LAHROE - After the buoyancy of last week, the local bourse entered a consolidation phase this week as investors opted for selective profit taking in blue chip stocks. Investors interest increased in mid tier stocks, however KSE-100 Index was still down 0.9 per cent WoW. Average volumes remained on the lower side, as they decreased by 22 per cent WoW to 195 million shares. Foreign interest in the market remained intact during the week as foreigners were net buyers of shares worth $0.3 million. Other major highlights during the week included, finalisation of the fiscal deficit figure by the Ministry of Finance, decline in T-bill yields and release of cement sales numbers by the APCMA. According to the Ministry Pakistan’s consolidated fiscal deficit for FY12 has registered at 8.5 per cent of GDP against the revised target of 5.5 per cent. This included a one off payment on account of debt consolidation of Rs391b (equivalent to 1.9 per cent of GDP).In the T-Bill auction this week the SBP sold treasury bills worth Rs299b against total bids of Rs509b. Participation in the 3M tenor was very limited (6.3 per cent of the realised amount), hence the indication that market is expecting further monetary easing. Cut off yields for 3M, 6M and 12M papers witnessed a decline of 13-14bps to 10.27 per cent, 10.31 per cent and 10.35 per cent respectively.PTC outperformed the market by 14.9 per cent on news flow related to the formalisation of the ICH agreement, while strong growth potential kept Efoods in the limelight with the stock outperforming the market by 2.9 per cent. Conversely, DGKC and LUCK underperformed the market by 3.5 per cent and 0.9 per cent respectively on the back of weak cement sales figures in August (down 18.6 per cent MoM).Experts said that since August 10, 2012 PTC’s stock price has gained 21 per cent on the back of the policy directive issued by the Ministry of Information Technology for the formation of International Clearing House (ICH). This policy directive to the PTA is a major step towards the formation of the ICH. If implemented, experts flag that ICH would be hugely beneficial for PTC, where it is estimated theoretical annualised earnings impact for the company at Rs2.28-3.81/share. Meanwhile, Competition Commission of Pakistan’s (CCP) policy note expressing reservations over the ICH dampened the party somewhat, leading to the stock closing down 5.3 per cent. While ICH is undoubtedly positive for PTC, experts do not rule out further scrutiny from various quarters (stakeholders and CCP) which could pose risk of both delay in and formation of ICH. Despite 15 per cent YoY decline in 9M earnings and no dividend announcement, PTC outperformed the market by 24 per cent YTD 2012. This impressive performance is mainly led by bouts of heightened interest in the stock on ICH related news flow.Under the ICH agreement the termination rate is expected to go up to US cents 8.8/min from current US cents 1.7-1.8/min. Industry channel checks suggest that the Long Distance and International (LDI) operating share will be US cents 5.85/min, up from the current share of US cents 0.5-0.7/min. The remaining US cents 2.9/min will be paid to the last operator providing service to the end user (termed as the APC) and US cents 0.05/min will be paid to the government.Assuming 12b incoming minutes per annum and a change in LDI margin of US cents 5.25/min; it is estimated annualised EPS impact on PTC of Rs3.81. It is however important to note that with the termination rate expect to go up, (1) usage will fall somewhat and (2) incentive for grey market players to penetrate the market will increase. Hence a decline in overall incoming minutes post ICH is very likely. On recurring basis the profitability of the company depressed by 39 per cent YoY compared to PAT of Rs462m (EPS: Rs5.0) in 1HCY12 compared to PAT (ex-profit from discontinued operations) of Rs756m (EPS: Rs8.2) same period last year. Some experts are of the view that overall market remained under pressure as investors opted to book profit after healthy gains of the prior week. Further, unclear political scenario coupled with lack of developments on the economic front and fall in international equity markets also induced investors to book profits. KSE-100 index declined by approximately 1 per cent while volumes also dropped by 20 per cent to Rs5.2b. Incremental impact of ICH development continued to keep telecom sector in the limelight while profit taking was witnessed in other stocks. 

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