Very valid and good points regarding UML and DIMO. The 2 companies also have significant exposure to Commercial vehicle market which has tax benefits ( as of today).
UML equity portfolio will take time to reap benefits as they would have bought above current prices. Thanks to UML dividend , it helped to push it to Rs 100 from Rs 70.
There might be a DIMO dividend on the way next month or so. Below might help as info to DIMO lovers . Also they are looking at Marine services.
Diesel and Motor Engineering Plc (DIMO) has announced plans to invest
Rs. 5 billion over the next three years despite a tough environment to
further bolster its business which enjoyed a windfall.
“We are targeting investments totalling Rs. 5 billion over the three
years ending 2013/14,” DIMO Chairman and Managing Director Ranjith
Pandithage revealed in the company’s 2012 Annual Report released last
Giving a sneak preview of some of the major long term investments, he
said that starting from Matara, DIMO is introducing a new experience in
vehicle tyre sales and service under the banner ‘Tyre Plus’.
“Work is in progress on the construction of the TATA and Mercedes-Benz
Centres; sales and service centres in Jaffna, Trincomalee and
Kurunegala; and the DIMO Technical Institute in Sooriyawewa,” Pandithage
In FY12 the company acquired 186 perches of land for Rs. 301.6 million
in close proximity to the proposed Mercedes Centre to develop a showroom
and a workshop dedicated to Tata Vehicles.
In addition, two lands were purchased to construct a showroom and a
workshop at Kurunegala and Jaffna. The construction work is scheduled to
commence during the current financial year.
The Bosch Centre at the Head Office premises and the new showroom and workshop at Anuradhapura were completed during FY12.
During the financial year ended on 31 March 2012, DIMO established DIMO
Customer Contact Points in many parts of the country. The Siyambalape
workshop facility was expanded and the state-of-the-art Bosch Centre
which accommodates all popular vehicle makes and modern diesel injection
systems was commissioned.
These planned new initiatives and investments are expected to
strengthen DIMO’s business which saw a major leap due to favourable
tariff though fortunes have lessened following the upward revision from
early this year.
Pandithage told shareholders that riding on the favourable
macroeconomic environment and duty regime of the previous year, DIMO saw
an all time best in FY12. DIMO Group’s gross turnover grew by 36% to
Rs. 39.9 billion and net profit attributable to equity holders rose by
27% to Rs. 2.69 billion. Group after-tax profit amounted to Rs. 3.7
billion, up by 9% over FY11.
“In a nutshell, it was an excellent performance all round,” Chairman Pandithage emphasised.
Bringing DIMO shareholders up to speed on the company’s strategic
thinking for the future, Pandithage said the business cycle was getting
shorter. “While we conclude another year with outstanding results, we
are entering an era of challenge,” he added.
He said that the company was mindful of the two main factors that
contributed to phenomenal growth in 2010/11; the decline in interest
rates and the reduction of duty on imported motor vehicles. A relatively
stable exchange rate that prevailed during the first three quarters
also favoured this scenario.
“We were well positioned to benefit from such an economic climate. However, there was also a downside,” he said.
The resulting surge in imports and increased consumption led to the
overheating of the economy in the second half of 2011. In response to
the widening deficit in the balance of payments the Central Bank of Sri
Lanka intervened with corrective measures that included the depreciation
of the Rupee, a hike in policy rates and a curb on credit expansion by
financial institutions. March 2012 saw an upward revision of the duty
“While these may well be early warning signals, they also serve to
prepare us to face the future with grit and determination,” the DIMO
According to him, the current financial year (FY12/13) will be one that will test DIMO’s mettle.
“We have experienced difficult times in our long history. We look back
on them with pride and satisfaction, having overcome the hardships while
holding true to the DIMO ethos. The real challenge during such periods
is to shield our customers and employees from the adverse situations
arising from the business cycle,” the Chairman said.
“Our customers’ businesses and livelihoods are dependent on our
unfailing service. The quality of life of the families that are
dependent on our employees cannot be compromised. As such, DIMO has to
be consistent in its delivery of value to them. They in turn will drive
DIMO’s value creation. We work simultaneously to keep our principals’
brands alive. Thus, while grappling with the demands that are before us,
we will not yield to short-term measures that would compromise our
ongoing commitment to our stakeholders,” Pandithage assured in the
Chairman’s Review of DIMO’s 2012 Annual Report.
He reiterated on DIMO’s eight strategic imperatives as they form the
basis for all plans and actions; and naturally the structure of the
“Our six forms of non-financial or intellectual capital – customers,
employees, business partners, regulatory authorities, community and
concern for the environment – are in dynamic interaction to create
financial value for DIMO, our seventh form of capital. That’s only one
side of the coin in economic value creation. The other side is the value
that DIMO delivers to each of the six forms of intellectual capital.
