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VALUE CALL
MONTHLY REVIEW AND OUTLOOK
31 May 2011 The Market

Index
13,000

The Market ‐ One Year Performance
Volume Index

Volume (m)
400 300 200

11,000

9,000

100 0
31‐Aug 30‐Nov 1‐Mar 31‐May

7,000
1‐Jun

The market was range bound coupled with thin volumes for most of the month under review before activity The Market ‐ May 2011 Index Volume (m) Turnover Index picked up over the final 10 days. The KSE‐100 Index 12,300 140 12,200 120 posted a minor gain of 65 points or 0.5% during May 12,100 100 12,000 2011 to close at 12,123 while the KSE‐30 Index improved 11,900 80 by only 46 points or 0.4% to 11,762. The average daily 11,800 60 11,700 turnover during May 2011 was 71.39m shares compared 11,600 40 11,500 20 to 75.52m shares during April 2011. The net inflow of 11,400 11,300 foreign funds according to NCCPL figures during the 2-May 5-May 10-May 13-May 18-May 23-May 26-May 31-May month under review was US$26.36m while the fiscal year ‐to‐date net inflow was US$321.39m and the calendar STOCK MARKET DATA 29‐Apr‐11 31‐May‐11 %Chg. year‐to‐date net inflow was US$71.40m.

Bank AL Habib Ltd. (BAHL)

KSE‐100 Index KSE‐30 Index Shares Traded m

12,057.54 12,123.15 11,716.35 11,762.76 1,585.92 1,570.54

0.5% 0.4% ‐1.0% ‐20.7% ‐20.7% 0.3% 0.3%

We are initiating coverage on BAHL, the eight largest Value Traded PKRm 65,065 51,571 commercial bank operating in Pakistan by asset size. US$m 762.78 604.58 PKRb 3,207.79 3,217.53 Qualities distinguishing BAHL from other banks include Market Cap. US$b 37.61 37.72 very low level of loan book infection and high operating efficiency. PERFORMANCE FOR THE MONTH OF MAY 2011 For FY11, we expect the bank to post a PAT of PKR 4,253 million (EPS: PKR 4.84) with a growth of 18.07% YoY. We also expect it to give a cash dividend of PKR 2.50.
Top 5 Gainers
Azgard Nine Limited Pakistan Telephone Cables Pakistan Reinsurance Jahangir Siddiqui & Co E.F.U. General Insurance 6.50 3.18 16.96 7.31 38.00 27.7% 27.2% 23.3% 23.3% 22.3%

31‐May‐11 % Chg. Chg.(PKR)
1.41 0.68 3.21 1.38 6.94

Using the justified price‐to‐book approach, we are valu‐ ing BAHL at PKR 32.41. As of May 31, 2011, the Bank is trading at PKR 28.39, with an upside of 14.16% to our Top 5 Losers target price; we, therefore, recommend an ACCUMU‐ Gharibwal Cement Agritech Limited LATE stance on it.

31‐May‐11 % Chg. Chg.(PKR)
6.15 18.84 14.92 21.23 45.53 ‐35.1% ‐14.4% ‐7.6% ‐7.1% ‐6.6% ‐3.33 ‐3.16 ‐1.22 ‐1.63 ‐3.20

Lotte Pakistan PTA Ltd. Netsol Technologies Limited Ibrahim Fibers

Taurus Securities Limited Value Call: May 2011

Table of Contents

Market Outlook 3 Company Report: Bank Al‐Habib Ltd. (BAHL) @ PKR 28.39 7 Ratings Guide 17 KSE‐100 Key Indicators 18 KSE‐100 Statistics 20 Economic Indicators 22

2

Taurus Securities Limited Value Call: May 2011

Market Outlook
Market Review ‐ May 2011
The market was range bound coupled with thin volumes for most of the month under review before activity picked up over the final 10 days. The KSE‐100 Index posted a Analyst: minor gain of 65 points or 0.5% during May 2011 to close at 12,123 while the KSE‐30 Salman Rasheed Index improved by only 46 points or 0.4% to 11,762. The average daily turnover dur‐ salman@taurus.com.pk ing May 2011 was 71.39m shares compared to 75.52m shares during April 2011. The net inflow of foreign funds according to NCCPL figures during the month under review was US$26.36m while the fiscal year‐to‐date net inflow was US$321.39m and the cal‐ endar year‐to‐date net inflow was US$71.40m. The market was mainly affected by the political events during the first week of the month. The KSE‐100 Index began the week on a bearish note shedding 385 points dur‐ ing the first three days to close at 11,672 on May 4. The capture and killing of Osama Bin Laden during a U.S. operation in Abbottabad in the wee hours of Monday morning along with the target killing of a prominent MQM leader in Karachi later that same day caused nervousness among most local and foreign investors leading to some panic selling. Most investors were concerned that the capture of Bin Laden on Pakistani soil would cause some blowback by other extremists group to seek revenge on the Paki‐ stani state and military. In addition, there was fear that the U.S. Congress would cut off economic aid to the country as some members of Congress were threatening this action, as they felt that the Pakistani security establishment was playing a double game by hiding Bin Laden or generally incompetent. The release of the April 2011 in‐ flation data showed that inflation was slowly creeping up again. Fortunately, the mar‐ ket rebounded on May 5 on the back of good news that Moody’s maintained Paki‐ stan’s sovereign credit rating and stated that Pakistan did not face an immediate risk of a withdrawal of foreign aid despite accusations that it sheltered Bin Laden. There was renewed buying activity in oil stocks such as OGDC, PPL and PSO as there were reports in the market that OGDC’s production over the next 2‐3 years will be higher
Comparative Performance (May 2011)
‐20% ‐15% ‐10% ‐5% 0% 5% 10% 15% 20% 25%
21.81% 20.28% 20.05% 17.32% 10.93% 3.85% 2.77% 2.62% 2.56% 1.92% 1.54% 1.15% 0.99% 0.52% 0.00% ‐0.04% ‐0.04%

Outperformers

Underperformers

‐0.23% ‐0.85% ‐1.18% ‐1.55% ‐2% ‐2.10% ‐2.14% ‐2.44% ‐2.63% ‐3.70% ‐4.37%

‐4.43% ‐6.06% ‐12.67%

B.O.Punjab JSCL ANL EFU General Ins AHL P.T.C.L.A OGDC P.S.O. ATRL PKGS BAFL UBL POL FFBL KSE‐100 Kapco AKBL PPL NBP Hubco MCB FFC AHCL Engro Corp. APL AICL LUCK DGKC HBL NML NIB Bank

3

Taurus Securities Limited Value Call: May 2011

than originally anticipated and that PSO received PKR 89.1bn from Hubco and Kapco and thus, was able to pay off some money owed to refineries and the FBR which led to the unfreezing of its bank accounts. The KSE‐100 Index shed 177 points during the week to close at 11,879 on May 6. The market was mainly upbeat but dull in terms of turnover during the second week. The KSE‐100 Index started the week on a bullish note as it gained 156 points in the first 3 trading days to close at 12,036 on May 11. Despite the continuing concerns over the Abbottabad incident, the market was positive due to various news reports on the weekend regarding recommended budgetary measures such as a lower corporate tax rate for listed companies and to not introduce further tax measures on existing taxpayers. In addition, the World Bank decided to visit Pakistan near the end of the week. There was renewed investor interest in ENGRO as it is expected to launch an IPO for Engro Foods, which recently acquired a Halal food company in the USA. There was a slight rebound in international crude oil prices during mid‐week and news that production from Maramzai field was about to restart soon (approximately 2,000 bpd crude oil and 40 mmcfd gas) that led to buying interest in oil stocks such as OGDC, POL, PPL and PSO. Fertilizer stocks had a good week based on news reports that urea prices may hike by another PKR 105 per bag as a result of government's agreement to divert 40 mmcfd gas from Independent Power Producers (IPPs) to fertiliser plants. In addition, there were positive developments on the macroeconomic front with remit‐ tances during 10mFY11 reaching US$ 9bn and the trade deficit during April 2011 shrinking by 33% YoY to US$ 870m. The KSE‐100 Index dipped on May 12 over con‐ cerns regarding the uncertainty of the outcome of the meetings during the week with the IMF and some profit taking activity and was subdued on May 13 due to the bomb blast in front of paramilitary training centre in Charsadda. The KSE‐100 posted a mar‐ ginal gain of 87 points during the week to close at 11,967 on May 13. The activity was dull with thinning volumes during the third week, as activity was fo‐ cused on lower tier stocks. The KSE‐100 Index dipped by 65 points on Monday, May 16 to close at 11,902. The main reason for the decline was the fear among investors regarding the souring U.S.‐Pakistan relations and imposition of new taxes. There were warnings from members of the U.S. Congress to cut‐off aid and restrict trade with Pakistan if terrorism and militancy were not curbed. In addition, it was reported over the weekend that the FBR has only accepted less than half of the budget proposals forwarded by the SECP. The Index staged a slight recovery on Tuesday, May 17 to end the day at 11,930 on the back of U.S. Senator John Kerry’s statement that there was no immediate threat to the aid to Pakistan. The KSE‐100 Index dipped again on Wednesday, May 18 to 11,884 because of realization among investors that the next IMF tranche remained uncertain. In addition, the MSCI review led to lowering the weightage of Pakistani stocks in the MSCI Frontier Market Index. Despite positive news on the macroeconomic front about the 10MFY11 current account surplus of US$ 748m, the market sentiments remained bearish. The T‐bill auction held on May 18 resulted in a slight increase in cut‐off yields across all tenors which led to further ap‐ prehension that there was a slight possibility that the SBP could raise the discount rate in the upcoming Monetary Policy Statement on May 21. There was positive move‐ ment in the share price of BAFL on the back of news that it was planning to open 20 new branches by August 2011. On Thursday, May 19, the KSE‐100 Index was lackluster as it shed 5 points to close at 11,878, as most investors decided to sit on the sidelines ahead of the Monetary Policy Statement scheduled for Saturday. ENGRO witnessed selling pressure as it reported that SNGP cut the gas supply to its new unit in contra‐ vention of the Sindh High Court decision and thus will take the matter back to the court. OMC stocks such as PSO experienced a rise in share price due to news reports
4

