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Pakistan International Container Terminal offers 16 million shares to general public

KARACHI (August 27 2003) : Pakistan International Container Terminal (PICT) goes for public subscription on August 28-29, 2003, and offers 16 million shares to general public.

Premier Mercantile Services (Pvt) Ltd (PMS), the holding company, was awarded a 21-year Concession to build and operate a container terminal ie PICT at Berths 6 to 9, Karachi Port, on BOT basis in April 2002 with capability of handling up to 450,000 Twenty-Foot Equivalent Container Units (TEUs) annually.

PMS is carrying out the container handling and stevedoring operations since 1964 on Berths 2-5 at East Wharf, Karachi Port, and the equipment which PMS has been using for the container handling has now been transferred to PICT at the new berths under the requirement of Implementation Agreement (IA) with the KPT, which was signed on June 18, 2002. With the immediate transfer of equipment from PMS to PICT, the company started its operations on October 15, 2002.

The PICT project comprises four phases, of which Phase 1-Preliminary (the basic infrastructure to carry out operations) has been completed.

With the completion of Phase-1 (Preliminary), PICT is handling in excess of 80,000 containers per annum, which will be further enhanced to 150,000 containers per annum, With the completion of Phase II and Phase III, the container handling capacity will correspondingly increase to 300,000 and 450,000 containers, respectively, per annum.

For the implementation of Phase I, the equity is now being raised through Private Placement and Public Offering, while debt has been arranged from IFC and Opec fund. According to the management of the company, the implementation of Phase II and III is expected to be completed through internal cash generation.

Financial Performance: Since its operations began, PICT has been able to perform commendably well. During October 15, 2002 to May 31, 2003, PICT revenue stood at Rs 161 million which is expected to increase with the completion of Phase I.

The company posted a terminal operating cost of Rs 111 million which resulted in a gross profit figure of Rs 51 million during the discussed period.

PAT during the seven month period was registered at Rs 17 million, which is likely to increase in the years to come.

Given that the project is currently in its implementation stages and that the first full year of financial figures will only be available by 2004 (as during 2003 the company has only seven months of operations), it may be a little too early to put a figure on PICT's bottom line.

However, simply annualising the seven months results, PAT for the company comes to Rs 276 million, which at the currently offered price of Rs 10 per share is not a bad deal.

As far as the dividend policy of PICT is concerned, the company will only declare and distribute dividends to the maximum limit permissible after satisfying the loan covenants with IFC and Opec fund ie there should be no defaults in terms of loan payments whereas PICT must also maintain a debt service coverage ratio of 1.4 and a current ratio of 1.2 (excluding in each case the IFC loan C worth $ 1.5 million for calculation purposes).

It is believed that even if everything works out according to the plan and PICT maintains its profitability, the company is not expected to opt for any dividend payout for the first couple of years as it would be more prudent to retire part of its current debt.

In the best scenario, therefore, a dividend is likely by 2006.

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