Sometimes businesses are better dead than alive. Here is an example;
KAPCO PPA has expired a while back which means co is technically entitled to shut down operations & return plant to the Govt.
In that case, Shareholders will continue owning listed co including all assets.1/n
KAPCO PPA has expired a while back which means co is technically entitled to shut down operations & return plant to the Govt.
In that case, Shareholders will continue owning listed co including all assets.1/n
Question 1: Will shareholders benefit if plant is handed back to GoP/WAPDA?
Answer: Yes.
KAPCO's plant is almost completely depreciated. So whatever equity co holds can be either handed over to the shareholders or invested in the fixed income. 2/n
Answer: Yes.
KAPCO's plant is almost completely depreciated. So whatever equity co holds can be either handed over to the shareholders or invested in the fixed income. 2/n
As of March 31, 2023 (last detailed accounts published), KAPCO's net equity (after adjusting for some long term assets) was ~71.8/share (63bn).
KAPCO's current stock price is 25.61 which means stock is trading at 65% to the net equity. 3/n
KAPCO's current stock price is 25.61 which means stock is trading at 65% to the net equity. 3/n
KAPCO can either hand over 71.8/share to shareholders (best case scenario) or invest in risk free instruments & earn 20%+ return (14.3/share). Last yr earnings were only 4.5/share.
Co is losing upto 10/share with 3.15/share direct operating loss on power operations. 4/n
Co is losing upto 10/share with 3.15/share direct operating loss on power operations. 4/n
Question 2: Why KAPCO is not thinking of optimising shareholders wealth?
Answer: Instead of minority, KAPCO board (WAPDA/GoP mainly) & management (pays and perks) are only thinking of their own selfish interests. 5/n
Answer: Instead of minority, KAPCO board (WAPDA/GoP mainly) & management (pays and perks) are only thinking of their own selfish interests. 5/n
KAPCO has been in market for a long time to acquire another entity to justify retaining shareholders money and probably hide losses on existing operations.
According to rumours (unverified), the latest contender for KAPCO's acquisition is Engro's Thar coal operations. 6/6
According to rumours (unverified), the latest contender for KAPCO's acquisition is Engro's Thar coal operations. 6/6
KAPCO
Market Cap: 22.5bn
Net Equity (excluding long term assets): 63.2bn
A single co has withheld 63.2bn of shareholders' wealth without any fundamental justification. 7/n
Market Cap: 22.5bn
Net Equity (excluding long term assets): 63.2bn
A single co has withheld 63.2bn of shareholders' wealth without any fundamental justification. 7/n
If anyone really wants to understand why no one invests in PSX and current market valuations (2-3x PE) are rock bottom, just take a look at KAPCO numbers.
Why should anyone trust any other company in PSX. 8/n
Why should anyone trust any other company in PSX. 8/n
برباد گلستاں کرنے کو بس ایک ہی اُلّو کافی تھا
ہر شاخ پہ اُلّو بیٹھا ہے انجام گلستاں کیا ہو گا
ہر شاخ پہ اُلّو بیٹھا ہے انجام گلستاں کیا ہو گا
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