Taurus Securities Limited Value Call: May 2011

that the margins on regulated products such as HSD and Motor Spirit might rise. The falling cotton prices had a negative impact on the share price of LOTPTA. The KSE‐100 ended the week on a slight positive note due to speculation regarding the Capital Gains Tax on shares in terms of either the central collection of CGT or possible removal cou‐ pled with a hike in CVT. The KSE‐100 Index gained only 6 points to end the week at 11,973 on May 20. The fourth week of May saw the market become bullish with improvement in turnover from the previous week on the back of news flow on the possibility of relaxation in CGT and other budgetary measures. It was reported that the Pakistan Business Council and prominent members of the KSE met with the Federal Finance Minister in Islamabad on May 23 and 24 to discuss budget proposals and it was also reported that the GoP would further consider these proposals. In addition, the SBP kept the policy rate unchanged at 14% for the next 2 months on the back of improved external account position and stable prices and the visit of US Secretary of State Hillary Clinton to Islamabad on May 27 was seen as a positive development, indicating restoration of some normalcy to Pak‐US rela‐ tions. The last 2 sessions of the month saw slight profit taking with activity concentrated in lower tier stocks. The KSE‐100 Index surged by 149 points over the final 7 trading days to end the month at 12,123 on May 31.

Regional Valuation
The Pakistan market PE at 6.92x is trading at a 44.8% discount to the regional average of 12.54x. Based on dividend yield, Pakistan is the most attractive at 5.98% as compared to the regional average of 2.49%, followed by Taiwan (3.48%) and Thailand (3.24%).
Regional Valuation Comparison Country
Chi na Hong Kong Indi a Indones i a Ma l a ys i a Pakistan Phi l i ppi nes Si nga pore South Korea Ta i wa n Tha i l a nd
Source: Thomson One Analytics Date: May 19, 2011

12m F PEx
13.83 12.03 12.03 14.03 13.60 6.92 12.88 12.36 9.68 13.03 11.96

12m F Div. Yield (%)
1.35 2.64 1.48 2.30 3.21 5.98 2.67 3.15 1.37 3.48 3.24

5

Taurus Securities Limited Value Call: May 2011

Looking ahead
We expect the market to react immediately to the federal budget for FY12 expected to be presented in the National Assembly on June 3. Another key driver that would influ‐ ence the market direction during the next 6 weeks would be the decision by the IMF to continue the SBA or not. Given the security situation in the wake of the Abbottabad incident and the attack on PNS Mehran naval base in Karachi and their implications on Pak‐US relations, any more such incidents could have negative repercussions on the bourses if it leads to further diplomatic isolation of Pakistan and domestic unrest. Domestic politics may play a greater role on the direction of the bourses in the after‐ math of the budget. If the PML‐N, PTI and other opposition parties plan to turn on the heat on the government and rally public support for early elections, this could lead to instability. We recommend investors to hold onto their positions; any sharp spike would be an op‐ portunity to book profits.

6

Taurus Securities Limited Value Call: May 2011

ACCUMULATE
Fair Value
12‐month Trading data Price of Ma y 31' 11 (PKR) Hi gh (PKR) Low (PKR) Avg da i l y vol ume ('000) Avg va lue tra ded (PKR m) Sha res outs ta nding (m) Free floa t Ma rket Ca pita l is a tion (PKR m) Ma rket Ca pita l is a tion (US$m) 52‐week ga in 52 week ga i n (i ndex) Beta KATS Code

Bank AL Habib Ltd. (BAHL)
Deep Within its Shell
We are initiating coverage of Bank AL Habib Ltd (BAHL), with a target price of PKR 32.41 for 2011, derived from justified price‐ to‐book value methodology. As of May 31, 2011, the Bank is trading at PKR 28.39, with an upside of 14.16% to our target price. We have an ACCUMULATE stance on the stock. We like BAHL because of its operational efficiency: its capability to keep its administrative costs under control while going for branch network expansion at the same time. BAHL is in fact better than the top four private banks in this area. Bank AL Habib stands out from the other banks also because of its inordinate operational model of extra risk‐aversion. The Bank’s tactfulness in doling out loans and advances has led it to have a remarkably low level of non‐performing loans (NPLs) compared to its gross advances. This conservatism is aug‐ mented by liberal provisioning for those NPLs. However, BAHL’s prudence has come at the expense of higher interest income forgone. Since 2009, BAHL has kept more in‐ vestments than advances, the only bank in our coverage uni‐ verse to do so. This situation begs to ask the question: Why so shy?
Financial Highlights
CY10 A Net Interest Income Provisions Charge Non‐Interest Income Non‐Interest Expense Profit After Tax Investments Advances Total Assets Deposits Equity Earnings Per Share (PKR) Dividends Per Share (PKR) Book Value Per Share (PKR) Price to Earnings (x) Dividend Yield (%) Price to Book Value (x) Net Interest Margin (%) Return on Assets (%) Return on Equity (%) 10,797 946 2,130 6,324 3,602 137,168 125,773 301,552 249,774 14,706 4.10 2.00 16.74 6.92 7.04% 1.70 4.46% 1.31% 26.69% CY11 E 11,591 1,126 2,808 6,731 4,253 157,340 136,149 338,630 280,964 17,527 4.84 2.50 19.95 5.86 8.81% 1.42 4.14% 1.33% 26.39%

32.41
28.39 38.83 27.03 273.88 7.94 878.60 86.9% 24,943 298 14.5% 30.4% 1.22 BAHL

Price Performance (12 months)
36 34 32 30
PKR

BAHL

Rel. KSE‐100

28 26 24 22 20
01‐Jun‐10 26‐Nov‐10 30‐May‐11

In PKR m unless mentioned
CY12 F 12,836 1,164 3,131 7,283 4,888 176,394 152,322 378,560 314,989 20,249 5.56 2.50 23.05 5.10 8.81% 1.23 4.11% 1.36% 25.88% CY13 F 14,492 1,124 3,467 7,839 5,848 195,970 172,221 425,264 353,099 23,931 6.66 3.00 27.24 4.27 10.57% 1.04 4.14% 1.45% 26.47% CY14 F 16,214 1,161 3,828 8,398 6,813 215,567 192,832 472,334 391,940 28,139 7.75 3.00 32.03 3.66 10.57% 0.89 4.15% 1.52% 26.17%

Analyst:

Shumaila Badar shumaila.badar@taurus.com.pk Source: Company Reports, TSL Research

7

Taurus Securities Limited Value Call: May 2011

Valuation
Using a variation of the Gordon growth model, the justified price‐to‐book value ap‐ proach, we have come up with a value of PKR 32.41/share for BAHL. The table below shows how we have arrived at our justified P/BV multiple (of 1.16x) and multiplied it with the forecasted average book‐value per share for the next five years to arrive at our target price.

