OGDC has risen by more than 90% this year, yet it still hasn't reached the $1 per share price at which it sold for back in 2019. Some consolation.
At its current price, the trailing dividend yield is under 5%, with stagnating production. Even after doubling its price within a year, the PE is just around 5. This highlights the stark mismatch between the replacement cost of capacity and the income stream it generates in the current distorted economic environment.
The upheaval we have experienced in recent years has been tremendous. Replacing or expanding the country’s industrial capacity would now cost five to six times more than it did just five years ago. Inflation and the depreciation of the currency have created significant barriers to entry, limiting production increases, thereby stifling both growth and competition. Meanwhile, existing units are struggling to recover gains both for the current year and the years lost - this limiting income from investment.
This mismatch between prices of assets and the income streams they generate is striking. Over the past five years, liquidity in the system has surged, initially directed towards meeting government financing needs through sovereign instruments. However, this liquidity has now begun flowing into stocks, driving prices to levels that reflect a re-rating in the current environment rather than growth potential or income generation.
Investment opportunities in the real economy have always been scarce here. Unfortunately, our tendency for political and economic experimentation is making them even rarer.