Securities Analysis

Introduction
We have been given Rs 500,000 in a hypothetical situation, in which we are to invest

this money in the security market by selecting any five different shares of our choice in
five different sectors. Before investing, we are to do a detailed analysis in the following
hierarchy:
• Economic Analysis of the country to take decision that whether it will be

beneficial to invest in the current economic conditions prevailing in Pakistan?
• On the basis of the sector performance, level of associated Risk & returns and
investment feasibility, sector trend, Selection of 5 sectors out of 34 sectors in
KSE (Excluding mutual funds)
• Selection of 1 company from each sector on the basis of company’s past

performance, consistency in performance, expectation of growth, trend of
company, company’s policies, share prices trend, and ratios analysis of the
company
• AS our main objective is to study the shares prices of the company, to check for
the Risk and return associated with the securities in which we are to invest
afterwards. Our Analysis of securities starts from 1st January 2001 to 30th October
2008. 1st January and 31st December in each year are considered to be the
opening & closing dates in each year respectively.
Table of Contents
Chapter # 1: Common Stock Analysis

• Economic Analysis
• Industry Analysis
• Company Analysis
• Technical Analysis
• Summary
Chapter # 2: Actual Risk & Return of the Companies

• Actual Return
• Relative Return
• Actual Risk
Chapter # 3: Expected Risk & Return

• Forecasted Returns
o Probabilities assigned (Reasons)
o Forecasted Returns
• Expected Risk
• Observation
Chapter # 4: Expected Portfolio Risk & Return

• Expected Return of Portfolio
• Risk Factor Calculation (Correlation Coefficient)
• Expected Risk of portfolio

• Interpretation
Economic Analysis of the Country
A brief view of the indicators is given below:
Serial No. Economic Indicator Effect on the Economy
GNP
1
Consumption 100% of GDP There is reported less NI
growth as compared to the
Investment 21.6% of GDP previous year. The reason
Govt. Expenditures might be the insolvency
position of the country
Development $496 billion
Non-Development 683.4 billion
Trade balance -$1.196 Billion
2 This has drastically impacted

CPI 12.00% the purchasing power of a
consumer. Hence, consumers
are not even able to fulfill their
necessities
3 Rise in PCI is a good

Per capita Income $1085 indicator, but real PCI is
showing not good indications.
The longer the higher

4 inflationary pressure persists,
Inflation rate 25% the greater is the chance for
wage-price spiral to gain a
firm hold.
Higher the interest rate, lower

5 will be the investment, which
Interest Rate 15% will lead to less production.
Consequently, less demand
will be fulfilled, increase in
inflation rate, unemployment
will occur.
Less than targeted 7.2%

6 GDP growth 5.8% which is showing economic
instability.
FDI was relatively high in

7 previous year -$ 8 billion. But
F.D.I $3.6 billion due to the financial instability
of the country, most of
FDIwas injected out. There
have been an investment
outflow of 8.84 billion in the
period when the ceiling of
KSE was released,
8 Unemployment rise
Unemployment 16% subsequently drag the people
Rate to below poverty line. People
can not fulfill their necessities.
9 Monetary Policy Tight M.P The money supply growth

during July- May 10th 2007-
• Disc. rate 12% 08 (henceforth July-May) of
• Cash Reserve the current fiscal year slowed
Requirement 9% to 9%
• Statutory Liquidity
Requirement 19% The FY 08 growth in M2 is
entirely attributable to a rise in
• Margin the net domestic assets
Requirement for
(NDA) of the banking system
L.O.C. 35%
due to high government
• money supply borrowings for budgetary
growth 9.0% support, as the NFA
• Floor of 5% on the registered a contraction
R.O.R on PLS during the period, mainly
A/c. reflecting the weaknesses in
country's external balance of
payment.
The monetary tightening has
been successful in
moderating the exceptional
rise in private sector credit
growth seen in recent years
to levels consistent with its
long term trends. However,
the impact of this desirable
moderation in private sector
growth on M2 was more than
offset by continued strong
budgetary borrowings of the
government from the banking
system. The borrowings from
the State Bank of Pakistan
reached an alarming level
SBP to Rs 945.9 billion. The

spread - a measure of
banking sector
efficiency/inefficiency -
increased from 6.3 percent to
6.7.
The total revenue collected

10 Fiscal Policy during FY 2007-08 stood at
Rs 1545.5 billion, higher than
• Fiscal Deficit $398 billion
the targeted level of Rs 1476
billion (based on information
till May 23, 2008). This
increase of Rs 69.5 billion
from the budgeted revenues
was mainly due to higher-
than-targeted non-tax
collections. an additional Rs
103 billion in non-tax
revenues, reaching to Rs 483
billion. Slippages in provincial
tax revenues amount to Rs 8
billion. There was an overall
fiscal deficit of Rs 398 billion.
11 Debts
$ 14.2 Billion & 945
Domestic Billion from SBP
Foreign $45.00bn
IMF loan of $ 3.5 billion has

caused to rise the reserves of
12 Reserves $9.3396 Bln the country. Otherwise, there
might be a downfall.
Money depreciation from past

13 year. Although now a days
Exchange Rate Money Depreciation by there have been seen a
6.4% relative appreciation. But its
less than to compensate the
conditions
Poverty has increase due to

14 increased in inflation rate,
Poverty 23.9% interest rate, unemployment
increase and decrease in
purchasing power of people.
In manufacturing sector, there

15 have been some L.S.G,
L.S. Manufacturing 4.8% showing the country is
growth moving towards future stable
conditions.
Political conditions has

drastically impacted the
16 Political Conditions Political Instability. country, in addition to this, the
continuing rage between the
neighbor countries, resulting
the decrease in FDI.
Population growth rate has

17 Population Growth 1.8% decreased. Showing facilities
inapprehension.
Can increase the purchasing
18 Base Wage Rs 6000 power, but will also increase
the prices.
Source: Economic Survey of Pakistan (issued, October,2008)
Interpretation:
Almost all the indicators are showing that the country is in a severe economic recession
now a days, and there are least chances that the investor can have good returns out of
stocks. Keeping in view all of the above stated factors, we have decided 5 sectors in
which we think that we can have some good returns. We think that our perceived
sectors will at least be affected by current economic conditions. Which are discussed in
the succeeding pages.
Industry Analysis
1. Banking Sector:
Particulars Description
Stabilizing stage, for some companies there has been the declining
stage, going for mergers and acquisitions with some foreign as well
as some domestic banks to ensure their existence in the market.
Sector Life Cycle Even an international bank ABN Amro is being acquired by RBS
another international bank. MCB is going for merger with Barclays to
maintain economic capital limit of 12%, set by state bank of Pakistan.
In the past few year, banking sector had a boom with an annual
growth rate of 20%. Showing robust performance. But from the
Historical declaration of insolvency position of Pakistan in May 2008 and
performance grading it to CCC-, a huge amount of F.D.I. has out flowed, now the
banking sector’s overall growth is reduced to 11% for this year.
Type of industry Interest Sensitive industry
Market players HBL, NIB, MCB, NBP ABP, UBL, Bank Al-Habib, Saudi Pak Bank,
Meezan Bank, Bank al Islami
Competitors of HBL, ABP, UBL, NBP

MCB
Competition Indirect Competition against Each other.

