Following lower than expected NPAT of PkR15.5bn (EPS: PkR18.57) in 9MCY11, we trim our earnings estimates for MCB by 3% on average and cut our Dec12 target price to PkR180/share from PkR205/share. Steeper decline in TP is due to assigned weight to DDM (25%) to partly reflect low earnings growth visibility in what is shaping up to be a volatile interest rate environment. While MCB should post 25%Y oY growth in CY11F (projected sequential improvement in 4QCY11F), unless asset quality improves, we believe the bank will be hard pressed to post double-digit profit growth across the next 2-3 years particularly if interest rates continue to swiftly decline (we anticipate a further 50bps in the DR by month end). As a result, while MCB should record average Tier-I ROE of ~25% across the medium-term, valuations may sustainably depart from the growth multiples traditionally associated with the bank. MCB trades at a CY12F P/B of 1.29x, PER of 6.01x and D/Y of 8.8%. Our revised TP of PkR180/share offers upside of 13% and implies an Accumulate stance. The FBR has provisionally collected PkR534.043bn during Jul-Nov 1611, against PkR424.923bn in the same period last year, a growth of 25.7%YoY. In other news, regarding the ongoing Pak-IMF talks, Pakistan has agreed to downward revise its projections for international trade, which will inflate the gap between external receipts and payments by another US$1.2bn. The Income Tax Appellate T ribunal has set a uniform tax rate (income tax + royalty) of 55% for E&P companies. It has also set well-head value as benchmark for calculating royalty and depletion allowance. The Ministry of Petroleum has reportedly asked the Finance Ministry to guarantee the cost of oil supply to power companies on a daily basis. The MoP has also given a payment plan for oil supplies to the power sector to avoid pile-up of circular debt. SBP sold T-Bills worth PkR118.36bn (against bids of PkR200.78bn) - realized value of PkR109bn, at an auction held yesterday. Cut off yields remained unchanged at 11.78% (3m), 11.81%(6m) and 11.87% (12m). The amount realized on 6m and 12m paper (PkR90.2bn) together comprises 82.5% of total realized amount of PkR109.35bn. . AKD Securities Limited Member Karachi Stock Exchange Equity Research / Pakistan Todays Daily Find AKD research on Bloomberg (AKDS<GO>), firstcall.com and Reuters Knowledge UAN: 111-253-111 Important disclosures, including investment banking relationsh ips and analyst certification at end of this report. AKD Securities does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of the report. Investors should consider this report as only a single factor in making their investment decision. A K D D a i l y Copyright©2011 AKD Securities Limited. All rights reserved. The information provided on this document is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject AKD Securities or its affiliates to any registration requirement within such jurisdiction or country. Neither the information, no r any opinion c ontained in this document constitute s a solicit ation or offer by AKD Securities or its affili ates to buy or sell any securities or provide any investment advice or service. AK D Securities does not warrant the accuracy of the information provided herein. KSE100 - Index Current 11,992.77 Pr ev i ou s 11 ,9 94 .01 Chg. -0.01% Mkt Cap. (PkRbn/US$bn) Current 3,123 / 35.94 Pr ev io us 3, 12 3 / 3 5. 93 Chg. 0.01% Daily Turnover (mn) Current 51.34 Pr evious 49.27 Chg. 4.2% Value Traded (PkRmn/US$mn) Current 3,131 / 36.03 Pr ev io us 2, 47 9 / 2 8. 52 Chg. 26.3% SCRA Flow FYTD (US$mn) 15-Nov-1 1 (1 27 .44) 14-Nov-1 1 (1 24 .92) Val. Chg (2.52) News and Views T h u r s d a y , N o v e m b e r 1 7 , 2 0 1 1 MCB: Still a growth stock? 0 50 100 150 200 250 300 350 Nov -10 Feb -1 1 May -1 1 Au g-1 1 (Index) 9,000 9,500 10,000 10,500 11,000 11,500 12,000 12,500 13,000 (Shares mn) Vol ume (LHS ) KSE-100 Index (RHS )
