20000117

Brief recordings

BY SCANNER

Modarabas

First Habib Bank Modaraba

Year Ended 30th June, 1999

Overview

The Modaraba has shown improvement on all accounts. Total asset base at Rs 614.83 million and shareholders' equity base at Rs 476.74 million expanded by 5.74%, 3.3% over the preceding year's. It is one of the largest Modarabas and its management company is, wholly owned subsidiary of Habib Bank Ltd. It is multipurpose Modaraba but its core business remains leasing. The other significant risk asset portfolio's are Morabaha finance and investment portfolios. Its balance sheet remained robust as reflected by the excellent current and debt equity ratios. The certificate in the Modaraba is trading at 6.15 per certificate which is grossly undervalued relative to its break-up value of Rs 12.01 and considering formidable fundamentals of the balance sheet and strong management base and highly motivated leadership. The company earned Rs 1.89 per certificate and announced dividend at Rs 1.50 per certificate.

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First Habib Bank Modaraba (FHBM) is relatively large Modaraba institution in Modaraba sector as it has a capital base of Rs 0.937 billion. FHBM is managed by Habib Bank Financial Services (Pvt) Ltd. which is a wholly owned subsidiary of Habib Bank Ltd.

The Modaraba is operating from its registered office located is Habib Bank Plaza, Karachi.

First Habib Bank Modaraba is a perpetual, multipurpose and multi dimensional Modaraba formed under the Modaraba companies and Modaraba (Floatation and Control) Ordinance 1980, and the rules framed thereunder.

The Modaraba is currently engaged in various modes of Islamic funding and other related business. It is listed on the Karachi, Lahore and Islamabad stock exchanges. The Modaraba was listed at the Karachi Stock Exchange in 1991.

The 10-rupee certificate in the Modaraba is trading at Rs 6.15 at 38.5% discount to its par value and at the same time the present market value of the certificate works out to 65.3% diminution relative to its 6-year highest price at Rs 17.75 quoted in 1994. After 1994, the market value of FHBM certificate met with free fall. Resultantly the lowest price of its certificate touched at Rs 3.75 in 1996. Since 1995, the certificate has not yet surfaced above the par value.

The profit distribution policy of the Modaraba is relatively persistent as since 1994 as the Modaraba has by passed dividend distribution only once in 1995. Considering the plight of Modaraba sector, the payout rate of the Modaraba between 15% to 20% is commendable. The Modaraba announced dividend at 15% for the financial year under review (FY 1998-99) which is in line with the corresponding period of the last financial year.

FHBM is a multipurpose Modaraba but its core business remains leasing business. Leased assets of FHBM increased by 27.09% to Rs 490.92 million over Rs 386.30 million.

The other significant asset is long term investments amounting to Rs 10.20 million at cost. Which carries market value at Rs 8.21 million. Short term investment was in the sum of Rs 10.695 million. After provision for diminution in market value of the investment, the balance was slightly reduced to Rs 9.25 million.

During the year under review, the Modaraba recorded total income at Rs 229.20 million which reflected improvement of 19.68% over preceding year's Rs 191.51 million.

Income from leasing operations at Rs 204.57 million (FY 1996-97: Rs 163.27 million) registered significant rise at 25.29% over the preceding year's. Lease rentals comprised 89.3% of total income as compared to 85.3% in the previous year showing increasing contribution of lease rentals in the revenue generation of the Modaraba.

The Chairman of FHBM, Shaukat Tarin, shared his insight about the future of leasing business in his review. According to him there is substantial growth potential in leasing as the share of leasing in estimated around 8% of the total private fixed capital expenditure in the country whereas in developed countries the share is reported around 35% to 40%. He further mentioned, "leasing sector draws its business from a vibrant industrial sector. The government is mobilising all its resources to revive the economy and to accelerate the pace of industrial growth. We are confident that latest steps to collect against willful default will eventually help in boosting the overall economy. It is expected that these efforts will improve the investment climate in the near future, which will create more demand for lease financing in the country. However, in the back drop of slow growth, leasing companies will have to follow a more stringent policy to ensure security of funds and recovery of rentals in time.

Being a leasing Modaraba, we will continue to focus on our core activity of leasing, while at the same time diversifying our lease portfolio to include companies with sound financials/track records and to sectors with growth potential and low risk profile."

The Modaraba's net profit after management fee and all expenses amounted to Rs 74.86 million which produced corresponding earning per certificate (EPC) at Rs 1.89 reflecting Rs 0.13 per certificate rise in EPC over the preceding year's Rs 1.76. At the current market price of its certificate, the price to earning to ratio is multiple of 3.3 evidencing confidence of investors in FHBM.

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Performance Statistics (Million Rupees)

June 30 1999 1998

Capital & LiabilitiesÉÉÉ

Paid-up Capital: 397.07 397.07

Reserves: 79.67 64.37

Certificate Holders' Equity: 476.74 461.44

Security Deposits on Lease Contracts: 52.00 44.94

Current Liabilities: 86.09 75.06

AssetsÉÉÉ

Tangible Fixed Assets Ñ Own Use: 0.50 0.54

Tangible Assets Given on Lease: 490.92 386.30

L.T. Investments: 10.20 11.08

Other Non Current Assets: 0.60 0.03

Current Assets: 112.61 183.49

Total Assets: 614.83 581.44

Revenue, Profit & PayoutÉÉÉ

IncomeÉÉÉ

Lease Rentals: 204.58 163.27

Return on Morabaha Transactions: 12.86 18.27

Return on Saving Accounts: 2.64 8.33

Gain on Sale of Investment Ñ Net: 7.11 Ñ

Other & Dividend Income: 2.01 1.64

Total Income: 229.20 191.51

Total Expenses & Provisions: 148.65 104.22

Profit Before Taxation: 80.55 87.29

Net Profit After Taxation: 74.86 70.00

Dividend Cash 15% (1997: 15%): 59.56 59.56

Financial Ratios... ... ...

Certificate Price Rs 3/1/2000: 6.15 Ñ

Book Value Per Certificate (Rs): 12.01 11.62

Price/Book Value Ratio: 0.51 Ñ

Debt/Equity Ratio: 0:100 0:100

Current Ratio: 1.31 2.44

Lease Rental/Total Income: 89.26 85.25

Net Profit To Total Income (%): 36.59 36.55

EPS (Rs): 1.89 1.76

Price/Earning Ratio: 3.27 Ñ

R.O.E. (%): 15.70 15.16

R.O.A. (%): 12.17 12.03

R.O.C.E. (%): 14.26 13.80

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Company information

Modaraba Company: Habib Bank Financial Services (Pvt) Ltd. Chairman: Shaukat Tarin. Chief Executive: Mian Abdus Salam. Directors: Mian Asif Said/Sohail Malik. Company Secretary: Mohammad Samiullah. Registered Office: 18, Habib Bank, Plaza Karachi-75650. Phone: 2412294/2410967. Fax: 2411860. e-mail: NA. Website: NA