Nature
Threats Bargaining power, Supplier
Industry Life Cycle Stabilizing Stage
Risk & mitigation Inflation rate, Interest Rate, Rise in Economic Capital Limit.
Financial Profitability in FY07 was 75.86bn, declined by 5.6% as compared to

Indicators 80.32bn in FY06,Non- performing loans of banks increased to 160bn.
Mergers and Maybank has acquired 25% shares in MCB

Acquisition
Interpretation:
Banking industry is most affected by interest hike, foreign direct investment outflow,
inflation rate rise and risk of default. Therefore, a significant decrease in growth rate and
profitability is addressed.
2.Fertilizer Industry
Expansion Stage, rising farming is resulting to rising needs of
fertilizers. Therefore, there have been a rising sales growth trend
Sector Life Cycle in the sector.
Fertilizer industry is fastly growing industry, being aided by

government of Pakistan, as it is Associated with agriculture.
Historical Pakistan, being an agriculture country will have to support all
performance industries which are directly related to Agriculture to ensure
maximum benefits as well as maximum production. Current the
sector is growing with almost 35% rate.
Type of industry Growth industry.
Market players Dawood Hercules, fauji fertilizers, Engro Chemicals
Competitors of
Engro Dawood Hercules, fauji fertilizers, Chemicals
Competition Direct competition

Nature
Threats Supplier (Raw materials), Consumer.(Less purchasing power).
Industry Life Cycle Expansion stage. Industry is having maximum profits.
Risk & mitigation Inflation rate, Interest Rate, Environmental problems, political
instability.
Financial • overall profitability of the fertiliser sector increased 45%

Indicators
• Increase in fertilizers demand by 18%.
Interpretation:
Although the industry has shown a positive trend in growth, sales and profits. But
due to the economic downfall, there will be a set back for the company is shape
of decreasing demand for fertilizers. Subsequently, the company’s stock prices
are decreasing down, which may affect the company’s growth rate.
3.Cement Industry
Sector Life Cycle Stabilizing, Domestic shortfall in demand but rising production is
offset by exporting more in the foreign market.
In the previous years, as there were many developmental

projects in the country, raised the need of cements in the country.
Historical This gave a chance to the industry to flourish. Now a days,
performance Economic slowdown coupled with aggravating law and order
situation has had an adverse impact on local sales growth.
However, growth in exports proved as a saving grace for the
overall cement dispatches Export market share has also risen to
34.1%. Capacity utilization also declined to 78.9%
Type of industry Growth industries
Market players Bestway cements, Lucky Cements, Fauji cements
Competitors of
Lucky Cements Bestway cements, Fauji Cements
Competition Direct Competition among the companies

Nature
Threats Supplier (Raw material), Consumer (Decreased DPs)
Industry Life Cycle Stabilizing Stage
Risk & mitigation Inflation rate, Interest Rate, Downfall in developmental projects
Financial Total cement dispatches during showed a nominal growth of

Indicators 0.7%, while domestic cement sales , depicting a decline of
15.4%, Profitability of the sector detained at 17%.
Interpretation:
The current decrease in cement demand as compared to rising production to
utilize optimize capacity, has been offset by exporting to the other countries. This
means in case of any set back, company can stay in market due to steps
embossed in the foreign market.
4. Oil Sector(Oil Marketing Companies)
Sector Life Cycle Stabilizing to expansion stage. As there has been more
exploration of oil fields in Pakistan by Exploration and production
companies, there will be more chances for the oil marketing
companies to expand by rising sales through availability of
reduced price oil, offsetting importing prices by the domestic
production.
In the previous years, OMCs have performed very well, having

huge profits, and high growth rate. But the rise in oil prices from
Historical 2007 has made their profits to decrease significantly, after the
performance releasing of government subsidy over the petroleum, the profits
shrinked to an alarming level, even now most of the OMCs are in
loss.
Type of industry Cyclical industry
Market players PSO, Shell, Attock Petroleum, Caltex, Askari.
Competitors of Shell, Attock Cements

PSO
Competition Indirect Competition.

Nature
Threats New entrants, Suppliers (Changing petroleum prices)
Industry Life Cycle Expansion
Risk & mitigation Inflation rate, Interest Rate, Rise in oil prices, oil shortages.
Financial the oil consumption in the country posted a slight decline of 2.9
Indicators percent. 52 percent of the total consumption was met through
local refineries and the remaining 48 percent met through
imports. Among the companies, PSO occupied the largest slice of
68.2 percent
Interpretation:
The rising demand of oil in the market has given the OMCs a chance to again establish
themselves on the floor of market. The oil prices crunch had made many companies to
abolish their existence. In future it is expected that there will be growth in the sector.
5.Commodities Sector
Expansion stage. There is a rising demand for the commodities,
Sector Life Cycle as these are the basic necessities for the people. The rising
population at a rate of 1.8 contributes towards more sales of the
commodities. And giving a backhand to flourish the industry. The
industry has although growth at lesser rate as compared to
previous year.
In the past years the industry has performed well, with ever
increasing sales growth. Even now in such an economic set back,
Historical the industry is performing well as the commodities are the need
performance of every person.
Type of industry Growth industry, having high profits.
Market players Haleeb, Nurpur, Continental foods, Dawn, Bake Parlour
Competitors of Haleeb, Nurpur.

Nestle
Competition Indirect Competition, healthy competition

Nature
Threats New entrants, Suppliers (Changing petroleum prices), consumer

based.
Industry Life Cycle Expansion
Risk & mitigation Inflation rate, Interest Rate, Rise in oil prices, decreasing
purchasing power of consumers
Financial Sales growth by 25%, Gross profit margin of the industry is 24%
Indicators while the net profit margin is 5%. Reduced Net profit margin is
due to increased debt cost and rising tax rate.
Interpretation:
The Commodities sector has although flourished but at a lesser pace as compared to
previous year. The rising demand for the commodities might be handy in the
development of the sector.
Company Analysis
Muslim Commercial Bank
Net Revenues 28,235,393 (20% growth)
Profit after Tax 15,266 Million (25.8% increase)
Dividends 7854 Million (98% increase), Per share
12.5
Ratios:
Capital Adequacy Ratio 17.88%
Dividend Yield Ratio 0.03
Dividend payout ratio 51.45%
Earning per share 24.3
Interpretation:
The company’s overall profitability is showing that it is going with a good growth rate. It
future it is expected that the company will give more better profits.
Nestle Pakistan
Net Revenues (Recent) 28,235,393 (26% growth)
Profit after Tax 1,805,212 (27.14% increase)
Dividend per share 10
Ratios:
Profit Margin 6.39%
Return on equity 43.90%
Dividend Yield Ratio 51.45%
Dividend payout ratio 82%
Interpretation:
Nestle Pakistan is fastly growing company, with a growth rate of 25%. It is expected that
it will give good returns.
Engro Chemicals:
Lucky Cements
Interpretation:
Net Revenues (Recent) 23183 Million (37.1% growth)
Profit after Tax 3155 Million (23.9% increase)
Ratios:
Profit Margin 14%
Return on equity 20%
Dividend Yield Ratio 51.45%
Engro chemicals has given good returns in the current year. It is expected that it will
give better profits in future irrespective of current economic spoil.
Pakistan State Oil

