.

Once this is done it shall trigger cement demand for the couple of years to come;
Given pressures in the regional market due to capacity additions, we foresee

lackluster export sales at competitive export prices in the years to come;
Largest dealer network (200 dealers across the Country); Dedicated storage silos at
Karachi Port capable of storing 24k tons of cement & leader in exporting lose cement;
Strategic Projects:
LUCK plans to increase its existing fleet of eighteen trailers to accommodate the
entire logistic requirements of its Karachi Plant;
The Waste Heat Recovery Project Plant at Pezu has begun commercial operations
thereby boding favorably for the Company’s margins in future;

LUCK
Fair Value: PKR81.05, Price, Jan 07, 2011: PKR75.13, ↑: 8%
LUCK LUCK FY10A FY11F FY12F
LUCK:PA LUCK:PA EPS (PKR) 9.70 11.74 13.19
LUKC.KA LUKC.KA PER (X) 7.75 6.40 5.70
Construction & DPS (PKR) 4.00 4.00 4.00
Construction & Materials Materials
DIV. YIELD 5.32% 5.32% 5.32%
3,233.75 3,233.75
323.38 323.38 Shareholding pattern
129.35 129.35 50.79%
24.29 24.29
0.28 0.28
3M 6M 12M
Avg. Price 74.32 71.08 71.05 9.81%
Max 79.98 79.98 84.31 29.66% 9.73%
Min 69.20 61.29 58.00

Avg. Vol. Mn 1.74 1.45 1.61
Tabba Group C os. Directors, C EO
Rel % 6% 21% 10%
Banks, DFI, MF etc Others

DGKC
More than a cement company
Eroding macro-economic fundamentals, a weak political govt., deteriorating law &

order situation and energy crisis along with a weak infrastructure affected negatively
by Floods 2010 have virtually choked construction activity in the Country;
Indications of substantial cuts in the PSDP program in FY2011 & FY2012 will affect
cement demand in the public sector - negative sign for domestic cement dispatches;
However, massive reconstruction is required for rehabilitation of flood affected areas.

Once this is done it shall trigger cement demand for the couple of years to come;
Given pressures in the regional market due to capacity additions, we foresee

lackluster export sales at competitive export prices in the years to come;
DGKC offers exposure in various Nishat Group Companies;
Strategic Projects:
We understand that the Refused Derived Fuel Project – first phase to begin
commercial operation soon - shall be operational in CY2011. Likewise, power
generation from Khairpur Waste Heat Recovery Project (10MW) - shall commence
in CY2012. Both these projects would allow DGKC to replace a substantial part of
its coal usage with cheap alternative fuels thus boding favorably for DGKC’s
margins & reducing its dependence on WAPDA;

DGKC
KATS Code DGKC FY10A FY11F FY12F
Bloomberg Code DGKC:PA EPS (PKR) 0.64 1.83 2.11
Reuter Code DGKH.KA
PER (X) 47.63 16.66 14.45
Construction &
Sector Materials DPS (PKR) - - 0.50
Paid-up Capital (PKR mn) 3,650.99 DIV. YIELD 0.00% 0.00% 1.64%
O/S (mn) 365.10

Shareholding pattern
Free Float (Shares mn) 182.55
68.21%
Mkt. Cap. (PKR bn) 11.00
Mkt. Cap. (US$ bn) 0.13
3M 6M 12M
Avg. Price 28.58 27.08 27.65
Max 32.10 32.10 34.00
0.39% 31.40%
Min 23.40 23.02 20.34
Avg. Vol. Mn 5.02 3.86 3.53
Rel % 28% 28% -9% NML AIC L Others

HUBC
The growing star
HUBC is pursuing two new projects:
Narrowal Project: A 214MW, R.F.O. based project with a C.O.D. of Feb 2011;
HUBCO stakes: 100% (To contribute PKR3/share to HUBC’s fair value);
Laraib Energy Ltd.: An 84MW, Hydel based project with a C.O.D. of June 2013;
HUBCO stakes: 75%;
We do not foresee any immediate resolution of the inter-corporate circular debt and
hence continue to see HUBC’s cash flows under stress during 2011;
A modest currency devaluation, higher tariff profile and higher generation bonus –
stemming from a high load factor – shall help strengthen the Company’s bottom-line
during FY2011;
A tax contingency currently being in the last leg of settlement could, however, cast
its negative spell on the Company’s EPS for FY11. If decided against HUBC, it could
pull down FY11’s earnings;
We understand that Byco’s interest in Asia Petroleum Ltd. pipeline – currently

dedicated to supply fuel to HUBC alone – shall have no impact on HUBC in long-run;

