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7/30/2019 First Capital Sri Lanka Weekly 26-30 Aug 2013
1/10
Sri Lanka Weekly
30.08.2013
Prime Lending Rate (Avg. Weighted) 11.8%Deposit Rate (Avg. Weighted) 10.4%Treasury Bill Rate (360 Days) 10.6%
Dollar Denominated Bond Rate 5.9%Inflation Rate (Annual Average) 6.3%LKR/US$ (Selling Rate) 135.0LKR/EURO (Selling Rate) 179.5Gold (USD/oz) 1407.2Oil (Brent) (USD/barrel) 115.1
This Week
Prv. Week WoW%
ASPI 5,834 5,952 -2.0S&P SL 20 3,261 3,343 -2.4Turnover (bn) 2.4 3.7 -34.7Foreign Purchases (mn) 775 2398 -67.7Foreign Sales (mn) 589 1377 -57.2Traded Companies 277 275 0.7Market PER (X) 16.59 16.86 -1.6Market Cap (LKR bn) 2,403 2,451 -2.0Market Cap (US$ bn) 17.80 18.34 -3.0
Dividend Yield (%) 2.67 2.62 1.9Price to Book (X) 2.22 2.26 -1.8
30-Aug 23-Aug WoW%Sri Lanka ASPI 5,834 5,952 -2.0India Sensex 18,620 18,519 0.5Pakistan - KSE 100 21,994 22,718 -3.2
Taiwan Weighted 8,022 7,873 1.9Singapore - Straits Times 3,029 3,089 -1.9Hong Kong - Hang Seng 21,731 21,864 -0.6S&P 500 1,632 1,664 -1.8Euro Stoxx 50 2,742 2,805 -3.7MSCI Asia Pacific 130 129 -0.9
M A R K E T
W A T C H
Market Indices
Ending the sideways movement of theprevious week, the ASPI lost 2.0%WoW toclose Fridays session at 5834. Dragging themarket down was bellwether John KeellsHoldings which dropped 10.5% during theweek on the announcement of a 2 for 13rights issue @ LKR175/- to raise funds foran integrated resort project. Eachsubscribed rights will also carry twowarrants; a warrant will be given for every3 subscribed rights, allowing the holder tobuy an ordinary share at LKR185/-, twoyears after its issue while the secondwarrant will allow the rights holder to buyan ordinary share at LKR195/-, three years
after the issue date. Meanwhile, losersoutpaced winners with Touchwood,Shalimar and Mercantile Shipping
Global Markets
26-30 Aug 2013
Market Performance
Interest Rates & Currencies
37.5
36.4
14.7
14.3
-36.1-17.9
-17.6
-17.1
PCH HoldingsPC Pharma
Anilana Hotels
PC HouseTouchwood
ShalimarMerc. Shipping
Kelsey
Gainers & Losers (%)
First Capital Equities(Private) Limited
32%
68%
ForeignDomestic
Turnover & Net Foreign Flows
-5,000
0
5,000
10,000
15,000
20,000
L K R M n
7/30/2019 First Capital Sri Lanka Weekly 26-30 Aug 2013
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Page 2Sri Lanka Weekly 26-30 Aug 2013
Market Performance (Cont.)
While tourist arrivals are expected to grow indouble digit terms over the next few years(which in turn should have a strong positive
impact on hotels), operators in the industry mayneed to be cautious with regard to the prospectof any further hikes in international oil prices asmargins could be affected. As indicated in ourSector Grid below however, we expect theimpact to be Moderate.
Despite the threat of a rise in oil prices, weexpect companies in the Banking, Plantations
and Telecommunications sectors to experienceonly a LOW impact while the Healthcare andPharmaceutical sectors are likely to be onlyMODERATELY affected. Given the wide-ranging nature of companies operating in theDIVERSIFIED sector, we expect a MODERATEimpact.
