The Pakistan State Oil Company announced 9MFY12 the earning per share (EPS) of Rs 52.32, marking what the analysts said a minor decrease of 3 percent compared to Rs 53.98 recorded in the same period last year.
The corporate result was accompanied by a cash dividend of Rs 3 per share.
“The primary reason behind the decline in earnings is the normalization of effective tax in 9MFY12 compared to last year,” said Nauman Khan of Topline Research.
“Barring the tax effect witness last year, we estimate the company to have posted an earning growth of 37-38 percent,” added the analyst. The increase in the company’s recurring profitability, he said, was due t higher oil prices that culminated into higher absolute margins in non-regulated products. The company’s gross profit rose by 18 percent to Rs 25.6 billion as against Rs 21.7 billion in the same period last year. Support to bottom-line also came from higher other income and curtailed financial cost. The company’s other income grew by a massive 132 percent to Rs7.4 billion with major income being booked in third quarter of FY12. The PSO’s financial cost declined by 3 percent to Rs 8.8 billion against last year’s Rs 9.1 billion. “Though still awaiting the detail accounts, we believe restricted financial expense is function of payment received in lieu of last TFC issued by the government,” said Khan. The growth in the recurring income was partially diluted by 92 percent increase in the company’s other operating expense on account of rupee depreciation against the greenback. In the 3Q, the PSO posted an EPS of Rs 25.6 up 106 percent as against Rs 12.4 in the same period last year, while is up 110 percent from Rs 12.2 reported in last quarter.
The analyst however remains wary of the PSO’s ability to reproduce a strong earning growth on recurring basis. “Our reservations stems from government’s inability to resolve the circular debt at least in the short-run that has in-trapped the cash flow of PSO,” Khan viewed.
Another market observer Khurram Schehzad added that the 3QFY12 was expected to see the company’s foreign exchange reserves losses to remain limited amid relatively a stable Pak rupee against the US dollar. “While financial charges are expected to have come down by 10 percent QoQ amid decline in company’s short term borrowings post repayment from the IPPs (government payments to the IPPs post TFC issue of Rs138bn to banks during 3Q),” the analyst said.
Schehzad expects the company’s scrip to continue to underperform on the single biggest risk of severe liquidity facing the company owing to recurring circular debt issue, with only ad-hoc efforts made by the government so far.