HUBC
KATS Code HUBC FY10A FY11F FY12F
Bloomberg Code HUBC:PA
EPS (PKR) 4.80 5.58 6.16
Reuter Code HPWR.KA
PER (X) 7.93 6.82 6.18
Sector Electricity
DPS (PKR) 5.00 5.00 6.00
Paid-up Capital (PKR mn) 11,572
DIV. YIELD 13.14% 13.14% 15.77%
O/S (mn) 1,157
Mkt. Cap. (US$ bn) 0.51 70.44%
3M 6M 12M
Avg. Price 35.32 35.05 34.14
Max 38.25 38.25 38.25
Min 32.90 31.59 30.50 12.12% 17.44%
Avg. Vol. Mn 1.88 1.79 1.78

Rel % 16% 20% 18% National Power Int'l Xenel Int'l Others

KAPCO
Looking for alternate fuel?
Despite discontinuing its proposed expansion project (280MW), the Company

continues to pursue growth opportunities in the energy sector. We understand
KAPCO’s management is currently exploring opportunities in the alternate fuel
segment. Any announcement on this end could bode favorably for the scrip;
We do not foresee any immediate resolution of the inter-corporate circular debt and
hence continue to see KAPCO’s cash flows under stress during 2011;
High dividend yielding stock;

KAPCO
KATS Code KAPCO FY10A FY11F FY12F
Bloomberg Code KAPCO:PA
EPS (PKR) 5.78 6.04 6.49
Reuter Code KAPCO.KA
PER (X) 7.40 7.08 6.59
Sector Electricity
DPS (PKR) 5.00 5.50 5.85
Paid-up Capital (PKR mn) 8802.53
DIV. YIELD 11.68% 12.85% 13.67%
O/S (mn) 880.25
36.00% 18.27%
3M 6M 12M
Avg. Price 40.14 41.01 42.77
Max 42.68 44.85 48.70
45.73%
Min 38.35 38.35 38.35
Avg. Vol. Mn 0.49 0.36 0.38 WAPDA
National Pow. (Kot Addu) Ltd.
Rel % 2% 1% -10%
Others

PSO
The largest energy company
Resolution of the issue of turnover tax & forecasted surge in sales volumes post
Floods 2010 should boost FY2011 earnings;
The issue of inter-corporate circular debt would have to be addressed by the govt.
When ever this is done, PSO would turn out to be its biggest beneficiary – it would
help strengthen PSO’s cash flows and allow it to execute its strategic plans by
investing in capacity building & enhancement of its storage network;
With furnace oil constituting 44% of PSO’s gross profits, the upcoming 3k-4k thermal
based IPPs due up until FY12 should help augment PSO’s gross margins in future;
Rehabilitation & reconstruction activities in flood affected areas and load-shedding of

gas (RFO is the next alternate fuel) should also bode favorably for PSO;
Largest OMC in Pakistan (Market Share: 70%; Furnace Oil Share: 86%) with largest
retail and storage infrastructure in the Country (Retail Stations: 3.6k; Storage
Capacity: +1.0mn tons);

PSO
The largest energy company
Vulnerable to any depreciation in the value of PKR as almost 90% of Pakistan’s oil
imports are carried out by PSO;
When implemented, IFEM deregulation would allow PSO to become the largest
beneficiary in the OMC sector especially in Sindh, given its large retail network all
over the Country;
Strategic Projects:
PSO is carrying out the due-diligence for acquiring major stakes in PRL, a move
which would allow PSO to execute its back-ward integration plan;
PSO is also working on a study that aims at connecting Kemari with Port Qasim
through a White Oil Pipeline. This will help increase the efficiency and flexibility of
the Company;

PSO
KATS Code PSO FY10A FY11F FY12F
Bloomberg Code PSO:PA
EPS (PKR) 52.76 56.41 65.02
Reuter Code PSO.KA
PER (X) 5.62 5.26 4.56
Sector Oil & Gas
DPS (PKR) 8.00 18.00 22.00
Paid-up Capital (PKR mn) 1,715.19
DIV. YIELD 2.70% 6.07% 7.42%
O/S (mn) 171.52
41.04% 17.56%
3M 6M 12M
Avg. Price 281.40 271.89 284.82
Max 300.53 300.53 324.90
22.45%
15.89%
Min 262.00 233.10 233.10 3.06%
Avg. Vol. Mn 0.96 0.83 0.91 GoP PSOC L EET
Rel % 11% 14% -3% NIT & IC P Modarbas, MF etc
Others

