imr 14 (june 2012)

Iran Market Reporter

ADDRESSING THE NEEDS OF INVESTORS

Mofid Securities Co.Member of TSE(Tehran Stock Exchange)Member of IME(Iran Mercantile Exchange)Member of Farabourse

Contact Person: Mr. Seifollahit 009821 8190 1165f 009821 8190 1022e [email protected] www.emofid.comw www.mofidkala.com

IRAN MARKET REPORTER Is produced by Mofid Securities Co.Distributed electronically via email.

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Volume 2ISSue 6JuN 201214

2 Iran Market Reporter No. 14 Jun 2012 ( Issue 6, Vol. 2) en.emofid.com

Contents

5 StockAverage number of trades droped by 27 percent for TSE and 20 Percent for Farabourse showing that individual investors were less active compared to the first quarter of Iranian year.

13 CommodityIME fell 21 percent in total value of traded com-modities compared to the last month which is mostly because of the 25 percent decrease in value of trades in Industrial and Mineral group.

3 OverviewMarket correction continued in June as the uncertainties in foreign developments along with low commodities prices and the liquidity squeeze overshadowed the potentials in most of TSE sectors.

9 FundOnly 4 out of 61 mutual funds could keep their monthly return above zero percent and 28 above TEDPIX in the month on June.

15 NewsThis section provides the most important news on Iran capital market specially exchanges for the month of June.

Bandar Abbas Oil Refining Companyperforms refining operations. Additionally it produces oil byproducts such as liquid gas, lead-free super gasoline, jet fuel, white oil, variety of dissolvers, gas oil, variety of the raw material for grease, fuel oil, bitumen, differ-ent kinds of petroleum, kerosene, asphalt, and sulphur. Bandar Abbas Oil Refining Co is based in Bandar Abbas, Iran.

2 Iran Market Reporter No. 14 Jun 2012 ( Issue 6, Vol. 2) en.emofid.com 3en.emofid.com Iran Market Reporter No. 14 Jun 2012 ( Issue 6, Vol. 2)

OverviewMarket correction continued in June as the uncer-tainties in foreign developments along with low commodities prices and the liquidity squeeze over-shadowed the potentials in most of TSE sectors.

Companies Struggle with Liquidity SqueezeAfter the increase in interest rates, it was natural for companies to experience an increase in finan-cial costs. But the price was not the only problem as loans and credit became even less available while the companies themselves faced with decline in cash inflow; either because of falling sales or increase in accounts receivable.

NDF to Inject Billions of Dollars into Industries Limitations in monetary policies prompted the authorities to look for other options. On June 19, “Mohammad Reza Farzin”, new chairman of the National Development Fund (NDF), announced that 35 billion USD will be injected into industries with priorities in oil, gas, petrochemicals, and power sectors. The fund announced earlier that 25 percent of resources will be used to recapitalize public banks that may help to make commercial loans more available.

Global Downturn Depresses Crude Oil, Commodities PricesFrom the global perspective, the sell off in crude oil and industrial metals slows but prices remain historically low as the major economies around the world show signs of losing steam. Euro-area is not in good shape even after Greek pro-bailout parties won majority in parliament in June 17 elections. Jobs growth in US is weak while there is no signal

from the Federal Reserve for further stimulus. And in China, the second largest economy, almost all economic indicators point to slower rates of growth.

TEDPIX Still Up 3.2 Percent for 2012IIn response to all these developments, the TSE All Share Index (TEDPIX) fell 5.9 percent in June, to limit its 2012 return to 3.2 percent. As it was men-tioned, monetary policies could be more accom-modative and the fiscal policies take time to show any positive effect. Foreign developments also played a role as Iran and 5+1 agreed in Moscow to continue negotiations at technical level on July 24.

Chemicals in $80 Crude Oil Environ-mentThe index of Chemicals fell 4.4 percent in June as the outlook for demand and prices remains clouded. On June 23, the WTI crude oil fell below 80 USD/Barrel while it traded below 87 all days this month. Some corporate reports also came


short of expectations.

