Our views on agricultural commodities have not changed and fertiliser companies such as Fauji remain a good way to get exposure to this trend. However Fauji, following a very strong run, has now sailed through our target price. With no reason to revise up our numbers, and with political risk in Pakistan increasing, it was hence sold.
The subsidiary of Fauji Fertilizer of Pakistan, Fauji Bin Qasim, was sold down heavily on the back of a rapid inventory build-up. This was ahead of the government introducing subsidiaries for farmers (passed through the companies and thus margin-neutral), and inventories have since rapidly been reduced by the pent-up demand. The second factor that impacted Fauji Bin Qasim's share price was the reduction in output for 2007 while the production plant's capacity is upgraded to accommodate increased demand. Thus both factors are temporary only and neither is malign; there is 40% upside, which would take the price back to the level it reached earlier in the year.
| Sedol |
Type |
Price |
Date |
| 6336088 |
Sell |
PKR 46.72 |
24/07/2007 |
| 6336088 |
Buy |
PKR 30.058 |
25/01/2007 |
| 6336088 |
Buy |
PKR 29.579 |
23/11/2006 |
|
