Author Topic: EFERT -- Engro Fertilizers Limited  (Read 153589 times)

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Offline SBM

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EFERT -- Engro Fertilizers Limited
« Reply #-1 on: October 14, 2013, 11:00:26 PM »
All about EFL
« Last Edit: February 23, 2014, 03:32:30 PM by M&M »
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EFERT -- Engro Fertilizers Limited
« Reply #-1 on: October 14, 2013, 11:00:26 PM »

Offline SBM

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Re: EFL -- Engro Fertilizers Limited
« on: October 14, 2013, 11:04:52 PM »
 
Engro Fertilizers Limited: Initial Public Offering   

Engro Fertilizers  Limited (EFL), a subsidiary of Engro Corporation (ENGRO), 
plans to price its PkR1.5bn (targeted) IPO at the end of Oct’13, according to 
an investor presentation made by its executives on Oct 11 ’13. EFL, one of 
Pakistan’s  major  fertilizer  manufacturing  and  marketing  companies,  is 
tapping into the capital markets to repay its debt obligations and fund its 
capex.   

The  company  plans  to  issue  75mn  ordinary  shares  at  a  floor  price  of 
PkR20/share, in addition to Engro Corp’s intention of divesting up to 30mn 
ordinary shares out of its existing stake in EFL at the strike price determined 
through  the  book  building  mechanism.  In  this regard,  the  book  building 
process is aimed at the end of Oct’13 followed by the Initial Public Offering 
(IPO) after a subsequent period of 2?3 weeks.    

The Transaction 
Engro Fertilizers Limited (EFL) will be the second IPO of CY13, and is expected 
to be listed on the Karachi Stock Exchange (KSE), as well as the Lahore Stock 
Exchange (LSE) next month. With regards to the nature of the transaction, the 
company explained its intent to float 75mn ordinary shares, 56.25mn of which 
(75% of the issue size) will be offered by way of book building at a floor price of 
PkR20/share using a Dutch (uniform price) auction. The remaining 18.75mn 
ordinary shares (25% of the issue size) will be offered to the general public at 
the strike price determined through the book building mechanism. In addition 
to this transaction, the parent company intends to divest up to 30mn ordinary 
shares out of its existing stake in the company at the determined strike price as 
well.    

Company dynamics  
The fertilizer  company's IPO  comes amid  improved  company dynamics with 
regards to EFL’s growing market share and better gas scenario. According to 
data released by the NFDC, Engro’s urea sales rose   by a substantial 66% in  
8MCY13 with  improved  gas availability rendering  into higher production for 
the  company (up 131%YoY). Higher utilization of its efficient Enven plant along 
with the allocation of 60mmcfd of gas flow from Guddu to its base plant has 
allowed  the  company  to  operate  both  its  plants  at  ~80%  capacity. 
Subsequently,  the  company’s  market  share  witnessed  a  significant 
improvement of 8ppts to clock in at 24% during the period.  
 
In terms of the future gas allocation arrangements, it has been reiterated that 
gas from the Reti?Maru field is expected at the end of CY13, while that from 
Kunar Pasakhi Deep (KPD) has been pushed over from the previously expected Jul’14 to sometime in 
3QCY14,  citing  a  three  month  delay.  In  this  regard,  the  company  has  put  KPD  related  capital 
expenditures on hold and has expressed its intent to top?up Enven production in the interim period 
until KPD is online. 
 
Recall that as part of its debt re?profiling, Engro had gained a 2.5 year extension of its loan tenure, 
along with amendments to  certain  covenants. This as well as Engro Corp.’s plans of divesting its 
fertilizer business are likely to have positive implications for the parent  company’s  cash flows, in 
addition to explicating EFL’s value for stakeholders of ENGRO. According to our estimates, at the 
offer price of PkR20/share (75mn shares), gains reflected in Engro Corp.’s stand?alone accounts will 
translate into an earnings enhancement of ~PkR1.5/share for Engro Corp. shareholders.    
Risks 
Although gas supply from Mari is likely to continue, timely availability of gas with regards to the 
company’s future arrangements remains crucial. In addition, with the government having principally 
agreed to raise PkR105bn (0.4% of GDP) as gas levy in its recent Letter of Intent (LoI) to the IMF, gas 
tariff rationalization is likely on the cards, in our view. In this regard, local fertilizer players including 
EFL are likely to face margin attritions in case full cost is not passed onto consumers. However, we 
still await clarity regarding this matter. 