Valuation
Risk‐free rate Market Risk Premium Beta Cost of Equity Sustainable ROE Growth Justified P/B Avg. BVPS Target Price Source: TSL Research 14.00% 6.00% 1.22 21.29% 24.13% 3.00% 1.16 28.06 32.41

The target price of PKR 32.41 gives the scrip an upside of 14.16% from its May 31st 2011 closing price of PKR28.39. We therefore recommend an ACCUMULATE stance on BAHL.
19.29% 20.29% 21.29% 22.29% 23.29%

Target Price Sensitivity Analysis Growth
2.0% 2.5% 3.0% 3.5% 4.0%

35.91 33.95 32.19 30.60 29.16

36.15 34.11 32.30 30.67 29.19

36.39 34.29 32.41 30.73 29.22

36.66 34.47 32.54 30.80 29.25

36.94 34.67 32.67 30.88 29.28

Source: TSL Research

Risks to our thesis
Persistence of high inflation: Continuation of inflationary pressure beyond our ex‐ pectations will raise operating expenditure. At the moment, we are expecting inflation to remain around 15% for FY11 and to ease beyond that.

Change in monetary policy stance: We are expecting the policy rate to be main‐ tained for this year. If SBP goes for a tightened stance then we can expect further rise in interest income and vice versa.

Changes in regulations: Risks on the regulatory front remain too. Low economic growth: A slower than expected recovery in the real sector will culmi‐ nate in a build‐up of even more non‐performing loans.

Cost of Equity

8

Taurus Securities Limited Value Call: May 2011

BAHL's Price‐to‐Book Value Band
90 80 70 60 50 40 30 20 10 0
15‐Aug‐06 17‐Jul‐07 02‐Apr‐07 06‐Nov‐07 28‐Apr‐06 06‐Oct‐08 16‐Apr‐10 29‐Jul‐10 20‐May‐09 11‐Nov‐10 28‐Feb‐08 07‐Dec‐06 03‐Sep‐09 02‐Jan‐06 16‐Jun‐08 28‐Jan‐09 29‐Dec‐09

5.0x 4.0x 3x 2x 1x Price

Source: Company Reports, TSL Research

BAHL's Price‐to‐Earnings Band
80 70 60 50 40 30 20 10 0 20x 17x 14x 11x 8x 5.0x

Source: Company Reports, TSL Research

02‐Jan‐06 07‐Apr‐06 07‐Jul‐06 04‐Oct‐06 12‐Jan‐07 16‐Apr‐07 12‐Jul‐07 09‐Oct‐07 16‐Jan‐08 16‐Apr‐08 14‐Jul‐08 15‐Oct‐08 20‐Jan‐09 22‐Apr‐09 20‐Jul‐09 20‐Oct‐09 22‐Jan‐10 22‐Apr‐10 16‐Jul‐10 11‐Oct‐10

Price

9

Taurus Securities Limited Value Call: May 2011

Earnings outlook
⇒ We are projecting BAHL’s earnings to grow by a 4‐year CAGR of 17.3%; from PKR 3.6bn (EPS: PKR 4.10) in 2010 to PKR 6.8bn (EPS: PKR 7.75) in 2014. ⇒ Interest income has grown substantially in previous years, with the growth in 2010 reaching 24.2%. We do not, however, expect BAHL’s top line to depict similar robust growth in CY11 and CY12, as we are not expecting any further monetary policy rate hikes this year. ⇒ Similarly, interest expense will likely discontinue rising at the high rate seen in previ‐ ous years. Apart from a higher base taking effect, this slow down will also be attrib‐ utable to a build‐up of cheap current and savings account (CASA) deposits. ⇒ In an attempt to decrease the cost of funds, BAHL will most likely continue to in‐ crease its branch network. We expect the network to expand at a 4‐year CAGR of 7.3%, from 303 in 2010 to 385 offices in 2014. ⇒ We expect provisions to rise slightly (at a 4‐year CAGR of 5.3%, from PKR 946m in 2010 to PKR 1,161m in 2014) due to increase in advances and minor rise in infection ratio. ⇒ Non‐interest income will, according to our forecast, rise at a 4‐year CAGR of 15.8%, from PKR 2,130m in 2010 to PKR 3,828m in 2014. ⇒ We are expecting non‐interest expense to rise at a 4‐year CAGR of 7.4% from PKR 6,324m in 2010 to PKR 8,398m in 2014. This rate is low keeping in mind that we ex‐ pect BAHL to undergo substantial branch network expansion.

BAHL's Returns
Return on Equity (LHS) 32.0% 30.0% 28.0% 26.0% 24.0%
CY07A CY08A CY09A CY10A CY11E CY12F CY13F CY14F CY15F

1.8% 1.7% 1.6% 1.5% 1.4% 1.3% 1.2% 1.1% 1.0%

Return on Assets (RHS)

Source: Company Reports, TSL Research

10

Taurus Securities Limited Value Call: May 2011

BAHL's Interest Based Earnings
Yield on Earning Assets 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% CY07A CY08A CY09A CY10A CY11E CY12F CY13F CY14F Cost of Funds Net Interest Margin

Source: Company Reports, TSL Research

Key Investment Considerations
Provisioning: Partly an illusion of extra prudence
Bank Al‐Habib allocates general provision (for NPLs) over and above the SBP require‐ ments every year. While this gives an impression of conservatism and prudence, it must be borne in mind that BAHL has not reversed any of these charges since 2007, which shows that they were needed and not in excess. BAHL has, however, reversed substantial amounts of specific provisions over the years, much more than the other top private banks, as shown below.

Portion of Provisions for NPLs Reversed During the Year *
CY07 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% BAHL HBL UBL MCB ABL BAFL FABL CY08 CY09 CY10

Source: Company Reports, TSL Research

*Calculated as total reversals during the year divided by the opening balance for NPL provisions We have valued BAHL with the assumption that it will continue to put aside PKR 450m (in practice since CY09) every year in general provisions over and above the SBP require‐ ment. There is, however, a slight chance that this will not be the case. The table below gives the earnings expectations if BAHL unexpectedly discontinues this ‘prudent’ prac‐ 11

Taurus Securities Limited Value Call: May 2011

tice.

CY11 E Base Case * 4.84 Discontinuation in CY11** 5.06 Discontinuation in CY12 4.84 Discontinuation in CY13 4.84 Discontinuation in CY14 4.84
Source: TSL Research
* Allotment of PKR 450mn every year

EPS T.Price CY12 E CY13 E CY14 E 5.56 6.66 7.75 32.41 5.90 6.99 8.09 34.11 5.90 6.99 8.09 33.82 5.56 6.99 8.09 33.40 5.56 6.66 8.09 33.03

** Allotment of PKR 150mn in 2011 (which has already happened in 1Q) and disconitnuation in subsequent years

Assets composition to stay
In line with expected industry trend, BAHL’s declining advances to deposit ratio will most probably stabilize in the coming years, and gradually reverse its inclination. For CY11, we expect advances to rise less than proportionally to deposits as there are still no signs that the overall economic condition will improve sufficiently for banks to be less risk‐ averse than they are at present.

ADR and IDR Trends Over the Years
Advances to Deposits 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0%
CY06A CY07A CY08A CY09A CY10A CY11E CY12F CY13F CY14F CY15F

Investments to Deposits

Source: Company Reports, TSL Research

Banks’ asset‐liability composition strategies rely heavily upon their own size, as smaller banks find it harder to get into long term risky loans when their deposit base is relatively unstable. However, compared to its peer banks (those ranked 6‐10 by asset size) BAHL is much more inclined towards investments in government securities.

12

Taurus Securities Limited Value Call: May 2011

BAHL's Higher Deposits and Lower Advances Compared to Peer Banks
350 330 310 290 270 250 230 210 190 120

Deposits (in PKR bn)

BAFL

BAHL AKBL SCBPL BOP*

140

160

180

200

Advances (in PKR bn)
Source: Company Reports, TSL Research

*BOP’s figures are as of End 2010, due to unavailability of data. Other’s figures are as of End March 2011. BAHL’s risk aversion comes at a cost of higher returns forgone as it is the only bank in our universe to own more investments than advances. Even its advances earn a lower yield than its yield on AFS securities due to the high credit worthiness of borrowers those advances are made to. It is of interest to note here that BAHL does not classify any of its investments as held for trading. This means that its earnings do not comprise of any volatile unrealized gains or losses related to HFT securities. We expect the asset quality to worsen slightly for BAHL, but as its NPLs to Gross Loans are already too low compared to other banks, this is hardly a cause for concern. The infection of BAHL’s loan book will likely reach 2.8% by CY14 from 2.28% in CY10. The main reason for this expected increase is that we believe BAHL’s present level of NPLs is already very low and also because we have an adverse outlook on the macroeconomic front.
Source: Company Reports, SBP, TSL Research

BAHL's Low Infection of Loan Portfolio Compared to Other Banks
BAHL 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%
CY06A CY07A CY08A CY09A CY10A CY11E CY12F CY13F CY14F CY15F

Avg. *

HBL

UBL

MCB

ABL

*average for local private banks

13

Taurus Securities Limited Value Call: May 2011

Continuous improvement in operating efficiency
BAHL has recently improved its operating efficiency and has managed to reign in its ad‐ ministrative expenses despite high inflation rate and branch network expansion. By 2010, BAHL had the lowest administrative expenses as a percent of deposits compared to six of the top local private banks.

