September was the month where the most number of large size companies' results were announced in the market. The KSE100 index that was widely expected to take some positive clues from impressive corporate results and head straight towards 12,000 level, wobbled within the 10,000 to 10,500 range.

During September, the KSE100 rose by 4.46%, but the market capitalization of KSE100 basket rose by 3.2%, the difference brought about by the fact that many large cap companies within KSE100 basket went ex-dividend.

During the month, Atlas Honda, the Motorcycles producing giant, performed the worst within the KSE100 basket as it lost over 23% of its market value, due to the share going ex-dividend. This share does not quite belong at Rs.158 price levels (September close) and soon the market should realize its true value. Other KSE100 shares that lost substantially during September were Bannu Woolen that lost 13.9%, PNSC 14.8%, Wazir Ali Industries 9.33%, etc. Most of the big losers during September were those whose June 30 closing results did not impress the market. PNSC is now out of favors with the market but it beats the author as to why it was there in the first place. The company has a pathetic payout ratio and is a bureaucratically managed company that does not quite try to serve the interest of minority shareholders. Bannu Woolen is a non-descript company, but what really bothers the author is the financial performance of Wazir Ali Industries. We will talk about the results a little while later.

During September, the best performer was Union Bank whose share speculatively went up substantially and closed at Rs.134.50. In fact for a first few days of October also this share went up but came down sharply. The reason why this share took such a giant leap up during September was that some analysts thought that with a swap ratio of 2.5:1, the fair value of pre-merger UNBL was about Rs.135, as if the majority shareholders of UNBL were fools to have walked away with just Rs.91 and not waited for a suitable swap ratio. If the pre-merger value of this share is Rs.135, then it would only prove that the new majority shareholders of UNBL were fools to offer a juicy swap ratio of 2.5:1.00. The author feels that neither is the case, and the only fools are those who believed the faulty fair values of some naÔve analysts.

Coming back, other major winners within the KSE100 basket during September were Saudipak Bank with a gain of 28%, Thal Limited 21.3%, NIB Bank Limited 32.2%, Bank Al Falah 25%, etc. Once again, the reason was their results that impressed the market.

During September, some 22 KSE100 companies announced their results, but the most interesting announcement that came during September was Callmate Telips (CTTL) results. The company's management had a fallout with their auditors and instead of merely accepting auditors' qualified accounts for 2005-06, the management boldly decided to take their auditors head-on. The author tends to agree with CTTL's management because firstly not many companies argue that strongly with an auditor of Ferguson's repute. Secondly, the real argument was about income recognition on pre-paid cards that were sold during the year. The author has gone through the relevant International Accounting Standards and finds nothing wrong with the company's policy to book all card sales as income on P&L rather than unearned income on balance sheet.

Out of the 22 KSE100 basket companies that declared their June 30 closing results in September, as many as 10 reported a decline in their Earnings Per Share, which means the month was not as good as August. Only one company, Wazir Ali Industries reported a loss but who cares for this company? This unfortunate company is one of the Wazir Ali Group and the author is sure that this company is the one the Group is not proud of as far as its profitability is concerned.

The worst decline in EPS was in PNSC that was 55.5%, followed by Mari Gas with 48% decline, KAPCO 34%, Gatron Industries 29%, etc. PNSC's decline in earnings was widely expected but that the share will fall from grace so substantially, only a few could guess. KAPCO's decline in EPS was welcomed by the market as it was expecting the first-time-taxes to hurt the company's bottom line much more than that. During September, the best results were from the two cement giants, DGK and Lucky Cement whose EPS rose by 79.7% and 134% respectively.

At the beginning of October, three KSE100 companies made an exit from the basket and three new ones got inducted. The ones exiting were Nishat Chunian, Kohinoor Textiles and Telecard. This exit is rendering Textile Composite and Technology and Communications sectors with one representative each in KSE100 basket.

The companies that are entering the KSE100 basket are Meezan Bank, Kohat Cement and Pakistan International Container Terminal. There are now 17 banks, 10 cement companies and 3 transport and shipping companies in the KSE100 basket.

Let us now look at the collective results of KSE100 basket companies for June 30 closing, which were announced till September end.

Table 1 shows that aggregate profit growth for KSE100 index companies is still solid despite poorer profitability of large companies like PTCL, PIA and Hubco. We do this analysis with and without these three companies because large fall in their profitability distorts the data substantially.

Table 2 is an aggregate for those KSE100 companies that have so far announced their June closing annual results. With and without PTCL and Hubco the profit growth figures are handsome. We have provided here two measures of PE multiple, the median and the average, having taken out Wazir Ali Industries (EPS was negative) and Dreamworld (PE multiple too high). The median PE multiple has fallen down in the last two weeks, but the average has risen. Some companies continue to be traded at low PE multiples and some at very high.

Table 3 is for KSE100 companies announcing their 9 month results. It comprises three companies, namely JDW Sugar, Siemens and Abbot Lab.

Table 4 comprises aggregate results of those KSE100 companies that have announced their half yearly results. For median and average PE multiples, we have excluded PIA and Pak PTA as both have announced losses.

No. of Companies June 2006 Total June 2005 Total Profit Growth

All results Net Profit Net Profit

79 Rs.177.6n Rs.150.3bn 18.2%

Without PTCL,

Hubco and PIA Rs.160.2bn Rs.120.4bn 33.12%

No. of Companies June 2006 Total June 2005 Total Profit Growth Median PE Average PE

Annual results Net Profit Net Profit Multiple Multiple

38 Rs. 136bn Rs. 119bn 14.21% 8.39 11.05

Without PTCL &

Hubco Rs.103.2bn Rs.77.7bn 32.83% - -

(All KSE100 companies with Jul-June Accounting years that announced their June closing results)

No. of Companies June 2006 Total June 2005 Total Profit Growth Median PE Average PE

(9 month results) Net Profit Net Profit Multiple Multiple

3 Rs. 1.6bn Rs. 1.34bn 18.9% 10.42 10.00

(All KSE100 companies with Oct-Sep Accounting years that announced their June closing results)

Table-4 KSE100 Companies

No. of Companies June 2006 Total June 2005 Total Profit Growth Median PE Average PE

(Half-Year Results) Net Profit Net Profit Multiple Multiple

37 Rs. 40bn Rs. 29.7bn 34.51% 10.00 13.3

Without PIA Rs. 46.1bn Rs. 31.8bn 45.1% - -