LAHORE - Corporate results this week carried limited positive surprises and hence were unable to lift investor sentiment at the local bourse while uncertainty prevailed on the outcome of talks with the Taliban. Resultantly, the benchmark KSE-100 index slipped by 1.1%WoW to close at the 26,394 level with average trading volumes for the week declining by 10%WoW to 255mn shares. On the macro front, major highlights of the week were (1) US release of CSF (Coalition Support Fund) worth US$352mn; (2) Foreign exchange reserves declined by US$428mn to US$7.6bn and (3) IMF staff mission concluded its discussion with Pak authorities. Also during the week, Pakistan Automotive Manufacturers Association (PAMA) released auto sales figures which showed a 9% YoY increase to 13,910 units in Jan 2014.

MSCI, a leading provider of investment decision support tools worldwide, announced results of the Quarterly Index Review for MSCI Equity Indices with no addition or deletion for Pakistan.

Within Frontier Markets (FM) Index, no country has been added or deleted in this review, however, previously upgraded Qatar and UAE will be reclassified in Semi annual review due to take place in May. From individual companies’ perspective, Barclays Bank (Kenya) has been elected from MSCI FM index. From Pakistan, there has been no addition to and deletion from MSCI FM Index. Same has been the case for regional FM peers. Pakistan’s weight in MSCI FM currently stands at 4.25%, which has increased from 3.94% in November 2013. However, with reclassification of Qatar and UAE which currently have combined weight of 35.52%, Pakistan’s weight may increase to 6-6.5% provided no other additions/deletions. Currently, Pakistan has 12 companies in the index, i.e. OGDC, MCB, FFC, UBL, POL, ENGRO, NBP, HBL, PPL, HUBC, PTC & FATIMA.

Experts said that Karachi Exchange witnessed a volatile week to close 1% down with 2% lower volumes. Positive news flow remained 10% increase in country’s oil sales, IMF’s upward revision of Pakistan’s GDP target, payment of CSF from the US, MSCI review and CCI decision on transfer of properties to PTCL, while result announcements from blue-chip companies remained a mixed bag. MCB’s result was in line with market expectations while ABL’s was higher on the back of tax reversal. Engro Corporation payout was not in line with expectations while Nishat Mills December-quarter earnings were in line with investors’ expectations. Going forward, result announcements from major companies will keep driving sentiments.

Nishat Mills Limited (NML) announced 1HFY14 unconsolidated earnings of Rs3.9b (EPS Rs10.96), up 34.8% compared to Rs2.9b (EPS Rs8.13) in the same period last year. During the period, revenues of the company increased by 6.7% to Rs28.1bn as against Rs26.3bn in 1HFY13. Experts attribute the increase to PKR depreciation and higher exports. Gross margins also increased by 196bps to 18.6% in 1HFY14 as compared to 16.7% in 1HFY13.

During 2QFY14, earnings stood at Rs6.49 per share, up by 45% as compared to Rs4.47 per share in 1QFY14, and 27%YoY as compared to 2QFY13 EPS of Rs5.10. during the quarter, other income surged by massive 87% QoQ to Rs1.3bn from Rs672m primarily.

Engro Corp announced 2013 full year profit of Rs8.2bn (Rs16.01 per share) as against profit of Rs1.3b (Rs2.61 per share) in same period last year, up 5.1x. Company announced specie dividend in the ratio of 1:10 (1 share of EFERT for every 10 shares of ENGRO).

After witnessing adverse operating environment in 2012, turnaround in its flag ship urea business in 2013 provided addition imputes to the holding company’s profitability. Profit of Rs9.9 per share came from Engro Fertilizers.

Hub Power Company (HUBC) is scheduled to announce its 1HFY14 financial results on February 18, 2014. Experts estimate the company to report net earnings of PKR3.9bn (EPS: PKR3.36) in 1HFY14. The topline is expected to shrink by 14% YoY owing to 13ppt drop in load factor, clocking in at 62% in 1HFY14. On QoQ basis, sales figure is expected to grow by 4% QoQ despite a 3ppt lower load factor of 61% in 2QFY14 on back of higher indexation adjustments.

Experts said that the Board of Directors of Kohat Cement Company Limited is scheduled to meet on February 18, 2014 to approve its 1HFY14 results. It is expected the company to post a strong 29% QoQ earnings growth of PKR 5.13/share in 2QFY14 compared to PKR 3.99/share. This growth mainly stems from lower power tariff as the government is yet to notify the price increase for consumers on Peshawar Electric Supply Corporation (PESCO).