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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » LALU VALUATION MORE THAN RS 105.00

LALU VALUATION MORE THAN RS 105.00

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1LALU VALUATION MORE THAN RS 105.00  Empty LALU VALUATION MORE THAN RS 105.00 Sun Apr 03, 2011 2:07 am

Gainer

Gainer
Associate Director - Equity Analytics
Associate Director - Equity Analytics
Dhammika’s offer for Lanka Aluminium "unreasonable’’

Both the Independent Advisor and the directors of Lanka Aluminium Industries PLC have tagged Mr. Dhammika Perera’s mandatory offer of Rs. 41.50 a share for approximately 66% of the company as unattractive. The offer is already closed and received only minimal acceptances.

The independent advice given by Acuity Partners utilizing three valuation methods concluded that the offer price "is not reasonable" as all the methods employed derived higher valuations than the offer price.

The price/book value based valuation placed the value per share at Rs.105.60, the discounted cash flow valuation placed it at Rs.117.07 and the price earnings valuation at Rs.101.61. Acuity also noted that the last traded market price on February 28 prior to their report was Rs.60.50.

Perera triggered the mandatory offer by acquiring 8.3% of Lanka Aluminium at the Rs.41.50 price on the CSE on January 24. He had previously owned 26.57% of the voting shares of the company and this acquisition raised his holding to 34.9% of the voting shares triggering the mandatory offer rule.

Subsequently, one week after he bought the 8.33%, Perera disposed 145,900 shares (0.06%) at prices between Rs.75 and Rs.79 reducing his current shareholding of the company to 33.84%.

The Independent Advisor‘s report describes Perera as a "well known prominent entrepreneur and investor with business interest in hydro power generation, manufacturing, hospitality, entertainment, banking and finance.’’

In addition to being the Chairman of LB Finance and Deputy Chairman of Royal Ceramics, he is on the boards of several quoted companies, the Sri Lanka Insurance Corporation, Nirmalapura Wind Power (Pvt) Ltd and Alutec Anodising & Machine Tools (Pvt) Ltd.

He is also Secretary to the Ministry of Transport and a director of the Strategic Enterprise Management Agency.

Thesundayisland.lk

2LALU VALUATION MORE THAN RS 105.00  Empty Re: LALU VALUATION MORE THAN RS 105.00 Sun Apr 03, 2011 7:50 am

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
It says here, The price/book value based valuation placed the value per share at Rs.105.60, the discounted cash flow valuation placed it at Rs.117.07 and the price earnings valuation at Rs.101.61.

Normally we go for PBV valuation for financial institutions, my opinion is earnings based (EPS) valuation is sufficient for most sectors.
See EPS based LALU analysis;

PAT after removing additional income sources;
31-03-2011 - 8.64 Mn (20% expected gain)
31-12-2010 - 7.2 Mn (Public Holding - 20.76%)
30-09-2010 - 12.2 Mn (Public Holding - 24.37%, Alchemy Heavy Metals sold out stake to D Perera 25.54%)
30-06-2010 - (7.43) Mn (Public Holding - 24.0%, D Perera 25.92%, PABC - 0.33%)

I assume coming qtr growth of 20% alone on profits due to favorable outlook on the industry though it could get hammered by competition, so this calculation based on this qtr profits as well;

Anticipated total yearly profits (with coming qtr Profits) = -7.43+12.2+7.2+8.64 = 20.61
No of Shares - 13.7Mn
EPS = 1.504

Manufacturing sector PE = 24.30;
Hence Sector PE Valuation = 24.30 * 1.504 = 36.55

Fair Share Valuation (30% discount to Sector PE) = EPS 1.504x PER 17.01 = Rs. 25.6/- level.

Share Price at the time of analysis = 55.9
Current Share price = 57.7

So this doesn't look so nice at all.. Take it to consideration the mandatory offer was made at 41.50 by DP, the offer seems above the earnings based valuation.
There could be something wrong.....So sometimes values may be too optimistic, nevertheless its D perera's company and those are high flying these days.. Even we saw LFIN had a momentum gain..

For your further analysis and inputs pls..

3LALU VALUATION MORE THAN RS 105.00  Empty Re: LALU VALUATION MORE THAN RS 105.00 Sun Apr 03, 2011 10:37 am

kuk83

kuk83
Manager - Equity Analytics
Manager - Equity Analytics
@Gainer wrote:

The price/book value based valuation placed the value per share at Rs.105.60, the discounted cash flow valuation placed it at Rs.117.07 and the price earnings valuation at Rs.101.61.


I cant understand how they came to this figures. Question Question
http://www.cse.lk/cmt/upload_report_file/674_1297164062613.12.2010pdf.pdf

Anybody have an idea ???

4LALU VALUATION MORE THAN RS 105.00  Empty Re: LALU VALUATION MORE THAN RS 105.00 Sun Apr 03, 2011 5:37 pm

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
[/quote]

I cant understand how they came to this figures. Question Question
http://www.cse.lk/cmt/upload_report_file/674_1297164062613.12.2010pdf.pdf

Anybody have an idea ???[/quote]

Even if we take the published nine months ended as @ 31-12-10 PAT of 14.32 (wihtout minority interest), annualizing it we arrive at a figure of 19.1.
Then we get a annualised EPS of 1.4;

This means on a fair valuation of - 23.8/- still lower than my expectations ;(

5LALU VALUATION MORE THAN RS 105.00  Empty Re: LALU VALUATION MORE THAN RS 105.00 Mon Apr 04, 2011 9:59 am

cse.alpha


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Good analysis by smallville

Even using more optimistic numbers, hard to defend independent advisor Acuity's valuations for LALU:

3Q-FY11 net profit of LALU was Rs9.1 mn, which gives 3Q EPS of Rs0.7
1-3Q-FY11 net profit of LALU was Rs14.3 mn, which gives 1-3Q EPS of Rs1.0

Annualising the more positive 3Q numbers (and automatically allowing for some growth), gives annual EPS target of Rs2.7 for FY12

What is a fair PER for this company though?

