· Economic Coordination Committee (ECC) in a meeting held on 3rd Feb’21 decided to remove the dividend distribution cap on Mari Petroleum Company Limited (MARI).

· The summary was put forward by the Petroleum Division as the company is being considered for privatization by the Government.

· The purpose of this decision by ECC is to make certain that divestment transaction produces maximum sale proceeds for the Government.

· Currently, the Government of Pakistan holds 24.5mn shares (18.39%) of MARI. While, Fauji Foundation and OGDC hold 52.9mn shares (40%) and 26.5mn shares (20%), respectively.

· To recall, Mari Well Price Agreement is effective since 1st Jul’14, according to which dividend till FY24 was to be distributed as per the previous cost-plus formula; shareholders were entitled to receive a minimum and maximum return in terms of dividends of 30% and 45%, respectively.

· Within these limits, shareholders were to receive 1% return on every additional 20mmcfd over the set benchmark of 425mmcfd.

· The company has an equity of PKR 101,949mn along with a Book Value of PKR 764/share.

· The company’s current Profit Reserve stands at PKR 86,213mn (PKR 646/share), while cash and short term investment are set at PKR 57,801mn (PKR 432/share).

· The company’s oil and gas reserves till Jun’20 are around 0.96 mnbbl and 4,755 bcf, respectively.

Recommendation:

· At present we have a ‘BUY’ call on the scrip with a Target Price of PKR 1,962.5/share, offering an upside of 28%.

Courtesy: AHL Research