Net Revenues 290589 Million (40%% growth)
Profit after Tax 2149Million (25% increase)
Ratios:
Profit Margin 7.3%
Return on equity 18%
Interpretation:
PSO is expected to have loss in the current quarter. But it is supposed that its loss will
be changed into profits to give good returns.
Engro Chemicals
2001
Act.
Period Opening Closing Dividends Return R.R Risk
Cash Stock
First Quarter 70.12 66.32 0 0 -5.42% 0.95
(Avg)
Second Quarter
(Avg) 58.93 58.75 0 0 -0.31% 1.00
Third Quarter
(Avg) 53.58 49.87 0 0 -6.94% 0.93
Fourth Quarter
(Avg) 52.38 54.33 7.5 0 18.04% 1.18
Average 58.75 57.32 1.88 0.00 1.34% 1.01 11.49%
2002
Act.
Cash Stock
First Quarter
(Avg) 62.52 69.68 0 0 11.46% 1.11
Second Quarter
(Avg) 65.90 61.45 0 0 -6.75% 0.93
Third Quarter
(Avg) 61.08 62.15 0 0 1.75% 1.02
Fourth Quarter
(Avg) 68.45 78.10 7.5 0 25.05% 1.25
Average 64.49 67.85 1.88 0.00 7.88% 1.08 13.66%
2003
Act.
Cash Stock
First Quarter
(Avg) 87.65 84.67 0 0 -3.40% 0.97
Second Quarter
(Avg) 81.30 82.55 0 0 1.54% 1.02
Third Quarter
(Avg) 91.47 89.52 0 0 -2.13% 0.98
Fourth Quarter
(Avg) 82.37 86.30 8 0 14.49% 1.14
Average 85.70 85.76 2.00 0.00 2.62% 1.03 8.18%
2004
Act.
Cash Stock
First Quarter
(Avg) 95.28 97.12 0 0 1.92% 1.02
Second Quarter
(Avg) 98.52 98.25 0 0 -0.27% 1.00
Third Quarter
(Avg) 95.77 93.58 0 0 -2.28% 0.98
Fourth Quarter
(Avg) 100.15 112.93 8.5 0 21.25% 1.21
Average 97.43 100.47 2.13 0.00 5.16% 1.05 10.87%
2005
Act.
Cash Stock
First Quarter
(Avg) 126.33 126.18 0 0 -0.12% 1.00
Second Quarter
(Avg) 120.43 115.90 0 0 -3.76% 0.96
Third Quarter
(Avg) 118.05 125.80 0 0 6.57% 1.07
Fourth Quarter
(Avg) 154.80 163.45 11 0 12.69% 1.13 7.29%
Average 129.90 132.83 2.75 0.00 3.84% 1.04 7.29%
2006
Act.
Cash Stock
First Quarter
(Avg) 196.62 211.13 0 0 7.38% 1.07
Second Quarter
(Avg) 193.00 180.13 3 0 -5.11% 0.95
Third Quarter
(Avg) 175.37 178.60 3 0 3.55% 1.04
Fourth Quarter
(Avg) 177.75 174.38 3 0 -0.21% 1.00
Average 185.68 186.06 2.25 0.00 1.40% 1.01 5.34%
2007
Act.
Cash Stock
First Quarter
(Avg) 178.62 184.22 0 0 3.14% 1.03
Second Quarter
(Avg) 200.18 222.58 2 0 12.19% 1.12
Third Quarter
(Avg) 244.17 246.47 2 0 1.76% 1.02
Fourth Quarter
(Avg) 272.05 274.00 3 0 1.82% 1.02
Average 223.75 231.82 1.75 0.00 4.73% 1.05 5.02%
2008
Act.
Cash Stock
First Quarter
(Avg) 291.52 310.90 0 0 6.65% 1.07
Second Quarter
(Avg) 310.65 296.29 2 0 -3.98% 0.96
Third Quarter -14.05
(Avg) 223.86 190.40 2 0 % 0.86
Average 275.34 265.86 1.33 0.00 -0.04 0.96 10.35%
Interpretation:
Engro Pakistan is giving negative returns in securities. The current economic downfall
has affected it positions of giving good returns a lot.
Lucky Cements
2001
Openi Closi Dividen Retur Act.
Period ng ng ds n R.R Risk
Stoc
Cash k
First Quarter 7.52 6.83 0 0 -9.09 0.91
(Avg) %
Second Quarter 13.76
(Avg) 6.78 6.97 0.75 0 % 1.14
Third Quarter -12.1
(Avg) 6.43 5.65 0 0 8% 0.88
Fourth Quarter 12.11
(Avg) 6.47 7.25 0 0 % 1.12
0 1.15 13.68
Average 6.80 6.68 0.19 .00 % 1.01 %
2002
Stoc
Cash k
First Quarter 0 10.73
(Avg) 9.78 10.83 0.00 .00 % 1.11
Second Quarter 0 1.45
(Avg) 9.17 8.55 0.75 .00 % 1.01
Third Quarter 0 5.86
(Avg) 8.82 9.33 0.00 .00 % 1.06
Fourth Quarter 0 4.91
(Avg) 9.85 10.33 0.00 .00 % 1.05
0 5.74 3.83
Average 9.40 9.76 0.19 .00 % 1.06 %
2003
Stoc
Cash k
First Quarter 0 -3.03
(Avg) 10.18 9.80 0.00 .08 % 0.97
(Avg) 11.55 14.22 0.75 .00 % 1.30
(Avg) 20.60 21.47 0.00 .00 % 1.04
(Avg) 20.70 22.03 0.00 .00 % 1.06
0 9.30 14.11
Average 15.76 16.88 0.19 .02 % 1.09 %
2004
Stoc
Cash k
(Avg) 26.13 29.03 0.00 .00 % 1.11
(Avg) 38.70 40.62 0.75 .00 % 1.07
Third Quarter 0 -1.24
(Avg) 38.83 38.35 0.00 .00 % 0.99
(Avg) 36.75 37.75 0.00 .00 % 1.03
0 4.87 5.32
Average 35.10 36.44 0.19 .00 % 1.05 %
2005
Stoc
Cash k
(Avg) 43.55 46.17 0.00 .00 % 1.06
Second Quarter 0 -2.31
(Avg) 43.27 42.27 0.00 .00 % 0.98
(Avg) 45.35 47.65 0.00 .00 % 1.05
Fourth Quarter 0 16.22 7.62
(Avg) 64.72 75.22 0.00 .00 % 1.16 %
0 6.25 7.62
Average 49.22 52.83 0.00 .00 % 1.06 %
2006
Stoc
Cash k
First Quarter 111.1 0 13.03
(Avg) 98.35 7 0.00 .00 % 1.13
Second Quarter 110.2 103.9 0 -4.78
(Avg) 3 7 1.00 .00 % 0.95
Third Quarter 102.8 101.9 0 -0.89
(Avg) 8 7 0.00 .00 % 0.99
Fourth Quarter 0 -15.3
(Avg) 88.67 75.03 0.00 .00 8% 0.85
100.0 0 -2.00 11.74
Average 3 98.03 0.25 .00 % 0.98 %
2007
Stoc
Cash k
(Avg) 63.98 70.45 0.00 .00 % 1.10
Second Quarter 117.4 0 21.17
(Avg) 97.93 2 1.25 .00 % 1.21
Third Quarter 126.0 122.8 0 -2.51
(Avg) 3 7 0.00 .00 % 0.97
Fourth Quarter 126.1 122.2 0 -3.10
(Avg) 8 7 0.00 .00 % 0.97
103.5 108.2 0 6.42 11.57
Average 3 5 0.31 .00 % 1.06 %
2008
Stoc
Cash k
First Quarter 120.7 128.4 0 6.42
(Avg) 0 5 0.00 .00 % 1.06
Second Quarter 130.4 116.5 0 -9.73
(Avg) 7 3 1.25 .00 % 0.90
Third Quarter 0 -12.8
(Avg) 77.87 67.84 0.00 .00 8% 0.87
109.6 104.2 0 10.35
Average 8 7 0.42 .00 -0.05 0.95 %
Interpretation:
At the start of 2008, lucky cements had given good returns, but the economic downfall
has affected the company’s returns a lot.
MCB
2001
Openi Closin Dividend Act.
Period ng g s Return R.R Risk
Stoc
Cash k
First Quarter -9.71
(Avg) 30.73 27.75 0.00 0.00 % 0.90
Second Quarter
(Avg) 25.52 25.83 0.00 0.00 1.24% 1.01
Third Quarter -4.76
(Avg) 22.75 21.67 0.00 0.00 % 0.95
Fourth Quarter -2.33
(Avg) 22.90 22.37 0.00 0.00 % 0.98
-3.89
Average 25.48 24.40 0.00 0.00 % 0.96 4.60%
2002
Stoc
Cash k
First Quarter
(Avg) 22.87 25.13 0.00 0.00 9.91% 1.10
Second Quarter
(Avg) 26.82 27.88 0.00 0.00 3.98% 1.04
Third Quarter -2.55
(Avg) 26.12 25.45 0.00 0.00 % 0.97
Fourth Quarter
(Avg) 30.97 33.05 0.00 0.00 6.73% 1.07
Average 26.69 27.88 0.00 0.00 4.52% 1.05 5.30%
2003
Period Openi Closin Dividend Return R.R Act.
ng g s Risk
Stoc
Cash k
First Quarter
(Avg) 33.71 33.68 1.50 0.00 4.35% 1.04
Second Quarter
(Avg) 34.20 35.63 0.00 0.00 4.19% 1.04
Third Quarter
(Avg) 45.03 47.45 1.25 0.00 8.14% 1.08
Fourth Quarter
(Avg) 44.23 46.43 0.00 1.00 7.23% 1.07
Average 39.29 40.80 0.69 0.25 5.98% 1.06 2.01%
2004
Stoc
Cash k
First Quarter
(Avg) 51.42 50.52 1.00 0.00 0.19% 1.00
Second Quarter
(Avg) 53.90 54.53 0.00 0.00 1.18% 1.01
Third Quarter
(Avg) 51.40 51.17 1.50 0.00 2.46% 1.02
Fourth Quarter
(Avg) 50.00 52.93 0.00 1.00 7.87% 1.08
Average 51.68 52.29 0.63 0.25 2.93% 1.03 3.42%
2005
Stoc
Cash k
First Quarter
(Avg) 67.53 69.30 1.75 0.00 5.21% 1.05
Second Quarter
(Avg) 69.08 74.18 0.00 0.00 7.38% 1.07
Third Quarter 105.7 19.05
(Avg) 90.10 7 1.50 0.00 % 1.19
Fourth Quarter 143.1 156.9 11.76
(Avg) 3 7 1.00 2.00 % 1.12
101.5 10.85
Average 92.46 5 1.06 0.50 % 1.11 6.11%
2006
Cash Stoc
k
First Quarter 215.2 234.3
(Avg) 7 5 2.00 0.00 9.79% 1.10
Second Quarter 220.4 215.5 -1.32
(Avg) 8 7 2.00 0.00 % 0.99
Third Quarter 215.8 230.7
(Avg) 0 0 2.00 0.00 7.83% 1.08
Fourth Quarter 261.5 258.5
(Avg) 0 3 1.50 1.50 0.01% 1.00