Encompassing the seven forms of capital is our business domain or
portfolio mix – and managing this is our eighth strategic imperative,”
Focusing on the eighth imperative, Pandithage explained that it was
prudent to consider diversity when selecting an investment portfolio in
order to reduce the risk. “The individual components of the portfolio
should bring about synergies. They should also build on the strengths of
the Group and forge new pathways for sustainable development and
The Chairman acknowledged DIMO’s heavy concentration in the motor
vehicles segment – high dependence on a select few, albeit prestigious,
principals and all five business segments of Dimo, being
import-dependent, are exposed to the vagaries of the exchange rate and
the tariff structure. “Both can change overnight, as we have seen in the
recent past – with positive and negative implications,” he said adding,
“These prompt us to further our thinking.”
Whilst the Group achieved its budgeted profit before tax in FY12, the
second half of the year witnessed some macro economic developments that
adversely affected the vehicles segment.
Among the adverse factors are increases in interest rates, depreciation
of the rupee and duty increases in passenger vehicles. Further
continuation of these negative factors is likely to hinder growth.
However, investments made in building capacity and competencies could
partially off-set these adverse effects. In this background, the budgets prepared for the financial year
2012/13, does not envisage a substantial growth in profits, although a
stable performance is expected, as per DIMO’s FY12 Annual Report.
“DIMO has withstood the test of time. Good times and bad. The golden
thread that kept the fabric of our enterprise together through its
73-year history was, and is, our reputation. We call it institutional
integrity in accounting for our intellectual capital. This is our
mainstay in an ever changing business world,” Chairman Pandithage told
In keeping with the performance of the company, the Board has
recommended further rewarding of shareholders with a final dividend of
Rs. 27.50 per share, which inclusive of the two previous interim
dividends, amounts to a total dividend payout of Rs. 40 per share for
the year. In FY11, it was Rs. 61 per share.
During the year DIMO’s Group assets topped the Rs. 15 billion mark to
finish FY12 at Rs. 15.5 billion from Rs. 10.9 billion a year earlier
whilst at company level it was Rs. 14.7 billion, up from Rs. 10.5
billion in FY11.
The Board of Directors of DIMO Plc comprises A.R. Pandithage (Chairman
and Managing Director), A.G. Pandithage (CEO), A.N. Algama, S.C. Algama,
A.M. Pandithage, B.C.S.A.P. Gooneratne, R.C. Weerawardane, Dr. H.
Cabral, Prof. U.P. Liyanage, T.G.H. Peries and R. Seevaratnam.
@The Alchemist wrote:
I feel this is not the real time to touch motor sector.Tax ll not be revise in near future, there fore whether they can perform well in near future is questionable.I ll be not surprise if these companies come with negative EPS in December quarter. This is just what i feel.
In 2010/2011 - UML reported EPS Rs 13.43.
In 2011/2012 - UML reported EPS Rs 33.83
I read somewhere, in the past 2 years, UML has sold over 20,000 vehicles (all types). these will require servicing, repairs and spare parts in the comming quaters. Furthermore, as mentioned, Montero permit sales will continue.
In FY 2011/2012, Out of total Rs 20 Bill Group Revenue, 75 % or Rs 15 Bill is on new car sales and Balance Rs 5 Bill on spares, service, repairs, lubricants and other car products, tyres, motor cycles.
On the Expenses side, Rs 1 Bill Admin and Rs 300 Mill Distribution (can we presume majority on new car sales ? )
now the question is out of the Rs 1 Bill Admin, how much is fixed and variable and dependent on new car sales ?
In 1st quater 2012 ending June, EPS was Rs 14.40. we obviously cannot expect them to repeat this performance for all future quaters. Therefore, we must first decide what P/E we are willing to pay for good asset rich motor stocks like UML, DIMO and COLO. If say for eg, we decide 5 times is a safe bet, for UML at current price of Rs 100, works out to EPS 20.Since they have already made Rs 14.40 in 1st quarter, future 3 Q's combined need to be only Rs 5.60
Alternatively, they have to average Rs 5 EPS per quater from now onwards,
They are also a property rich company as reflected in the NAV. 300 Perches in Lipton Circus Prime Property. also i think they have property in Hyde Park Corner, Urogodawatte etc. Last year, they have also invested Rs 500 Million in a Blue Chip share portfolio like JKH, COMB Bank, DFCC, NDB, DIMO, etc
I will be not be surprised if UML posts EPS between Rs 5-7 for quater ending 30th Sep. This would put half Year EPS around Rs 20. anything more would be an Earnings Surprise. less than Rs 5 would be a reality check.
I see many buyers and sellers around Rs 100 nowadays. UML is a good, solid speculative share similiar to DIMO but DIMO has Rs 5 Billion 3 year funding needs to finance their 3 Outstation service centers in Kurunegala, Matara and somewhere else.