PSX to Separate Real Estate Assets to Enhance Income Potential

PSX’s Strategic Shift: What You Need to Know

The Pakistan Stock Exchange (PSX) recently made headlines with a significant decision during the quarter that ended on December 31, 2017. After experiencing a downturn, where profits turned into losses, the board announced plans to separate its real estate assets from its core operations. Why does this matter? Let’s dive in!

PSX’s board approved the demerger in an effort to streamline operations and boost net earnings. According to PSX Company Secretary Muhammad Rafique Umer, the separation will create a new entity focused solely on real estate. This means that existing shareholders of the exchange will also receive shares in this newly formed company, making it a noteworthy opportunity for investors.

A key takeaway from this decision is that PSX aims to enhance its earnings per share by shedding what can be considered idle assets. A PSX official noted that the real estate segment has been generating minimal returns, which ultimately hampered the exchange’s overall performance. With the share capital being split equally—Rs4 billion for both bourse operations and real estate—the future looks promising for more focused growth.

Recently, PSX has faced financial challenges. The exchange reported a loss of Rs8.42 million for the October-December 2017 quarter, mainly due to high administrative costs and burdensome taxes, a stark contrast to the profit of Rs75.98 million recorded in the same period the previous year. The loss per share was Rs0.01, compared to Rs0.09 in the previous year, which raises some eyebrows among investors.

In terms of overall revenue, PSX earned Rs199.72 million, down 22% from Rs256.25 million the previous year. While administrative expenses remained stable at Rs272 million, they significantly outstripped revenue, leading to a steep operating loss of Rs72.5 million. Furthermore, the tax on profit surged to an alarming 141.14%, dwarfing the 16.22% tax paid during the same quarter last year.

Moreover, PSX recently welcomed Canadian national Richard Morin as its new managing director, potentially signaling a fresh approach to navigate these turbulent waters.

The exchange’s stock price saw a decline of 3.27%, closing at Rs24.83, as trading volumes reached 1.52 million shares. While uncertainty looms, interest from foreign investors remains strong. A Chinese consortium had previously acquired a 40% stake through competitive bidding, indicating confidence in the long-term prospects despite current challenges.

In summary, the PSX’s decision to separate its real estate assets is more than just a financial maneuver; it’s a strategic pivot aimed at revitalizing the exchange’s core operations. For investors keeping an eye on this evolving situation, the demerger may represent both challenges and opportunities in the fast-paced world of finance.

Stay tuned as this story unfolds, and keep an eye on PSX’s financial health in the coming quarters!