228.2 234.7
Average 6 9 1.88 0.38 4.08% 1.04 5.55%
2007
Stoc
Cash k
(Avg) 2 0 2.50 0.00 3.83% 1.04
Second Quarter 303.2 334.6 11.20
(Avg) 0 5 2.50 0.00 % 1.11
Third Quarter 333.7 323.0 -2.45
(Avg) 0 3 2.50 0.00 % 0.98
Fourth Quarter 361.8 384.1
(Avg) 0 2 5.00 0.00 7.55% 1.08
319.4 332.2
Average 3 5 3.13 0.00 5.03% 1.05 5.82%
2008
Stoc
Cash k
(Avg) 5 3 1.50 0.00 1.63% 1.02
Second Quarter 368.3 338.6 -7.25
(Avg) 0 0 3.00 0.00 % 0.93
Third Quarter 280.4 252.5 -9.94
(Avg) 6 7 0.00 % 0.90
352.5 335.1
Average 7 0 2.25 0.00 -0.05 0.95 6.06%
Interpretation:
MCB has given all time good returns. It the current year it had initially given very good
return. The economic downfall has somewhat affected the company initially, but
afterwards it stabilize it by again showing positive returns. But being an interest
sensitive company, the outflow of F.D.I and interest rate hike again dropped its returns
to losses
PSO
2001
Stoc
Cash k
First Quarter 143.5 140.4 0 -2.17
(Avg) 3 2 0.00 .00 % 0.98
Second Quarter 139.4 138.8 0 -0.42
(Avg) 5 7 0.00 .00 % 1.00
Third Quarter 127.9 119.0 0 -7.01
(Avg) 7 0 0.00 .00 % 0.93
Fourth Quarter 105.3 100.9 0 -4.18
(Avg) 3 3 0.00 .00 % 0.96
129.0 124.8 0 -3.44 2.83
Average 7 0 0.00 .00 % 0.97 %
2002
Stoc
Cash k
First Quarter 116.6 138.2 0 18.51
(Avg) 3 2 0.00 .00 % 1.19
Second Quarter 150.0 144.3 0 -3.81
(Avg) 5 3 0.00 .00 % 0.96
Third Quarter 161.1 180.2 0 11.85
(Avg) 5 5 0.00 .00 % 1.12
Fourth Quarter 189.7 194.4 0 2.49
(Avg) 2 5 0.00 .00 % 1.02
154.3 164.3 0 7.26 9.88
Average 9 1 0.00 .00 % 1.07 %
2003
Stoc
Cash k
First Quarter 199.7 196.9 0 -1.43
(Avg) 9 3 0.00 .00 % 0.99
Second Quarter 207.3 215.8 0 4.08
(Avg) 3 0 0.00 .00 % 1.04
Third Quarter 266.4 283.2 0 6.28
(Avg) 8 2 0.00 .00 % 1.06
Fourth Quarter 267.4 270.7 0 1.25
(Avg) 2 7 0.00 .00 % 1.01
235.2 241.6 0 2.55 3.36
Average 6 8 0.00 .00 % 1.03 %
2004
Stoc
Cash k
First Quarter 289.7 288.7 0 -0.36
(Avg) 7 3 0.00 .00 % 1.00
Second Quarter 275.8 266.2 0 -3.47
(Avg) 2 5 0.00 .00 % 0.97
Third Quarter 256.5 254.3 0 -0.84
(Avg) 3 8 0.00 .00 % 0.99
Fourth Quarter 258.7 270.8 0 4.70
(Avg) 2 7 0.00 .00 % 1.05
270.2 270.0 0 0.01 3.41
Average 1 6 0.00 .00 % 1.00 %
2005
Stoc
Cash k
First Quarter 336.6 373.6 0 11.02
(Avg) 0 8 0.00 .00 % 1.11
Second Quarter 375.0 371.0 0.00 0 -1.07 0.99
(Avg) 0 0 .00 %
Third Quarter 383.2 382.8 0 -0.09
(Avg) 2 8 0.00 .00 % 1.00
Fourth Quarter 403.8 414.4 0 2.63
(Avg) 3 5 0.00 .00 % 1.03
374.6 385.5 0 3.12 5.49
Average 6 0 0.00 .00 % 1.03 %
2006
Stoc
Cash k
First Quarter 416.1 401.5 0 -3.51
(Avg) 2 0 0.00 .00 % 0.96
Second Quarter 339.6 318.3 0 -0.98
(Avg) 7 3 18.00 .00 % 0.99
Third Quarter 333.8 334.9 0 0.30
(Avg) 8 0 0.00 .00 % 1.00
Fourth Quarter 304.0 300.0 0 0.65
(Avg) 2 0 6.00 .00 % 1.01
348.4 338.6 0 -0.88 1.89
Average 2 8 6.00 .00 % 0.99 %
2007
Stoc
Cash k
First Quarter 329.7 350.0 0 7.38
(Avg) 3 8 4.00 .00 % 1.07
Second Quarter 361.8 373.9 0 6.39
(Avg) 5 8 11.00 .00 % 1.06
Third Quarter 365.3 355.0 0 -1.45
(Avg) 2 2 5.00 .00 % 0.99
Fourth Quarter 399.1 414.5 0 3.85
(Avg) 7 2 0.00 .00 % 1.04
364.0 373.4 0 4.04 3.95
Average 2 0 5.00 .00 % 1.04 %
2008
Period Openi Closi Dividen Retur R.R Act.
ng ng ds n Risk
Stoc
Cash k
First Quarter 447.5 489.8 0 10.79
(Avg) 2 0 6.00 .00 % 1.11
Second Quarter 492.1 453.4 0 -7.87
(Avg) 5 1 .00 % 0.92
Third Quarter 356.8 311.1 0 -12.8
(Avg) 6 1 .00 2% 0.87
432.1 418.1 0 12.45
Average 8 1 6.00 .00 -0.03 0.97 %
Interprettion:
PSO has given all time good returns. During the current year it had initially given very
good return. The economic downfall has somewhat affected the company initially, but
afterwards it stabilize it by again showing positive returns. But being a cyclical nature
company, the rise and fall in prices of petroleum has greatly affected the current
p[performance of PSO. PSO is at 12.2 loss per share in the quarter. But hoping to
change losses into profits in the remaining year.
Nestle
2001
Openi Closin Dividen Retur Act.
Period ng g ds n R.R Risk
Stoc
Cash k
First Quarter 143.0 139.6 0 -2.33
(Avg) 0 7 0.00 .00 % 0.98
Second Quarter 132.3 131.3 0 -0.76
(Avg) 3 3 0.00 .00 % 0.99
Third Quarter 142.6 148.6 0 4.21
(Avg) 7 7 0.00 .00 % 1.04
Fourth Quarter 159.0 158.6 0 -0.21
(Avg) 0 7 0.00 .00 % 1.00
144.2 144.5 0 0.23 2.80
Average 5 8 0.00 .00 % 1.00 %
2002
Stoc
Cash k
First Quarter 167.3 174.6 0 4.38
(Avg) 3 7 0.00 .00 % 1.04
Second Quarter 183.0 187.6 0 2.55
(Avg) 0 7 0.00 .00 % 1.03
Third Quarter 189.8 190.5 0 0.35
(Avg) 3 0 0.00 .00 % 1.00
Fourth Quarter 199.0 207.8 0 4.44
(Avg) 0 3 0.00 .00 % 1.04
184.7 190.1 0 2.93 1.93
Average 9 7 0.00 .00 % 1.03 %
2003
Stoc
Cash k
First Quarter 205.5 200.3 0 -2.51
(Avg) 3 7 0.00 .00 % 0.97
Second Quarter 216.0 231.6 0 7.25
(Avg) 0 7 0.00 .00 % 1.07
Third Quarter 266.2 275.6 0 3.51
(Avg) 7 0 0.00 .00 % 1.04
Fourth Quarter 274.3 307.0 0 13.36
(Avg) 7 3 4.00 .00 % 1.13
240.5 253.6 0 5.40 6.66
Average 4 7 1.00 .00 % 1.05 %
2004
Stoc
Cash k
First Quarter 436.6 471.3 0.00 0 7.94 1.08
(Avg) 5 2 .00 %
Second Quarter 483.0 482.6 0 -0.07
(Avg) 0 7 0.00 .00 % 1.00
Third Quarter 461.6 455.3 0 -1.37
(Avg) 7 3 0.00 .00 % 0.99
Fourth Quarter 465.0 485.0 0 5.37
(Avg) 2 0 5.00 .00 % 1.05
461.5 473.5 0 2.97 4.42
Average 8 8 1.25 .00 % 1.03 %
2005
Stoc
Cash k
First Quarter 509.9 511.6 0 0.33
(Avg) 8 7 0.00 .00 % 1.00
Second Quarter 537.0 540.0 0 0.56
(Avg) 8 8 0.00 .00 % 1.01
Third Quarter 542.2 549.8 0 1.41
(Avg) 2 8 0.00 .00 % 1.01
Fourth Quarter 562.3 577.3 0 5.33
(Avg) 3 3 15.00 .00 % 1.05
537.9 544.7 0 1.91 2.33
Average 0 4 3.75 .00 % 1.02 %
2006
Stoc
Cash k
First Quarter 697.0 771.3 0 10.66
(Avg) 0 3 0.00 .00 % 1.11
Second Quarter 990.6 1083. 0 9.34
(Avg) 7 19 0.00 .00 % 1.09
Third Quarter 1030. 975.8 0 -5.26
(Avg) 07 8 0.00 .00 % 0.95
Fourth Quarter 930.0 965.0 0 4.30
(Avg) 2 0 5.00 .00 % 1.04
911.9 948.8 0 4.76 7.22
Average 4 5 1.25 .00 % 1.05 %
2007
Stoc
Cash k
First Quarter 1275. 1487. 0 16.59
(Avg) 98 67 0.00 .00 % 1.17
Second Quarter 1586. 1541. 0 -2.84
(Avg) 33 33 0.00 .00 % 0.97
Third Quarter 1513. 1498. 0 -0.99
(Avg) 33 33 0.00 .00 % 0.99
Fourth Quarter 1621. 1721. 0 6.78
(Avg) 67 67 10.00 .00 % 1.07
1499. 1562. 0 4.89 8.85
Average 33 25 2.50 .00 % 1.05 %
2008
Stoc
Cash k
First Quarter 1696. 1600. 0 -5.66
(Avg) 97 97 .00 % 0.94
Second Quarter 1405. 1448. 0 3.03
(Avg) 84 50 .00 % 1.03
Third Quarter 1640. 0 0.00
(Avg) 00 7.00 .00 % 1.00
1580. 1524. 0 4.41
Average 93 74 7.00 .00 -0.01 0.99 %
Interpretation:
Neslte Pakistan has given all time good returns. Even in the current economic spoil,
nestle was initially had a downfall, but being an international company, it has made it
stabilized to give expected returns at good rate.
Expected Risk & Return
Engro
Expected Return Expected Risk (δA)

