Presentation for equity investors

March 31, 2009

ALHabib Capital Markets (Pvt) Ltd

Introduction
AL Habib Capital Markets (Pvt) Ltd.
 Registered as a Corporate Member of the K.S.E, AL Habib Capital
Markets (Pvt) Limited (AHCML) is a full-spectrum financial
services provider, with a current emphasis on securities brokerage
and research. Adding value to its client represents the foundation of
all that it does.
 The year 2005 witnessed the birth of AHCML, followed by its
progress and growth which exceeded all expectations as the
Company commenced its operation within four short months of its
incorporation. AHCML has since established itself on solid footings
in Pakistan’s financial service industry through the vision and
leadership of its seasoned management team.

ALHabib Capital Markets (Pvt) Ltd

Introduction
 AHCML is a subsidiary of Bank AL Habib Ltd. (sponsored by the
Dawood Habib Group), a premier commercial bank providing
banking services in Pakistan for the past 14 years through a fast
growing network of over 200 branch locations. Bank AL Habib is
the major sponsor of AHCML, accounting for two-thirds of the
ownership. The remaining one-third is owned by friends and family
members of the Dawood Habib Group.
 The Group has been historically involved in the banking sector for
over 85 years. Foremost to its credit is being the founder member of
Habib Bank Limited which predates Pakistan itself. In addition to
Bank AL Habib, the Group also comprises other companies which
include Habib Insurance Limited, Habib Sugar Mills Limited and
Habib Asset Management Limited.

ALHabib Capital Markets (Pvt) Ltd

Important Disclaimer
 AL Habib Capital Markets (Pvt) Ltd. (“AHCML”) believes that the
audience over here is well aware of the risks attached with investments
in Pakistan.
 This presentation and the analysis enclosed in this presentation should
not be used as the sole base for any investment decision by any of the
investors.
 AHCML adheres to the code of conduct and ethical standards set by the
CFA Institute, USA and it encourages its clients to abide by these rules
and guidelines.
 We hereby certify that the views expressed in this research presentation
about securities and issues accurately reflect the respective research
analysis. We also certify that no part of our respective compensation
was, is, or will be, directly or indirectly, related to the specific
recommendations of views expressed in this presentation.

ALHabib Capital Markets (Pvt) Ltd

Pakistan economy
Moving within the ambits of the IMF
 Real GDP growth forecasted to slow to 2.5% in 2008/09 and
increase to 3.7% in 2009/10
 External current account deficit to narrow to 6.5% of GDP (US$10.6
billion) in 2008-09 and 5.7% of GDP in 2009/10
 External financing gap for 2009/10 projected at US$3.6 billion
 Fiscal deficit targeted to decline to 4.2% of GDP in 2008/09 and
3.3% of GDP for 2009/10
 Electricity subsidies to be eliminated by June 2009
 Base electricity tariff to be further increased during 2008/09
 Domestically-financed development spending to be reduced by
about 1pps of GDP (PSDP already slashed!)

ALHabib Capital Markets (Pvt) Ltd

Pakistan economy
Moving within the ambits of the IMF
 Tax reforms to be introduced; tax revenue to be increased
 Non-interest current expenditure to be reduced
 Fuel prices to allow pass through of international crude prices
 Plan for eliminating the inter-corporate circular debt to be prepared
by beginning of Apr, 2009 (PKR80bn TFCs in the offing!)
 Cost of utilities rising? Uninterrupted supply also questionable
 Hydel resources and scarcity - A big question mark
 SBP financing of budget to be limited to zero on a cumulative basis
during Oct 1, 2008 – Jun 30, 2009
 Gross Official Reserves to increase to US$8.6bn by June 2009
 12-month inflation rate projected to decline to 20% at end-June
2009 and 13% in 2009/10

