Professional Documents
Culture Documents
SRI LANKA
Corporate Update
STRONG BUY
APR 2015
KEY DATA
Share Price (LKR)
40.00
49.0/31.0
37,199
1.54
1,855
P/E 31 Mar
Net Interest Income (LKR mn)
FY13
FY14
FY15E
FY16E
FY17E
2,278
3,339
3,948
4,961
6,005
164
166
227
457
578
EPS (LKR)
3.2
3.3
4.5
9.0
11.4
1%
37%
101%
26%
3 mths 12mths
YoY % Growth
Valuations
36%
-24.0%
12.7%
PER (x)
12.4x
12.3x
8.9x
4.4x
3.5x
-3.2%
-9.3%
12.8%
Major Shareholders as at 30th December 2014
PBV (x)
1.7
1.6
1.0
0.8
0.6
2.8%
2.8%
3.8%
7.6%
9.7%
62.38%
NAVPS
23.7
25.8
38.8
49.3
62.5
14.35%
1.1
1.1
1.5
3.1
3.9
34%
34%
34%
34%
34%
-17.2%
ASPI
LB Finance PLC
4.11%
2.78%
1.90%
Public Holdings
36.95%
50
900
48
800
46
700
44
('000)
Price
600
42
500
40
400
38
Dividend Payout
Softlogic Finance (CRL) as one of the fast growing finance companies in Sri
Lanka is expected to achieve a 101% earnings growth amidst changing focus
on credit disbursement portfolio to high yielding segments, lowering
impairment stemming from leases and higher purchases and increasing
presence of branch network. We expect CRL to achieve an EPS of LKR 9.0 in
FY16E leading to a PER of 4.4x and PBV of 1.0x compared to sector average of
11.2x and 1.6x respectively. FC Research expects a total return of c.58% by
FY16E, based on a target price of LKR 65.0 (+54%) and a dividend yield of 3.6%.
Changing clientele may generate 32% growth in NII in FY16E: CRL has been
changing its product mix and focus from leases and hire purchases to Micro
finance in order to capture high yielding niche market segments by developing
innovative products. Hence, we expect net interest income to grow by 32% to
LKR 2bn in FY16E attributing to high yielding loans and advances growth of 25%
to LKR 11.5bn in FY16E. Further, we maintain our conservative forecast for
leases and hire purchases growth at 17% to LKR 8bn.
300
36
34
200
32
100
30
Apr-14 Jul-14 Oct-14 Jan-15
Volume
Price
(Source: www.cse.lk)
Disclaimer on Shareholding:
First Capital Holdings does not hold positions in CRL
except for 669,642 shares in First Capital Limited.
First Capital has not taken any positions in TJL in the
3 trading days prior this report while it does not
envisage taking positions in this share for the
succeeding 7 trading days to this report.
Efficient cost management and lowering impairment may drive +101% profit
growth in FY16E: We expect CRLs to lower impairment compared to FY15 due
declined exposure in leases and hire purchase portfolio. Further, strategic
branch expansion and cost management measures are expected to improve
CRLs cost-to-core-income ratio to 63% in FY16E from 67% in FY15E.
CRL may provide a total 1-year return of 58%: CRL at LKR 40.0, trades on a FY16E
PER of 4.4x and PBV of 1.0x. The counter may also provide a DPS of LKR 1.5 for
FY15E and LKR 3.1 for FY16E, which may translate into a dividend yield of 3.8%
and 7.6% respectively. On justified book value CRL is valued at LKR 58.0 while on
8.0x FY16E average PER the company is valued at LKR 72.0. On average we
provide a target price of LKR 65.0 for CRL for a 1-Year period providing a total
return of 58% - BUY.
FC Research
10
Growth QoQ
LKR Bn
9
8
70%
56%
50%
40%
30%
20%
10%
62%
60%
5%
5%
0%
4
-10%
-20%
1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15
2QFY14
2%
7%
6%
0%
3QFY14 4QFY14 1QFY15 2QFY15 3QFY15
-12%
-6%
-15%
-19%
-30%
Lease and hire purchase receivables
FC Research
20.6%
34.1%
22.7%
20.1%
17.5%
9,258
3,677
8,344
PLC
CFIN
LFIN
COCR
CRL
6,381
9MFY14
9MFY15
Repossessed
vehicle stock,
3%
Loans and
receivables,
29%
Lease and hire
purchase, 66%
FC Research
75%
71%
62%
61%
FY12
FY13
FY14
FY15E
57%
57%
FY16E
FY17E
FY13
FY14
FY15E
FY16E
FY17E
2,278
3,339
3,948
4,961
6,005
164
166
227
457
578
3.2
3.3
4.5
9.0
11.4
YoY % Growth
Valuations
36%
1%
37%
101%
26%
PER (x)
12.4x
12.3x
8.9x
4.4x
3.5x
PBV (x)
1.7
1.6
1.0
0.8
0.6
2.8%
2.8%
3.8%
7.6%
9.7%
NAVPS
23.7
25.8
38.8
49.3
62.5
1.1
1.1
1.5
3.1
3.9
34%
34%
34%
34%
34%
CRL at LKR 40.0, trades on a FY16E PER of 4.4x and PBV of 1.0x. The
counter may also provide a DPS of LKR 1.5 and LKR 3.4 for FY15E and
FY16E, which may translate into a dividend yield of 3.8% and 7.6%
respectively.