Return R-
S.No (R) Probability (P) ̅ṜA=∑RP ṜA (R-ṜA)2 (R-ṜA)2P
1 10.00% 0.08 0.008 0.09 0.008464 0.00067712
2 5.00% 0.12 0.006 0.04 0.001936 0.00023232
3 3.00% 0.15 0.0045 0.03 0.000650 9.7538E-05
-0.0
4 -5.00% 0.25 -0.0125 4 0.001406 0.00035156
-0.0
5 -10.00% 0.4 -0.04 6 0.003600 0.00144
Total 1 -3.40% 0.00279854
δA = √∑(R-
ṜA)2P 5.29%
Interpretation:
The expected returns of the company are depicted to be
negative with a high risk involvement.
Expected Return Expected Risk (δB)

Return R-
S.No (R) Probability (P) ̅ṜB=∑RP ṜB (R-ṜB)2 (R-ṜB)2P
1 10.00% 0.1 0.01 0.09 0.008100 0.00081
2 8.00% 0.12 0.0096 0.07 0.004956 0.00059474
3 5.00% 0.2 0.01 0.04 0.001600 0.00032
4 2.00% 0.4 0.008 0.01 0.000144 0.0000576
-0.0
5 -5.00% 0.18 -0.009 4 0.001681 0.00030258
Total 1 2.86% 0.00208492
δB = √∑(R-
ṜB)2P 4.57%
Interpretation:
MCB is expected to give good returns in future with a least
rate of risk associated with it.
Lucky Cements
Expected Return Expected Risk (δC)