ALHabib Capital Markets (Pvt) Ltd

Pakistan economy
Moving within the ambits of the IMF
 SBP’s provision of FX for oil imports to be phased out: Diesel: Aug
01, 2009 & Crude: Feb 01, 2010 (Pressure on PKR!)
 SBP to maintain tight monetary policy. Quarterly MPS: Apr, Jun,
Sep & Dec, 2009 (400bps decline in policy rate by Dec 31, 2009)
 Federal Budget 2009-10, due June 2009 (Capital Markets not to be
taxed up until FY10; Real Estate to be taxed)
 Quarterly Reviews under IMF Program - Mar 2009 and Jun 2009
 Major inflow, IMF: US$840mn; WB: US$500mn & ADB:
US$200mn
 Friends of Democratic Pakistan conference due April 17, 2009
 Remittances, exports and foreign investment in Pakistan to suffer as
a result of global financial meltdown

ALHabib Capital Markets (Pvt) Ltd

Top Picks
Equities still offer values
 Hub Power Company (HUBCO)
 Kot Addu Power Company (KAPCO)
 Oil and Gas Development Company Ltd. (OGDCL)
 Pakistan Oil Fields Ltd. (POL)
 Pakistan Petroleum Ltd. (PPL)
 Engro Chemicals Ltd. (ENGRO)
 Fauji Fertilizer Company Ltd. (FFC)
 Fauji Fertilizer Bin Qasim Ltd. (FFBL)

ALHabib Capital Markets (Pvt) Ltd

HUBCO
‘Buy’ (Fair Value: PKR35.38)
HUBCO
 HUBCO is pursuing two new
PKR mn FY08(A) FY09(F) FY10(F)
projects:
PAT 2,604 3,271 4,668
 Narrowal Project: A EPS 2.25 2.83 4.03
225MW, R.F.O. based project DPS 2.15 2.70 4.00
with a C.O.D. of March 2010; P/E (x) 8.64 6.87 4.82
HUBCO stakes: 100%; D/Y 11% 14% 23%

Expansion Value/Share: Earning growth -2% 26% 42%

PKR3.80 FV 35.38
 Laraib Energy Ltd.: An Closing price (Mar 26, 2009) 19.44

84MW, Hydel based project Upside potential 82%

Market cap. PKR bn/US$ bn 22.50/0.28
with a C.O.D. of Feb 2012;
O/S shares (mn) 1,157.15
HUBCO stakes: 75%;
Free Float (mn) 752.15
Expansion Value/Share: Recommendation BUY
PKR0.25

ALHabib Capital Markets (Pvt) Ltd

HUBCO
 A 25% increase in the R.O.E. tariff
component effective July 2009 coupled
with revenues which are indexed to the
PKR/USD parity and the US CPI makes
HUBCO quite attractive at current
levels.
 Settlement of the ‘Inter-Corporate
Circular Debt’ would allow the
Company to reduce its short-term
borrowings and hence bode favorably
for its bottom-line (and resultant D.P.S.)
and cash flows.

ALHabib Capital Markets (Pvt) Ltd

KAPCO
‘Buy’ (Fair Value: PKR40.21)
KAPCO
 KAPCO is pursuing an expansion
  FY08(A) FY09(F) FY10(F)
project at Muzaffargarh, a
PAT 7,966 5,616 5,678
450MW, dual fuel powered EPS 9.05 6.38 6.45
project with a C.O.D. of Dec DPS 5.45 5.50 5.00
2012; KAPCO stakes: 100%; P/E (x) 3.67 5.21 5.15
Expansion Value/Share: D/Y 16% 17% 15%
PKR5.80. Earning growth 60% -30% 1%

 Like HUBCO, KAPCO’s FV 40.21

revenues are indexed to the Closing price (Mar 26, 2009) 33.21
PKR/USD parity and the US CPI Upside potential 21%

insulating it from the effects of Market cap. PKR bn/US$ bn 29.23/0.36

depreciation of the PKR. O/S shares (mn) 880.25

Free Float (Shares mn) 176.05
Recommendation BUY

ALHabib Capital Markets (Pvt) Ltd

KAPCO
 WAPDA is the biggest shareholder; the
only fuel buyer and the biggest lender of
KAPCO thus easing KAPCO’s cash
flow needs.
 Settlement of the ‘Inter-Corporate
Circular Debt’ would allow the
Company to reduce its short-term
borrowings and hence bode favorably
for its bottom-line (and resultant D.P.S.)
and cash flows.

