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Foundation ResearchEquities
29 March 2013
PPL PA N/A
Stock price as of 28th Mar Rs 179
une 13 target Rs N/A
Upside/downside % N/A
Valuation Rs N/A
- Reserve based DCF
Oi an gas exporation
Market cap Rs bn 293
30-day avg turnover US$m 1.5
Market cap US$m 3008Num er s ares on issue m 1643
Investment fundamentalsYear end 30 J un 2012A 2013E 2014E
2015E
Tota revenue m 96,222 105,682 119,623 128,780
EBIT m 64,529 68,799 82,306 89,993
EBIT Growth % 33.4 6.6 19.6 9.3
Recurring proit m 40,924 46,784 55,968 61,195
Reporte pro it m 40,924 46,784 55,968 61,195
EPS rep Rs 24.9 28.5 34.1 37.2
EPS rep growt % 30.1 14.3 19.6 9.3
PE rep x 7.2 6.3 5.2 4.8
Tota DPS Rs 9.20 11.50 13.00 13.50
Tota iv yie % 5.15 6.44 7.28 7.56
ROA % 24.0 23.2 23.5 21.9
ROE % 37.1 33.3 32.6 29.4
EV/EBITDA x 3.4 3.1 2.7 2.5
Net e t/equity % 45.9 56.1 59.3 63.2
Price/ oo x 2.3 1.9 1.6 1.3
PPL PK rel KSE100 performance
Source: Bloomberg, Foundation Research, Mar' 2013
(all figures in PKR unless noted)
Analyst
Mohammad Fawad Khan, CFA
92 21 5612290-94 [email protected]
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KSE PPL
Pakistan Petroleum Ltd
Key triggers in 4Q may reducerelative discount; estimates
liftedEvent
PPL is entering into an exciting phase with heavy drilling and
developmentnews-flow, concentrated in 4Q, in our view. Likely
market excitement on futuretriggers may serve to reduce discount
PPL trades versus its local peers (15%on FY14E P/E). That said, we
highlight PPL has intensified its focus onexploration as evident
from outcome of latest bidding of exploration leases
though the companys efforts to acquire producing/exploration
asset haveproduced mixed results. We have lifted our earnings
estimates by 13-15% forFY14-FY15 to build in higher volumes from J
V fields and rupee devaluation.
Impact
Excitement period ahead: In 4Q, a number of positive triggers
may unfoldin PPL which, we believe, are relatively ignored by the
consensus. A cursorylook on PPIS drilling update highlights that
the company is part of at least tenongoing drillings (two
explorations and eight development/appraisal)representing 37% of
total industry drillings. Out of these, we believe results onat
least one exploration and five development wells may transpire in
4Q(including drilling in Lundali, Nashpa, Manzalai, Sui and Latif)
which can offerfuture upside to our production and earnings
estimates. Apart from drilling,
PPL may also benefit from progress on a raft of development
projects in bothoperated and non-operated areas. Noteworthy among
them are (1) productionaddition from Tal block (slated for J
une13), and start of production fromKirthar (tight sand).
Exploration focus intensified: We highlight PPL has intensified
its focuson exploration, which is evident from the outcome of
latest bidding. PPL hassuccessfully bid for at least ten more
exploration leases (EL) with totalminimum commitment of US$65mn
(~100% of FY12A exploration capex).
This will increase number of areas in PPLs portfolio to 45. We
think PPL mayundertake swapping of EL in future to further
diversify its risk which mayaddress market concern on aggressive
exploration strategy.
Mixed results on asset acquisi tion: PPL has recently concluded
a deal on
acquisition of M&D Pakistan asset. As per our estimates,
size of the dealcould range US$80-100mn. M&D Pakistan includes
mature producing assetsin areas with significant potential of tight
gas and exploration leases. We havenot incorporated the impact of
new assets, however, we highlight that theimpact on PPLs near-term
earnings estimates is likely to be nominallynegative.
Our industry channel checks suggest PPLs bid for acquisition of
TullowPakistan & Bangladesh seems to have hit certain snags and
stands lowchances of materialization.
Earnings revision
We have lifted our earnings estimates by 13-15% for FY14-FY15 to
build inhigher volumes from J V fields and rupee devaluation. Our
preliminary
estimates suggest PPLs 3Q earnings may range PKR7.2-7.4/sh
PAKISTAN