Return R-
S.No (R) Probability (P) ̅ṜC=∑RP ṜC (R-ṜC)2 (R-ṜC)2P
1 5.00% 0.08 0.004 0.05 0.002116 0.00016928
2 3.00% 0.2 0.006 0.02 0.000576 0.0001152
3 1.00% 0.3 0.003 0.01 0.000049 0.0000147
-0.0
4 -2.00% 0.27 -0.0054 1 0.000213 5.7553E-05
Nestle Pakistan
Expected Return Expected Risk (δE)

Return R-
S.No (R) Probability (P) ̅ṜE=∑RP ṜE (R-ṜE)2 (R-ṜE)2P
1 15.00% 0.1 0.015 0.14 0.018225 0.0018225
2 10.00% 0.15 0.015 0.09 0.007225 0.00108375
3 5.00% 0.3 0.015 0.04 0.001225 0.0003675
4 2.00% 0.4 0.008 0.01 0.000144 0.0000576
-0.0
5 -2.00% 0.05 -0.001 2 0.000361 0.00001805
Total 1 5.20% 0.0033494
δE = √∑(R-
ṜE)2P 5.79%
Interpretation:
Nestle, being an international company, is expected to give good returns at a highest

rate out of the securities with somewhat level of risk associated with it.
Reasons to apply probabilities to the securities
Engro Chemicals
Probability
Return (R) (P)
10.00% 0.08
5.00% 0.12
3.00% 0.15
-5.00% 0.25
-10.00% 0.4
1
From May 2008 onwards, there have been a decreasing trend in the security’s prices of Engro
Chemicals. In the past years, the security’s prices were rising steadily, showing a good growth
rate. But the first set back occurred in May 2008 when there has been a drastic decrease in the
prices. While after that the prices are constantly decreasing. Showing all time negative returns.
The last return given by the security in September was. As now a days there have been a cash
outflow of $8.84 billion out of stock market by the foreign investors, so it can be easily
interpreted that the stock prices will go down. There is a rise in interest rate (13.33%), although
somewhat money appreciation is seen now a days but the discount rate is still very high (10.2%)
depicting that the company is affected highly by the current economic disaster.
Positive returns are assumed by having the following assumptions:
• There have been a stable interest rate
• No further inflation rate hike
• Money appreciation in future
• IMF loan of $3.5 billion for maintaining the solvency position of the country
• Foreign reserves has got a nominal rise

