Breaking fundamental laws: PICT shares beat the market after offer from Philippines

By Kazim Alam, The Express Tribune

KARACHI: If you had bought shares of Pakistan International Container Terminal (PICT) worth Rs100,000 on October 10, the value of your investment would have been Rs183,280 at the end of the trading session on December 19 – a staggering gain of over 83.3% in a little over two months.

With an increase of Rs9.7 from the preceding session, the closing rate of PICT on the Karachi Stock Exchange was Rs269.9 on Wednesday, up from Rs147.5 on October 10, the day the tender offer by the Philippines-based International Container Terminal Services Inc Mauritius Limited (ICTSIML) to purchase PICT stocks at the rate of Rs150 a share expired.

ICTSIML’s parent company – which owns 24 marine terminals and port projects in 17 countries – tried to acquire a 20% stake in PICT at the rate of Rs150 per share through the tender offer, which remained effective from August 10 to October 10.

However, PICT Company Secretary Arsalan Khan told The Express Tribune last month that the Philippines-based company could obtain only a 5%-6% stake through the tender offer, apparently because small shareholders refused to sell their stake at the offered price.

“The offer (Rs150 per share) was not low. It was at a premium to the average price prevailing at the time,” Elixir Securities Senior Research Analyst Muhammad Raza Rawjani told The Express Tribune. “As per the Pakistan Acquisition Laws, if a company acquires a significant stake in any other listed company, the acquirer also has to announce a share buyback. However, there are talks of another buyback, which has pushed up the (stock) price,” he added, referring to market rumours of a second tender offer, swiftly driving the share price up.

However, speaking to The Express Tribune on Wednesday, PICT Director Aasim A Siddiqui said there was no truth in these rumours. “There is not going to be any buyback whatsoever. PICT is, and will always remain, a listed company,” he said.

Siddiqui represents the Marine Group on the PICT’s board of directors with a 32% stake in the company. The Marine Group’s stake decreased from 47% after the Philippines-based company recently became the largest shareholder in PICT by acquiring up to 35% shares through a definitive share price agreement and the tender offer.

When asked about the reason that was causing the unusual surge in the share price of PICT in recent weeks, Siddiqui said the stock performance could ‘possibly’ be attributed to rumours. “I have no idea who is trading PICT shares on the stock market. Perhaps people have higher expectations from PICT now that a foreign company has made heavy investments in the company,” he added.

Speaking to The Express Tribune on condition of anonymity, a stock analyst said that ICTSIML’s bid to acquire up to 20% shares in PICT through the stock market was largely unsuccessful. “So another tender offer is likely to be in the offing,” he said. “While the company is indeed profitable and has lots of potential to grow, the rapid increase in its share price cannot entirely be attributed to its fundamentals,” the stock analyst noted.

According to the annual report of PICT for 2011-12, the company posted a pre-tax annual profit of Rs2.17 billion, up 2% from Rs2.12 billion from the preceding year. The quarterly report for the three-month period ending on September 30, 2012, is not available on the PICT website.

Published in The Express Tribune, December 20, 2012.

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