KARACHI - Sui Northern Gas Pipelines Limited (SNGPL) and Sui South Gas Company (SSGC) are set to announce their 1HFY10 financial results on Feb 19 and 22, respectively. It is expected that both gas distribution companies (GDCs) to face higher Unaccounted For Gas (UFG) losses due to a long winter season in northern areas and Balochistan. SNGPL is expected to post an encouraging increase of 29 percent Year on Year in its 1HFY10 earnings to Rs839mn (EPS Rs1.53). SNGPL expected to have spent Rs6.6bn as capital expenditure resulting in an increase of 16 percent YoY in operating assets, leading to a 6 percent YoY rise in companys EBIT. However, time and again the UFG losses are expected to hit the bottom-line of the company by Rs2.7bn as prolonged winter season led the company to face gas theft problems in the far flung areas of the NWFP and the Punjab. The company relied on internal cash generation and deferred credit to finance its capital expenditure. Thus, any unusual increase in the financial charges could not be foresee, which is expected to be around Rs409mn (up by 16 percent YoY). Moreover, a rise of 30 percent YoY in companys 2QFY10 earnings to Rs321mn (EPS Rs0.58)is also expected owing to the above-mentioned reasons which are expected to have been more pronounced in the 2QFY10 results along with a low-base effect. Similarly, SSGC is expected to announce a PAT of Rs112mn (EPS Rs0.17) as compared to a profit after tax of Rs228mn (EPS Rs0.34) - to mark a 51 percent YoY decline during 1HFY10. The decline is expected primarily on the back of increase in the UFG losses to 7.20 percent in 1HFY10 and skyrocketing financial charges which are expected to have jumped by a massive 49 percent YoY to Rs3.1bn, resulting in a significant hit to the bottom-line of the company. The company had to increasingly rely on the external financing to fund its capex requirements as well as fill in the gap created by the recent circular debt crisis in the country. However, the 24 percent YoY increase in the operating assets coupled with 50 percent YoY rise in the other income head is expected to support the companys bottom-line. On quarterly basis, the company is also expected to post a PAT of Rs47mn (EPS Rs0.07), to show a massive decline of 67 percent YoY basis. It is believed that the earnings of both of the GDCs are expected to remain subdued, with no surprises expected in the profits. In the current situation, it is also believed that new return formula (KIBOR based) would be a better choice for the GDCs, if materialized. Abdul Azeem and Farhan Bashir Khan at Investcap research said that after incorporating 1QFY10 results and adjusting risk free rate to 11.44 percent the Dec-10 target price is to be stood at Rs11/share for SSGC and Rs32/share for SNGPL.