APL
Growing strong
Resolution of the issue of turnover tax & forecasted surge in sales volumes post
Floods 2010 should boost FY2011 earnings;
The issue of inter-corporate circular debt would have to be addressed by the govt.
When ever this is done, PSO would turn out to be its biggest beneficiary – it would
help strengthen PSO’s cash flows and allow it to execute its strategic plans by
investing in capacity building & enhancement of its storage network;
Vulnerable to any depreciation in the value of PKR;
Strategic Projects:
APL has undertaken to enhance its operational capacities at both, Rawalpindi Bulk
Oil Terminal and Machike Bulk Oil Terminal. It also plans to establish storage
terminals at Mehmood Kot, Multan and Tarru Jabba. With the finalization of this
enhancement, APL’s storage capacity shall be significantly enhanced;
APL has also purchased 15 acres of land at Port Qasim, Karachi for construction of
bulk oil terminal;

APL
Growing strong
APL has also entered into a JV with Askari CNG, which is currently operating 52
CNG outlets to convert 20 of its existing CNG outlets into multi-fuel facility
outlets. These outlets will be converted into the APL brand and commissioned as
soon as the process of acquiring pre-requisite licenses is completed;
APL plans to finance all its future plans and projects through equity financing;
When implemented, IFEM deregulation would benefit APL;

APL
KATS Code APL FY10A FY11F FY12F
Bloomberg Code APL:PA EPS (PKR) 52.00 53.82 58.97
Reuter Code APL.KA
PER (X) 6.61 6.38 5.83
Sector Oil & Gas
DPS (PKR) 30.00 30.00 32.00
DIV. YIELD 8.73% 8.73% 9.31%
O/S (mn) 69.12
Free Float (Shares mn) 13.82 Shareholding pattern
21.88%
Mkt. Cap. (US$ bn) 0.28 34.38%
7.02%
3M 6M 12M
Avg. Price 323.19 317.17 329.39
Max 374.20 374.20 377.24 2.20%
34.53%
Min 287.99 281.26 275.00
Pharaon Inv. Grp Ltd.
Avg. Vol. Mn 0.39 0.27 0.17 ATRL
POL
Rel % -4% 20% -5% The Attock Oil C o. Ltd.
Others

POL
Its all about the Tal Block
Given rising crude prices (US Crude forecasted between US$95-100/barrel during
CY11), we foresee higher well-head prices & hence higher operating margins for POL;
A weak PKR, expected to lose further value against the US$, should augur favorably
for POL’s earnings during FY2011;
Successful commissioning of Manzalai Central Gas Processing Facility, forecasted

further discoveries from Tal Block & the potential from Domial should help keep
production numbers high thus auguring positively for the Company’s revenues;
With most of its gas priced under the 1994 and 2001 policies, POL enjoys higher
average gas margins as compared to its peers;
Dividend yield is attractive;

POL
KATS Code POL FY10A FY11F FY12F
Bloomberg Code POL:PA
EPS (PKR) 31.44 41.85 47.41
Reuter Code PKOL.KA
PER (X) 10.23 7.69 6.79
Sector Oil & Gas
Paid-up Capital (PKR mn) 2,365.46 DPS (PKR) 25.00 27.00 30.25
O/S (mn) 236.55 DIV. YIELD 7.77% 8.39% 9.40%

Mkt. Cap. (PKR bn) 72.61 Shareholding pattern
Mkt. Cap. (US$ bn) 0.85 46.25%
3M 6M 12M
Avg. Price 265.34 245.96 239.30
Max 310.98 310.98 310.98
Min 231.01 209.99 207.90 53.75%
Avg. Vol. Mn 1.96 1.51 1.68
Rel % 28% 43% 25% Attock Oil C ompany Ltd. Others

PPL
The premier producer of hydrocarbons
Given rising crude prices (US Crude forecasted between US$95-100/barrel during
CY11), we foresee higher well-head prices & hence higher operating margins for PPL;
A weak PKR, expected to loses further value against the US$, should augur favorably
for PPL’s earnings during FY2011;
While significant increase in gas and condensate sales are expected from Tal, Hala
and Napsha Blocks, the same may be off-set by decrease in gas sales from Sui,
Kandhkot, Adhi and Qadirpur fields;
However, installation of Kandhkot Gas Field Compression Station may push gas
production up in 2011;
High investments should allow high Interest Income during 2011;
We understand that the issue of inter-corporate circular debt would have to be

addressed by the govt. When ever this is done, PPL with PKR21bn tied in inter-
corporate circular debt as at June 30, 2010 would also benefit;

