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SC SECURITIES (PVT) LTD.

Corporate Member: Karachi Stock Exchange (Guarantee) Ltd.

Sui Southern Gas Company

SSGC 70000000 40
Continuous Expansion with
Privatization In The Near Future!!! 60000000 35

50000000 30
Volume 25

Price
40000000
20
SHORT TERM 30000000
15
Hold 20000000 10
10000000 5
LONG TERM 0 0
Buy
1/17/2005

2/16/2005

3/16/2005
3/31/2005
4/14/2005
4/29/2005
5/13/2005
5/27/2005
6/10/2005
6/24/2005

7/22/2005

8/22/2005

9/19/2005
10/3/2005
10/17/2005
11/2/2005
11/21/2005
12/5/2005
12/19/2005

1/20/2006
1/3/2005

2/2/2005

3/2/2005

7/8/2005

8/5/2005

9/5/2005

1/2/2006

2/3/2006
FAIR VALUE PKR 38
KATS Code : SSGC SSGC has an exclusive license of distributing and transmitting gas
in the provinces of Sindh and Baluchistan. The company recorded
Current Price : PKR 34
a substantial increase in capital expenditure in FY05, as part of the
Total No. of Shares : 671.174 mn company’s ambitious 5-year, Rs 43 billion Strategic Development
Plan. SSGC also owns and operates the only gas meter
EPS for FY05 : Rs 1.51 manufacturing plant in the country, under an agreement with
Schlumberger Industries, France having an annual production
EPS for FY06F : Rs 2.30 capacity of over 300,000 meters.

PER : 14.8
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.

Financial Performance 1QFY06


Research Department
SC Securities (Pvt) Ltd. The Net Profit for the 1Q06 was Rs 342 million against Rs 336 million
Tel: 92 21 111 111 721 (Ext 107,108) for the corresponding period last year. Though it shows only a
Email: research@scsecurities.net 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
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 be attributed to its expansion
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.

FY00 FY01 FY02 FY03 FY04 FY05 FY06F


Earnings Per Share 1.36 1.93 2.14 2.16 1.49 1.51 2.30
Breakup Value Per Share 12.55 14.48 15.16 15.66 15.43 15.44 15.60
Dividend Yield 9.12 14.56 14.52 8.55 4.57 6.48 6.14
Debt : Equity ratio 43:57 38:62 40:60 37:63 31:69 41:59 43:57
Return On Equity 10.38 15.34 14.76 14.23 9.48 9.77 10.68
Return On Assets 4.45 7.66 8.79 8.72 5.98 5.25 5.7
Current Ratio 1.04 1.19 1.25 1.36 1.37 1.23 1.24
Gross Margin 31 23.16 19.54 18.74 12.85 10.83 11.32
Net Margin 3.93 5.08 4.45 4.00 2.10 1.86 1.98

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