BAHL's Administrative Expenses to Deposits Compared with Other Banks
BAHL 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% CY07 CY08 CY09 CY10 HBL UBL MCB ABL BAFL FABL

Source: Company Reports, TSL Research

BAHL has been aggressively expanding its branch network. In 2010 alone, it added 22 branches and 25 sub‐branches, to bring up its network to 303 from 255 in 2009 (2008: 225, 2007: 175, 1QCY11: 314 offices). Sub‐branches are branches that provide basic fa‐ cilities but do not handle more sophisticated operations like giving out advances and handling foreign exchange trade. This model (of a mix of branches and sub‐branches) is expected to increase BAHL’s access to cheap deposits. We, however, do not expect it to incur any less administrative expenses than a pure branches model would have.

Impressive performance so far this year
BAHL posted a profit after tax of PKR 1,034.8m (EPS: PKR 1.18) in the 1QCY11, compared to PKR 880.6m (EPS: PKR 1.00) in the corresponding period last year. As with most other banks in the industry, this growth was largely driven by increase in net interest income. As the average 6‐month KIBOR in 1QCY11 was 140bps above that in the corresponding period in CY10, interest income grew by 30.7%. Build‐up in cheap deposits (CASA as at 30 Mar, 2011: 61.0%; 31 Dec, 2010: 59.27%), meanwhile, ensured that interest expenses didn’t rise by as much as interest income, resulting in a 40.9% surge in net interest in‐ come. Provisions increased substantially (by 297%) as a result of both rise in infection ratio and ageing of loan portfolio. Though the infection ratio has risen by the end of 1QCY11 (2.21%) compared to that of 1QCY10 (1.93%); it has actually declined from that by the end of 2010 (2.28%). Non‐interest based income and expenses have increased by 23.5% YoY and 27.9% YoY, respectively, in line with the trend.

14

Taurus Securities Limited Value Call: May 2011

Bank AL Habib Limited
Unconsolidated Markup Income Markup Expense Net Markup Income Provisions Expense NII after Provisions Non‐Markup Income Other Expenses Profit before tax Taxation Profit after tax EPS
Source: Company Reports

In PKR mn
1QCY11 8,251 4,939 3,312 484 2,828 618 1,795 1,651 616 1,035 1.18 1QCY10 6,315 3,964 2,351 2,229 500 1,403 1,326 445 881 1.00 %Chg 30.7% 24.6% 40.9% 26.9% 23.5% 27.9% 24.5% 38.5% 17.5% 17.5%

122 297.1%

Brief company overview
Bank AL Habib, the eighth largest commercial bank in Pakistan by asset size, has been operating as a publicly listed bank since 1992 (incorporated in October 1991). Its major sponsor is the Dawood Habib Group, the same group that initially established Habib Bank Limited. Currently it has only one subsidiary, AL Habib Capital Markets (Pvt.) Lim‐ ited, as its other subsidiary, AL Habib Financial Services Limited, was wound up in De‐ cember 2010.

Outlook: A pleasant ride ahead
Going forward, we expect the bottom line to grow on the back of healthy rise in top line, which in turn will be driven by lower cost of funds and increase in interest earning assets (both investments and advances). Provisions will continue to remain subdued due to BAHL’s conservative policies; though we expect to see a slight rise in infection of their loan book as a natural consequence of the present and foreseen economic scenario. Rise in non‐interest based income and constrained growth in operating expenses (despite network expansion) due to management efficiency will further support earnings in the future.

15

Taurus Securities Limited Value Call: May 2011

Financial Highlights
Bank AL Habib Ltd
Balance Sheet Highlights CY10 A Cash and Balances with Banks Investments Advances Total Assets Borrowings Deposits Equity Total Liabilities and Equity Profit and Loss Highlights CY10 A Interest Income Interest Expense Net Interest Income Provisions Charge Non‐Interest Income Non‐Interest Expense Profit Before Tax Profit After Tax Key Performance Indicators CY10 A Earnings Per Share (PKR) Dividends Per Share (PKR) Book Value Per Share (PKR) Price to Earnings (x) Dividend Yield (%) Price to Book Value (x) Advances to Deposits (%) NPLs to Gross Loans (%) CASA to Total Deposits (%) Yield on Avg Earning Assets (%) Cost of Funds (%) Net Interest Margin (%) Spreads (%) Return on Assets (%) Return on Equity (%)
Source: Company Reports, TSL Research

In PKR mn CY11 E 25,130 157,340 136,149 338,630 24,724 280,964 17,527 338,630 CY12 F 27,123 176,394 152,322 378,560 27,942 314,989 20,249 378,560 CY13 F 31,374 195,970 172,221 425,264 31,900 353,099 23,931 425,264 CY14 F 35,040 215,567 192,832 472,334 35,660 391,940 28,139 472,334 In PKR mn CY11 E 30,109 18,518 11,591 1,126 2,808 6,731 6,543 4,253 CY12 F 33,195 20,359 12,836 1,164 3,131 7,283 7,520 4,888 CY13 F 37,234 22,741 14,492 1,124 3,467 7,839 8,996 5,848 CY14 F 41,550 25,336 16,214 1,161 3,828 8,398 10,482 6,813 27,475 16,679 10,797 946 2,130 6,324 5,656 3,602 21,133 137,168 125,773 301,552 22,579 249,774 14,706 301,552

CY11 E 4.84 2.50 19.95 5.86 8.81% 1.42 48.46% 2.30% 59.90% 10.76% 6.14% 4.14% 4.62% 1.33% 26.39%

CY12 F 5.56 2.50 23.05 5.10 8.81% 1.23 48.36% 2.55% 60.60% 10.63% 6.04% 4.11% 4.59% 1.36% 25.88%

CY13 F 6.66 3.00 27.24 4.27 10.57% 1.04 48.77% 2.70% 60.90% 10.64% 6.03% 4.14% 4.61% 1.45% 26.47%

CY14 F 7.75 3.00 32.03 3.66 10.57% 0.89 49.20% 2.80% 61.10% 10.63% 6.03% 4.15% 4.60% 1.52% 26.17%

4.10 2.00 16.74 6.92 7.04% 1.70 50.35% 2.28% 59.27% 11.36% 6.42% 4.46% 4.94% 1.31% 26.69%

16

Taurus Securities Limited Value Call: May 2011

RATINGS GUIDE May 31, 2011
Stock
Allied Bank Bank Al‐Habib Faysal Bank Bank Alfalah Habib Bank MCB Bank United Bank Attock Cement Cherat Cement D.G. Khan Cement Fauji Cement Lafarge Pakistan Cem Lucky Cement M.Leaf Cement Millat Tractors Ltd Pak Suzuki Hub Power KAPCO Attock Petroleum P.S.O Oil & Gas Dev. Pakistan Oilfields Pakistan Petroleum Indus Motors P.I.C.T. P.T.C.L. Fauji Fert. Bin Fauji Fertilizer ICI Pakistan Engro Polymer