PPL
KATS Code PPL FY10A FY11F FY12F
Bloomberg Code PPL:PA EPS (PKR) 19.52 28.51 29.85
Reuter Code PPL.KA
PER (X) 11.56 7.92 7.56
Sector Oil & Gas
DPS (PKR) 7.50 15.00 15.00
DIV. YIELD 3.32% 6.65% 6.65%
O/S (mn) 1,194.98
8.62%
Mkt. Cap. (US$ bn) 3.09 21.60%
3M 6M 12M
Avg. Price 198.65 197.45 195.50
Max 225.48 225.48 225.48
69.77%
Min 173.45 168.70 168.70
Avg. Vol. Mn 1.08 0.99 1.04 GoP
Rel % 28% 20% 12% PPL Employee Empowerment Trust
Others

NRL
The lube business
The Company is and shall continue to face liquidity crunch due to the inter-corporate
circular debt. Settlement of this issue would bode favorably for NRL’s cash flows;
NRL is in no position to increase the price of base oil in tandem with rising prices of
international crude (US Crude forecasted between US$95-100/barrel during CY11).
We thus do not foresee NRL realizing any extra-ordinary margins in 2011;
We understand that NRL may even export base oil to clear its inventory. This would
prevent NRL from reaping the benefits of customs duty and C&F charges built in local
landed costs of base oil;
While a lot of hue and cry has been raised about the negative impact of the new
pricing formula on NRL’s fuel segment by reducing its GRM margins, the same has
been overplayed given the volatile nature of this segment’s GRMs;
Vulnerable to any depreciation in the value of PKR;

NRL
Fair Value: PKR290.92, Price, Jan 07, 2011: PKR278.57, ↓: 4%
KATS Code NRL FY10A FY11F FY12F
Bloomberg Code NRL:PA
EPS (PKR) 41.08 45.04 41.76
Reuter Code NRL.KA
PER (X) 7.08 6.46 6.97
Sector Oil & Gas
DPS (PKR) 20.00 17.50 15.00
DIV. YIELD 6.87% 6.02% 5.16%
O/S (mn) 79.97
25.00% 25.00%
Mkt. Cap. (US$ bn) 0.26 15.01%
3M 6M 12M
Avg. Price 247.05 220.48 198.67
Max 282.00 282.00 282.00
Min 203.00 183.25 160.00 34.99%
Avg. Vol. Mn 0.24 0.15 0.12
Rel % 35% 49% 55% ATRL POL IDB, Jeddah Others

INDU
Moving forward
Eroding macro-economic fundamentals do not bode favorably for the long-term sales
of the Company;
Uncertainty over the govt.’s plan to allow import of used cars under the transfer of
residence & baggage scheme could negatively affect sales of locally assembled cars;
Forecasted weakness of the PKR against the Yen and USD could push raw materials’
price up & negatively affect the Company’s margins;
The recently signed Afghan Transit Trade Agreement, unless managed properly,
could adversely affect local sales and especially INDU’s spare parts business;
Expiry of AIDP in 2011 offers both opportunities & challenges to the sector;
The recent launching of Toyota’s 4x4 LCV – Toyota Hilux presents an opportunity for
INDU to establish itself among a niche market;
Strategic Project:
The Board has recently approved a PKR1.6bn appropriation for Phase-2 of the
Press Shop for making additional body parts. This would promote further
localization of auto parts;

INDU
KATS Code INDU FY10A FY11F FY12F
Bloomberg Code INDU:PA EPS (PKR) 43.81 34.63 37.74
Reuter Code INDM.KA PER (X) 5.92 7.49 6.87
Sector Automobile & Parts DPS (PKR) 15.00 15.00 18.50
Paid-up Capital (PKR mn) 786.00 DIV. YIELD 5.78% 5.78% 7.13%
O/S (mn) 78.60
81.27%
3M 6M 12M
Avg. Price 246.80 244.63 236.23
Max 282.45 287.00 287.00 6.22%
12.45% 0.05%
Min 218.00 212.29 196.02
Avg. Vol. Mn 0.05 0.04 0.06
Rel % 17% -1% 28% Foreign Investors Thall HIC L Others

PTCL
The leading integrated telecom company
In FY2011, we foresee a drop in PTCL’s revenue due to Pakistan Floods 2010 with
attrition being witnessed in the PSTN, International Business and Carrier and
Wholesale segments to be partly mitigated by a surge in revenue from Broadband
Services (wire line and wireless);
Expenses to increase during FY2011 stemming from a surge in employees’’

compensation costs and aggressive marketing campaigns;
Other Operating Income shall increase due to healthy return on the Company’s
investments and enhanced availability of funds;
Ufone shall continue to maintain its high performance and growth in the industry ---
its revenue and profitability should see continued growth in the next few years;
We foresee the project of Revenue Assurance and Fraud Management helping curb
the menance of grey traffic in the next few years;
We foresee continued focus on broadband services (wire line and wireless),

commercial operation of 3rd International Submarine Cable, integrated business
solutions for corporate customers, drop in domestic revenue (stemming from fierce
price competition & mobile substitution) & surge in international traffic & its revenue;

