20000121

Brief recordings

BY SCANNER

Modarabas

First Habib Modaraba

Year Ended June 30, 1999

Overview

First Habib Modaraba (FHM) commenced business operation in 1985 with initial paid-up capital (fund) of Rs 25 million only. Alhamdolillah, now FHM has total equity base of Rs 0.345 billion and total size of the balance sheet of Rs 0.6 billion. FHM has been regular in dividend distribution reflecting excellent social responsiveness to its stakeholders. For the year ended June 1999, FHM has declared cash dividend of 20% which is the highest payout rate since 1994, and second highest distribution rate after Grindlays Modaraba in the Modaraba sector. It earned A3 rating from PACRA in 1996, showing superb professional standard. Net profit of the Modaraba at Rs 65.07 million increased by 35.2% over Rs 48.14 million posted in the previous year.

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The First Habib Modaraba (FHM) is a perpetual, multi-purpose Modaraba and managed by Habib Modaraba Management Ltd. The certificate in the FHM was listed at Karachi Stock Exchange in 1985. It is quoted on all stock exchanges of the country.

At present, the certificate is trading at Rs 4.05 at 59.5% discount to its par value of Rs 10. During the last 6 years the highest price of the Modaraba was recorded in 1994 at Rs 12.25. After that the market value of its share plummeted and the lowest price at Rs 3.75 touched in 1996.

The Modaraba has good track record of profit distribution as during last 6 years it has skipped dividend only in one year, in 1995. The yearly dividend payout rate of 10% was recorded in two years, 1994 and 1996. In 1996 payout rate increased at 15% and in 1999 the payout rate moved upto 20%. The lowest payout rate of last six years was recorded at 7.5% in 1998.

The Modaraba commenced business operation in 1985 with initial capital of Rs 25 million only. Alhamdolillah, now FHM has total equity base of Rs 345.23 million and compared to last year's certificate holders' equity at Rs 330.56 million there is a significant expansion in the equity base by Rs 14.67 million.

During the financial year FY 1998-99, the period under review, the Modaraba's leased asset portfolio was recorded at Rs 564.64 million, reflecting 7.16% growth over preceding year's Rs 526.89 million.

It is reported that the new leases executed during the period were written for Rs 303 million which is marginal increase on preceding year's Rs 294 million.

Maintaining steady growth, has been the hallmark of the longterm strategy of the leadership in Modaraba which is drawn from a scion of the renowned House of Habibs. They have mostly believed in the conservative but soled business. Slow and steady wins the race.

The Modaraba has therefore built a large total asset base of Rs 0.6 billion within a shot span of 6 years. Unlike majority of the Modarabas their assets did not erode but kept on mounting with steady pace. So there was very little infection in their asset in spite of downturn in the economy of the country.

The Chairman of Modaraba, Wazir Husain Jafree, shared his perception of the economy with the certificate holders of FHM in his Report. He said,

"the country has long been in the grip of constantly declining economic activity. The fiscal year 1998-99 did not prove to be an economic good year for the country because of the overall economic scenario reflected negative trend. GDP estimated to have grown by 3.1% in 1998-99 compared to 4.3% in 1997-98. The slower GDP growth resulted mainly due to the reduction in agricultural growth and value added goods in large scale manufacturing as well as in service sectors."

The Modaraba's balance sheet remained fighting fit as reflected in the long term debt to equity ratio at 0:100, because there was no long term debts. However the current ratio at 0.2 was for below 'ONE' the acceptable criteria of the measurement of liquidity.

During the year the Modaraba's core business remained leasing activity as 99.2% of total income was generated from the leasing business. This is in spite of the fact that it could harness other avenues of profit because it is a multipurpose Modaraba.

The Modaraba's total income at Rs 65.07 million (FY 1997-98: Rs 48.14 million) shot-up by 35.2% over previous year's.

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Performance Statistics (Million Rupees)

June 30 1999 1998

Capital & LiabilitiesÉÉÉ

Paid-up Capital: 252.00 252.00

Reserves & Profit: 93.23 78.55

Equity: 345.23 330.56

Other Non Current Liabilities: 43.38 44.00

Current Liabilities: 210.77 179.42

AssetsÉÉÉ

Fixed Assets Ñ Own Use: 0.24 0.52

AssetsÊÑÊLeased Out: 564.64 526.89

Other Non Current Assets: 0.82 0.22

Current Assets: 33.68 26.35

Total Assets: 599.38 553.98

Revenue, Profit & PayoutÉÉÉ

Gross Revenue

Lease Rentals: 348.92 300.04

Other Income: 2.83 2.80

Total Income: 351.75 302.84

Depreciation (Leased Assets): 245.41 209.22

Financial Ratios: 21.37 16.67

Other Expenses and Management Fee: 18.26 18.48

Total Expenses: 285.04 244.37

Profit Before Tax: 66.71 58.47

Net Profit: 65.07 48.14

Dividend Cash 20% (1997: 7.5%): 50.40 18.90

Certificate Price (Rs) 14/1/2000: 4.05 Ñ

Financial Ratios... ... ...

Book Value Per Share (Rs): 13.70 13.12

Price/Book Value Ratio: 0.30 Ñ

Debt/Equity Ratio: 0:100 0:100

Current Ratio: 0.16 0.15

Lease Rental/Total Income: 99.20 99.07

Net Profit Margin (%): 18.49 15.90

EPC (Rs): 2.58 1.91

Price/Earning Ratio: 1.57 Ñ

R.O.E. (%): 18.85 14.56

R.O.A. (%): 10.86 8.68

R.O.C.E. (%): 16.73 9.44

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Company information

Modaraba Company: Habib Modaraba Management Limited. Chairman & Chief Executive: Wazir Husain Jafree. Director: Mohammad Shoaib. Director: F. H. Mukhi. Registered Office: Hirani Centre, I.I. Chundrigar Road, Karachi.