Closing EPS DPS BVPS Fair Shares Year Div P/BV x Beta P/E x price as at Rating Value* Outstanding end Yld(%) FY10A FY11F FY12F FY10A FY11F FY12F FY10A FY11F FY12F 31‐05‐11 65.0 62.0 Hold 9.6 11.6 12.3 3.6 4.0 4.0 41.8 49.4 56.7 5.4 6% 1.3 1.1 860 879 733 1,349 1,102 836 1,224 87 96 365 1,331 1,313 323 526 37 82 1,157 880 69 172 4,301 237 1,195 79 109 5,100 934 848 139 663 Dec Dec Dec Dec Dec Dec Dec Jun Jun Jun Jun Dec Jun Jun Jun Dec Jun Jun Jun Jun Jun Jun Jun Jun Jun Jun Dec Dec Dec Dec 32.4 28.4 Accumulate 4.1 4.8 5.6 2.0 2.5 2.5 18.3 22.1 25.2 5.9 9% 1.3 1.2 9.9 9.9 Hold 1.6 1.3 2.2 NIL 1.0 1.0 22.5 24.7 26.4 7.9 10% 0.4 1.2 11.6 10.3 Accumulate 0.7 1.6 2.0 113.5 117.3 Reduce 200.9 208.0 Reduce 64.1 64.8 Reduce 74.2 54.9 Buy 8.5 10.1 Sell NIL 1.0 1.0 16.5 17.4 18.3 6.4 10% 0.6 1.3 6% 1.2 1.1 6% 2.1 1.2 8% 1.1 1.2 5% 0.8 0.9 NIL 0.4 0.9 NIL 0.3 1.4 NIL 0.4 1.5 4% 0.8 1.3 14.2 18.1 20.3 6.5 7.0 7.0 81.2 93.9 107.8 6.5 20.2 23.0 26.2 10.5 11.5 12.0 94.7 100.0 114.8 9.0 9.1 10.4 11.9 5.0 5.0 6.0 55.9 61.7 70.1 6.2 11.7 6.3 8.5 5.0 3.0 4.0 62.3 65.7 70.2 8.7 (0.1) 0.5 1.0 NIL NIL NIL NIL NIL NIL NIL 23.5 23.5 26.6 20.9 NIL 1.0 72.6 77.1 84.4 20.1 NIL NIL 7.2 10.7 11.1 9.7

26.0 23.1 Accumulate 0.6 1.2 1.6 10.5 4.8 Strong Buy 0.2 0.5 0.4 1.9 3.0 Sell 2.1 2.3 Reduce 581.9 540.0 Hold 66.4 65.6 Hold 0.7 ‐ (0.3) (4.9) (7.0) (5.6)

NIL NIL 6.7 8.3 6.8 N/A NIL 0.4 1.1 NIL NIL 9.8 9.8 9.7 N/A NIL 0.2 1.6 2% 0.4 0.9 13% 18% 9% 4% 3% 10% 6% 6% 5% 11% 14% 9% 11% 2% 1.4 0.9 0.6 0.7 3.6 1.0 1.1 1.1 3.3 1.1 2.4 1.2 2.4 1.0 1.0 1.1 2.5 0.8 0.8 1.1 3.1 1.0 8.3 0.8 1.4 1.0 0.9 1.1

80.6 71.1 Accumulate 9.7 11.0 12.7 4.0 3.0 4.0 77.6 85.6 94.3 6.4

62.4 71.2 79.1 52.0 60.0 60.0 114.5 173.4 218.3 7.6 12% 3.2 1.0 3.1 4.7 7.5 0.5 1.0 1.0 176.2 177.3 184.8 14.0 5.0 5.0 6.5 25.8 5.0 8.0 8.5 25.6 25.0 35.0 40.0 133.6 8.0 10.0 15.0 171.0 5.5 5.0 5.0 36.6 25.5 32.0 32.0 123.1 7.5 12.0 13.0 66.9 15.0 13.0 14.0 160.1 4.0 4.0 5.0 34.1 1.8 2.0 2.0 21.2 6.6 6.2 13.8 13.1 10.4 13.2 13.6 18.2 17.5 17.5 10.0 97.1 NIL 0.3 14.1 10.4 26.2 27.1 6.9 70.5 57.4 5.0 106.1 137.8 6.5 265.0 317.4 4.9 45.8 55.8 10.5 136.7 150.3 7.3 87.6 106.1 7.1 213.7 244.3 5.2 34.4 40.1 9.7 21.7 22.3 8.4 13.6 6.0 6.4 16.9 23.7 9.5 111.4 131.2 7.6 12.6 0.8 5.7

46.2 37.6 Buy 4.8 5.5 6.9 48.5 43.5 Accumulate 5.8 8.6 8.7 408.4 378.1 Hold 52.0 58.2 62.4 342.0 283.6 Buy 52.8 57.7 67.2 107.7 150.5 Sell 13.8 14.4 15.0 302.9 333.4 Reduce 31.4 45.6 45.6 228.1 213.1 Hold 19.5 30.2 31.5 235.0 221.5 Hold 43.8 42.5 47.8 88.3 85.0 Hold 8.3 8.8 10.1 21.7 17.6 Buy 2.3 2.1 2.5 38.2 42.8 Sell 7.0 6.7 6.3 129.2 139.8 Reduce 13.0 14.7 15.1 176.4 157.0 Accumulate 17.5 20.5 17.8 12.5 11.6 Hold (1.2) 2.0 2.2

17

Taurus Securities Limited Value Call: May 2011

KSE 100‐ KEY INDICATORS
Sector
Oil And Gas

Company

Mkt. Cap (mln) 26,132 11,178 8,017 29,171 647,247 78,874 254,638 2,988 48,638 3,631 15,411 5,534 7,620 76,415 7,683 40,008 8,528 118,539 21,785 7,393 22,592 25,800 1,716 6,237 4,753 4,274 10,121 3,567 3,938 22,985 2,462 6,028 9,510 8,191 3,161 1,396 9,962 19,767 9,275 3,735 1,091 9,259 17,411 5,399 1,869 153,727 24,625 65,757 8,621 941 345 2,921 3,826

Equity (mln) 9,236.6 12,196.9 9,190.8 19,638.0 157,392.5 29,124.7 79,906.2 2,348.8 29,336.1 (8,068.9) 7,900.0 2,658.4 22,671.8 30,599.0 6,906.3 12,210.0 16,135.3 15,447.5 15,455.4 10,799.5 9,688.4 24,258.8 3,110.7 4,690.5 5,395.4 7,006.1 26,519.2 12,435.8 8,815.4 25,095.9 4,000.4 4,143.6 26,929.9 7,168.4 5,664.0 1,399.7 6,362.7 4,192.4 3,718.0 7,133.5 1,015.7 3,891.8 12,587.6 14,497.9 3,785.5 5,581.9 4,953.9 3,560.3 404.4 6,795.7 201.2 18,469.7 1,960.7

Sh. O/S (mln) 69.1 85.3 73.5 80.0 4,300.9 236.5 1,195.0 35.0 171.5 392.1 68.5 34.1 120.3 393.3 663.5 934.1 375.0 848.2 138.8 392.4 1,514.2 2,000.0 41.2 119.9 86.6 325.7 438.1 58.1 1,312.6 323.4 400.3 106.7 84.4 8.2 30.7 28.5 42.9 36.6 109.2 132.1 385.4 62.6 78.6 82.3 17.3 45.3 9.2 13.3 6.2 121.9 7.3 449.3 7.6

PAT (mln) 3,594.3 126.4 1,186.0 3,284.8 59,177.1 7,437.0 23,320.5 (2,974.5) 9,049.6 (1,616.4) 1,615.6 762.7 3,248.0 6,441.0 (813.8) 6,514.4 (2,768.9) 11,028.8 2,428.8 885.7 4,527.8 (163.6) 348.1 1,026.3 1,003.6 (1,209.4) 233.0 (128.9) (948.5) 3,137.5 (1,027.5) 947.2 (332.4) 999.5 1,366.3 45.5 1,908.9 2,284.5 907.8 711.5 (1,616.8) 712.5 3,443.4 211.1 315.3 4,112.8 1,837.9 3,273.2 437.5 260.5 (18.3) 60.5 585.5

EPS P/E (Rs) (x) 52.0 1.5 16.1 41.1 13.8 31.4 19.5 (85.0) 52.8 (4.1) 23.6 22.4 27.0 16.4 (1.2) 7.0 (7.4) 13.0 17.5 2.3 3.0 (0.1) 8.5 8.6 11.6 (3.7) 0.5 (2.2) (0.7) 9.7 (2.6) 8.9 (3.9) 121.2 44.5 1.6 44.5 62.4 8.3 5.4 (4.2) 11.4 43.8 2.6 18.2 90.7 199.0 246.2 71.0 2.1 (2.5) 0.1 77.4 7.3 88.4 6.8 8.9 10.9 10.6 10.9 N.M 5.4 N.M 9.5 7.3 2.3 11.9 N.M 6.1 N.M 10.7 9.0 8.3 5.0 N.M 4.9 6.1 4.7 N.M 43.4 N.M N.M 7.3 N.M 6.4 N.M 8.2 2.3 30.7 5.2 8.7 10.2 5.2 N.M 13.0 5.1 25.6 5.9 37.4 13.4 20.1 19.7 3.6 N.M 48.3 6.5