  
KSE?100 Index  21775 
Change  100.41 
Chemical Sector 
Market Cap (PkR mn)  402,106 
Market Cap (US$ mn)  3,793 

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Offline SBM

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Re: EFL -- Engro Fertilizers Limited
« Reply #1 on: October 14, 2013, 11:07:04 PM »
 Engro Fertilizer intends to issue 75mn shares out of which 56.25mn shares will be offered through book building process at a floor price of Rs20/share, while the remaining 18.75mn shares will be offered to the general public at the strike price determined through the book building mechanism.
§        In addition to this, Engro Corp intends to divest upto 30mn shares out of its existing shareholding at the strike price to the institutional investors on a first come-first serve basis.
§        The company will only be able to pay dividends after it repays 33% of its senior loan (Rs13bn). Current loan schedule suggests that the first DPS may come in 3Q2015.
§        Since July 20, 2013, both the fertilizer plants are operational (at ~80% utilization level) owing to 60mmcfd of additional gas from Guddu. However, this is not a permanent allocation and it may be diverted away from Engro as early as next month but at the latest by March 2014 when the new Guddu power plant comes online.
§         We recommend ‘Subscribe’ on Engro Fertilizer’s IPO with our fair value of Rs28 based on the premise that gas flows based on GSA starts flowing in from 2015 onwards. However, the key risks remain 1) delay in re-verification of GSA by the new govt. or any change in gas allocation plan, and 2) sharp gas price hike which could results in margin contraction as local fertilizer producers may find it difficult to pass on its impact.

JS Global
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Offline MZ

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Re: EFL -- Engro Fertilizers Limited
« Reply #2 on: October 14, 2013, 11:16:28 PM »
Efert going for an IPO

About the transaction
Engro Fertilizers Limited (EFert) is issuing 75mn ordinary shares, from which 56.25mn shares (75% of the total issue) would be offered through book building mechanism at a floor price of PKR 20/share whereas the remaining 18.75mn (25% of the total issue) will be offered to the general public at the strike price determined through the book building mechanism.

In addition to the aforementioned transaction, Engro Corporation Limited aims to divest its existing shareholding up to 30mn shares in the company at the strike price determined by the book building.

Briefing updates
The company’s debt restructuring has been approved with its local lenders. The principle payments of the senior debt as at Jun-12 have been deferred by 2.5 years.

Gas sale agreement (GSA’s) with KPD, Reti Maru and Makori East are intact. The company is drawing gas from MARI SML (~20mmcfd), while Reti Maru (~12mmcfd) flow is expected by the end of this year.

The company has signed Gas tolling agreements (GTA’s) with SSGC and SNGP.

The Economic Coordination Committee has yet to reconfirm the long term gas plan. However the management expressed the confidence, that ECC would shortly confirm the plan, while a delay of 2-3 months cannot be ruled out in the execution of the aforementioned plan (3QCY14 now vs. 2QCY14 previously).

Engro’s management is continuously under discussion with the GoP regarding the concessionary feed stock price of USD 0.7/mmbtu for its new plant.

Capex with respect to KPD pipeline by the company is on hold until reconfirmation of the long term gas plan by the government.

International urea prices are expected to remain stable with USD 300/ton and above in the long run, however in the short-run prices below USD 300 cannot be ruled out amid demand supply mismatch.

The gov’t is yet to finalize gas prices, though the cause of delay is the fear of fertilizer prices hike (substantial in case of equating feed and fuel) due to aforementioned increase. The gov’t is working on different proposals to facilitate farmers (direct farm subsidy).

In case of massive gas prices increase (more than the current GSA price of USD 4.5/mmbtu), the long term gas plan GSA’s would be revised upwards in line with the tariff of fertilizer industry.

3QCY13 earnings to jump by a hefty 64% QoQ
In 3QCY13, we expect the company to post PAT of PKR 1,361mn (EPS: PKR 1.11 @ 1222mn share) a hefty jump of 64% QoQ. The massive surge in the profitability is mainly due to the better gas availability and company was able to run both of its plant at approximately 80% of its installed capacities. To recall, the GoP decided to revert gas from Guddu thermal Power to Engro Fertilizer in 3QCY13 (July onwards) which was previously diverted to Guddu from three of the fertilizer companies. This enabled the company to run both of its plant at less than desired capacity utilization levels and company was able to record 37% QoQ jump in its urea offtake to 443k tons  in 3QCY13 (highest quarterly offtake ever).

