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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » A share that can give more than 100% return in 2012/13 - REXP

A share that can give more than 100% return in 2012/13 - REXP

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hariesha


Vice President - Equity Analytics
Vice President - Equity Analytics
* As most of the good shares who can resist hard economic conditions, REXP is also seem to be already bottomed out. During march 2012 quarter REXP was stable on Rs.18/- levels against market volatility. In June 2012 quarter most of the days it maintained at Rs.20/- levels. Unless market falls drastically, now it seem to be stable around Rs.23/-. But it is extremely difficult to collect a quantity at Rs.23/- levels.

* I think company has benefitted from both internal factors as well as external factors during last four quarters. As company was in the red for a long period, now they seem to be having good internal controls. Externally, most of the factors are favorable to them. Their main raw material "Rubber" prices are adjusting downwards in each auction. Due to rupee depreciation, now they are more competitive in international market. They have better access to USA market, which is their main export destination due to inclusion of Sri Lanka in the US GSP program in last year.

* As number of shares in the market is less than 1 million shares (including all shares except for the controlling share holder), during last year it was highly speculative. From Rs. 28/- in march 2011, it was taken above Rs.50/- within two months with no fundamental value. As a result most of the existing shareholders have collected the shares when it was above Rs.40/-. No one seem to be selling, as fundamental value of the counter is improving in every quarter.

* If company managed to maintain the same profitability as in June 2012 quarter, it will end the year with an EPS of Rs.13.00.

IF MARKET BECOME BULLISH AGAIN, WHERE IT CAN GO ?

Click the following link to download the PDF file in the research section.

http://research.srilankaequity.com/t512-shares-that-can-give-more-than-100-return-in-2012-13-02-richard-pieris-exports#587

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
hariesha,


thanks for the good analysis. Due to speculation of future earnings based on current trend and illiquidity this share can run as you mentioned. This share in my book is good for careful trading. For long term investing ofcourse the net asset value is a concern as it is negative.

However again thanks for a good analysis and bringing it to our attention.

hariesha


Vice President - Equity Analytics
Vice President - Equity Analytics
REXP net asset value per share at company level is Rs. 46.37 which is a very strong figure. But at group level it's Rs.-1.68 as at June 30th 2012. This is because brought forward losses in one of the subsidiaries, which is now in profits.
Group level NAVPS was Rs.-10.73 as at 30th June 2011. So within a year NAVPS has improved by Rs. 9.05, a tremendous achievement. If company continued its performance as per June 2012 quarter, REXP can end 2012/13 financial year with NAVPS of more than Rs.12/-. As company hasn't done any re-valuation of assets recently, if they opt to do that in current financial year, NAVPS should touch Rs.20.00.

So long term investors should not need to worry about group level NAVPS, as it's not as bad as it's shown in books. Actually long term investors should look at the speed of the recovery. It's not a concern for the company either, as they have declared a dividend in 2010 with negative NAVPS. Long term investors should look at the positives lying ahead for the company as described in my analysis. Always when rubber prices are softening REXP is performing well. Last two quarters REXP has performed extremely well when rubber prices were hovering around Rs.400/- to Rs. 460/- per Kg. Most of the current quarter, rubber prices remained below Rs.400/- and in the month of August it dropped even further to Rs. 350/- to Rs. 330/-.

And it’s a Richard Peiris Company.

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Yes, if this trends continues they can turn their group - nav to positive very quickly. I also agree that these are the kind of the shares that can run very quickly if the fancy comes.


You mentioned some good points when REXP makes profits. If one goes for long term, one needs to study the impact of what happens to REXP if rubber prices recover to over Rs 500. Is this a true recovery of REXP ? If certain yes, we can take long term position. Why am i saying this. If we take parent RICH for example, we can be confident that during good times and bad times it has the muscle to survive or recover. ( except during the quarter of plantation wage issues) . We have seen that over the years. Their diversification and expansion show growth possibilities . In my opinion we need to study those aspects with REXP if going for long term. In the past we seen soem companies that appear to recover but suddenly again turns negative.

Again, I am not taking anything way from you good post or REXP. I am just saying that going short term is one thing and long term is another with REXP. but as you said being a RICH company there is some security of decent management.

BTW have you looked at HEXP. Hasn't showed recent EPS power of REXP but it also has some speculative potential.

traderathome

traderathome
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
placed a BUY @7.70 on RICH this evening,hope this would be filled up by morning....... Very Happy

TARGET is open but in 2digit range, obviously Basketball

Regards
TAH

Rapaport

Rapaport
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Good discussion guys. Nice find!

I am sticking with the main group share - that is RICH, which is also having a 50%-100% upside potential. Their last 10 year performance is very pleasing.

Since Hariesha is talking about less liquidity in public hands, one other good share with potential is LFIN. There are around 70million shares issued and 94% owned by Top 20 shareholders, who are usually medium to long term investors. Other good shares with low liquidity DIMO, BFL, COLO - Not hot shares at the moment but can turn around in a big way if conditions are favourable.