PTCL
The leading integrated telecom company
Transfer of properties under PTCL’s name coupled with payment worth US$1.20bn by
Etisalat to the Govt. of Pakistan on account of sale of PTCL shall serve as a short-
term trigger for the scrip;
Attractive dividend yield;

PTCL
KATS Code PTC FY10A FY11F FY12F
Bloomberg Code PTC:PA
EPS (PKR) 1.82 2.19 2.37
Reuter Code PTCA.KA
PER (X) 10.71 8.90 8.23
Sector Fixed Line Tele.
Paid-up Capital (PKR mn) 37,740.00 DPS (PKR) 1.75 1.75 1.65
O/S (mn) 3,774.00 DIV. YIELD 8.97% 8.97% 8.46%

Mkt. Cap. (PKR bn) 72.95 Shareholding pattern
Mkt. Cap. (US$ bn) 0.85 11.79%

26.00%
3M 6M 12M
Avg. Price 19.26 18.98 19.55
Max 20.12 20.22 22.49
Min 18.21 17.20 16.50 62.21%
Avg. Vol. Mn 1.52 1.60 3.68
Rel % 3% 10% 6% Etisalat Int'l Pak. GoP Others

ENGRO
The ever diversifying conglomerate
Gas curtailment: The govt. has decided to ensure 45 days closure of all fertilizer
factories effective Jan 7, 2011 and 20% curtailment of gas on an open ended basis.
This shall affect Engro’s new urea plant, commissioned on Dec 29, 2010. It has also
been decided that 12% curtailment of gas shall be done on an open ended basis for
fertilizer plants that are supplied from the Mari Gas Field. This shall affect Engro’s
existing fertilizer plant & prevent the Company from reaping the gains in production
and efficiencies of its investments for the time being;
Off-take: Demand in the upcoming Rabi season is expected to rebound as higher

expected wheat prices, better water availability and increase in acreage in non-flood
areas is likely to off-set lower demand in the flood affected areas. However,
curtailment of gas will affect industry situation and alter the supply situation;
Urea imports: Given gas curtailment and resultant low urea production in the
Country, we foresee urea imports worth an incremental 500k-600k tons;
Engro Foods: We foresee continued growth in this segment given the inelasticity of
its demand. Imposition of RGST on packaged milk, ice cream, tea whiteners etc
could, however, temporarily dampen related sales;

ENGRO
The ever diversifying conglomerate
PVC: Given deteriorating macro-economic fundamentals & their negative impact on

construction we foresee a weak PVC market only to be mitigated by a surge in
exports of PVC at better margins. Caustic Soda sales should, however surge!
Financial management: In a rising interest rate scenario, the Company is

substituting its expensive KIBOR based commercial loans with relatively cheap, fixed
interest rate retail ‘Engro Rupiya Certificates’. This strategy, if continued, should help
rationalize Engro’s financial charges in the long-run;
Engro Avanceon: Further slow down may be witnessed in Engro Avanceon’s

Pakistan and UAE business thus pushing its accumulated losses upwards;
Strategic Projects:
Engro Foods shall commission its rice husking and storage unit on a commercial
scale in FY2011 for international export of rice by Engro Eximp to Midddle East
and the European Union;
Engro Corp. would keep on pursuing the Thar Coal Mining and Power Project as
well as the North African Fertilizer Venture; however, both of these are not
expected to materialize within the next 1-2 years!

ENGRO
KATS Code ENGRO FY10E FY11F FY12F
Bloomberg Code ENGRO:PA
EPS (PKR) 17.09 22.81 28.11
Reuter Code EGCH.KA
PER (X) 11.79 8.84 7.17
Sector Chemicals
DPS (PKR) 6.00 9.00 12.00
O/S (mn) 327.74 DIV. YIELD 2.98% 4.47% 5.95%

51.54%
3M 6M 12M
Avg. Price 183.71 181.25 186.18
Max 200.88 200.88 216.00 38.13%
6.71%
3.62%
Min 173.30 165.60 165.50
Avg. Vol. Mn 1.60 1.19 1.72
Rel % 11% 13% 3% DAWH C IC L Patek (Pvt.) Ltd. Others