Recommendation
We are in the process of finalizing our forward estimates for Efert and will revert back to our clients with a detailed investment case for the same.

 AHL Research

Offline merc007

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Re: EFL -- Engro Fertilizers Limited
« Reply #3 on: October 15, 2013, 12:23:54 AM »
AOA.

so for a layman like me how do we buy this share would it be the normal way we trade or will there be some forms to be filled in and apply for these shares???? 
lets see how long it takes to be wealthy

Offline MZ

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Offline Dehan

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Re: EFL -- Engro Fertilizers Limited
« Reply #6 on: October 15, 2013, 10:06:58 PM »
Engro to list flagship fertiliser unit by month-end

Chorein g IPO of EFL.

Aalam bhai nien Engro ki TP for Jan-14 Rs. 80 daay di hay. Mushtari Hosair Bash.
"Suno sab ki, laiken Dehan apna apna"

Offline Valueestimator

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Re: EFL -- Engro Fertilizers Limited
« Reply #7 on: October 17, 2013, 02:11:59 PM »
Engro to list flagship fertiliser unit by month-end

Chorein g IPO of EFL.

Aalam bhai nien Engro ki TP for Jan-14 Rs. 80 daay di hay. Mushtari Hosair Bash.
Due to huge debts, company will not be able to pay cash div for some years
AGIC UNIC AICL KML FASM BTL JDMT

Offline MZ

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Re: EFL -- Engro Fertilizers Limited
« Reply #8 on: October 26, 2013, 04:15:24 AM »
Engro Fert breathes sigh of relief as both plants online

Engro Fertilizers, a subsidiary of Engro Corporation, posted its financial results on its website, announcing a profit of Rs3.2 billion for the first nine months of calendar year 2013. This compares to a loss of Rs2.97 billion in the corresponding period last year, resulting in earnings per share of Rs2.77 for the current period, compared with a loss per share of Rs2.62 in the previous year.
The company was able to increase net sales by 78% to Rs34.4 billion, resulting in a 151% increase in net gross profits from Rs5.9 billion in the previous year to Rs14.8 billion in the first nine months of the current calendar year.
The increase in sales was mainly due to availability of gas for Engro’s EnVen plant. As a result of which, both plants owned by the company were operational in third quarter of the current calendar year. However, the supply of gas to the new plant is temporary, and analysts expect a reversion to its previous inactive state once the allotted time is over.
Engro Fertilizer also saw an increase of 188% in other income, which rose from Rs212 million to Rs611 million for the current nine month period. Conversely finance costs fell 15% from Rs8.1 billion to Rs6.9 billion.
On quarterly basis, the company’s profits stood at Rs1.8billion in the third quarter of calendar year 2013, as compared with a loss of Rs1.2 billion in the corresponding period last year. Profits almost doubled on a quarter on quarter basis, driven primarily by 31% higher urea sales due to gas availability for both plants.
Engro Fertilizer is one of the largest fertiliser producers in Pakistan. Its EnVen plant was the company’s biggest investment in the country, and the largest single train fertiliser plant in South Asia. However, the plant has not been supplied gas for long periods of time, resulting in massive losses for the company. The current reprieve, though temporary, was welcomed by investors, especially after Engro Foods, another subsidiary of Engro Corporation, posted lower than expected income.
Published in The Express Tribune, October 26th, 2013.

Offline Valueestimator

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Re: EFL -- Engro Fertilizers Limited
« Reply #9 on: October 26, 2013, 10:14:00 AM »
where is IPO, month is about to end.
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Re: EFL -- Engro Fertilizers Limited
« Reply #10 on: October 27, 2013, 07:20:34 AM »
book building process to be completed till oct end

ipo in mid of nov

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Offline MZ

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Re: EFL -- Engro Fertilizers Limited
« Reply #12 on: November 12, 2013, 03:35:52 PM »

