OGDCL GDS eats away scrips value on home ground

Posted on 12.06.06 by StockPK Team @ 11:11 am    

Equity experts questioning the success OGDCL Global Depository Shares (GDS) have observed that the price fixation issue has resulted in reducing its weightage by more than three per cent at Karachi bourse.

The index mover OGDCL saw its value clipped from November 15 to 30 at the same time when Government of Pakistan was holding road shows to make GDS issuing success in the international markets.

The scrip was carrying approximately 23 per cent weightage in KSE 100-share Index before the issue of indemnification between the Company (OGDCL) officials and Government officials was highlighted in press on November 10, 2006, they said.

It was reported that OGDCL board categorically told Privatisation Commission (PC) representative Shahid Akbar that it wanted an indemnification from the Federal Government before endorsing the listing of OGDCL at the London Stock Exchange for GDS offering.

The indemnification was meant to ensure that the company authorities do not face any legal action from any stakeholders in case the information provided in offer document proves incorrect or insufficient and has negative impact on GDS value, they were quoted as saying.

On November 30, when Cabinet Committee on Privatisation (CCoP) approved price for GDS at $18.90 (which is equal to 10 ordinary shares at KSE at Rs115 per share) and secondary offering at Rs110 for the domestic market, OGDC weightage declined approximately to 19 per cent in 100-Index at KSE, equities experts said.

Moreover, the issue of price settlement of GDS led to wild speculation the caused the share price of OGDCL to plunge at KSE.

On November 08, 2006, a day before the issue of indemnification was raised, OGDCL scrip finished the day at Rs138.80 per share. Afterwards, scrip fell by Rs18 to Rs120.80 on December 01 a day after the GDS price was announced.

Moreover, scrip closed at Rs156 per share on October 19, 2006 the last day of Pre-Eid session, a leading analyst reminded.

Experts say that market manipulators, including BMA Capital Market, which was assigned the responsibility of book building process for OGDCL GDS and a party among the purchasers of five per cent shares (GDS) being domestic institutions, had played a key role in minimizing the share price at KSE.

BMA Capital in one of its research report said that OGDCL Earning Per Share would reduce to Rs10.01 this year against Rs10.69 it registered at the end of last year, they quoted.

On the contrary, other research houses and independent analysts believe that OGDCL would register an EPS of around Rs12 by this year.

Apart from EPS issue, BMA is blamed to have manipulated the price fixation issue, majority of the analyst believe.

The fair value of OGDCL is estimated at Rs175 per share. Its 52-week high and low value is quoted at Rs170.50 and Rs108.35 respectively in the newspapers. The share is believed to recover its price in few sessions, as the price had gone down to its average value, analysts pointed out.

They hoped that the stock would recover its price sooner or later, but the bigger beneficiary would definitely be the manipulator. In this case too, the retail investors were discouraged and sent home with bigger losses and miner profits. The retail investors’ participation declined remarkably, they argued and cited that it was evident with the thin average daily turnover recorded at 125 million shares last week.

They identified a number of grey areas in which Government of Pakistan could have done a better job while offering OGDCL GDS in international market.

They said that pre announcement of GDS price, prior to road shows or at any appropriate time, could have saved local bourse from deterioration.

Price could have been fixed on the basis of company’s five years performance and balance sheet, they replied.

The timing for launching of GDS was not appropriate, as oil prices in the international market were falling day by day.

The success or failure GDR or GDS of NBP, UBL, HBL and power company Kot Addu hang in balance ahead of OGDCL unconditional trading at London Stock Exchange from December 06, 2006.

Source: The News