Steady streams for Hubco

Financial results of the largest power station in the country are out, largely in line with expectations of the analysts community.
With profits increased to Rs99,694 million, a growth of 47 percent, EPS saw a rise to Rs4.80 from Rs3.27 in FY09. Share prices increased from Rs34.92 to Rs35.25 on the KSE after the announcement. With diminishing performance on the KSE for the last few days, the rise is indeed noteworthy.
The surge in the bottom line has been prompted by a confluence of factors, improvement in indexation factor and project company equity (PCE), being two prominent ones.
With a decline in rupee against the greenback between 7-9 percent, the indexation factor rose by 15 percent year-on-year in FY10. As far as PCE is concerned, the returns on the same have showed an increase of 31 percent, according to analysts reviews. This has pushed up the turnover and hence the profits of the company for the year.
Efficiency gains during the year also played their part in driving up earnings of the company. 2QFY10 witnessed an increase in generation bonus owing to greater electricity generation, which triggered an increase in revenues for the whole year.
Other income of the company, however, registered a fall of 62 percent year-on-year to Rs53 million. The cause of the significant decline were delayed payments from WAPDA., and as the circular debt problem persists, other income is likely to bear the strain.
Finance costs, on the other hand witnessed a decline of over 14 percent over the last year - spurred primarily by Term Finance Certificates issued by the government in 1HFY10. Yet, the fall in finance costs was kept in check by the persistent circular debt issue, in particular liabilities to PSO.
The cherry on top was the announcement of a cash dividend at Rs2.50 per share, bringing the net payout to Rs5 per share after including the interim dividend of Rs2.50, paid out in April 2010, bringing the payout to over 100 percent, and dividend yield of over 14.5 percent.
Future outlook seems secure for the company, keeping in mind the positive profit growth. The 220MW Narowal Project, which is expected to commence operations by October, seems promising for the coming year and better performance from the company is anticipated in FY11.

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Hub Power Co

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P&L - Rs (mn)                 FY10        FY09      Change

Turnover                    99,694      82,784       20.4%

Operating costs            (92,006)    (76,687)      20.0%

Gross profit                 7,688       6,097       26.1%

Other income                    53         138      -61.6%

General & admin expenses      (391)      (360)        8.6%

Finance costs               (1,794)    (2,095)      -14.4%

Net profit                   5,556      3,781        46.9%

EPS (Rs)                       4.8       3.27        46.8%

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Source: KSE announcement