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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Shares that can give 100 % returns in 2012

Shares that can give 100 % returns in 2012

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hariesha


Vice President - Equity Analytics
Vice President - Equity Analytics
Richard Peris Exports
--------------------


* 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 the 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.

These favorable factors will remain in the foreseeable future.

* REXP was bottomed out during April-June period. Current global economic conditions are highly favorable
for the company's operations and quarter by quarter company is releasing impressive results. During March
2012 quarter REXP was stable on Rs.18/- levels against high market volatility. In June 2012 quarter most of
the days it was hovering at Rs.20/- levels.

During last month ASI touched 6000 and gone down to 5500 levels. But share price of REXP was steady, as
there was ample demand for the share. It was hovering around Rs. 30/- level after hitting a high of
Rs.34/-. So with impressive results for the quarter ended 30th Sep. 2012, it will try to find a new price
range for the share. Unless market falls drastically, it will remain above the current price. But it is
extremely difficult to collect a sizable quantity at Rs.32/- levels.

* 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/-. Now no one seem to be selling, and no
need either as fundamental value of the counter is improving in every quarter.

If company managed to maintain the same profitability as in first half of 2012, it will end the year with an
EPS of Rs.15/- to Rs.18/-. At current share price of Rs.32.10 share trades at a PER of 2X, making it the
lowest PER ratio in CSE. Another factor to consider is, pending re-valuation of assets. REXP has not done
any asset re-valuations recently.

When it was at Rs.18/- levels, I made the first recommendation under the heading "Shares that can give
100% returns in 2012". Now REXP is at Rs.32 after giving a 77% return in just six months. With the latest results share trades @ a PER ratio of 2X.

Again I am publishing this revised report under the same heading.

Please refer the updated report from bellow link.

http://research.srilankaequity.com/t579-shares-that-can-give-100-returns-in-2012#667

PGCR


Equity Analytic
Equity Analytic
Hope you are not the fifth largest shareholder of the Company. Surprised

5 Mr.H.A. Pieris 117,533 1.05%

If it is the case be frank enough to disclose it.

hariesha


Vice President - Equity Analytics
Vice President - Equity Analytics
Hay.. Don’t try to figure out people. H A Pieris is Singer CEO, not me.

Almost all major holdings in this share are seemed to be medium term (six months to one year from now). As commodity prices are in a downward trend, prospects for companies like REXP are high. I think most investors are enjoying capital appreciation without booking profits as it gives a reliable share for leveraging purposes.

When I made my 3rd recommendation in this forum few weeks back it was trading on a PER of 3X. But now even at Rs.35/-, it’s bellow 3X.




CSEStockWatch


Senior Equity Analytic
Senior Equity Analytic
In my understanding, rubber prices are at bottom and Rs against USD at the peak. What will happen to the bottom line of REXP when rubber price is increased and Rs appreciate against USD?.

hariesha


Vice President - Equity Analytics
Vice President - Equity Analytics
I agree with you about Rs/USD peak. But that does not mean Rs. will appreciate to previous levels. Most analysts predict it will be in the range of Rs. 125-127 to the USD.

With regards to rubber prices, it will remain around current levels or low. We have already gone into one half months in the 3rd quarter of FY 2012/13. Average rubber prices have dropped by 8% during this period. Rupee has appreciated by 1.9% during this period.

A drastic increase of rubber prices is highly unlikely due to following reasons.

1. 2012 will a record year for rubber production in the world. As demand got slowed due economic slowdown, there will be a surplus.

2. If you look at latest economic news, a major rubber consumer Japan is entering into a mild recession.

3. Oil prices are falling making substitute for natural rubber more cheaper.

4. Sri Lankan government is discouraging raw rubber exports, making raw rubber cheaper in local market.

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