Corporate Member: Karachi Stock Exchange (Guarantee) Ltd.

SC SECURITIES (PVT) LTD.

Sui Southern Gas Company

SSGC
Continuous Expansion with Privatization In The Near Future!!!

70000000 60000000 50000000

40 35 30

Volume

40000000 30000000 20000000 10000000 0
1/3/2005 1/17/2005 2/2/2005 2/16/2005 3/2/2005 3/16/2005 3/31/2005 4/14/2005 4/29/2005 5/13/2005 5/27/2005 6/10/2005 6/24/2005 7/8/2005 7/22/2005 8/5/2005 8/22/2005 9/5/2005 9/19/2005 10/3/2005 10/17/2005 11/2/2005 11/21/2005 12/5/2005 12/19/2005 1/2/2006 1/20/2006 2/3/2006

SHORT TERM Hold LONG TERM Buy FAIR VALUE
KATS Code : SSGC Current Price : PKR 34 Total No. of Shares : 671.174 mn EPS for FY05 : Rs 1.51 EPS for FY06F : Rs 2.30 PER : 14.8

20 15 10 5 0

PKR 38

SSGC has an exclusive license of distributing and transmitting gas
in the provinces of Sindh and Baluchistan. The company recorded a substantial increase in capital expenditure in FY05, as part of the company’s ambitious 5 -year, Rs 43 billion Strategic Development Plan. SSGC also owns and operates the only gas meter manufacturing plant in the country, under an agreement with Schlumberger Industries, France having an annual production capacity of over 300,000 meters.

Development Projects
The distribution network to new towns and villages of Sindh and Baluchistan was enhanced by 204 km, a 44% increase over the same period last year, to connect 22 further towns and villages. An additional 173 km of mains and services was laid during the period, an increase of 10% over the same period last year.

Research Department

Financial Performance 1QFY06
The Net Profit for the 1Q06 was Rs 342 million against Rs 336 million for the corresponding period last year. Though it shows only a minimal growth in profitability but considering the financial charges of additional Rs 78 million, it has posted a growth of more than 14 percent. Sales volume during the 1Q06 increased by

SC Securities (Pvt) Ltd.
Tel: 92 21 111 111 721 (Ext 107,108) Email: research@scsecurities.net

Price

25

2percent to 85,933 MMCF and its value increased by 14percent to Rs 15.2 billion. Though the sales value has increased by 14 percent but the cost of gas per MMCF has also increased by 11 percent. The increase in sales volume can b attributed to its expansion e plans towards industries and domestic sector.

Recommendation
Based on prospective FY06 EPS of Rs 2.3 and PE multiple of 15, the short-term target price of the company comes to Rs 35. But as the privatization process of the company is about to start in the near future we recommend a Hold stance on the stock. Our DCF based fair value of the company comes to Rs 38. Long term outlook of the company is well supported by expansions leading to improved profitability prospects. We recommend a BUY stance for our long term investors.

Earnings Per Share Breakup Value Per Share Dividend Yield Debt : Equity ratio Return On Equity Return On Assets Current Ratio Gross Margin Net Margin

FY00 1.36 12.55 9.12 43:57 10.38 4.45 1.04 31 3.93

FY01 1.93 14.48 14.56 38:62 15.34 7.66 1.19 23.16 5.08

FY02 2.14 15.16 14.52 40:60 14.76 8.79 1.25 19.54 4.45

FY03 2.16 15.66 8.55 37:63 14.23 8.72 1.36 18.74 4.00

FY04 1.49 15.43 4.57 31:69 9.48 5.98 1.37 12.85 2.10

FY05 1.51 15.44 6.48 41:59 9.77 5.25 1.23 10.83 1.86

FY06F 2.30 15.60 6.14 43:57 10.68 5.7 1.24 11.32 1.98

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