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SNGPL

Introduction

Three main departments:


1)Transmission
Largest integrated gas
Listed on PSX 2)Distribution
company in Pakistan
3) Project
Industry Outlook

Demand-supply gap
Import of LNG
Oil and Gas Regulatory Authority

Prices
Competition
Licenses
Shareholding Pattern
Corporate Governance Practices
Competitive Analysis
Porters Five Forces Model

Entrants
Rivalry
Entrants
Rivalry
Substitutes
Customers
Substitutes
Customers
Suppliers
Suppliers
Very
Low
Low
Very
Low
LowLow
Low
Low
Low
Medium
Medium
Swot Analysis
Comparative Analysis

Distribution costs have increased on YoY basis for the FY-15 to 169%
which is due to the fact that SNGP has to provide security to the major
lines connecting the provinces.
Accounts payable increased by 165% on YOY basis showing that SNGP is
covering its receivables portion by holding its suppliers debts, where
recievables also showed a 151 % increase on YOY basis.
Business Risk

Unaccounted for gas losses


Political instability

Initiatives taken to curtail


UFG losses including:
The gradual replacement of faulty lines
Up gradation of supply network
Improvement in the monitoring mechanism to reduce theft.
Financial Analysis

1. Profitability
Average of gross profit and net profit margin:

- increased from -5.5%% in FY-13 to 0.15% in FY-14.


Reasons:

1. Percentage increase in sales > percentage increase in


COGS
2. FY 13: Increase in gas prices and and expenses
3. FY 14: The demand for gas connections increased; more
sales.
continued

SNGPL shows good profitability:

- SNGPLs ratios > industrys ratios

Operating margins

- SNGPL(0.4; operational efficiency) < Industry ( -1.1; operational


inefficiency)

Comment: SNGPL has been able to recover UFG losses to some


extent.
2. Working Capital Management

Fiscal Year A/R (million) A/P (million)


2013 63,491 68,619
2014 106,092 104,678
2015 123,606 127,840
3. Capital structure:
long-term debt: RS. 9,520 million at end-Dec15
(-FY14: RS. 9,276m, -FY13: RS. 8,940 m)

-Comment:
Companys operations are more financed by its debts than by
equity, this is due to increases in short term finances.
Impact of Interest
4. Altman Z-score: shows short-term illiquidity
SNGPL: 2.05 ( the company is in a grey zone)

5. Financial Risk: -weak liquidity situation due to circular debt


- Debt to equity ratio of 3.33 is almost half as
compared to the
industry average of 6.36.
- Market value of shares: SNGPL (Rs 47.5) &
SSGC ( Rs 32.24)
- P/E ratio: SNGPL ( -12.16) & SSGC ( -5.27)
6. Liquidity Risk

-The Net cash cycle shows a constant decreasing trend.


-FY 16: current ratio 0.82 and quick ratio 0.77 are bothNet
lower
40%
Cash Cycle
20%
than the industry of 0.92 and 0.87 respectively. 0%
2016 2015 2014 2013
-20%
-40%
-60%

7. Turnover Analysis

-SNGPLs inventory turnover( 55.41 times) is greater than the


industrys current
average of 51.18 for the 9MFY-16.
- Receivable turnover ratio is also high as compared to
industrys i-e 4.24 to 3.1.
8. Du Pont Analysis

-ROE of SNGPL, FY-15 :-69.81% with a leverage multiplier


of 59.27 while of
ROE of SSGC : 61.20%.
ROE of SNGPL FY -14: -98%

Long-term debt to equity ratio for SNGPL has risen


sharply from 12.18 in FY14 to 24.78 in FY15.
9. Cashflow Analysis
FY14 to FY15: operating CF decreased by 15.3%.
(employee benefits increased by 18.9%)

The investing CFs increased by 27.8% .


(new property, plant & equipment)

Major inflow from debt borrowing.


(an increase of 2632% from previous FY-14)