Sectors Oil Price Impact
Banking and Finance,Insurance
Low
Diversified Moderate
Health, Pharmaceutical &Chemical
Moderate
Plantations Low
F&B and Hotels HighManufacturing High
Motor HighTelecommunication Low
90
95
100
105
110
115
120
125
2 - J a n -
1 3
1 7 - J a n - 1
3
1 - F e b - 1 3
1 6 - F e b - 1
3
3 - M a r - 1
3
1 8 - M a r - 1
3
2 - A p r -
1 3
1 7 - A p r - 1
3
2 - M a y - 1
3
1 7 - M a y - 1
3
1 - J u n -
1 3
1 6 - J u n - 1
3
1 - J u l - 1 3
1 6 - J u
l - 1 3
3 1 - J u
l - 1 3
1 5 - A u g -
1 3
USD/barrel Brent Crude Oil Price
shedding 36.1%, 17.9% and 17.6% andoffsetting advances in PCH Holding, PCPharma and Anilana Hotels which gained37.5%, 36.4% and 14.7% respectively. Globalmarkets meanwhile fell extending a sell-offsparked by growing fears of a military strikeagainst Syria.
Oil Price Impact on CSE Sectors
With oil prices having spiraled upwardsover the week as a result of the threat ofmilitary action over Syria, different sectorsof the Sri Lanka bourse could suffer an
erosion in margins. However, not allcompanies will be equally affected, butcompanies belonging to the ManufacturingSector are expected to bear the brunt of anyfurther rise in oil prices. With energyaccounting for the majority of theiroperating costs, we expect operatingmargins to decline by at least 1-2% for thesector, should oil remain at current price
levels, while margins could fall further inthe event of any further spikes in oil prices.As such, we expect any spike in oil prices tohave a HIGH IMPACT on themanufacturing sector. Even though we areOverweight on the food and beveragessector, rising oil prices could exact pressureon margins despite our expectation ofrobust volume growth. We expect theimpact on the food and beverages sector toconsequently be HIGH. Similarly,companies operating in the Motor sectorcould experience a notable decline in thedemand for motor vehicles and motoraccessories should oil prices continue totrend upwards and view the impact of asurge in oil prices to be HIGH on the sector.
Source-Bloomberg/First Capital Equities Research
7/30/2019 First Capital Sri Lanka Weekly 26-30 Aug 2013
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Page 3Sri Lanka Weekly 26-30 Aug 2013
Market Performance (Cont.) In economic news, Sri Lankas tourist arrivalsrose for the 51st straight month since May 2009to record an increase of 9.5%YOY to 98,944during the month of July 2013. The highest
number of arrivals were recorded from EasternEurope which grew by 36.6% to 4,433. Incumulative terms, for the first 7 months of2013, the largest increase was recorded byEastern Europe again which rose by 22.4 % to42,130 while arrivals from East Asia grew by21.9 % to 81,817. Total cumulative arrivals forthe period Jan-July 2013 rose by 12.5%YoY to611,222. Despite the rising trend in August,
arrivals from the Middle East declined by 7.9%YOY on a cumulative basis. Meanwhile, SriLanka aims to attract 1.25 million tourists andearn revenues of $1.5 billion in 2013 andindications are that these figures are likely tobe comfortably achieved.
Market Trajectory
Despite todays decline, we view marketopportunities in the bourse mainly from abottom-up perspective as at a macro level,economic growth is likely to continueunabated. We believe that the economy will
0
20,000
40,000
60,000
80,000100,000
120,000
140,000
2012 2013
Tourist Arrivals
have the capacity to fuel growth not only bystrong domestic consumption on anindividual level but also at a corporate andstate level thereby creating multiple,interrelated drivers for economic expansion.Consequently, we advise investors to target
sectors, sub sectors and accordinglycompanies that will benefit from the strongmacro-economics and buying on priceweakness with a medium to longer terminvestment horizon.
In balancing what we consider the compellingopportunities provided by the Sri Lankabourse in selected counters, we see particular
value in domestically focused companieswhich should experience less earningsvolatility against an uncertain globalbackdrop and exchange rate volatility.Among domestically oriented stocks, weadvise investors to avoid companies thatpossess high energy requirements as thecurrent upward movement in oil prices isexpected to continue given the on-goingtension in the Middle East.
