FLASHNEWS:

AKD Securities Limited – Off the Analyst’s Desk (31-08-2021)

Karachi, August 31, 2021 (PPI-OT): BAFL: 1HCY21 Analyst Briefing Takeaways

The Bank Alfalah Limited (BAFL) conducted its analyst briefing today to discuss 1HCY21 results. To note, BAFL announced half year profitability of PkR6.9bn (EPS: PkR3.9) which was largely in line with our estimates.

BAFL has opened 6 new branches already in CY21 and plans to add another 64 branches to its network by CY21 end.

Deposits have crossed PkR1.0trn mark where CA/TD ratio has remained close to 47%. Going forward, the bank will continue to focus on raising low cost deposits and therefore doesn’t expect a significant deterioration in this ratio.

BAFL’s current ADR of ~62% make the bank immune to additional tax liability related to ADR. The bank reported a headline growth in loan book of ~6% during 1HCY21. However, the consumer portfolio has grown by 48% whereas ex-consumer Islamic loan book is up 28%.

The bank has a PIB book of PkR310bn where 60% PIBs are parked at a fixed yield of 9.55%. The bank has a maturity of PkR39bn (yield: 8.5%) up for maturity during 3QCY21.

BAFL’s market share of deposits stood at 4.8%, for advances at 6.8% and home remittances at14.5% as of Jun’21. As for RDA, bank enjoys a market share of ~10.5% and is one of the top 3 banks in terms of market share.

Management spoke on bank’s Afghanistan operations as well where the bank operates through 2 branches. The bank only has retail operations in Afghanistan where it takes deposits and invests in liquid, international bonds. Hence there are no major concerns related to bank’s Afghan operations. The total book size of Afghanistan operations is only ~11mn Afghani.

BAFL’s total exposure to Hascol is PkR1.8bn and the management has already made 100% provisions against this exposure.

The bank holds general provisions of PkR4.25bn which could be reversed in subsequent quarters. The management doesn’t see any need to increasing general provisions.

Bank expects SBP to increase interest rates by 50bps in 4QCY21 and another 50bps during 1QCY22.

The CAR stood at 15.4% in Jun’21.

HUBC: Analyst Briefing Takeaways

Hub Power Company Ltd (HUBC) announced 4QFY21 NPAT of PkR8.87bn (EPS: PkR6.84), up 31% on YoY basis, but flattish QoQ. This takes the FY21 NPAT to PkR33.68bn (EPS: PkR25.97), up 35%YoY. The company has also announced final interim cash dividend of PkR5.0/sh, taking full year payout to PkR12.0/sh.

In the first installment of latest circular debt clearance, GoP had settled PkR23bn or 40% of the overdue receivables of PkR57bn in form of cash, PIBs and Sukuks to HUBC. The company liquidated the entire amount of PIBs and Sukuks received, which were partially paid out as dividends (PkR6.5bn). HUBC used the inflows to pay PkR7bn to PSO in penal expense.

The GoP plans to settle the remaining 60% installment (PkR34bn) by Nov’21 end. Post the first installment, the change in tariffs negotiated earlier has become effective. The receivables of existing plants though continue to mount up. Current project wise receivables are as follows: base plant – PkR70bn, Narowal – PkR18bn, Laraib – PkR7bn, CPHGC – PkR40bn, taking cumulative outstanding receivables to PkR135bn.

As an update on CPEC projects, Thar Energy Ltd (330MW) and Thal Nova Ltd (330MW) are expected to come online in 3/4QFY22, respectively. The operations for the 1,320MW CPHGC plant was interrupted in Jul’21 due to a lightning incident, however the plant is now back to normal operations.

ENI acquisition has been completed in a 50:50 joint venture with ENI’s local employees. The name of the joint venture is Prime International Oil and Gas Company Ltd. The regulatory approvals for transfer of ownership and management control to the joint venture are expected to be concluded by 4Q2021.