FFBL
DAP is the way
Gas curtailment: The govt. has decided to ensure 45 days closure of all fertilizer
factories effective Jan 07, 2011 and 20% curtailment of gas on an open ended basis.
This decision shall negatively affect FFBL’s plant operations thus constraining local
DAP production and hence pushing DAP’s domestic prices further up;
Off-take: A further increase in DAP prices, internationally, along with local market
dynamics (as mentioned above) may push DAP prices up domestically thereby
negatively affecting DAP off-take in 2011. However, favorable weather and adequate
financial support by the govt. in the form of subsidy on inputs and adequate wheat
support prices shall mitigate the negative fall-outs of the same and bring favorable
impact for the industry;
Urea imports: Given gas curtailment and resultant low urea production in the
Country, we foresee urea imports worth an incremental 500k-600k tons;
Pakistan Maroc Phosphore (PMP): Given improvement in international price of

phosphoric acid, stable phos rock prices and sustained plant operations, we foresee a
surge in PMP profitability during FY2011;

FFBL
DAP is the way
Strategic Projects:
FFBL is actively looking out for further diversification opportunities by either going
for own projects or participating with other investors in opportunities like
privatization, LNG Terminal, IPPs, cement sector etc.
In the power sector, FFBL is studying setting up an independent 125MW power

generation company (COD: End 2012; Cost: US$180mn) & three wind power
projects of 50MW each (COD: 2012/13; Cost: US$135mn each).
In the cement sector, the Company has invested in Fauji Cement thereby
increasing the latter’s capacity from 1.17 MTPA to 3.51 MTPA
FFBL offers one of the best dividend yields at KSE;

FFBL
KATS Code FFBL FY10E FY11F FY12F
Bloomberg Code FFBL:PA EPS (PKR) 5.41 4.58 4.69
Reuter Code JORD.KA PER (X) 7.11 8.39 8.20
Sector Chemicals DPS (PKR) 4.75 4.00 4.00
DIV. YIELD 12.36% 10.41% 10.41%
O/S (mn) 934.11
Mkt. Cap. (PKR bn) 34.58 9.54%
17.29%
Mkt. Cap. (US$ bn) 0.40 22.30%
3M 6M 12M
Avg. Price 33.22 30.66 30.32
Max 38.05 38.05 38.05
50.88%
Min 27.51 25.90 25.00
Avg. Vol. Mn 3.30 2.40 3.44
FFC Fauji Foundation
Rel % 33% 42% 42%
Banks, DFI, MF etc Others

NML
Staying competitive
Ever increasing production costs, uncertainty about cotton supply and prices,
deteriorating economic fundamentals, power and gas outages are the major
challenges being faced by the Company;
Loss of cotton crop due to Floods 2010 may cause reduction in cotton supply. This
shall push domestic cotton prices up; along with high international cotton pricesthis
may erode NML’s margins and negatively affect its export business;
Increase in textile demand in Europe & America along with announcement of

reduction in import duty on a number of textile products by the EU should provide
some support to the Company’s top-line;
Strategic Plans:
NML is installing 17 additional air-jet looms to increase its production capacity in

the Weaving Business giving it added advantage for specialized products;
NML is also increasing its capacity to 600,000 garments/month to allow its

garment business to post great results in future;

NML
Staying competitive
Plans are afoot for setting up a wholly owned subsidiary in UAE for operating
wholesale and retail outlets of the Company in UAE;
The management has approved the divestment of 10% of its shareholding in

Pakgen Power through an Offer for Sale and Listing of Pakgen whose possible
divestment is likely to go through in 3QFY11;
Sound core business & strong equity portfolio comprising MCB Bank, DGKC, Nishat
Power Limited, AES Lalpir and Pakgen Power;

NML
Fair Value: PKR67.97, Price, Jan 07, 2011: PKR68.14, ↔: 0%
KATS Code NML FY10A FY11F FY12F
Bloomberg Code NML:PA EPS (PKR) 8.29 9.37 10.98
Reuter Code NISM.KA
PER (X) 2.50 2.50 2.50
Sector Personal Goods
DPS (PKR) 6.00 9.00 12.00
DIV. YIELD 8.81% 13.21% 17.61%
O/S (mn) 351.60
65.81%
3M 6M 12M
Avg. Price 56.60 51.52 53.44
Max 68.00 68.00 73.20 8.61%
25.22% 0.36%
Min 46.80 40.81 40.81
Avg. Vol. Mn 5.34 3.76 3.07
Rel % 43% 58% -7% DGKC AIC L Mansha Family Others