Price Weightage 31‐May Div. Yield (%) (%)
378.07 131.05 109.07 364.79 150.49 333.44 213.09 85.38 283.57 9.26 225.02 162.19 63.33 194.30 11.58 42.83 22.74 139.76 156.95 18.84 14.92 12.90 41.70 52.02 54.89 13.12 23.10 61.37 3.00 71.08 6.15 56.50 112.71 993.19 103.00 49.04 232.01 540.00 84.97 28.28 2.83 148.02 221.51 65.60 107.92 3389.81 2666.08 4946.40 1400.00 7.72 46.94 6.50 506.13 7.94 0.00 2.84 5.48 3.65 7.65 4.22 0.00 2.82 0.00 5.33 8.32 7.90 3.09 0.00 15.29 0.00 9.30 11.15 0.00 3.35 0.00 11.99 7.69 9.11 0.00 0.00 0.00 0.00 5.63 0.00 4.42 2.88 9.06 3.88 3.06 8.62 12.04 4.71 5.30 0.00 1.69 6.77 0.76 4.63 2.21 4.31 4.97 5.07 0.00 5.33 0.00 5.53 0.91% 0.39% 0.28% 1.02% 22.53% 2.75% 8.86% 0.10% 1.69% 0.13% 0.54% 0.19% 0.27% 2.66% 0.27% 1.39% 0.30% 4.13% 0.76% 0.26% 0.79% 0.90% 0.06% 0.22% 0.17% 0.15% 0.35% 0.12% 0.14% 0.80% 0.09% 0.21% 0.33% 0.29% 0.11% 0.05% 0.35% 0.69% 0.32% 0.13% 0.04% 0.32% 0.61% 0.19% 0.07% 5.35% 0.86% 2.29% 0.30% 0.03% 0.01% 0.10% 0.13%

Attock Petroleum Ltd Attock Refinery Mari Gas Company Limited National Refinery O G D C Pakistan Oilfields Pakistan Petroleum Ltd Pakistan Refinery Pakistan State Oil Byco Petroleum Sec. P/E: 10.29 Shell Pakistan Chemicals Clariant Pakistan Dawood Hercules Engro Corporation Engro Polymer & Chemicals Ltd Fauji Fertiliser Bin Qasim Arif Habib Corporation Fauji Fertilizer ICI Pakistan Sec. P/E: 8.37 Agritech Limited Lotte Pakistan PTA Ltd. Forestry And Paper Fatima Fertilzer Company Industrial Metals And Mining Security Papers Construction And Materials International Industries Attock Cement Bestway Cement D.G. Khan Cement Javedan Cement Lafarge Pakistan Cement Sec. P/E: 8.66 Lucky Cement Gharibwal Cement General Industries Ghani Glass Packages Limited Siemens Engineering Sec. P/E: 5.25 Thal Limited Electronics And Electrical Equipments Pakistan Cables Limited Al‐Ghazi Tractors Industrial Engineering Sec. P/E: 7.09 Millat Tractors Industrial Transportation P.I.C.T Sec. P/E: 8.03 P.N.S.C. Support Services TRG Pakistan Limited Automobile And Parts Atlas Honda Indus Motors Sec. P/E: 7.34 Pak Suzuki Motors Beverages Muree Brewery Co Ltd Food Producers Nestle Pakistan Rafhan Maize Unilever Pakistan Ltd. Sec. P/E: 26.16 Unilever Foods Ltd Household Goods Pak Electron Limited Leisure Goods Grays of Cambridge Pak Personal Goods Azgard Nine Limited Bata Pakistan Ltd.

18

Taurus Securities Limited Value Call: May 2011
Sector Company Mkt. Cap Equity (mln) (mln) 22,430 3577.1 14,137 15238.1 5,734 4310.4 20,917 31376.3 15,099 6819.9 26,060 3602.1 1,619 1585.7 9,058 3912.5 14,515 10799.8 18,400 347.1 5,841 ‐56416.9 4,635 22792.0 89,607 99389.6 43,544 29881.3 18,182 31300.9 2,966 7051.7 38,326 22494.7 10,521 18702.1 18,482 14072.3 53,339 35974.9 8,406 16004.0 24,943 16066.1 13,896 22305.5 3,242 3743.1 7,254 16517.8 129,295 89524.7 18,630 20308.1 173,912 79204.2 14,221 11080.0 88,716 128495.8 7,036 13662.8 3,861 8917.7 32,715 51073.1 79,376 68415.1 8,355 11035.0 7,441 338.2 4,750 10464.5 5,173 11575.9 4,570 2873.4 5,088 6785.7 5,557 1579.3 772 5194.4 5,580 10127.7 3,677 6937.2 1,654 3337.2 67 155.6 2,232 1365.1

Sh. O/S (mln)
31.6 310.5 18.1 351.6 61.6 255.5 50.5 97.9 196.4 32.0 2327.3 32.5 5100.0 1157.2 7451.6 169.5 880.3 549.1 839.0 860.3 707.0 878.6 1349.2 528.8 732.7 1102.1 1047.8 836.2 803.0 1681.8 4043.7 602.3 3871.6 1224.2 123.7 25.1 125.0 71.8 79.1 300.0 85.0 278.9 763.3 283.5 77.9 21.0 134.1

PAT (mln)
1151.6 3360.1 1858.5 2915.5 958.4 925.1 189.0 1176.9 1057.4 1.9 ‐20785.1 427.9 9151.2 5556.1 ‐14641.2 687.3 5089.1 2554.6 4399.1 8225.3 943.2 3602.2 968.5 ‐10059.5 1190.3 15613.1 2818.0 16873.2 1649.6 17563.2 ‐10112.1 125.4 3605.6 11159.9 2434.5 8.4 732.3 836.6 450.2 269.9 363.2 436.8 ‐8983.8 551.7 951.9 ‐107.4 ‐73.6

EPS (Rs)

P/E (x)

Price Weightage 31‐May Div. Yield (%) (%)
1.90 4.39 0.00 7.56 1.02 3.28 7.80 5.40 5.41 0.00 0.00 0.00 9.96 13.29 0.00 14.29 11.48 10.44 6.81 6.45 0.00 7.04 0.00 0.00 0.00 5.54 0.00 5.53 0.00 14.22 0.00 0.00 7.10 7.71 3.70 0.00 0.00 4.17 3.46 17.69 7.65 0.00 13.68 15.42 5.89 0.00 0.00 0.78% 0.49% 0.20% 0.73% 0.53% 0.91% 0.06% 0.32% 0.51% 0.64% 0.20% 0.16% 3.12% 1.52% 0.63% 0.10% 1.33% 0.37% 0.64% 1.86% 0.29% 0.87% 0.48% 0.11% 0.25% 4.50% 0.65% 6.05% 0.50% 3.09% 0.24% 0.13% 1.14% 2.76% 0.29% 0.26% 0.17% 0.18% 0.16% 0.18% 0.19% 0.03% 0.19% 0.13% 0.06% 0.00% 0.08%

Colgate Palmolive Ibrahim Fibers Indus Dyeing & Mfg. Company Sec. P/E: 7.04 Nishat Mills Tobacco Phillip Morris Sec. P/E: 21.85 Pakistan Tobacco Company Health Care Equipment And Services Shifa International Hospitals Pharma And Bio Tech Abbot Laboratories Sec. P/E: 10.55 GlaxoSmith‐Kline Pak Ltd. Travel And Leisure Dreamworld Ltd P.I.A.C. (A) Sec. P/E: 53.59 Pak Services Fixed Line Telecommunication PTCL Electricity Hub Power Company K.E.S.C. Kohinoor Energy Sec. P/E: 7.49 Kot Addu Power Co. Ltd Gas Water And Multiutilities Sui Northern Gas Ltd Sec. P/E: 4.17 Sui Southern Gas Banks Allied Bank Limited Askari Bank Limited Bank Al‐Habib Bank Al‐Falah Bank Of Punjab Faysal Bank Habib Bank Habib Metropolitan Bank MCB Bank Ltd. Meezan Bank National Bank NIB Bank Soneri Bank Standard Chartered Bank Sec. P/E: 7.69 United Bank Limited Non Life Insurance Adamjee Insurance East West Insurance Co.Ltd. E.F.U. General Insurance IGI Insurance New Jubilee Insurance Sec. P/E: 7.48 Pakistan Reinsurance Life Insurance E.F.U. Life Assurance Real Estate Investment And Services Pace Pakistan Limited Jahangir Siddiqui & Co Equity Investment Instruments PICIC Growth Fund Software And Computer Services Netsol Technologies Limited Technology Hardware And Equipment Pakistan Telephone Cables Media Media Times Ltd. N.A = Not Available, N.M = Not Meaningful (**) Companies have equity, dividend yield and PAT of 2009