Sure, growth should improve due to increased construction activity, but competition is also rising - see recent moves by both HAYL and TILE group through PARQ. And the company is not a pure play on aluminium extrusions - its biggest revenue component is from tea ! Global aluminium prices is another unpredictable factor.

The sector PER may be 25.7x as per Acuity, the independent advisor, who have taken the sector forward PER at 21.4x (with 20% growth), but is this a correct benchmark? A more reasonable forward PER may be around 15x.

Using 15x on forward (optimistic) EPS of 2.7, gives a fair valuation of Rs40.5 per share - well below Acuity valuations, and even current price of Rs58

LALU Book value per share at 31/12/2010 = Rs30.9

But price to book value is not the best way to value this company, and using a sector price to book value of 3.2x as Acuity have done does not seem very useful.

Investors should check though if there is any potential for land revaluation gains - land and buildings of around Rs150 mn seem to have been revalued as at 31/03/2007 in LALU books, and even giving 50% upside to land and building value will only increase book value by around Rs6 per share to around Rs37/share.

But only 20,000 shares are needed to enter Top20 shareholder as at 31/12/10, so this is another illiquid share that can be manipulated - but note that even Dhammika Perera sold 145,900 LALU shares between Rs75-79.

6LALU VALUATION MORE THAN RS 105.00  Empty Re: LALU VALUATION MORE THAN RS 105.00 Tue Feb 17, 2015 4:31 am

sisira.wijeweera


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
[quote="Gainer"]Dhammika’s offer for Lanka Aluminium "unreasonable’’

Both the Independent Advisor and the directors of Lanka Aluminium Industries PLC have tagged Mr. Dhammika Perera’s mandatory offer of Rs. 41.50 a share for approximately 66% of the company as unattractive. The offer is already closed and received only minimal acceptances.

The independent advice given by Acuity Partners utilizing three valuation methods concluded that the offer price "is not reasonable" as all the methods employed derived higher valuations than the offer price.

The price/book value based valuation placed the value per share at Rs.105.60, the discounted cash flow valuation placed it at Rs.117.07 and the price earnings valuation at Rs.101.61. Acuity also noted that the last traded market price on February 28 prior to their report was Rs.60.50.

Perera triggered the mandatory offer by acquiring 8.3% of Lanka Aluminium at the Rs.41.50 price on the CSE on January 24. He had previously owned 26.57% of the voting shares of the company and this acquisition raised his holding to 34.9% of the voting shares triggering the mandatory offer rule.

Subsequently, one week after he bought the 8.33%, Perera disposed 145,900 shares (0.06%) at prices between Rs.75 and Rs.79 reducing his current shareholding of the company to 33.84%.

The Independent Advisor‘s report describes Perera as a "well known prominent entrepreneur and investor with business interest in hydro power generation, manufacturing, hospitality, entertainment, banking and finance.’’

In addition to being the Chairman of LB Finance and Deputy Chairman of Royal Ceramics, he is on the boards of several quoted companies, the Sri Lanka Insurance Corporation, Nirmalapura Wind Power (Pvt) Ltd and Alutec Anodising & Machine Tools (Pvt) Ltd.

He is also Secretary to the Ministry of Transport and a director of the Strategic Enterprise Management Agency.

Thesundayisland.lk
[/quote]

7LALU VALUATION MORE THAN RS 105.00  Empty Re: LALU VALUATION MORE THAN RS 105.00 Tue Feb 17, 2015 10:38 am

fireshelter

fireshelter
Associate Director - Equity Analytics
Associate Director - Equity Analytics
Very Happy Very Happy

8LALU VALUATION MORE THAN RS 105.00  Empty Re: LALU VALUATION MORE THAN RS 105.00 Tue Feb 17, 2015 12:16 pm

Gainer

Gainer
Associate Director - Equity Analytics
Associate Director - Equity Analytics
LALU currently current market value more +

9LALU VALUATION MORE THAN RS 105.00  Empty Re: LALU VALUATION MORE THAN RS 105.00 Tue Feb 17, 2015 12:46 pm

sisira.wijeweera


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
[quote="Gainer"]LALU currently current market value more +[/quote]

hi Gainer Currently how much Valuvetion
bounce

10LALU VALUATION MORE THAN RS 105.00  Empty Re: LALU VALUATION MORE THAN RS 105.00 Tue Feb 17, 2015 10:27 pm

Market.Watch.

Market.Watch.
Manager - Equity Analytics
Manager - Equity Analytics
LALU 90 plus...PARQ will follow.

11LALU VALUATION MORE THAN RS 105.00  Empty Re: LALU VALUATION MORE THAN RS 105.00 Tue Feb 17, 2015 11:08 pm

fireshelter

fireshelter
Associate Director - Equity Analytics
Associate Director - Equity Analytics
PARQ No need to recommend now all Know the value of this sockt

12LALU VALUATION MORE THAN RS 105.00  Empty Re: LALU VALUATION MORE THAN RS 105.00 Wed Feb 18, 2015 6:16 am

Harry82

Harry82
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
VFIN VALUATION MORE THAN RS 75.00

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