ALHabib Capital Markets (Pvt) Ltd

OGDC
‘Buy’ (Fair Value: PKR119.78)
 Highly correlated (like the OGDC
  2008 2009 2010
banking sector) with foreign PAT 49,614 53,676 62,837
investor interest. EPS 11.54 12.48 14.61
 Drop in international oil DPS 9.50 9.90 11.75

prices will not affect P/E (x) 5.71 5.28 4.51

D/Y 14% 15% 18%
OGDC’s revenue since Earning growth 9% 8% 17%
domestic gas prices are FV 119.78
based on 6-month oil prices Closing price (Mar 26, 2009) 65.68
while oil revenues comes Upside potential 82%
from old field which never Market cap. PKR bn/US$ bn 283.26/3.52

incorporated the full impact O/S shares (mn) 4,300.93

of rising crude prices. Free Float (Shares mn) 628.81

Recommendation BUY

ALHabib Capital Markets (Pvt) Ltd

OGDC
 Low cost/bbl of Pakistan oil companies
as compared to regional peers.
 Revenues and costs denomination are in
US dollar implying that the Company
offers a great hedge against Pak rupee
depreciation.
 Low production growth coupled with
declining int’l oil prices should bode
negative for its top-line.
 OGDCL is an aggressive explorer –
Nashpa production high (7,200 bpd) but
Tal block is low (2,400 bpd). And
production from Sanjhoro & TAY
blocks to come online w.e.f FY10.

ALHabib Capital Markets (Pvt) Ltd

POL
‘Buy’ (FV: PKR263.67)
POL
 The Company’s fundamentals
  2008 2009 2010
have become weak now as oil
PAT 8,616 6,266 8,163
prices have declined and EPS 36.43 26.49 34.51
production growth is delayed. DPS 16.00 15.25 19.80
 POL’s production growth is P/E (x) 4.31 5.92 4.55

largely dependent on Tal Block D/Y 10% 10% 13%

whose output has been delayed Earning growth 45% -27% 30%

over the last couple of years due FV 263.67

to poor law & order situation and Closing price (Mar 26, 2009) 156.86

slow progress on its development Upside potential 60.09%

program. Significant volume Market cap. PKR bn/US$ bn 37.10/0.46

O/S shares (mn) 236.55
growth is expected by FY11 from
Free Float (Shares mn) 107.06
the field.
Recommendation BUY
 Dividend yield is attractive.

ALHabib Capital Markets (Pvt) Ltd

PPL
‘Buy’ (Fair Value: PKR231.16)
PPL
 Revenue growth is being fuelled
  2008 2009 2010
by price formula revision coupled
PAT 19,707 29,053 17,651
with higher oil prices which result EPS 23.75 35.01 21.27
in higher gas prices. DPS 15.50 19.75 19.25
 PPL’s reserves remain the real P/E (x) 7.19 4.88 8.03

cause of concern as a declining D/Y 9% 12% 11%

trend has been observed in PPL’s Earning growth 18% 47% -39%

gas reserves. FV 231.16

 Earnings are expected to remain Closing price (Mar 26, 2009) 170.72
Upside potential 35%
strong during FY09E forecasted
Market cap. PKR bn/US$ bn 141.67/1.76
to grow at 18%.
O/S shares (mn) 829.85
Free Float (Shares mn) 171.63
Recommendation BUY

ALHabib Capital Markets (Pvt) Ltd

PPL
 Deteriorating law and order situation
coupled with no significant addition in
the Company’s reserve during the next
couple of years would bode negatively
for PPL’s cash flows.
 Declining reserves and vulnerability to
lower oil prices are the issues currently
being faced by PPL.

ALHabib Capital Markets (Pvt) Ltd

ENGRO
‘Buy’ (Fair Value: PKR184.00)
ENGRO
 ENGRO is the second-largest
  2008 2009 2010
fertilizer company in Pakistan,
PAT 4,240 3,082 3,550
with market shares of 19% in EPS 19.93 14.48 16.68
urea. DPS 6.00 5.60 6.50
 We believe that the recent decline P/E (x) 6.62 9.11 7.91

in the price of the scrip was D/Y 5% 4% 5%

mainly due to over-emphasized Earning growth 34% -27% 15%

impact of interest rate and FV 184.00

currency depreciation on Engro’s Closing price (Mar 26, 2009) 131.89

profitability. Upside potential 40%

Market cap. PKR bn/US$ bn 28.07/0.35
 It is a conglomerate with an
O/S shares (mn) 212.82
investments in the Free Float (Shares mn) 85.13
petrochemicals, food and power Recommendation BUY
sectors.