The leasing industry may not do well this year but very soon we can have interest rates coming down, demand growth, stronger ruppee and even car taxes coming down. Also LFIN is very aggressive in its business and gives stiff competition with many branches.

Further analysis required and not a BUY signal. I am not trying to do propaganda but hope to educate new guys who have a good opportunity to research before the next bull run.

Cheers!

Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
@hariesha wrote:
Last two quarters REXP has performed extremely well when rubber prices were hovering around Rs.400/- to Rs. 460/- per Kg. Most of the current quarter, rubber prices remained below Rs.400/- and in the month of August it dropped even further to Rs. 350/- to Rs. 330/-.

See this news
Thailand to start cutting rubber exports from Oct.

BANGKOK
(Reuters): Top rubber producer Thailand will cut exports by 10 percent a month for six months from October, an industry official said on Monday, after agreeing with Indonesia and Malaysia to boost benchmark prices that are the lowest since late 2008.
“The government is authorised by law to control exports and has allocated fewer export quotas to companies that amount to a total drop of around 10 percent, or around 25,000 tonnes, per month,” Prapas Uernontat, president of the Thai Rubber Association, told Reuters.
Prapas said the government would review the export cut when it expires on March 31.
Thailand, Indonesia and Malaysia are the world’s top three rubber exporters, accounting for 70 percent of global rubber output, and all three agreed this month to cut exports by a total of 300,000 tonnes to shore up prices.
The prices of benchmark Thai smoked rubber sheet (RSS3) are currently around $2.95 per kg, a sharp drop from the record high of $6.40 per kg hit in February 2011 and the lowest since $1.10 per kg reached in late 2008.
Thailand’s Deputy Agriculture Minister Nattawut Saikuar is due to visit Jakarta this week for talks about other possible measures to support prices.
Traders said Indonesia and Malaysia had yet to announce any export cuts.
“At this moment, I don’t see any announcement from the government or from the rubber association about export restrictions. We can sell rubber at prices that we are satisfied with,” said a Jakarta-based trader.
“They could announce some measures later, but at this moment there is nothing,” added a trader in Malaysia.
In addition to export restrictions, Thailand’s government is implementing a scheme to buy rubber from farmers at above-market prices to help boost rural incomes.
The scheme, however, is making rubber too expensive for some exporters, who signed deals to sell at cheaper prices. Buyers wanted prices to fall to around $2.80 per kg, traders said.
“We can’t afford rubber at such high prices. We would suffer losses as we are committed to deals at prices cheaper than current levels. We may need to delay shipments eventually,” said a trader in Thailand’s Hat Yai rubber centre.
In Indonesia, traders were also seeking lower prices. Indonesian block rubber grade (SIR20) was offered at around $1.16-$1.20 per lb, but buyers traded at only $1.15 per lb. Only big dealers who had lower costs could meet deals, traders said.
http://www.ft.lk/2012/08/28/thailand-to-start-cutting-rubber-exports-from-oct/

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics

Good eye Rapaport. I see shares below that can gain 100-200% in a major bull run in the future. LFIN is growing at the rate of knots. The share holding proportions can make it run faster when it happens.

I see some interest back in DIMO. Think over 12000 shares got traded yesterday. BFL is under slow collection.


@Rapaport wrote:Good discussion guys. Nice find!

I am sticking with the main group share - that is RICH, which is also having a 50%-100% upside potential. Their last 10 year performance is very pleasing.

Since Hariesha is talking about less liquidity in public hands, one other good share with potential is LFIN. There are around 70million shares issued and 94% owned by Top 20 shareholders, who are usually medium to long term investors. Other good shares with low liquidity DIMO, BFL, COLO - Not hot shares at the moment but can turn around in a big way if conditions are favourable.

The leasing industry may not do well this year but very soon we can have interest rates coming down, demand growth, stronger ruppee and even car taxes coming down. Also LFIN is very aggressive in its business and gives stiff competition with many branches.

Further analysis required and not a BUY signal. I am not trying to do propaganda but hope to educate new guys who have a good opportunity to research before the next bull run.

Cheers!

Arena


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@ Hariesha

Your prediction for EPS 13 was exactly correct and you are simply great. now what is the next prediction we can have. I an little bit curious whether to sell or Hold.

I feel this will be a good counter with this strong earnings. Today one top 20holder sold ( Around 50,000 shares ) at 46.............

mark

mark
Expert
Expert
you great man hariesha.. cheers

i bought a one share at 29 and holding,i bought in hexp instead rexp thinking both can make a turnaround,finaly sold all at 32

btw there was many internal transfers done in Rexp from 30rs..So the players support was so helpful to rexp to reach 45 other than financials.

sahan8896


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@mark wrote:
btw there was many internal transfers done in Rexp from 30rs..So the players support was so helpful to rexp to reach 45 other than financials.
Aniwa mark. Very Happy

VALUEPICK

VALUEPICK
Expert
Expert
Do you like this now? When compare with other stocks in the same group what do you think about value?

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