June 22, 2012 (JS Research)
While the daily turnover at the KSE has improved by 1.4x times in FY12, more encouragingly the public offerings at the local bourse have also shown relative improvement from last year. Initial public offerings (IPOs) are considered a key indicator to gauge market’s depth. The market witnessed four IPOs worth Rs850mn in FY12 compared to only two worth Rs1.1bn in FY11 (based on date of public subscription). Notably, the offerings were subscribed by 0.96x this year compared to a subscription of 0.61x last year.
Four IPOs in FY12 vs. two last year
The public offerings improved to four in FY12 compared to only two in FY11. However, it remains much lower than 11 and 14 offered in FY04 and FY05, respectively. Cumulatively (including book-building exercise), a sum of Rs888mn was raised in FY12 vs. Rs1.17bn in FY11. Amongst the issues this year, one each belonged to the food producers and insurance sectors and two belonged to the services sector.
Post their listing at the bourse; ENGRO Foods (EFOODS) has posted an impressive return of 164%, while TPL Direct Insurance (TDIL) has recorded a gain of 5%. However, Next Capital (NEXT) value has declined by 28%.
Value-wise subscription improves to 0.96x
The value-wise subscription of the offerings stood at 0.96x in FY12, as opposed to 0.61x in FY11. A total of Rs812mn were raised from the general public against a target of Rs850mn. TPL Trakker stood out as the most favored offering to the general public with a subscription of 1.15x. Participation ratio (based on number of applications received) also improved from last year, clocking at 0.12x compared to 0.02x.
Outlook
Despite domestic political uncertainty and complicated ties with the US , the market has rallied by 20% in 2012 till date, while volumes have improved markedly as well. The improving confidence at the local bourse is likely to encourage future listings at the local bourse.
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Forex reserves decline by US$371mn
Pakistan’s foreign exchange reserves have declined by US$371mn in a week to US$15.046bn. Reserves held by the SBP fell by US$437mn to US$10.680bn while reserves held by the commercial banks rose by US$65mn to US$4.365bn. According to the SBP the decline has come on account of routine payments as no extraordinary payments were made.
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