From May 2008 onwards, there have been a decreasing trend in the security’s prices of Muslim
Commercial Bank. In the past years, there was a healthy rise in prices, showing a robust growth
prices (). While after that the prices had both increasing and decreasing trend showing negative
as well as positive returns. As now a days there have been a cash outflow of $8.84 billion out of
stock market by the foreign investors, so it can be easily interpreted that the stock prices will go
down. There is a rise in interest rate (15%), although somewhat money appreciation is seen
now a days but the discount rate is still very high (10.2%). The statistics are depicting that the
company was affected highly initially but making itself stable in the current economic disaster.
The rise in economic capital limit set by the state bank of Pakistan is another issue for the bank.
Lucy Cements
From May 2008 onwards, there have been a decreasing trend in the security’s prices of Lucky
Cements. In the past years, there was a pretty fair rise in prices, showing a fair growth rate. But
the first set back occurred in May 2008 when there has been a drastic decrease in the prices ().
But the matter does not end here; there was a constant decrease in prices until the prices
reached almost the half of the peak value, giving negative returns. The company didn’t give
stable positive returns at any period. As now a days there have been a cash outflow of $8.84
billion out of stock market by the foreign investors, so it can be easily interpreted that the stock
prices will go down. There is a rise in interest rate (15%), although somewhat money
appreciation is seen now a days but the discount rate is still very high (10.2%). The statistics are
depicting that the company is affected highly by the current economic disaster.
Pakistan State Oil
From May 2008 onwards, there have been a decreasing trend in the security’s prices of
Pakistan State Oil. In the past years, there was a healthy rise in prices, showing a robust growth
prices ().While after that the prices had decreasing trend until the prices reached almost the half
of the peak value, giving negative returns. In the current quarter the company had a heavy loss
of -48.88 EPS, depicting that company will not be able to give progress in the current scenario.
As now a days there have been a cash outflow of $8.84 billion out of stock market by the foreign
investors, so it can be easily interpreted that the stock prices will go down. There is a rise in
interest rate (13.33%), although somewhat money appreciation is seen now a days but the
discount rate is still very high (10.2%). The statistics are depicting that the company was
affected highly by the current economic disaster.

Nestle Pakistan
Return Probability
(R) (P)
15.00% 0.1
10.00% 0.15
5.00% 0.3
2.00% 0.4
-2.00% 0.05
1
There was a slight deviation in prices of Nestle in May 2008, but the decrease didn’t last for
long. And the company, being an international company, grew at a robust rate irrespective of the
current economic conditions of the country. So it can be interpreted that the company will give
high positive returns in future. As the Company have grown at a steady rate, so somewhat less
but constant returns are expected.
Portfolio Risk & Return
Let Returns of; Expected risk are:
Engro =
A -3.40% 5.29%
MCB =
B 2.86% 4.57%
L.C. =
C 0.01% 2.51%
PSO =
D -1.30% 6.86%
Nestle =
E 5.20% 5.79%
Portfolios = {AB,AC,AD,AE,BC,BD,BE,CD,CE,
DE}
So examining all of the above stated portfolios one by one:
1. Engro with MCB
S. no A B A.B A2 B2
1 0.1000 0.1000 0.0100 0.0100 0.0100
2 0.0500 0.0800 0.0040 0.0025 0.0064
3 0.0300 0.0500 0.0015 0.0009 0.0025
-0.001
4 -0.0500 0.0200 0 0.0025 0.0004
5 -0.1000 -0.0500 0.0050 0.0100 0.0025
Total 0.0300 0.2000 0.0195 0.0259 0.0218
Expected Portfolio Risk (δP1)
r1 = 0.9714
δA = 5.29%
δB = 4.57%
δP1 = 0.038%
2. Engro with MCB
S. no A C A.C A2 C2
1 0.1000 0.0500 0.0050 0.0100 0.0025
2 0.0500 0.0300 0.0015 0.0025 0.0009
3 0.0300 0.0100 0.0003 0.0009 0.0001
4 -0.0500 -0.0200 0.0010 0.0025 0.0004
5 -0.1000 -0.0500 0.0050 0.0100 0.0025
Total 0.0128 0.0259 0.0064

r2 = 0.9945
δA = 5.29%
δC = 2.51%
δP2 = 0.024%
3. Engro with PSO
S. no A D A.D A2 D2
1 10.00% 10.00% 0.0100 0.0100 0.0100
2 5.00% 7.00% 0.0035 0.0025 0.0049
3 3.00% 3.00% 0.0009 0.0009 0.0009
4 -5.00% -5.00% 0.0025 0.0025 0.0025
5 -10.00% -15.00% 0.0150 0.0100 0.0225
Total 3.00% 0.00% 0.0319 0.0259 0.0408

r3 = 0.9847
δA = 5.29%
δD = 6.86%
δP3 = 0.059%
4. Engro with Nestle
S. no A E A.E A2 E2
1 10.00% 15.00% 0.0150 0.0100 0.0225
2 5.00% 10.00% 0.0050 0.0025 0.0100
3 3.00% 5.00% 0.0015 0.0009 0.0025
-0.001
4 -5.00% 2.00% 0 0.0025 0.0004
5 -10.00% -2.00% 0.0020 0.0100 0.0004
Total 3.00% 30.00% 0.0225 0.0259 0.0358

r4 = 0.9674
δA = 5.29%
δE = 5.79%
δP3 = 0.048%
5. MCB with Lucky Cements
S. no B C B.C B2 C2
1 10.00% 5.00% 0.0050 0.0100 0.0025
2 8.00% 3.00% 0.0024 0.0064 0.0009
3 5.00% 1.00% 0.0005 0.0025 0.0001
-0.000
4 2.00% -2.00% 4 0.0004 0.0004
5 -5.00% -5.00% 0.0025 0.0025 0.0025
Total 20.00% 2.00% 0.0100 0.0218 0.0064

r5 = 0.9851
δB = 4.57%
δC = 2.51%
δP5 = 0.020%
6. MCB with PSO
S. no B D B.D B2 D2
1 10.00% 10.00% 0.0100 0.0100 0.0100
2 8.00% 7.00% 0.0056 0.0064 0.0049
3 5.00% 3.00% 0.0015 0.0025 0.0009
-0.001
4 2.00% -5.00% 0 0.0004 0.0025
5 -5.00% -15.00% 0.0075 0.0025 0.0225
Total 20.00% 0.00% 0.0236 0.0218 0.0408

r6 = 0.9946
δB = 4.57%
δD = 6.86%
δP6 = 0.052%
7. MCB with Nestle
S. no B E B.E B2 E2
1 10.00% 15.00% 0.0150 0.0100 0.0225
2 8.00% 10.00% 0.0080 0.0064 0.0100
3 5.00% 5.00% 0.0025 0.0025 0.0025
4 2.00% 2.00% 0.0004 0.0004 0.0004
5 -5.00% -2.00% 0.0010 0.0025 0.0004
Total 20.00% 30.00% 0.0269 0.0218 0.0358