For example, Kharg Petrochemicals which is a main methanol producer now estimates that sales volume may decline as much as 35 percent this year. Kharg exports almost all of its products and it raised its EPS forecast by 19.6 percent because of a stronger USD but it seems the data was already priced by investors.

Basic MetalsBasic metals prices in LME fell to lowest level since October 2011before rebounding in the final days of June. So the local producers adjusted their sales forecasts as well. Bama, a main zinc and lead producer, lowered its annual sales forecast by 11.2 percent as almost 89 percent of its revenue comes from exports. However, exports also helped Bama to offset parts of the overall decline in revenue as it raised the USD/IRR exchange rate from 14230 to 16000 Rials per USD.

Banks The index of Banks fell 5.9 percent in June after climbing 5.5 percent in the prior month. High interest rates and rising competition between

banks is a main concern. This is so important that even the CBI chairman criticized some banks for the policy of raising short term interest rates only to absorb the maximum deposits. The June sell off left the index below its 50 day moving average again.

Vehicles and Auto Parts Negative effects from liquidity squeeze specially felt in auto industry. On June 22, a member of auto parts association said that liquidity and finan-cial transactions could lead to lower production and shorter working hours. Evidences also confirm the challenging environment as the recent reports suggest considerable decline in vehicles produc-tion. The index of vehicles and auto parts fell 8.1 percent in June to record the third consecutive monthly decline.

PharmaceuticalsAmong the main TSE sectors, Pharmaceuticals was the only gainer in June. The index jumped 2.5 percent on June 6, the day a main pharmaceutical producer resumed trading after raising sales and EPS forecasts. Alborz Darou [DALZ], which makes up almost 30 percent of the index, estimates that annual sales will rise by 25.0 percent in value while there will be almost no change in volume. The company sells all of its products domestically but imports 56 percent of materials in Euro. So the cost of produc-tion is estimated to rise but the recent depreciation of Euro against USD could offset parts of the ap-preciation of Euro in local FX market. At the same time, the 41 percent profit margin also helps Alborz Darou to experience 25.6 percent increase in after tax earnings.

Overview


OverviewOfficials to Further Support Capital Markets In response to broad decline in stock market, of-ficials from the Securities Exchange Organization (SEO), Tehran Stock Exchange (TSE), and Ministry of Economics held meetings to take steps to sup-port the market and shore up investors’ confidence. Injecting cash into companies, priority in access to loans and financial facilities, support from institu-tional investors, all are in a package announced on June 29 to support companies listed in exchanges.

Falling PE Ratios Makes Stocks CheaperFrom the revenue perspective, many companies look very cheap as the Price to Earnings ratio fell to 28 months low. From technical perspective, the June sell off again looks excessive as the TEDPIX RSI on the daily chart fell below 30 level from June 20. This is why that some experts suggest that the market may find a bottom soon, at least for a breathing time and revising assumptions and opportunities.


Stock | Market Summary

Trade Value (M USD) Trade Volume (M) Number of Trades Number of Trading Days

TSE1 803 4,829 212,706 18

Farabourse2 519 1,210 82,872 181Tehran Stock Exchange 2OTC Market

Tehran Stock Exchange

Value of Index

High Low Average Compared to last month %

Compared to last year %

TEDPIX1 25,171 26,735 25,055 26,106 -5.92% 2.72%

TEDPIX (FM) 20,945 22,251 20,865 21,744 -5.93% 0.09%

TEDPIX (SM) 34,012 36,104 33,731 35,120 -5.95% 18.66%

FFI2 31,447 33,745 31,313 32,800 -6.88% -0.48%

Industry Index 19,971 21,194 19,859 20,718 -5.84% 5.54%

TEDFIX 30 1,431 1,537 1,424 1,494 -7.01% -6.38%1TSE Dividend & Price Index (All-share Index) 2Free Float Index

TEDPIX


Stock | Average P/E

Highest P/E

Sector Average P/E Market Weight

Transportation and Storage 14.65 1.38%

Basic Metals 8.53 17.23%

Refined Petroleum Products 7.17 4.71%

Metal Ores Mining 6.56 8.18%

Post and telecommunications 5.84 9.56%

Lowest P/E

Sector Average P/E Market Weight

Motor Vehicles And Auto Parts 3.56 4.27%

Technical & Engineering Services 3.99 1.72%

Diversified Industrials (Holdings) 4.24 9.07%

Banking 4.42 18.12%

Cement, Lime & plaster 4.84 2.89%


Fund | All Funds Overview

Top 10 Best Funds of May

Working Days

NAV(Rial)