We view the current market environment asan opportunity for investors to clean theirbooks, re-align their portfolios and repositionthemselves with a flight to quality. As wehead towards the 3Q2013 corporate results,we advise investors to break away from theherd, maintain a healthy investment horizonand focus on companies that are likely todeliver quality earnings.Source- First Capital Equities Research /sltda.gov.lk
7/30/2019 First Capital Sri Lanka Weekly 26-30 Aug 2013
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Page 4Sri Lanka Weekly 26-30 Aug 2013
Global OutlookUS
Equities continued to decline with the S&P500losing 1.8% for the week while the Nasdaqand Dow Jones also lost 2.0% and 1.4%respectively. Investors appeared to be morefocused on the tense situation in Syria as signsof a US led military strike seemed imminent.However, Investors' fears eased after USPresident Barack Obama on Saturday opted toseek congressional authorization for militaryaction, a move that was likely to delay anystrike for at least nine days.
Meanwhile, Wall Street is bracing for a waveof economic reports this week, including theAugust jobs report, which might provedecisive in determining whetherthe economy is strong enough for the FederalReserve to dial back its bond purchases inmid-September. Anxiety about the Fedpossibly reducing its $85 bn monthlystimulus, also known as QE3, has hurt theequity markets, which recorded its steepestmonthly fall since May 2012. But the market'sgreater anxiety, which has developed inrecent weeks, is that the Fed will press aheadwith a reduction in support even asthe economy remains fragile. Recent data hasfailed to provide evidence of the convincinggrowth the Fed says it wants to see. Until
then, stocks will benefit from the cheapmoney resulting from the Fed's bondpurchases.
Europe
European shares hit a six-week closing low onFriday as reduced chances of an immediatemilitary strike on Syria weighed on energyequities due to weakened oil prices, althoughlonger-term market outlook stayed bright.National benchmark indices dropped in all ofthe 18 Western European markets. TheEurostoxx50 fell by 3.7% to end at 2721,Germanys DAX declined by 3.8% while UKsFTSE 100 slipped 1.2% and F rances CAC 40lost 3.3%.
This was the biggest loss since June, amidconcern any military action by the US againstSyria may escalate into a larger conflict in theMiddle East and push up oil prices. Syria wasa key factor in driving markets lower thisweek as the threat of a military interventionand the threat of a spike in oil prices tend tobe a derogatory combination for equityinvestors
Meanwhile, the upbeat data from the eurozone weren't enough to lift the indexes. TheEconomic Sentiment Indicator rose sharply by2.7 points in August to 95.2, beatingexpectations of a 93.7 reading, according to apoll by FactSet. Additionally, data showed thenumber of unemployed people in the eurozone fell in July for the second straight month,although the improvement wasn't enough to
bring down the unemployment rate from itsall-time high of 12.1%.
http://www.reuters.com/places/syriahttp://www.reuters.com/finance/economy?lc=int_mb_1001http://www.reuters.com/finance/economy?lc=int_mb_1001http://www.reuters.com/finance/stocks?lc=int_mb_1001http://www.reuters.com/places/syriahttp://www.reuters.com/places/syriahttp://www.reuters.com/finance/stocks?lc=int_mb_1001http://www.reuters.com/finance/economy?lc=int_mb_1001http://www.reuters.com/finance/economy?lc=int_mb_1001http://www.reuters.com/places/syria7/30/2019 First Capital Sri Lanka Weekly 26-30 Aug 2013
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Page 5Sri Lanka Weekly 26-30 Aug 2013
Global Outlook Cont..Asia
Asian stocks fell for a second week for thefirst time since June, over concerns that the USwill attack Syria in response to the alleged useof chemical weapons by President Bashar Al-Assad. The MSCI Asia Pacific Index slipped0.9% to 130, the first back-to-back weekly losssince the first week of June, widening itsAugust retreat to 1.6%.
Chinas economy meanwhile is strengtheningafter a two-quarter slowdown, with amanufacturing gauge rising to a 16-monthhigh in August while Indias slowesteconomic expansion since 2009 adds pressureon Prime Minister Manmohan Singh to stem aslide in the rupee.