r7 = 0.9507
δB = 4.57%
δE = 5.79%
δP7 = 0.042%
8. Lucky Cements with PSO
S. no C D C.D. C2 D2
1 5.00% 10.00% 0.0050 0.0025 0.0100
2 3.00% 7.00% 0.0021 0.0009 0.0049
3 1.00% 3.00% 0.0003 0.0001 0.0009
4 -2.00% -5.00% 0.0010 0.0004 0.0025
5 -5.00% -15.00% 0.0075 0.0025 0.0225
Total 2.00% 0.00% 0.0159 0.0064 0.0408

r8 = 0.9902
δC = 2.51%
δD = 6.86%
δP8 = 0.035%
9. Lucky Cements with Nestle
S. no C E C.E. C2 E2
1 5.00% 10.00% 0.0050 0.0025 0.0100
2 3.00% 7.00% 0.0021 0.0009 0.0049
3 1.00% 3.00% 0.0003 0.0001 0.0009
4 -2.00% -5.00% 0.0010 0.0004 0.0025
5 -5.00% -15.00% 0.0075 0.0025 0.0225
Total 2.00% 0.00% 0.0159 0.0064 0.0408

r9 = 0.9902
δC = 2.51%
δE = 5.79%
δP9 = 0.027%
10. PSO with Nestle
S. no D E D.E. D2 E2
1 5.00% 10.00% 0.0050 0.0025 0.0100
2 3.00% 7.00% 0.0021 0.0009 0.0049
3 1.00% 3.00% 0.0003 0.0001 0.0009
4 -2.00% -5.00% 0.0010 0.0004 0.0025
5 -5.00% -15.00% 0.0075 0.0025 0.0225
Total 2.00% 0.00% 0.0159 0.0064 0.0408

r10 = 0.9902
δC = 6.86%
δE = 5.79%
δP10 = 0.064%
Risk on Return:
A,A 1 -0.0136
B,B 1 0.01144
C,C 1 4E-05
D,D 1 -0.0052
E,E 1 0.0208
Total Portfolio Risk & Return

w1w1r1.1s1* w1w2.r1.2s1*.s w1w3.r1.3s1*. w1.w4.r1.4.s1*. w1.5.r1.5.s1*s5
s1* 2* s3* s4* *
w2w1r2.1s2* w2.w2.r2.2.s2* w2.w3.r2.3.s2 w2.w4.r2.4.s2*s w2.w5r2.5.s2*.s

s1* .s2* *.s3* 4* 5*
w3w1r3.1.s3* w3.w2.r3.2.s3* w3w3.r3.33s3 w3.w4.r3.4s3*.s w3.w5.r3.5.s3*.

.s1* s2* *.s3* 4* s5*
w4w1.r4.1s4* w4w2r4.2.s4*s w4.w3.r4.3.s4 w4w4.r4.4.s4.*s w4.w5.r4.5.s4*.

.s1* 2* *.s3* 4* s5*
w5w1.r5.1.s5 w5.w2.r55.2.s5 w5.w3.r5.3s5* w5.w4.r5.4.s5*. w5.w5.r5.5.s5*.

*.s1* *.s2* .s3* s4* s5*
4.57 0.038 0.052 1

w1= 0.2 s1*= % A,A % B,B % C,D .00
4.57 0.024 0.042 1
w2= 0.2 s2*= % A,B % B,C % C,E .00
2.51 0.059 0.035 1
w3= 0.2 s3*= % A,C % B,D % D,D .00
6.86 0.048 0.027 1
w4= 0.2 s4*= % A,D % B,E % D,E .00
5.79 0.020 0.064 1
w5= 0.2 s5*= % A,E % C,C % E,E .00
Portfolio Risk = 1.13%

Securities Analysis

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Securities Analysis

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Introduction

We have been given Rs 500,000 in a hypothetical situation, in which we are to invest

• Economic Analysis of the country to take decision that whether it will be

• Selection of 1 company from each sector on the basis of company’s past

Chapter # 1: Common Stock Analysis

Chapter # 2: Actual Risk & Return of the Companies

Chapter # 3: Expected Risk & Return

o Probabilities assigned (Reasons)

Chapter # 4: Expected Portfolio Risk & Return

• Risk Factor Calculation (Correlation Coefficient)

• Expected Risk of portfolio

A brief view of the indicators is given below:

Serial No. Economic Indicator Effect on the Economy

Non-Development 683.4 billion

Trade balance -$1.196 Billion

2 This has drastically impacted

3 Rise in PCI is a good

The longer the higher

Higher the interest rate, lower

Less than targeted 7.2%

FDI was relatively high in

9 Monetary Policy Tight M.P The money supply growth

SBP to Rs 945.9 billion. The

The total revenue collected

IMF loan of $ 3.5 billion has

Money depreciation from past

Poverty has increase due to

In manufacturing sector, there

Political conditions has

Population growth rate has

Source: Economic Survey of Pakistan (issued, October,2008)

Type of industry Interest Sensitive industry

Competitors of HBL, ABP, UBL, NBP

Competition Indirect Competition against Each other.

Threats Bargaining power, Supplier

Industry Life Cycle Stabilizing Stage

Financial Profitability in FY07 was 75.86bn, declined by 5.6% as compared to

Mergers and Maybank has acquired 25% shares in MCB

Fertilizer industry is fastly growing industry, being aided by

Type of industry Growth industry.

Market players Dawood Hercules, fauji fertilizers, Engro Chemicals

Competition Direct competition

Threats Supplier (Raw materials), Consumer.(Less purchasing power).

Industry Life Cycle Expansion stage. Industry is having maximum profits.

Financial • overall profitability of the fertiliser sector increased 45%

In the previous years, as there were many developmental

Type of industry Growth industries

Market players Bestway cements, Lucky Cements, Fauji cements

Competition Direct Competition among the companies

Threats Supplier (Raw material), Consumer (Decreased DPs)

Industry Life Cycle Stabilizing Stage

Financial Total cement dispatches during showed a nominal growth of

In the previous years, OMCs have performed very well, having

Type of industry Cyclical industry

Market players PSO, Shell, Attock Petroleum, Caltex, Askari.

Competitors of Shell, Attock Cements

Competition Indirect Competition.

Threats New entrants, Suppliers (Changing petroleum prices)

Industry Life Cycle Expansion

Type of industry Growth industry, having high profits.

Market players Haleeb, Nurpur, Continental foods, Dawn, Bake Parlour

Competitors of Haleeb, Nurpur.

Competition Indirect Competition, healthy competition

Threats New entrants, Suppliers (Changing petroleum prices), consumer

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