FC Research
On justified book value CRL is valued at LKR 57.6 while on 8.0x FY16E
average PER the company is valued at LKR 72.0. On average we provide
a target price of LKR 65.0 for CRL on 1 Year period providing a total
return of 58% - BUY.
FY16E
ROAE
20%
Rf
8%
Rm
14%
Growth
1.80
COE
18%
18%
PBV
1.2
NAVPS
49.3
Fair Value
57.6
3.2 PE Band
PE band based based Valuation
FY16E
9.00
Average PER
8.0x
72
Fair Value
Figure 8: PE Band
PRice - LKR
3%
140
120
100
80
60
40
20
Jun-09
4.0x
Jun-10
Jun-11
6.0x
Jun-12
8.0x
Jun-13
10.0x
Jun-14
12.0x
Jun-15
Jun-16
Price
FC Research
0
72
58
65
Return
Target Price
65
Current Price
42
Dividend FY15E
1.5
Capital Gain %
54%
Dividend Yield %
3.6%
Total Return %
58%
FC Research
FY12
FY13
FY14
FY15E
FY16E
FY17E
FY18E
Capital
Equity / Assets
11.0%
9.1%
7.2%
9.6%
9.8%
10.2%
10.6%
14.9%
14.2%
13.2%
13.8%
20.4%
20.4%
18.9%
1.7%
1.4%
1.1%
1.2%
2.0%
2.0%
2.0%
24.9%
23.9%
27.2%
26.1%
27.3%
27.5%
27.5%
13.2%
14.2%
15.2%
14.1%
14.4%
14.6%
14.6%
11.7%
9.7%
11.9%
12.0%
12.9%
12.9%
12.9%
12.0%
9.3%
10.4%
10.4%
11.4%
11.1%
11.1%
Cost / Core-income
77%
78%
63%
67%
63%
63%
63%
Cost / Income
75%
71%
61%
61%
60%
59%
59%
8.4%
6.4%
5.6%
5.9%
6.1%
5.9%
5.8%
38.2
43.7
51.6
52.3
51.9
51.9
53.4
Earnings
1.476
2.245
2.855
2.520
2.632
2.825
3.046
Asset Growth
128%
31%
38%
13%
24%
22%
20%
Deposit Growth
195%
49%
34%
30%
25%
23%
22%
54%
-38%
209%
-15%
20%
18%
10%
279%
50%
16%
137%
25%
21%
21%
79%
20%
15%
-15%
17%
17%
17%
109%
28%
15%
33%
21%
19%
19%
Loan / Deposits
176%
152%
131%
134%
130%
126%
123%
Loan / Funds
131%
182%
107%
164%
165%
167%
178%
82%
80%
67%
79%
77%
76%
75%
Deposit / Liabilities
52%
58%
55%
65%
66%
67%
68%
Employees
550
467
502
748
891
992
1,092
16
17
17
22
27
32
37
Asset Quality
Borrowings Growth
Loans & advances Growth
Leases & higher purchases Growth
Total Lending Growth
Liquidity
Branches
New Branches during the Year
FC Research
FY12
FY13
FY14
FY15E
FY16E
FY17E
1,534
(793)
741
2,278
(1,391)
886
3,339
(2,058)
1,281
3,948
(2,377)
1,572
4,961
(2,885)
2,075
6,005
(3,578)
2,426
48
5
18
812
69
31
62
1,048
119
21
13
1,433
134
53
126
313
166
62
42
270
194
85
97
376
73
328
404
206
210
806
975
1,105
1,481
2,139
2,592
Personnel Expenses
Depreciation of Property, Plant and Equipment
Amortization of Intangible Assets
Other Operating Expenses
Total Operating Expenses
214
26
1
369
611
239
44
2
457
742
288
50
3
535
877
468
71
6
605
1,151
625
83
10
683
1,401
779
95
14
772
1,661
195
233
228
330
737
931
30
165
44
121
37
196
32
164
37
191
26
166
60
270
43
227
102
635
178
457
128
803
225
578
EPS
2.4
3.2
3.3
4.5
9.0
11.4
FC Research
FY12
FY13
FY14
FY15E
FY16E
FY17E
1,104
70
6,005
2,241
472
7
176
10,076
1,473
115
79
7,222
3,353
792
8
178
13,219
2,431
1,515
85
8,325
3,887
1,693
10
312
18,260
2,064
50
123
7,058
9,207
1,816
24
316
20,659
3,002
61
142
8,241
11,473
2,270
35
315
25,538
4,206
104
163
9,642
13,853
2,792
44
309
31,113
Liabilities
Due to banks
Derivative financial instruments
Due to customers
Other borrowed funds
Other non financial liabilities
Retirement benefit obligations
Deferred tax liabilities
Total Liabilities
1,153
4,682
2,564
481
12
75
8,968
2,653
6,957
1,581
744
14
65
12,014
