Q411 Earnings Review - Royal Ceramics PLC (RCL)- bartleetstock

Net Revenue up 29.2% YoY to LKR 5,751mn from LKR 4,451mn

We believe the growth in volumes to be the key catalyst that led to top line growth. The prices have remained constant for both its Tile and Sanitary ware segment; indicating that the growth in volumes drove revenue in FY 2011. We expect a Net Revenue growth of 19.1% to LKR 6,848mn (previous estimate- LKR 7,460mn) for FY 2012E and a growth of 20.9% to LKR 8,279mn for FY 2013E, further steered by increased volumes.

Flat Gross Profit Margins

RCL achieved a Gross Profit growth of 25.4% to LKR 2,656mn in FY 2011. We expect RCL’s Gross Profit to grow by 17.4% YoY to LKR 3,120mn (previous estimate- LKR 3,446mn) in FY 2012E and by 22.8% to LKR 3,828 in FY 2013E. Gross Profit margins are expected to be steady at 45.6% for FY 2012E and 46.2% for FY 2013E.

EBIT growth of 27.2% in FY 2011 to LKR 1,579mn (previous estimate – LKR 1,560mn)

EBIT is adjusted for non-recurring gains of LKR 164mn in FY 2011. We expect an EBIT growth of 5.5% to LKR 1,665mn (previous estimate-LKR 1,875mn) in FY 2012E and 25.2% to LKR 2,085mn in FY 2013E. We believe the growth in volumes coupled with cost savings will aid in EBIT growth.

Valuation – Attractive at the current price of LKR 155.60; upside potential of 11.8%

Based on our new estimates we have arrived at a target price of LKR 173.93(previous estimate-LKR 165.28). Our valuations are based on a WACC of ~ 9.4% and terminal growth of 3.0%. The WACC is based on a debt to equity of 50%, beta of 0.91(based on ASPI vs. RCL stock price movements), risk free rate of 7.3% and an equity risk premium of 4.0%. 

Regards,

BMS Equity Research Team | Bartleet Mallory Stockbrokers

Recommendations for Expolanka IPO

Broker pulse on Expolanka IPO
Broker        Comment

•     Acuity         Yes
•     Asha Phillip     Yes/Medium to Long Term
•     Asia Securities     Yes
•     Assetline     Neutral/Yes Long Term
•     Ceylinco     Yes
•     CT Smith    Yes
•     DNH        Yes/Medium to Long Term
•     Heraymila    Yes
•     IIFL Ceylon    Yes/Long Term
•     John Keells    Yes
•     NDB        Report Out Today
•     Richard Peiris     Neutral/Yes Long Term
•     SC Securities    Yes
•     Taprobane    Yes

expo ipo

Expo Lanka Holding Limited - IPO

Sri Lanka's stock exchange has approved an initial public offering by Expolanka Holdings to raise 2.4 billion rupees by issuing 172 million ordinary voting shares at 14 rupees each. The IPO opens May 12 with the prospectus was available on April 25.

The company has said it plans a sell-down of a 25 percent stake including a recent private placement to raise funds for expansion and repay debt.

The company announced after its recent private placement that three independent directors had been appointed to its board. 

post by Sinhala Ayojakaya,

Expo Lanka Holding Limited, another IPO.As usual our retails investors are very busy to find cash to apply for said ipo.Some time they sell their good stocks to find cash. Who cares prospectus? Why? Every IPO share price is going up in first day. So no need to read prospectus and best thing is applying all IPOs. Do you think same? We think that most of our retail investors think so. Companies, those come to IPOs, they know how our investors think and they value their IPO price with smart premium and rest will be handed over to our investors. They are doing job well. Finally IPO is oversubscribed by many times.

If above comments is not relevant to you, please forget it.

Here we would like to highlight few points regarding Expo Lanka Holding Limited.

·       Stated capital of the company Rs.1,782,915,000/=.its equal to issued no of shares (before IPO).This means promoters cost of shares is Rs.1.if directors sell 127,351,071 shares @14,their cost for the company is zero. They can do this without changing major shareholding.

·       15%, out of IPO shares will be allocated to employees, its means 25,800,000 no of shares. In addition to this another 2,678,500 shares will be allocated on May 2011 under ESOP. some time they may dump their holding in first day,if they feel,price is getting down and they know their company real value.

·        316,667,500 shares were transferred @ rs.6.we can’t say exactly their decision on first trading day. but  we know if they sell @14,they will get  a wonderful capital gain (14-6).

·        ROE of the company is 15%, EPS .711 for nine months ended including major one off income, Book value per shares 2.41 after IPO increased to 3.42.pls make your valuation.

·       Company has declared dividend for the nine months ended 31st December 2011,cents 0.121.this reduced further cost of a share of directors

·         During the year Rs.100,626,192 has been granted to directors as advance.

Note. If you think that above comments are wrong, please discuss with Sinhala Ayojakaya.