36.5 19.5 710 10.8 4.2 45.53 102.8 3.1 317.27 8.3 7.2 59.49 15.6 15.8 245.19 3.6 28.2 102 3.7 8.6 32.05 12.0 7.7 92.52 5.4 13.7 73.9 0.1 9668.9 575 ‐8.9 N.M 2.51 13.2 10.8 142.5 1.8 9.8 17.57 4.8 7.8 37.63 ‐2.0 N.M 2.44 4.1 4.3 17.5 5.8 7.5 43.54 4.7 4.1 19.16 5.2 4.2 22.03 9.6 6.5 62 1.3 8.9 11.89 4.1 6.9 28.39 0.7 14.3 10.3 ‐19.0 N.M 6.13 1.6 6.1 9.9 14.2 8.3 117.32 2.7 6.6 17.78 20.2 10.3 207.97 2.1 8.6 17.71 10.4 5.1 52.75 ‐2.5 N.M 1.74 0.2 30.8 6.41 0.9 9.1 8.45 9.1 7.1 64.84 4.2 16.1 67.54 0.3 881.3 296 5.9 6.5 38 11.6 6.2 72 5.7 10.2 57.78 0.9 18.9 16.96 4.3 15.3 65.38 1.6 1.8 2.77 ‐11.8 N.M 7.31 1.9 6.7 12.97 12.2 1.7 21.23 ‐5.1 N.M 3.18 ‐0.5 N.M 16.64

KSE‐100 INDEX
Market Cap. (Rs m) P/E (x) Dividend Yield (%) ROE (%)

12,123.15 2,872,523 9.34 5.24 19.54

19

Taurus Securities Limited Value Call: May 2011

KSE‐100 STATISTICS

May 31, 2011
20 Lowes t P/E x Stocks
Netsol Technologies Limited Pace Pakistan Limited Thal Limited Dawood Hercules Indus Dyeing & Mfg. Company Pak Electron Limited Sui Northern Gas Ltd Sui Southern Gas Ibrahim Fibers Kohinoor Energy Attock Cement Security Papers Lotte Pakistan PTA Ltd. National Bank Indus Motors Al‐Ghazi Tractors P.N.S.C. Pakistan State Oil Muree Brewery Co Ltd International Industries 1.74 1.77 2.31 2.35 3.09 3.61 4.12 4.20 4.21 4.31 4.74 4.93 4.99 5.05 5.06 5.22 5.25 5.37 5.93 6.08

20 Lowest P/BV x Stocks
Pak Electron Limited Pace Pakistan Limited Azgard Nine Limited Pak Services Javedan Cement Dawood Hercules Packages Limited Pak Suzuki Motors D.G. Khan Cement Kohinoor Energy Pakistan Telephone Cables Soneri Bank Faysal Bank Lafarge Pakistan Cement IGI Insurance E.F.U. General Insurance Muree Brewery Co Ltd Netsol Technologies Limited NIB Bank P.N.S.C. 0.14 0.15 0.16 0.20 0.29 0.34 0.35 0.37 0.38 0.42 0.43 0.43 0.44 0.45 0.45 0.45 0.49 0.50 0.51 0.52

Top 20 EPS Stocks (Rs )
Unilever Pakistan Ltd. Rafhan Maize Siemens Engineering Indus Dyeing & Mfg. Company Nestle Pakistan Bata Pakistan Ltd. Unilever Foods Ltd Millat Tractors Pakistan State Oil Attock Petroleum Ltd Thal Limited Al‐Ghazi Tractors Indus Motors National Refinery Colgate Palmolive Pakistan Oilfields Dawood Hercules Shell Pakistan Clariant Pakistan MCB Bank Ltd. 246.2 199.0 121.2 102.8 90.7 77.4 71.0 62.4 52.8 52.0 44.5 44.5 43.8 41.1 36.5 31.4 27.0 23.6 22.4 20.2

Top 20 Market Cap Stocks (Rsm) Unilever Foods Ltd 108.18 O G D C 647,247 254,638 Unilever Pakistan Ltd. 91.94 Pakistan Petroleum Ltd 173,912 Nestle Pakistan 73.68 MCB Bank Ltd. 153,727 Fauji Fertilizer 71.40 Nestle Pakistan 129,295 Millat Tractors 54.49 Habib Bank 118,539 Fauji Fertiliser Bin Qasim 53.35 Fauji Fertilizer 89,607 Lotte Pakistan PTA Ltd. 46.73 PTCL 88,716 Indus Dyeing & Mfg. Company 43.12 National Bank 79,376 Attock Petroleum Ltd 38.91 United Bank Limited 78,874 O G D C 37.60 Pakistan Oilfields 76,415 Rafhan Maize 37.10 Engro Corporation 65,757 Colgate Palmolive 32.19 Unilever Pakistan Ltd. 53,339 Sui Southern Gas 31.26 Allied Bank Limited 48,638 Pakistan State Oil 30.85 Pakistan State Oil 43,544 Abbot Laboratories 30.08 Hub Power Company 40,008 Al‐Ghazi Tractors 30.00 Fauji Fertiliser Bin Qasim 38,326 Bata Pakistan Ltd. 29.86 Kot Addu Power Co. Ltd 32,715 Pakistan Petroleum Ltd 29.18 Standard Chartered Bank 29,171 Clariant Pakistan 28.69 National Refinery 26,132 Netsol Technologies Limited 28.52 Attock Petroleum Ltd

Top 20 ROE Stocks (%)

Top 20 Div. Yld Stocks (%)
Pakistan Reinsurance PICIC Growth Fund Fauji Fertiliser Bin Qasim Kohinoor Energy National Bank Jahangir Siddiqui & Co Hub Power Company Millat Tractors Security Papers Kot Addu Power Co. Ltd ICI Pakistan Sui Northern Gas Ltd PTCL Fauji Fertilizer Attock Cement Siemens Engineering Al‐Ghazi Tractors Clariant Pakistan Attock Petroleum Ltd Dawood Hercules 17.69 15.42 15.29 14.29 14.22 13.68 13.29 12.04 11.99 11.48 11.15 10.44 9.96 9.30 9.11 9.06 8.62 8.32 7.94 7.90

20

Taurus Securities Limited Value Call: May 2011

KSE‐100 Sector Statistics
P/Ex
Oil And Gas Chemicals Forestry And Paper Industrial Metals And Mining Construction And Materials General Industries Electronics And Electrical Equipments Industrial Engineering Industrial Transportation Support Services Automobile And Parts Beverages Food Producers Household Goods Leisure Goods Personal Goods 10.29 8.37 4.34 6.08 8.66 5.25 30.67 7.09 8.03 n.m. 7.34 5.93 26.16 3.61 n.m. 7.04

ROE(%)
30.54 21.48 11.19 21.88 4.90 7.55 3.25 39.73 14.92 0.00 14.10 8.33 66.63 3.83 0.00 13.25 Tobacco Health Care Equipment And Services Pharma And Bio Tech Media Travel And Leisure Fixed Line Telecommunication Electricity Gas Water And Multiutilities Banks Non Life Insurance Life Insurance Real Estate Investment And Services Financial Services Equity Investment Instruments Software And Computer Services Technology Hardware And Equipment KSE‐100 Index

P/Ex
21.85 8.57 10.55 n.m. 53.59 9.79 7.49 4.17 7.69 7.48 15.30 1.77 n.m. 6.66 1.74 n.m. 9.34

ROE(%)
18.07 11.92 15.19 0.00 1.86 9.21 12.49 21.22 14.51 10.99 23.00 8.41 0.00 7.95 28.52 0.00 19.54

Top 20 Li quid Sha res (m)
Lotte Pakistan PTA Ltd. Jahangir Siddiqui & Co Azgard Nine Limited Bank Al‐Falah NIB Bank Bank Of Punjab D.G. Khan Cement Fauji Fertiliser Bin Qasim National Bank Arif Habib Corporation Nishat Mills Fauji Fertilizer Pakistan Reinsurance Byco Petroleum O G D C Engro Corporation PTCL Pakistan Oilfields Hub Power Company TRG Pakistan Limited 6.24 5.60 4.67 2.35 2.25 2.24 1.78 1.61 1.52 1.50 1.46 1.31 1.23 1.16 1.14 1.04 0.91 0.88 0.85 0.77

20 Lowes t PEG Stocks *
Dreamworld Ltd Security Papers Habib Metropolitan Bank P.I.C.T Unilever Foods Ltd Shifa International Hospitals Rafhan Maize Attock Petroleum Ltd Engro Corporation Pakistan Cables Limited ICI Pakistan Netsol Technologies Limited Pakistan Tobacco Company Allied Bank Limited Mari Gas Company Limited Shell Pakistan IGI Insurance Askari Bank Limited Fauji Fertiliser Bin Qasim Ibrahim Fibers *growth taken over last 5 years 0.04 0.05 0.08 0.08 0.10 0.10 0.10 0.11 0.12 0.12 0.13 0.14 0.14 0.16 0.20 0.20 0.21 0.21 0.22 0.23