1,597
11
9,313
4,888
1,073
22
47
16,950
1,627
12,107
4,159
724
22
47
18,684
1,971
15,133
4,983
877
22
47
23,034
2,350
18,614
5,860
1,046
22
47
27,938
1,003
13
21
79
(8)
1,108
1,003
43
48
130
(19)
1,205
1,003
76
76
142
12
1,310
1,405
121
144
292
12
1,974
1,405
213
281
594
12
2,505
1,405
329
455
976
12
3,176
10,076
13,219
18,260
20,659
25,538
31,113
22
24
26
39
49
62
FC Research
Symbol
Price
Trailing 12
NAVPS
months
PER
PBV
CRL.N0000
39.5
4.1
29.2
9.6x
1.4x
COCR.N0000
52.7
6.2
17.0
8.5x
3.1x
PLC.N0000
23.0
2.6
13.2
8.8x
1.7x
CFIN.N0000
252.9
34.3
223.7
7.4x
1.1x
LB Finance
LFIN.N0000
164.0
30.3
106.8
5.4x
1.5x
LOFC.N0000
4.0
0.5
2.8
7.8x
1.4x
COCR.N0000
52.7
6.2
17.0
8.5x
3.1x
CDB.N0000
85.0
11.0
71.1
7.7x
1.2x
CLC.N0000
4.1
0.2
1.6
19.3x
2.6x
2,200.0
189.0
2,562.7
11.6x
0.9x
1,010.5
MERC.N0000
ALLI.N0000
800.0
126.2
6.3x
0.8x
TFC.N0000
15.5
(12.2)
(61.6)
-1.3x
-0.3x
Senkadagala Finance
SFCL.N0000
60.0
8.2
36.8
7.3x
1.6x
Softlogic Finance
CRL.N0000
39.5
4.1
29.2
9.6x
1.4x
Vallibel Finance
VFIN.N0000
46.1
8.5
33.8
5.4x
1.4x
Singer Finance
SFIN.N0000
19.5
2.1
13.6
9.3x
1.4x
Sinhaputhra Finance
SFL.N0000
174.8
16.3
165.1
10.7x
1.1x
AMCL.N0000
22.4
10.7
57.0
2.1x
0.4x
CSF.N0000
4.4
0.3
1.2
14.4x
3.7x
PMB.N0000
24.5
(1.3)
14.0
-19.2x
1.8x
Orient Finance
ORIN.N0000
12.5
0.5
7.6
22.8x
1.6x
ARPI.N0000
158.9
30.8
117.4
5.2x
1.4x
AAF.N0000
1.8
0.1
1.5
14.4x
1.2x
SFS.N0000
1.9
(1.5)
(2.5)
-1.2x
-0.8x
Abans Finance
AFSL.N0000
26.1
1.6
13.9
16.3x
1.9x
AMF.N0000
437.9
52.9
132.4
8.3x
3.3x
NIFL.N0000
9.3
0.2
5.7
49.6x
1.6x
TFIL.N0000
27.0
3.2
15.5
8.5x
1.7x
Bimputh Finance
BLI.N0000
40.0
2.1
15.6
19.4x
2.6x
GSF.N0000
23.1
(2.3)
11.1
-10.2x
2.1x
Multi Finance
MFL.N0000
26.3
(0.9)
12.4
-30.4x
2.1x
Chilaw Finance
CFL.N0000
24.8
1.2
15.6
20.7x
1.6x
SMB Leasing
SEMB.N0000
1.0
0.1
0.6
19.9x
1.7x
CALF.N0000
14.6
0.2
8.4
80.7x
1.7x
10
FC Research
Cost of Equity
1%
2%
3%
4%
5%
15%
68.3
69.8
71.5
73.5
76.0
16%
63.8
64.8
66.0
67.4
69.1
17%
59.8
60.5
61.3
62.2
63.3
18%
56.6
57.1
57.6
58.2
58.9
19%
53.2
53.4
53.6
53.9
54.3
20%
50.4
50.4
50.5
50.6
50.6
21%
47.8
47.8
47.7
47.6
47.5
11
FC Research
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This
Review
prepared
andofissued
byare
First
Capital
Equities
(Pvt)
based
on information
public domain,
internally
developed
other
has
been
taken tois
ensure
the contents
the Review
accurate,
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Equities
(Pvt)Ltd.
Ltd and/or
its Directors,
employees, in
are the
not responsible
for the correctness,
usefulness,
reliabilityand
of same.
First
Capital
Equities
(Pvt) Ltd may
a Broker in the
investments
are the subject
of this
document
related to
investments
have actedof
on or
used
the information
contained in First
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sources,
believed
toact
beas correct.
Although
allwhich
reasonable
care
has
beenortaken
ensureand
themay
contents
the
Review
are accurate,
Capitalor
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
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oremployees
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12
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