Equity Analysis /
Pakistan

Hub Power: Higher than expected dividend uplifts confidence in future payouts

  • HUBC surprised with a high interim DPS of PKR15.50 today after skipping payout from Jun’22

  • This puts HUBC into a top order of defensive scrips despite hitting upper circuit today

  • We remain constructive with a TP of PKR 124/sh as this move potentially wards off payout concerns

Intermarket Securities
3 October 2022

HUBC announced FY23’s first interim payout of PKR15.50/share today after skipping DPS announcement in the final result of FY22. A significant payout prior to the slated quarterly earnings announcement shores up investor confidence massively. The stock hit upper circuit today, more prominently as the payout offers ample 22.2% dividend yield from last close (20.6% at today’s upper circuit). This warrants another upper circuit in tomorrow’s trading session as the current cash payout will still yield a handsome 19.2% return, against 12month T-bill rate of 15.74%. This announcement potentially wards off the payout concerns owing to slow IPP payments.

  • Management guidance reveals that the payout has come about from the internal FCFE generation as well as recent IPP payments. We would like to highlight that speculations were rife regarding HUBC’s payout of PKR4.00-PKR5.50 per share for Jun’22 announcement where the company had skipped the final payout announcement.

  • In between the Jun’22 result and today’s announcement, HUBC also notified commissioning of Thar Energy Limited (TEL); HUBC’s share of 60%. This project adds upto PKR1.5-1.9/share dividends to HUBC over the next few years and we estimate a NPV of PKR 13.57/share, already built into our current Target Price.

For FY23E, IMS’s estimated payout initially stood at PKR15.00 per share. This announcement uplifts the investor sentiment while also indicating a likelihood of another interim/final announcement for the year. We remain constructive on HUBC based on our Jun23 TP of PKR 124.0 per share.