20000224

Brief recordings

BY SCANNER

Modarabas

First Prudential Modaraba

Year Ended June 30, 1999

Overview

The Modaraba has been able to make a turn around as it posted profit after tax at Rs 16.08 million replacing after tax loss at Rs 51.43 million in the previous year. It has a large investment portfolio which has resulted in only nominal yield in terms of dividend and at the same posted loss on the sale of investment. While the dividend income was in the sum of Rs 2.8 million, the loss on the sale of investment was with larger amount of Rs 8.45 million. But there has been encouraging trend in the stock market. So the Modaraba wrote back Rs 13.24 million to the credit of income account as compared to the provision of large amount against diminution in value of investment at Rs 51.9 million in the previous year. The directors also reported that further reversal to the extent of 10.5 million was also available as on 13-12-99.

The Modaraba has also received in its favour the decree on recovery suits. So substantial reversal of provision are also expected.

The First Prudential Modaraba is managed by Prudential Capital Management Ltd. a company incorporated in the province of Sindh with registered office in Karachi. It is a constituent member of a large conglomerate which offers wide range of financial products.

At its apex the Chairman Rashidullah Yacoob, a renowned and seasoned commercial banker.

The other sister companies are Prudential Commercial Bank Ltd., Prudential Securities Ltd., Prudential Discount & Guarantee House Limited, Third Prudential Modaraba, Prudential Fund Management Limited, First Pak Modaraba, Prudential Stocks Fund Limited, Second Prudential Modaraba, Prudential Investment Bank Ltd., Prudential Capital Management Ltd., Prime Insurance Company Limited, Pakistan Industrial & Commercial Leasing Ltd. and Royal Management Services (Pvt) Limited. The House of Prudential has office of its companies in all important cities, such as, Bahawalpur, Faisalabad, Gujranwala, Hyderabad, Islamabad, Karachi, Lahore, Mardan, Mirpur (A.K.), Multan, Peshawar, Quetta, Sukkur.

First Prudential Modaraba, is a multipurpose modaraba engaged in various modes of Islamic funding and business.

During the year under review, Gross Revenue of First Prudential Modaraba sharply declined by 22.7% to Rs 23.33 million from preceding year's Gross Revenue of Rs 30.18 million. Profit on the short-term Musharika finance was by far the largest component of Gross Revenue. Profit on Musharika finance was 89.8% of Gross Revenue as compared to 72.5% in the previous year. Short-term Musharika investments portfolio at Rs 84.37 was 37.74% of total assets at Rs 223.57 million.

While Musharika investment portfolio decreased by 30% from previous year's Rs 120.66 million, Musharika profit receivable at Rs 36.73 shows 130% increase over previous year's Rs 15.92 million showing difficult liquidity position.

The other major engagement of the Modaraba is equity investment portfolio at Rs 73.3 million (1997-98: Rs 75.41 million). The portfolio comprised 32.8% of total assets and covers both short-term and long-term portfolio. The portfolio has remained almost unremunerative the dividend income amounted to Rs 2.8 million but disposal of some investment turned loss at Rs 8.48 million. Without this loss the gross revenue would have surpassed the previous years gross revenue.

The other feature of this portfolio was that last year the Modaraba had booked provision for diminution in the value of investment to the extent of Rs 51.91 million. But this year an amount of Rs 13.24 million was written back to the credit of income account as reversal.

During the year under review, the Modaraba booked pre-tax profit at Rs 16.10 million as compared to last year's pre-tax loss of Rs 50.92 million. The after tax earning per certificate was in the sum of Rs 0.69 per share which shows turn around from substantial loss per certificate of Rs 2.21 in the previous year.

Chief Executive, M. Asif Dar is quite optimistic about the potential of the investment portfolio which has been unremunerative and has been cause of massive loss in the previous year.

He informed:

"Provisioning on diminution in investment is a temporary phenomena which is largely based on market fluctuation. This is evident from the fact that against provision of Rs 51.91 million made last year, there is a reversal of Rs 13.242 million during the period under review. The management is pleased to disclose that further reversal by Rs 10.546 million in the value of investment is available as on 13.12.1999. The current trend of the (stock) market is encouraging for all those who have investment in the stock market."

So, despite large capital deficiency, the management has rightly distributed cash dividend at 5% and spread around the stakeholders the sentiment of optimism.

Four years after the Modaraba was listed at the stock exchange, the Modaraba had declared cash dividend at 10% in 1994 and after that the Modaraba declared dividend in 1999.

June 30 1999 1998

Capital & Liabilities ..........

Paid-up Capital: 232.56 232.56

Statutory Reserve: 10.69 7.47

Accumulated (Loss): (50.51) (53.75)

Equity: 190.74 186.28

Long-Term Debts: 7.98 10.48

Current Liabilities: 24.85 111.05

Assets:

Fixed Assets - Own Use: 0.57 1.04

Asset-Leased Out: 7.79 8.35

L.T. (Equity) Investment: 35.06 37.64

L.T. Morabaha Finances: 7.25 Ñ

Deferred Cost: Ñ 0.05

Current Assets: 172.90 260.73

Total Assets: 233.57 307.81

Revenue, Profit & Payout .......

Revenue:

Profit on S.T. Musharika Investments: 20.96 21.87

Profit on S.T. Morabaha Finances: 0.97 0.89

Gain Loss on Disposal ST Equity Investment: (8.48) 1.34

Profit on Portfolio Management and Bank Accounts: 6.90 2.47

Other Income: 2.98 3.61

Gross Revenue: 23.33 30.18

Expenditure & Provision/Reversal: 7.23 81.10

Profit/(Loss) Before Taxation: 16.10 (50.92)

Profit/(Loss) After Taxation: 16.08 (51.43)

Dividend Cash 5% (1998: Nil): 11.63 Ñ

Financial Ratios ........

Certificate Price (Rs) 16/2/2000: 2.10 Ñ

Book Value Per Share (Rs): 8.20 8.01

Price/Book Value Ratio: 0.26 Ñ

Debt/Equity Ratio: 4:96 5:95

Current Ratio: 6.96 2.34

Net Profit to Gross Revenue (%): 68.92 (170.41)

EPC (Rs): 0.69 (2.21)

Price/Earning Ratio: 3.04 Ñ

Musharika Income to Revenue (%): 89.84 72.46

R.O.E. (%): 8.43 (Ñ)

R.O.A. (%): 6.88 (Ñ)

R.O.C.E. (%): 7.75 Ñ

Company Information:

Modaraba Company: Prudential Capital Management Ltd.

Chairman: Rashidullah Yacoob; Chief Executive: M. Asif Dar; Directors: Tahir Hasan/Mohammad Zafar Iqbal, Mohammad Tahir Siddiqui/S. Samir Rauf/S. Haider Javed; Company Secretary: Mohammad Ali Adil; Registered Office: Mehersons Estate, Talpur Road, Karachi.