ALHabib Capital Markets (Pvt) Ltd

ENGRO
 ENGRO is expanding its urea
capacity to 2.3mn tons from current
0.95mn tons. Other investment includes
an investment opportunity in Algeria
for a green-field DAP project
 ENGRO remains a play amid an agri-
boom and growing demand for dairy
products in Pakistan. Currently, Engro
Food Ltd. is backward-integrating its
supply chain to pace up the rapid volume
growth in the sector.

ALHabib Capital Markets (Pvt) Ltd

FFC
‘Buy’ (Fair Value: PKR124.00)
FFC
 One of the safest stock based on
  2008 2009 2010
dividend yield. The twin Faujis
PAT 6,525 8,297 8,364
are bound for payout given their EPS 10.58 13.45 13.56
relationship with the Fauji DPS 13.75 12.75 12.80
Foundation. P/E (x) 7.80 6.13 6.08
 FFC is the largest urea producer D/Y 17% 15% 16%

in the country (production Earning growth 22% 27% 1%

capacity of 2.3 mn tons) and FV 124.00

holds a market share of 42%. Closing price (Mar 26, 2009) 82.46
Upside potential 50%
 FFC is also a major shareholder
Market cap. PKR bn/US$ bn 50.86/0.63
of FFBL, a contributor to its
O/S shares (mn) 616.84
‘Other Income’. Free Float (Shares mn) 339.26
Recommendation BUY

ALHabib Capital Markets (Pvt) Ltd

FFC
 FFC has acquired a 12.5% equity stake
in a phosphoric acid plant in Morocco,
which will provide an assured
phosphoric acid supply to FFBL.
 FFC is also planning to invest in the
power sector, which carries a
sovereign guarantee on equity returns.
 Urea demand is higher then domestic
production coupled with the fact that the
country’s economy is regarded as an
agriculture dominated economy

ALHabib Capital Markets (Pvt) Ltd

FFBL
‘Buy’ (Fair Value: PKR22.86)
 FFBL is Pakistan’s sole DAP FFBL
producer and holds a market share   2008 2009 2010
of 41% besides a 12% market PAT 2,900 2,158 2,354
share of domestic urea market. EPS 3.10 2.31 2.52
 A recent contract for phosacid has DPS 2.85 2.15 3.75
been set at US$765/ton for 1Q09. P/E (x) 5.31 7.13 6.54
This will bode positive for D/Y 17% 13% 23%
FFBL’s DAP operations since Earning growth 14% -26% 9%
there were fears that owing to
negative margins there will be a FV 22.86
delay in resuming DAP Closing price (Mar 26, 2009) 16.48
production. Upside potential 39%
 FFBL has a 25% equity stake Market cap. PKR bn/US$ bn 15.39/0.19
in a phosphoric acid plant in O/S shares (mn) 934.11
Morocco. The investment will Free Float (Shares mn) 326.94
provide assured supply of the
Recommendation BUY
phosphoric acid.

ALHabib Capital Markets (Pvt) Ltd

 Q&A

Thank you

ALHabib Capital Markets (Pvt) Ltd

Head Office
GF-01, Techno City, Hasrat Mohani Road, Karachi
Ph: +(92-21)-2270808-13
Fax: +(92-21)-2270519
 

Stock Office
Room No. 16 Ground Floor, New Stock Exchange Building,
Stock Exchange Road, Karachi
Ph: +(92-21)-2460867-2460869

Company Representatives Phone

+(92-21) 2270800
Aftab Q. Munshi – C.E.O. +(92-21) 2270525
Syed Imran Ali – C.O.O. +(92-21) 2270814 
Sales Team +(92-21) 2270801-7

ALHabib Capital Markets (Pvt) Ltd