10 Highest/Lowest Rel. Perf.*
Azgard Nine Limited Pakistan Telephone Cables Pakistan Reinsurance Jahangir Siddiqui & Co E.F.U. General Insurance P.I.C.T E.F.U. Life Assurance Bank Of Punjab Grays of Cambridge Pak TRG Pakistan Limited Gharibwal Cement Agritech Limited Lotte Pakistan PTA Ltd. Netsol Technologies Limited Ibrahim Fibers Siemens Engineering Bestway Cement Pak Suzuki Motors Pace Pakistan Limited Pak Services 27.7% 27.2% 23.3% 23.3% 22.3% 21.2% 21.0% 20.9% 18.2% 10.5% ‐35.1% ‐14.4% ‐7.6% ‐7.1% ‐6.6% ‐6.3% ‐6.2% ‐5.6% ‐4.8% ‐4.8%

*Rel. Perfomance taken over MoM

21

Taurus Securities Limited Value Call: May 2011

ECONOMIC INDICATORS
Nominal GDP (Rs billions) Real GDP Growth (%) Large Scale Manufacturing Growth(%) Agriculture Growth (%) Major Crops: Wheat (m tons) Cotton (m bales) Sugarcane (m tons) Rice (m tons) Services Sector Growth (%) Exports (US$ millions) Growth (%) Imports (US$ millions) Growth (%) Trade Balance (US$ millions) Current Account Balance (US$ millions) SBP Foreign Exchange Reserves (US$ millions) Exchange Rate (Rs per US$) % change Total External Liabilities (US$ billions) Domestic Debt (Rs billions) of which: Permanent (Rs billions) Floating (Rs billions) Unfunded (Rs billions) Tax Revenue (Rs billions) Budgetary Expenditures (Rs billions) Budgetary Deficit (% of GDP) Borrowing for Budgetary Support (Rs billions) Credit Expansion (%) M2 Growth (%) Consumer Price Index (FY91=100) Sensitive Price Index (FY91=100)
Source : SBP Annual Reports

FY04 5533 6.4 18.2 2.2 19.5 10.0 53.4 4.8 6.0 12313 10.3 15592 27.6 (3279) 280 10326 57.6 (1.6) 35.3 1979 537 543 899 510 899 2.3 63.7 23.7 19.6 4.6 6.0

FY05 6548 8.4 15.4 7.5 21.6 14.3 47.2 5.0 7.9

FY06 7195 5.8 8.3 6.3 21.6 14.3 47.2 5.0 6.5

FY07 8235 6.8 8.7 4.1 23.3 12.9 54.7 5.4 7.0

FY08 FY09 FY10A/P 9922 12082 13844 3.7 1.2 4.1 4.0 (8.2) 4.4 1.0 4.0 2.0 21.0 24.0 23.9 11.7 11.8 12.9 63.9 50.0 49.4 5.6 7.0 6.9 6.0 1.6 4.6

14391 16451 16976 19052 17688 19346 16.9 14.3 3.2 12.2 (7.2) 9.4 20598 28581 30540 39966 34822 34710 32.1 38.8 6.9 30.9 (12.9) (0.3) (6207) (12130) (13564) (20914) (17134) (15364) (1070) (4990) (6878) (13874) (9261) (3495) 9578 59.4 3.1 35.8 2129 501 778 850 590 1001 3.3 60.2 22.2 19.1 9.3 11.1 10836 59.9 0.8 36.4 2337 500 941 882 704 1196 4.3 70.9 16.1 15.1 7.9 7.8 14333 60.6 1.3 39.5 2610 553 1108 940 840 1365 4.4 102.0 14.2 19.3 7.8 9.4 8745 62.5 3.2 44.9 3275 608 1637 1020 1010 1921 7.6 519.9 29.3 15.4 12.0 14.2 9527 78.5 25.5 51.1 3861 678 1904 1271 1252 2101 5.3 305.6 15.4 9.6 20.8 22.7 13112 83.8 6.8 54.5 4653 794 2399 1456 1483 2577 6.3 304.6 12.7 12.5 11.7 13.2

22

CORPORATE OFFICE
Suite # 604, 6th Floor, Progressive Plaza, Beaumont Road, Karachi, Pakistan. UAN : (021) 111 82 87 87 Fax : (92) 021‐3568‐6279
Syed Zain Hussain Aftab Afroz Mahmoodi Chief Executive Officer Chief Financial Officer & Company Secretary Ext: 217 zain@taurus.com.pk aftab@taurus.com.pk

CORPORATE SALES
Muhammad Asif M. Aftab Alam M. Irfan Surya Feroz Ahmed Tauseef Ladak Muhammad Usman Ansari Khurram Rasheed Syed Qulb‐e‐Abbas Fahed Fazal Resident Vice President (Group Chief) Senior Manager Senior Manager Senior Manager Senior Manager Senior Manager Manager Manager Manager 35682690 35212946 35673390 35662817 35662731 35215952 35681420 35684228 35651128 asifjan@taurus.com.pk aftab.alam@taurus.com.pk mirfan@taurus.com.pk feroz@taurus.com.pk tauseefladak@taurus.com.pk usman.ansari@taurus.com.pk khurram@taurus.com.pk qulb.abbas@taurus.com.pk fahed@taurus.com.pk

RESEARCH
Salman Rasheed Saad Najaf Ali Sayed MohammadAli Ghanghro Nabil Saleh Shumaila Badar Head of Research & Investment Advisory Senior Equity Analyst Equity Analyst Equity Analyst Equity Analyst Ext: 202 Ext: 203 Ext: 202 Ext: 202 Ext: 203 salman@taurus.com.pk saad@taurus.com.pk m.ali@taurus.com.pk nabil@taurus.com.pk shuma ila.badar@taurus.com.pk

PESHAWAR BRANCH
Abdul Basit M. Adeel Saifullah

State Life Building, 2nd Floor, 24 The Mall, Peshawar Cantt. UAN (091)111 82 87 87 Fax: (091) 270063

Resident Representative Equity Sales Officer Equity Sales Officer

basit@taurus.com.pk adeelahmed@taurus.com.pk safiullah@taurus.com.pk

HYDERABAD BRANCH
Sarfraz M. Akhund Farhana Aneel Shaikh

Mezzanine Floor, Gul Centre, Fatima Jinnah Road, Cantt Hyderabad. Ph: (022) 9201197‐9, Fax: (022) 2786691

Resident Representative Equity Sales Officer Equity Sales Officer

sarfraz@taurus.com.pk info@taurus.com.pk anil@taurus.com.pk

URL: http://www.taurus.com.pk E‐mail: research@taurus.com.pk

Analyst Certification
We, Salman Rasheed and Shumaila Badar, the authors of this report, hereby certify that all of the views ex‐ pressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or se‐ curities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the spe‐ cific recommendation(s) or view(s) in this report.

Disclaimer of Warranty and Limitation of Liability
The information contained herein is provided on an “AS IS,” “WHERE IS” and “WHERE AVAILABLE” basis. Taurus Securities Lim‐ ited (Taurus) does not warrant the information or service provided herein. Although the information provided to you in this re‐ search is obtained or compiled from sources we believe to be reliable, Taurus cannot and does not guarantee the accuracy, valid‐ ity, timeliness or completeness of any information or data made available to you for any particular purpose. Neither Taurus, nor any of its affiliates, directors, officers or employees, nor any third party vendor, will be liable or have any responsibility of any kind for any loss or damage that you incur, or resulting from the act or omission of any other party involved in producing this research, the data contained herein or the products or services offered in this document to you, or from any other cause relating to your access to, inability to access, or use of these materials, whether or not the circumstances giving rise to such cause may have been within the control of Taurus or of any vendor providing any services. In no event will Taurus or any such parties be liable to you, whether in contract or tort, for any direct, special, indirect, consequential or incidental damages or any other dam‐ ages of any kind even if Taurus or any other such party has been advised of the possibility thereof. Taurus Securities Limited or individuals connected with it may have used research material before publication and may have positions in or may be materially interested in the securities mentioned herein.

Global Research Distribution
SAB Securities Limited (UK) has an Agreement with Taurus Securities Limited (Taurus) to exclusively distribute its research glob‐ ally, except Pakistan. Taurus’ research, including its analysis, opinions, views, data and due diligence, is conducted independently and entirely of its own accord.

TAURUS SECURITIES LTD

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