ICI
Diversified yet focused
PSF: We foresee high domestic PSF prices stemming from increased downstream
market demand, rising global cotton prices and a surge in international PSF prices.
This should bode favorably for ICI;
Paints: Forecasted high inflation & interest rates & resultant contraction in aggregate
demand particularly in the construction sector may push sales of paints down to be
mitigated by a surge in demand of paints in auto sector. We foresee reduced margins
in this segment stemming from high cost of input materials;
Pharmaceuticals: With land being reclaimed from flood waters and sowing seasons
for wheat & sunflower in full swing, we foresee pharmaceuticals, animal health and
vegetable seeds’ businesses performing during FY2011;
Chemicals: Margins may come under pressure due to high raw material prices;
Overall: Shortage of gas supply & weakening macro-economic fundamentals shall

keep cost of business up in 2011 thus eroding margins of some segments of the
Company’s business. Further, Afghan Transit Trade Agreement, which facilitates duty
free re-entry of goods in domestic market; under-invoicing of imports; inefficient
tariff on import of PSF (allowing dumping of cheap imported PSF) & persistent energy
shortages may cumulatively hurt ICI’s profitability in the long-run;

ICI
KATS Code ICI FY10E FY11F FY12F
Bloomberg Code ICI:PA
EPS (PKR) 18.12 19.36 21.64
Reuter Code ICI.KA
PER (X) 8.30 7.77 6.95
Sector Chemicals
DPS (PKR) 10.00 10.50 11.50
O/S (mn) 138.80 DIV. YIELD 6.65% 6.98% 7.65%

75.81%
3M 6M 12M
Avg. Price 133.55 126.28 139.60
Max 149.89 149.89 190.40
Min 116.95 109.50 109.50 24.19%
Avg. Vol. Mn 0.43 0.45 0.33
Rel % 27% 26% -14% IC I Omicron BV Others

Disclaimer
All rights reserved. The information Rating Definitions

presented in this report is compiled from
sources that we believed to be reliable in the
preparation of this report. However, we do
not accept any responsibility for its accuracy Min C.I. Max C.I.
and completeness. This report is not
intended to be an offer or solicitation to buy
or sell any security. ALHabib Capital Markets Neutral -5% 5%
(Pvt.) Ltd. and its employees may or may
not have a position in or with respect to the
securities mentioned in this report. In
particular, the report takes no account of the Accumulate 5% 20%
investment objectives, financial situation
and particular needs of investors who should
seek further professional advice or rely upon
their own judgment before making any Buy 20% Infinity
investment.
All prices are as of Jan 07, 2011 Reduce -20% -5%

Date of Distribution: Jan 08, 2011
Sell -20% Infinity

Head Office
GF-01, Techno City, Hasrat Mohani Road, Karachi
Ph: +(92-21) 32270808-13
Fax: +(92-21) 32270519
Stock Office
Room No. 16 Ground Floor, New Stock Exchange Building,
Stock Exchange Road, Karachi
Ph: +(92-21) 32460867- 32460869
Company Representatives Phone

Sales Team +(92-21) 32270801-7
Research Team +(92-21) 32270801-7

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Pakistan Investment Strategy, 2011

ALHabib Capital Markets (Pvt) Ltd

 Pakistan political landscape

 Karachi Stock Exchange

ALHabib Capital Markets (Pvt) Ltd

ALHabib Capital Markets (Pvt) Ltd

ALHabib Capital Markets (Pvt) Ltd

 While remittance are expected to rise to a record high (US$10.52bn – US$11.02bn),

 We foresee GDP growth hovering between 2.50% to 2.70% stemming from an

ALHabib Capital Markets (Pvt) Ltd

ALHabib Capital Markets (Pvt) Ltd

 In certain areas, such as energy, it is unavoidable due to current price structuring.

 Monthly oil subsidy ranges up to around PKR12bn, which is annually roughly

ALHabib Capital Markets (Pvt) Ltd

ALHabib Capital Markets (Pvt) Ltd

 On books, Pakistan has a forex reserves position of US$17.2bn, out of which

ALHabib Capital Markets (Pvt) Ltd

ALHabib Capital Markets (Pvt) Ltd

ALHabib Capital Markets (Pvt) Ltd

ALHabib Capital Markets (Pvt) Ltd

ALHabib Capital Markets (Pvt) Ltd

 Standing currently at PKR1577.814bn and hence contributing to growth in Broad

 The fast pace of growth in currency in circulation is caused by weakening of rupee,

ALHabib Capital Markets (Pvt) Ltd

ALHabib Capital Markets (Pvt) Ltd

 Investment in MRTBs has reached PKR1,450bn; PIB holding is PKR516.5bn and

 Caution is required when buying govt. securities, as excessive purchase of govt.

 Recent downgrading of major Pakistani banks by global rating agencies is due to

ALHabib Capital Markets (Pvt) Ltd

ALHabib Capital Markets (Pvt) Ltd

Key monetary data From To

Remittances (US$ bn) 10.52 11.02

ALHabib Capital Markets (Pvt) Ltd

ALHabib Capital Markets (Pvt) Ltd

 Law & Order

 Pakistan in committee of nations

 Retirement of key public office bearers – 2011

 Domestic political scenario

 Its all about the numbers!

