20000224

Speculators play

up with Hubco shares

ASHRAF KHAN

KARACHI: The speculators are unorthodoxly playing up with the Hubco scrips, the bluest chip at the bourses, which should have lost investors attraction in real terms, since the financial indicators of the company have reached abysmally at low level.

The profits, the company has been able to pay to its shareholders have become insufficient as a result of predicaments, the company is faced to for years propelling its internal rate of return (IRR) down drastically to only 10.3 percent, far below than any fixed deposit scheme offers.

Millions and millions shares of Hubco are traded daily at the stock exchanges of the country for short term capital gains out of wishful speculations with regard to the resolution of the company's legal and corporate contentions with the government.

Sources on Wednesday said that the Hubco share is a paradigm as to how strongly the speculators hold of on stock exchanges.

Nevertheless, there is another unpropitious aspect of the story relating to the Hubco share which really enjoys the mover and shaker status of the stock exchange having one of the largest market capitalisations.

Sources said that since its listing on the stock exchange in 1994, Hubco could practically offer returns to its stakeholders only once, due to the reasons generally known, while it kept itself from announcing dividend for the year 1999, well-informed sources told Business Recorder.

It announced and gave the first dividend of 70 percent to the shareholders in 1998. For the year 1999, the Hubco board envisaged to announce Rs. 3.91 dividend but could not proceed with the idea being unable to disburse it to the shareholders, especially from foreigners, sources said.

Hubco's past bitter experience of its failure to remit dividend to the expatriate shareholders for a considerably long time prompted it to hold back its intentions to announce any dividend, sources said.

Thus its perpetual impotency of offering attractive profits; against its high, otherwise, potential; has brought down its IRR to mere 10.3 percent as against its estimated annual returns of 17.3 percent, sources said. Now, it virtually offers returns much lesser than the National Saving certificates which offers 14-16 percent returns, that too after six months of the commencing of the account.

Prolonged litigation, arm-twisting by the different official agencies, procrastinating bilateral negotiations, usage of fuel oil on highly inflated cost, and pending rescheduling of the Hubco loans are the factors which could be attributed to its deteriorating rate of profits, sources said.