Meanwhile, Oil and gold prices fell again onFriday after Britain refused to back a US ledmilitary strike on Syria, but both marketsended August sharply higher after rallyingwith other commodities in recent weeks.Platinum, natural gas and cocoa had some ofthe biggest monthly gains among rawmaterials, due to encouraging US economicdata and supply concerns.
http://www.bloomberg.com/quote/MXAP:INDhttp://topics.bloomberg.com/china%27s-economy/http://topics.bloomberg.com/china%27s-economy/http://topics.bloomberg.com/manmohan-singh/http://www.moneycontrol.com/commodity/gold-price.htmlhttp://www.moneycontrol.com/commodity/gold-price.htmlhttp://topics.bloomberg.com/manmohan-singh/http://topics.bloomberg.com/china%27s-economy/http://www.bloomberg.com/quote/MXAP:IND7/30/2019 First Capital Sri Lanka Weekly 26-30 Aug 2013
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Page 6Sri Lanka Weekly 26-30 Aug 2013
Company CSECODESharePrice Net Profit (LKR mn)
(LKR) 2010 2011 2012
Sri Lanka Telecom SLTL 40.10 3,943 4,505 4,036
Lanka ORIX Leasing LOLC 50.10 7,023 8,937 -
AHOT Properties AHPL 69.00 2,148 2,502 3,097
Dialog Axiata DIAL 8.20 4,755 4,870 6,030
Softlogic Holdings SHL 8.90 971 1,022 -
Colombo Fort Land & Buildings CFLB 29.00 2,139 2,087 -
Aitken Spence SPEN 116.90 3,428 4,437 4,254
John Keells Holdings JKH 214.80 9,063 10,978 13,591
Commercial Bank COMB 115.40 5,524 7,932 10,081
Hemas Holdings HHL 30.00 1,355 1,261 1,934
Hayleys HAYL 293.00 1,128 1,646 3,619
Hatton National Bank HNB 152.30 4,464 6,265 7,703
Distilleries DIST 185.50 8,308 6,138 -
Richard Pieris RICH 6.40 2,141 2,870 2285
Eden Hotel Lanka EDEN 36.00 101 146 -
Nawaloka Hospitals NHL 2.90 1,071 271 454
Kotagala Plantations KOTA 40.50 668 439 517
Asiri Hospitals ASIR 13.90 262 842 -
DIMO DIMO 478.00 2,122 2,702 462
Kegalle Plantations KGAL 96.00 883 769 542
Royal Ceramics RCL 86.40 1,374 1,243 1,727
Lanka WallTile LWL 59.50 766 990 1,135
Ceylon Glass GLAS 5.50 579 685 724
Laugfs Gas LGL 26.00 853 822 1,061
VallibelOne VONE 15.60 N/A 3,645 -
National Development Bank NDB 149.90 2,176 2,763 8,932
DFCC Bank DFCC 122.40 7,137 3,038 3,538
Sampath Bank SAMP 187.60 3,520 3,705 5,346
Ceylon Leather CLPL 72.00 107 41 97
Ceylon Grain Elevators GRAN 35.60 475 419 150Expolanka Holdings EXPO 7.10 1,768 1,210 1,279
First Capital Equities TOP 30 Valuation Guide
7/30/2019 First Capital Sri Lanka Weekly 26-30 Aug 2013
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Page 7Sri Lanka Weekly 26-30 Aug 2013
EPS EPS Growth (%) PE(X)
Price toGrowth
(X)
DividendYield (%)
Sharesin
issue(mn)
MarketCap
(LKRbn)
2010 2011 2012 2010 2011 2012 2010 2011 2012 2012
SLTL 2.18 2.50 2.24 407% 14% -10% 18.4 16.1 17.9 -1.72 2.1% 1,805 72.4
LOLC 8.08 13.17 - 94% 63% - 6.2 3.8 - - - 475 23.8
AHPL 4.01 4.86 5.63 -17% 21% 16% 17.2 14.2 12.2 0.77 5.8% 443 30.6
DIAL 0.62 0.64 0.74 -139% 3% 16% 13.2 12.8 11.1 0.70 4.0% 8,144 66.8
SHL 1.06 0.62 - 438% -42% - 8.4 14.3 - - 1.5% 779 6.9
CFLB 6.37 7.15 - 1653% 12% - 4.6 4.1 - - 1.0% 180 5.2
