REP-300 Pakistan Strategy 2020 Targeting 51,000; Checkmate AHL Research D: +92 21 32462742 UAN: +92 21 111 245 111, Ext: 322 F: +92 21 32420742 E:
[email protected] Corporate Finance House of Best Equity Research www.jamapunji.pk Best Domestic Equity House Top 25 Companies the Year: 2018 Analyst: 2017 Pakistan Strategy 2020 1 Pakistan Equity Market Synopsis: Improving Macros to Pump Up Valuations Total Return . The KSE-100 Index is expected to provide a return of 25% (USD-based: 21%) in CY20. The index is celebrating an end to Balance of Payments led economic crisis and is thereby returning to its historic mean multiples. Attractive Valuations . The KSE-100 Index is trading at a P/E of 7.2x, which is at a 16% discount to historic P/E multiple of 8.6x for the Pakistani stock market. The KSE-100 Index is trading at a 48% discount to regional markets compared to historic discount of 34%, showing an upside of 26%. In terms of P/BV, the market is trading at 1.1x P/BV, at a 37% discount compared to historic P/BV of 1.8x. Returning to a Sustainable Macro-economy . 73% decline in Current Account Deficit during 5MFY20 (Expected FY20 CAD at 1.8% of GDP). 3x increase in Total Foreign Investment during 5MFY20. Stability in PKR, whereby the Pak Rupee appreciated by 5% since the start of FY20. 25% increase in Foreign Exchange Reserves while reduction in forward liabilities by USD 1.2bn. Primary surplus of PKR 286bn or 0.6% of GDP during 1QFY20.