ALHabib Capital Markets (Pvt) Ltd

 Growing religious militancy - in F.A.T.A., most of N.W.F.P., Southern Punjab –

 Ability of local law enforcement agencies to uproot domestic terror groups;

ALHabib Capital Markets (Pvt) Ltd

 Future of the 19th Amendment;

 Various cases against President, senior ministers & bureaucrats;

 Missing persons’ cases;

 President of Pakistan holding dual offices etc;

ALHabib Capital Markets (Pvt) Ltd

 Pakistan’s foreign relations especially:

ALHabib Capital Markets (Pvt) Ltd

Name Designation Retirement Date

Judge Supreme Court of May 31, 2011

Judge Supreme Court of (Adhoc Justice Supreme

Lt Gen Ahmad Shuja Pasha DG Inter-Services March 18, 2011

Lt Gen Jamil Haider Commander, Army Strategic September 21, 2011

ALHabib Capital Markets (Pvt) Ltd

 Change in political situation in the following provinces:

 Sindh: No major change expected;

ALHabib Capital Markets (Pvt) Ltd

 Demands from various opposition parties to:

 Conduct free and fair Local Bodies’ elections;

ALHabib Capital Markets (Pvt) Ltd

Party position in National Assembly

Pakistan political landscape

Karachi Stock Exchange

While remittance are expected to rise to a record high (US$10.52bn – US$11.02bn),

We foresee GDP growth hovering between 2.50% to 2.70% stemming from an

In certain areas, such as energy, it is unavoidable due to current price structuring.

Monthly oil subsidy ranges up to around PKR12bn, which is annually roughly

On books, Pakistan has a forex reserves position of US$17.2bn, out of which

Standing currently at PKR1577.814bn and hence contributing to growth in Broad

The fast pace of growth in currency in circulation is caused by weakening of rupee,

Investment in MRTBs has reached PKR1,450bn; PIB holding is PKR516.5bn and

Caution is required when buying govt. securities, as excessive purchase of govt.

Recent downgrading of major Pakistani banks by global rating agencies is due to

Law & Order

Pakistan in committee of nations

Retirement of key public office bearers – 2011

Domestic political scenario

Its all about the numbers!

Growing religious militancy - in F.A.T.A., most of N.W.F.P., Southern Punjab –

Ability of local law enforcement agencies to uproot domestic terror groups;

Future of the 19th Amendment;

Various cases against President, senior ministers & bureaucrats;

Missing persons’ cases;

President of Pakistan holding dual offices etc;

Pakistan’s foreign relations especially:

Change in political situation in the following provinces:

Sindh: No major change expected;

Demands from various opposition parties to:

Conduct free and fair Local Bodies’ elections;

Forecasted better corporate earnings;

Introduction of Margin Trading System;

Weak macro-economic fundamentals;

Imposition of Flood Tax, Wealth Tax and R.G.S.T.;

Issuance of rules for Capital Gains Tax;

Rising political instability;

Default of MTS market & ready market will not be inter-mingled;

Trading will be done on an undisclosed basis in MTS Market;

Each new contract will be max. for 60 calendar days;

MTS contract period shall be limited to 60 days subjected to compulsory release

Settlement of MTS contract will be on T+2 basis;

Following reports shall be made public:

Top 15 AFs & financees in MTS market;

Total disbursements in the market & per eligible scrips;

Total funds to be released in next 3-days on expiry at every 15th calendar

Total funding provided in each share;

Percentage of MTS funds invested in each of eligible share;

Amount of MTS funds released during day & refinanced;

Amount availed by financee & number of financees in the market;

Eroding macro-economic fundamentals, a weak political govt., deteriorating law &

However, massive reconstruction is required for rehabilitation of flood affected areas.

Given pressures in the regional market due to capacity additions, we foresee

Eroding macro-economic fundamentals, a weak political govt., deteriorating law &

However, massive reconstruction is required for rehabilitation of flood affected areas.

Given pressures in the regional market due to capacity additions, we foresee

DGKC offers exposure in various Nishat Group Companies;

HUBC is pursuing two new projects:

We understand that Byco’s interest in Asia Petroleum Ltd. pipeline – currently

Despite discontinuing its proposed expansion project (280MW), the Company

High dividend yielding stock;

Rehabilitation & reconstruction activities in flood affected areas and load-shedding of

Vulnerable to any depreciation in the value of PKR;

When implemented, IFEM deregulation would benefit APL;

Successful commissioning of Manzalai Central Gas Processing Facility, forecasted

Dividend yield is attractive;

High investments should allow high Interest Income during 2011;

We understand that the issue of inter-corporate circular debt would have to be