SPEN 8.44 8.59 8.05 66% 2% -6% 13.8 13.6 14.5 -2.29 1.3% 406 47.5
JKH 9.62 11.30 14.23 59% 17% 26% 22.3 19.0 15.1 0.58 1.6% 857 184.1
COMB 7.06 10.17 12.92 31% 44% 27% 16.3 11.3 8.9 0.33 6.0% 780 90.0
HHL 2.35 2.26 3.22 34% -3.8% 42.3% 12.8 13.3 9.3 0.22 1.8% 515 15.5
HAYL 9.03 13.84 24.72 -61% 53% 79% 32.5 21.2 11.9 0.15 1.5% 75 22.0
HNB 11.24 15.77 19.39 3% 40.3% 23.0% 13.6 9.7 7.9 0.34 5.6% 397 60.5
DIST 27.08 18.92 - 280% -30% - 6.9 9.8 - - 1.6% 300 55.7
RICH 0.87 1.33 0.98 190% 53% -26% 7.4 4.8 6.5 -0.25 3.1% 1,939 12.4
EDEN 1.92 2.76 - 3261% 44% - 18.7 13.0 - - 0.6% 53 1.9
NHL 0.76 0.19 0.43 1004% -74.7% 123.3% 3.8 15.1 6.8 0.05 1.7% 1,410 4.1
KOTA 20.88 11.80 16.15 107% -43% 37% 1.9 3.4 2.5 0.07 6.2% 32 1.3
ASIR 0.21 0.67 - 3% 214.6% - 64.8 20.6 - - - 889 12.4
DIMO 239.06 304.36 52.06 663% 27% -83% 2.0 1.6 9.2 -0.11 2.1% 9 4.2
KGAL 35.32 30.77 21.70 135% -12.9% -29.5% 2.7 3.1 4.4 -0.15 - 25 2.4
RCL 12.40 11.22 15.08 93% -10% 34% 7.0 7.7 5.7 0.17 2.3% 111 9.6
LWL 8.75 8.87 13.77 43% 1% 55% 6.8 6.7 4.3 0.08 4.2% 55 3.2GLAS 0.61 0.72 0.76 -1049% 18% 6% 9.0 7.6 7.2 1.27 6.5% 950 5.2
LGL 2.20 2.13 2.74 61% -4% 29% 11.8 12.2 9.5 0.33 5.8% 387 10.1
VONE N/A 3.35 - N/A N/A - N/A 4.7 - - - 1,087 17.0
NDB 12.81 15.39 53.92 1% 20% 250% 11.7 9.7 2.8 0.01 3.3% 164 24.6
DFCC 19.20 11.19 13.04 97% -42% 17% 6.4 10.9 9.4 0.57 4.1% 265 32.4
SAMP 21.40 22.62 32.81 68% 6% 45% 8.8 8.3 5.7 0.13 6.4% 163 30.5
CLPL 3.12 2.80 2.75 197% -10% -2% 23.0 25.7 26.2 -13.25 - 34 2.5
GRAN 7.92 5.77 2.24 255% -27% -61% 4.5 6.2 15.9 -0.26 0.4% 60 2.1EXPO 0.79 0.53 0.54 199% -33% 3% 9 13 13 4.95 1.7% 1,955 13.9
First Capital Equities TOP 30 Valuation Guide
7/30/2019 First Capital Sri Lanka Weekly 26-30 Aug 2013
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Page 8Sri Lanka Weekly 26-30 Aug 2013
2005 2006 2007 2008 2009 2010 2011 2012
Nominal GDP (LKR bn) 2,453 2,939 3,579 4,411 4,835 5,604 6,544 7,582
% YoY 17 20 22 23 10 16 17 16
Nominal GDP (US$ bn) 24 28 32 41 42 50 59 59% YoY 18 16 14 26 3 18 18 1
Real GDP Growth (%) 6.2 7.7 6.8 6 3.5 8 8.3 6.4
GDP per Capita (US$) 1,241 1,421 1,617 2,014 2,057 2,400 2,836 2,923
% YoY 17 15 14 25 2 17 18 3
Population (mn) 19.7 19.9 20 20.2 20.5 20.7 20.869 20.3
% YoY 1 1 1 1 1 1 1 -3Inflation (%) 11 10 15.8 22.6 3.4 5.9 6.7 7.6
M2 (LKR bn) 823 993 1,148 1,282 1,537 1,813 2,193 2,593
% YoY 20 21 16 12 20 18 21 18
Average Oil Prices (US$ / barrel) 51 61 69 95 61 78 109 114
% YoY 40 21 13 37 -35 27 41 5
Exports (US$ bn) 6.3 6.9 7.6 8.1 7.1 8.6 10.6 9.8% YoY 9 10 10 7 -12 17 23 -8
Imports (US$ bn) 8.9 10.2 11.3 14.1 10.2 13.5 20.3 19.2
% YoY 11 15 11 25 -28 32 50 -5
Trade Balance (US$ bn) -2.5 -3.4 -3.7 -6 -3.1 -4.8 -9.7 -9.4
% YoY 14 36 9 62 -48 67 -102 -3
Current Account Balance (US$ bn) -0.7 -1.5 -1.4 -3.9 -0.2 -1.1 -4.6 -3.9
% YoY 0 130 -6 177 -94 563 318 -15
Balance of Payments (US$ bn) 0.5 0.2 0.5 -1.4 2.7 0.9 -1.1 0.2
% YoY -350 -60 150 -380 -293 -67 -222 114
Budget Deficit (US$ bn) -1.7 -2 -2.2 -2.9 -4.1 -3.9 -4.1 -3.7
% YoY 11 15 12 29 45 -5 -4 10