Asset Under Man-agement (USD)1

Last Month (%)

Last 6 Months (%)

Last 12 Months (%)

Since Inception (Compound Return)

Tourism Bank 350 1,215,860 4,169,821 0.60 13.50 — 21.60

Yekom Iranian 1,246 2,145,423 37,423,491 0.60 9.60 19.40 25.10

Tajrobeh Iranian 362 1,257,429 12,228,467 0.50 10.70 — 25.70

Mehr Iranian 917 1,759,539 13,429,935 0.50 10.40 19.30 25.30

Day 722 1,543,076 629,527 -2.00 17.60 14.20 24.50

Karafarin 960 2,158,788 877,977 -2.20 7.10 3.10 34.00

Tose'e Farda 387 1,159,177 478,548 -2.30 9.20 14.90 14.90

Bourse Bimeh 1,143 1,849,530 1,332,953 -3.60 -12.00 -31.70 21.70

Tejarat Bank 1,421 2,532,338 1,325,204 -3.90 4.10 9.90 27.00

Melli Bank 1,514 5,099,268 4,260,767 -4.00 4.80 5.60 48.10

TEDPIX -5.92 2.90 2.00

All FundsIndex2

-4.30 0.90 2.00

1USD to Rial exchange rate: 12,260 2Including 61 Mutual Funds


Fund | Pishtaz Mutual Fund

CommentaryLast month Tehran Stock Exchange main index had a steep decline of 5.92 percent, widely-held shares experienced even a bigger fall. Market decline was largely fueled by political factors and tension regarding impact of sanctions on the economy. Surprisingly, earnings growth has been strong largely driven by decline in local currency and therefore higher profits for export- oriented companies. We have to consider that given the decline in values of stocks and at the same time healthy profit growth for many of the major com-panies , the P/E ratio are at very attractive levels.

Pishtaz had a decline of 7.7 percent over the last month. Higher exposure to commodities was part-ly responsible for lower return in June. However, we believe the Pishtaz has a well balanced portfo-lio and sufficient cash posi¬tion to take advantage of market opportunities.

Fund’s Composition Percent

Metal Ores Mining 9.70

Banking 6.59

Chemicals & By-products 6.39

Farabourse 6.24

Telecommunication 5.88

Other Industries 65.20

Pishtaz Mutual Fund

Inception date May. 9, 2008

Working Days 1,515

Asset under managementM Rials 92,817

1 Month -7.70%

3 Month -7.00%

6 Months 5.40%

12 Months 4.10%

Life (Compound Return) 41.80%

NAV (Rial) 4,245,127

12 Months Hight 4,783,727

Low 3,967,224


Fund | Momtaz Mutual Fund


The 3rd largest mutual fund of the market, Momtaz, had a decline of 7.1 percent over the last month. We tried to increase our investment in chemical and by-products and let go of our positions in Banking sector in June. Major petro-chemical producers such as Abadan Petr. [PABD], Esfahan Petr. [PESF] and Pardis Petr. [PRDZ] are in “chemical and by-products” sector.




FaraBourse 9.46

Telecomunication 7.62

Banking 7.44


Momtaz Mutual Fund

Inception date Feb. 16, 2010

Working Days 867


1 Month -7.10%

3 Month -7.30%

6 Months 8.20%

12 Months 6.60%


NAV (Rial) 2,152,773


Low 1,968,300


Fund | Pishro Mutual Fund

Pishro Mutual Fund

Inception date Apr. 20, 2011

Working Days 439


1 Month -6.60%

3 Month -4.50%

6 Months 12.00%

12 Months 10.60%


NAV (Rial) 1,079,866


Low 951,788


Pishro had a decline of 6.6 percent versus a market index decline of 5.9 percent. Pishro has a balanced portfolio and has invested in top leading stocks of the market. We increased our positions in Tele-communication sectors as it is a weak correlation between the price of telecommunication compa-nies and foreign exchange markets.




