How Management quality gets rewarded at the PSX (A case of Fauji Foundation associated companies)

I am a firm believer in management driving shareholder wealth especially in the time of activist investment philosophy now coming to the fore (be it minority shareholders or majority ones). In the same stead after the nomination of Mr Waqar Ahmed Malik (previously CEO of ICI along with being Sponsor shareholder of Adira Capital- bought out Linde Pakistan's shareholding) things were bound to change at one of Pakistan's premier investment group- The Fauji Foundation and change they have. Over the last 7 months some of the companies in which the group has interests are one of the best performing companies in their specific sectors at the PSX as investors realise that this huge management change will usher in changes in the way group companies are run. Over the last 2 quarters (a very short time to judge performance) group companies have significantly improved operating performance and hence the rise in shareholder wealth (FFBL and FFL are two companies whose performance has improved noticeably).

Performance of Fauji Group Listed companies on the Stock Market from 6th Apr’20 until 5th Nov’20

Since the nomination of Waqar Malik as the CEO of Fauji Foundation on 6th April 2020, the group’s various listed companies have witnessed a significant rise in shareholder wealth (measured by increase in market capitalization) where the total recorded market capitalization of the group companies combined was PKR 310.8bn on 6th April 2020. Fast forwards around 7 months later the market capitalization is now up a whopping PKR 84bn, up 27% in aggregate. 

Amongst group companies, FFBL has witnessed the largest rise of 93.9% in market capitalization followed by FFL of around 80.4% while the other companies like FCCL and AKBL have also notched up solid gains. At a time when oil prices have tanked and the other oil stocks have gone down, MARI has been able to weather the storm with its market cap up 23.8%. An important aspect to bear in mind is this increase in market capitalization has come on the back of significant improvement in these group companies financial results (where new management teams were brought in) in such a short span of time.