The Bell
 
Engro Fertilizers Limited – Regaining glory
Jun-14 PT of PKR58/sh; recommend subscribe
Our Jun-14 PT of Engro Fertilizers stands at PKR58/sh, which is by far above the floor price of PKR20/sh. Our investment case is based on implementation of long term gas supply agreement after which both plants will be operational and allow the company to post strong earnings growth. At floor price, Engro fertilizers would be available at an attractive CY15 PER of 2.8x. We believe that strike price could be in the range of PKR25-30/sh, at which CY15 PER would still be attractive in the range of 3.5-4.2x.
Worst case valuation is also 20% above floor price
Under a worst case scenario, long term gas supply plan would not be executed, and only one plant (Enven) is operational on Mari network’s gas supply. Such a scenario would still yield a Jun-14 PT of PKR24/sh, 20% higher than floor price.
CY13; the year of fertilizer business turn around
After posting a loss of PKR2.9bn in CY12, Engro Fertilizers turned around in 9MCY13 which was due to production optimization and diversion of gas supply from Guddu power plant to Engro fertilizers. This temporary gas supply (diverted from Guddu power plant) would likely continue during 4QCY13 and thus boost CY13 earnings of Engro Fertilizers to PKR3.74/share.
Earnings growth of 119% likely in CY15
CY14 earnings of Engro Fertilizers are estimated to drop marginally by 9% to PKR3.1/sh which would primarily be due to expensive gas from KPD expected in 4QCY14, which would replace cheap Mari diversion.  CY15 earnings of Engro Fertilizers would grow by whopping 119% and clock in at PKR7.1/sh as both urea plants will be operational for the complete year.

elixir

Offline 007

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Re: EFL -- Engro Fertilizers Limited
« Reply #13 on: November 12, 2013, 04:34:41 PM »
will it be a efoods all over again  :good

I will subscribe from 2 accounts

Offline SBM

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Re: EFL -- Engro Fertilizers Limited
« Reply #14 on: November 12, 2013, 04:46:15 PM »
will it be a efoods all over again  :good

I will subscribe from 2 accounts

not participating in book building ?
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Offline stockz_123

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Re: EFL -- Engro Fertilizers Limited
« Reply #15 on: November 12, 2013, 08:18:39 PM »
Engro Fertilizer is finally coming 

Yesterday the book runner and lead arranger released bidding period dates of Engro Fertilizer (EFL) from 19th November 2013 to 21st November 2013  (both days inclusive).

The total paid up capital of EFL is designated at Rs 1,297.8 mn. Out of this 91.91% is contributed by holding company i.e. Engro Corporation which is Rs1,192.8mn.

The overall program is to divest Rs30mn to HNW wherein Rs 56.25 mn shall be offered in the book building process - ostensibly through proposed Dutch auction. The general public shall be offered Rs18.75mn through IPO. This all represents 8.1% divestment to general public which could generate nearly Rs2.6bn. Even though, the total liabilities of Engro Corporation remain double digit sword. It is to the tune of Rs54.7bn at least. 

EFL gas allocation - no more an enigma

After the decisions of Economic Coordination Council (ECC) the company was allocated gas from five dedicated gas fields namely Mari, Makori East, Reti Maru, Kunar Pasaki Deep and Bahu to a consortium. The company's share in this consortium is 79mmcfd. The company has already started receiving gas from Mari while gas from Reti Maru is expected by the end of 2013. EFL expects concessionary feedstock gas supplies which could be US$ 0.7/mmbtu.

Capacity to equate or sneak pass through FFC

EFL to sneak pass through FFC i.e. 975k tons of the base plant and 1,300k tons of the new Enven plant and also a small NP capacity of 150k tons per annum.  Though Fatima Fertilizer sells more NP then EFL. EFL over the years bogged down due to non or partial supply of feed stock gas from Qadirpur i.e. 100mmcfd. Now this is a good omen that EFL shall receive uninterrupted gas supplies through various arrangements. We see CY13 EPS to reach Rs4/sh ; however we do not expect dividend from EFL itself since it is burdened with humungous loan.

Pricing

The book building through Dutch auction is at a floor price of Rs20/sh. The total book value of EFL is Rs15/sh. We see EFL's CY13 PE is 9x to 10x.

Having considerable leverage in the balance sheet, the only trigger is equivalent gas supplies. We are neutral on the issue. 

SCS

Offline SBM

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Re: EFL -- Engro Fertilizers Limited
« Reply #16 on: November 15, 2013, 03:12:14 AM »
« Last Edit: November 19, 2013, 11:33:38 AM by SBM »
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Offline 007

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Re: EFL -- Engro Fertilizers Limited
« Reply #17 on: November 15, 2013, 10:48:07 AM »
will it be a efoods all over again  :good

I will subscribe from 2 accounts

not participating in book building ?

 :D

Offline Dehan

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Re: EFL -- Engro Fertilizers Limited
« Reply #18 on: November 15, 2013, 11:07:45 AM »
Research notes on EFL IPO

FS

HMFS

WE

PEARL

Good work SBM Bhai keep it up.
"Suno sab ki, laiken Dehan apna apna"