KARACHI: The board of directors of the Pakistan Telecommunication Company Ltd (PTCL) is expected to announce an after tax profit of Rs30 billion at its meeting on Tuesday.
This could translate into a cash dividend of Rs4.75 per share, offering a dividend yield of 11 per cent approximately.
A research analyst with Capital One Research, Anwer Ahmed Khan, said on Monday, “The value of PTCL has a further upside potential depending upon the implementation of expansion plans and tariff rationalisation strategies of the company in the post deregulation era.”
At present, the scrip is trading at a profit to earning ratio of 9.4x as compared to the prevailing market trend of 10.1x.<br>
“The 9M-FY04 performance of the company showed a tremendous growth where profit after tax has surged by 26 per cent and total revenue increased by 12 per cent as compared to the corresponding period last year,” the analyst said.
During FY04 the company had reduced nationwide and international calling rates by 15 per cent and 23 per cent, respectively, enhancing revenue base owing to the high elasticity of demand for the service.
The tariff cut coupled with expansion in calling card business, gave a boost to the domestic proceeds that contributes around 75 per cent of the total revenue.
“A 33 per cent cut in the line rent is expected to cause a Rs5 billion dent on the earnings, otherwise the net income could top Rs35 billion,” says the analyst.
Gauging the upcoming competition in the telecommunication sector, the PTCL is aggressively carrying out expansion and has plans to add 2 million lines during the current fiscal out of which 1.5 million lines will be on WLL (Wireless Local Loop).
“The company had participated in the frequency auction for WLL and acquired frequency in all 13 telecom regions at a price of over Rs4 billion.
According to the analyst, “In the deregulation era, quality of service and improved customer support would be the main differentiation factors and diligent efforts in this direction would help the company in executing ongoing expansions.”
“The recent reduction in NWD and international calling tariff, installation charges, and Internet bandwidth rates would remain the main catalyst for expansion and revenue growth for the company in FY05,” the analyst thinks.
“The new telecom companies emerged in the process of deregulation still largely depend upon PTCL’s services and we expect the interconnection, co-location and Internet bandwidth fee would come into sight as one of the major contributors to the total revenue figure,” the analyst concludes.