FaraBourse 8.98

Telecommunication 6.26

Banking 5.55



CommodityIran Mercantile Exchange SummaryIME fell 21 percent in total value of traded com-modities compared to the last month which is mostly because of the 25 percent decrease in value of trades in Industrial and Mineral group. The decrease in trading value of Agricultural group and Oil and Petrochemical group by 73 and 10 percent

are also noticeable.

In Future Gold Coin Contracts, the average price of contracts in different months rose by around 10 percent over the last month. This is mostly be-cause of the volatility in FX market and investors’ expectations from the market.

Groups of Products

Type Value(M Rials)

Value (USD) Volume (MT)

% Value previous month (USD)

Compared to last Month

(USD)

Industrial and Mineral

Export Ring 500 40,799 100 1% 11,216,150 -99.64%

Domestic Ring 7,847,097 640,056,850 533,768 65% 850,753,976 -24.77%

Total 7,847,597 640,097,649 533,868 65% 861,970,126 -25.74%

Agricultural Export Ring 0 0 0 0% 0

Domestic Ring 83,302 6,794,648 9,642 2% 25,995,914 -73.86%

Total 83,302 6,794,648 9,642 2% 25,995,914 -73.86%

Oil & Petro-chemical

Export Ring 1,065,882 86,939,823 143,075 8% 103,773,883 -16.22%

Domestic Ring 3,677,894 299,991,356 358,243 25% 326,410,334 -8.09%

Total 4,743,776 386,931,179 501,318 33% 430,184,217 -10.05%

Total 12,674,676 1,033,823,477 1,044,828 100% 1,318,150,257 -21.57%

Industrial and Mineral

Agricultural

Oil & Petrochemical Export Ring

Oil & Petrochemical Domestic Ring


Tehran Stock Exchange Offers Bandar-Abbas Oil Refining June 24, 2012 Source: TSE.ir

Bandar-Abbas Oil Refining Company made an initial public offering of its 690 million equities.

On 24 June 2012, Bandar-Abbas Oil Refining Company (BAORCO), the first state-owned listed company this year, made an initial public offer-ing of its 690 million equities, equivalent to 5 percent of its total shares. The shares were sold to the public at a price of IRR 1,142 (0.093 USD) each, with the total value of IRR 788 billion (USD 64.3 million).

Bandar-Abbas Oil Refining Company began its activities in 1997. The company’s plant is located

in Bandar-Abbas city, at the northern coasts of the Persian Gulf, with more than 1,100 staff at present. BAORCO’s annual production capacity exceeds 14 million tons of LPG, gasoline, jet fuel, kerosene, gasoil, fuel oil, bitumen, sulfur, and naphtha. The company’s capital is IRR 13,800 billion.

To get more information on the company please visit:http://en.niordc.ir/index.aspx?siteid=77&pageid=394

With this IPO market cap of BOARCO exceeded IRR 15,750 Billion (USD 1,285 Million).

News | IPO

Initial Pu

blic O

ffering (IPO

)

http://en.niordc.ir/index.aspx?siteid=77&pageid=394


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Cement Offers Grows in IMEJune 27, 2012 Source: IME.co.ir

The secretary of Association of Cement Taskmas-ters has mentioned that according to the listing of 36 cement producer in last year, the price of this commodity is going to go higher in IME by the price liberalization.

According to the report from IME international affairs and public relations, Mohammad Hasan Khalil Pour in an interview with SENA said: “24 out of 36 affairs mentioned companies have of-fered their products in IME till this moment”.

Considering price liberalization as a positive move-ment for cement producers in order to reduce their costs he added: As most of the cement producers listed in IME, price liberalization will help the companies to have a better control over their pro-duction costs.

The secretary of Association of Cement Taskmas-ters uttered: If we do the pricing based on ask and bid the fluctuations also will take place based on that and we have no more magisterial prices.

News

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imr 14 (june 2012)

Documents

gas oil

fuel oil

crude oil

white oil

oil byproducts

iran market reporteraddressing

iran capital market

percent decrease