Budget Deficit as % of GDP -7 -7 -6.9 -7 -9.9 -8 -6.9 -6.4
Exchange Rate (LKR/US$) 100.5 104 110.6 108.3 114.9 113.1 110.6 127.6
Ke Economic Indicators
7/30/2019 First Capital Sri Lanka Weekly 26-30 Aug 2013
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Page 9Sri Lanka Weekly 26-30 Aug 2013
0
2,000
4,000
6,000
8,000
2005 2006 2007 2008 2009 2010 2011 2012
Nominal GDP
Nominal GDP
Real GDP
Ke Economic Charts
0
500
1000
1500
2000
2500
3000
3500
2005 2006 2007 2008 2009 2010 2011 2012
GDP per Capita
GDP Per Capita
0
2
4
6
8
10
2005 2006 2007 2008 2009 2010 2011 2012
GDP Growth
GDP Growth
19
19.5
20
20.5
21
2005 2006 2007 2008 2009 2010 2011 2012
Population (mn)
Population
4
5
6
7
8
9
10
11
2005 2006 2007 2008 2009 2010 2011 2012
Exports (US$ bn)
Exports (US$ bn)
4
9
14
19
24
2005 2006 2007 2008 2009 2010 2011 2012
Imports (US$ bn)
Imports (US$ bn)
-2
-1
0
1
2
3
2005 2006 2007 2008 2009 2010 2011 2012
BOP(US$ bn)Balance of payment
90
95
100
105
110
115
120
125130
2005 2006 2007 2008 2009 2010 2011 2012
Exchange Rate (LKR/USD)
LKR/US$
7/30/2019 First Capital Sri Lanka Weekly 26-30 Aug 2013
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Page 10Sri Lanka Weekly 26-30 Aug 2013
Disclaimer
This Review is prepared and issued by First Capital Equities (Pvt) Ltd. based on information in the publicdomain, internally developed and other sources, believed to be correct. Although all reasonable care hasbeen taken to ensure the contents of the Review are accurate, First Capital Equities (Pvt) Ltd and/or its Directors, employees, are not responsible for the correctness, usefulness, reliability of same. First Capital Equities (Pvt) Ltd may act as a Broker in the investments which are the subject of this document or related investments and may have acted on or used the information contained in this document, or the research or analysis on which it is based, before its publication. First Capital Equities (Pvt) Ltd and/or its principal,their respective Directors, or Employees may also have a position or be otherwise interested in theinvestments referred to in this document. This is not an offer to sell or buy the investments referred to inthis document. This Review may contain data which are inaccurate and unreliable. You hereby waiveirrevocably any rights or remedies in law or equity you have or may have against First Capital Equities
(Pvt) Ltd with respect to the Review and agree to indemnify and hold First Capital Equities (Pvt) Ltd and/or its principal, their respective directors and employees harmless to the fullest extent allowed by lawregarding all matters related to your use of this Review. No part of this document may be reproduced,distributed or published in whole or in part by any means to any other person for any purpose without prior permission.
ContactsSales Desk: +94112145000
Branch Sales: Negombo - +94 31-5676451
Research: +94112145016, +94112145017
E- mail: [email protected]
Head Office Branch
No.01, Lake Crescent,Colombo 02, Sri Lanka.
No. 142, Greens Rd,Negombo.