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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Next Bull .... 2014 ?

Next Bull .... 2014 ?

Go down  Message [Page 1 of 1]

sriranga

sriranga
Co-Admin
NDB Stockbrokers in special report says amidst gradual revival, two-year bull run on the cards; valuations attractive; corporate profit growth to bounce back in 2013 in resilient economy

NDB Stockbrokers in a special research report that is likely to move investor sentiments for the better is upbeat of a revival in the currently-bearish stock market as well as a rebound in corporate earnings from next year onwards.

Boldly titled ‘Emerging Bull in the World of Bears,’ the NDBS stated: “In view of the stabilising economic conditions, we remain positive on the profit growth prospects over the next two years.

While we estimate that currently the overall Sri Lankan market is trading at a forward P/E of 11x, we expect it to increase to 15x with the improvement in sentiment over the next two years.”

Recalling that in its previous review released in May a forecast was made that the bull run would commence from the latter part of 2012, NDBS said since then the ASI has gained 6% (from 5,048 to 5,331).

In line with the positive factors, “we maintain our ASPI target of 9,000 by end of 2014. However, the sentiment is likely to improve gradually and pick up steam by 2013H2 in view of the prevailing uncertainty in global economies and high domestic interest rates.”

Its latest report also predicted corporate profit growth to bounce back from 2013.

After two years of exceptional growth (of 75% and 25% respectively) in corporate profits, 2012 is seemingly a year of consolidation with profits remaining flat from previous year up to September.

NDBS expects the trend to continue till the rest of the year and accordingly revised downwards its previous profit growth expectation of 10% for 2012. However sectors such as banking, hotel, telecommunication and food and beverage have recorded appreciable profit growth, it noted.

“We maintain our expectation that the profits would bounce back in 2013 and 2014, to record a growth of 20% and 15% respectively. This is in view of the improving economic stability resulting from the measures taken in 2012H1,” NDBS said.

Emphasising on attractive valuations, the broking firm said Sri Lankan equities were attractively priced compared to regional emerging/frontier markets.

“While according to our estimates the Sri Lankan stocks are trading at a forward P/E of 11x, the regional markets are trading at a forward P/E of 12.8x. With the expected improvement in profitability and economic stability over the next two years, we maintain our expectation that the forward P/E would reach 15x with improving investor sentiment,” NDBS pointed out.

It implied that attractive valuations as well as future upside in relation to regional peers were key reasons for record net foreign inflow into Sri Lankan equities so far this year.

“The foreign investors have been bullish on Sri Lankan equities since early 2012, with net foreign inflows to the stock market reaching Rs. 33 billion up to October,” NDBS said.

As of last week, as reported by the Daily FT, the net inflow had crossed the Rs. 37 billion mark. This is in comparison to net foreign outflows of Rs. 26 billion and Rs. 19 billion in 2010 and 2011 respectively.

“This indicates that the value investors perceive upside potential in Sri Lankan equities in view of positive policy measures taken in 2012 and the prospects of impressive growth over the next few years,” NDBS said.

Noting that demand for equities was quietly accumulating whilst supply was slowing down, the broking firm said Initial Public Offerings (IPOs) and secondary equity issues (rights issues, etc.) by listed companies had slowed down in 2012 compared to 2010 and 2011.

As a result, NDBS said the investable funds within the economy have been accumulating and have been directed to short-term fixed income instruments to a large extent, in view of the relatively-high interest rates. In addition, with the increase in interest rates and triggering of margin calls, the utilisation of margin trading (leverage) would have reduced significantly over the last 12 months.

“We feel the equity selling pressure has been reducing substantially over the last 12 months. Simultaneously, the investable funds have been accumulating, which could flow into the equity market if the interest rates come down (including an increase in margin trading activity) or any other event occurs that could boost the sentiment of the equity market,” NDBS added.
http://www.ft.lk/2012/12/10/cse-emerging-bull-in-the-world-of-bears/

http://sharemarket-srilanka.blogspot.co.uk/

2Next Bull .... 2014 ?  Empty Next Bull .... 2014 ? Mon Dec 10, 2012 9:51 am

Arena


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
http://www.ft.lk/2012/12/10/cse-emerging-bull-in-the-world-of-bears/

This is a general and simple analysis backed by some personal conclusions

2009 Bull
In 2009 ASI started to outperform all other regional Markets in the world due to a very basic and clear reason, which was the war factor. This was the first time i saw a Bull market and there were 1000's of new comers who entered the market.
Then suddenly Bull became a bear, all the new comers were very lucky that they saw the Dark side of the market within two years of trading. This cycle had a good hike and a great deep so the people who followed the investment blindly vanished within no time. (Personally I made a considerable loss but purely due to PCH and CSD profits, still I am surviving)

2014 on wards

When it’s come to the present situation, ASI at 5300-5400 level And market PE at around 11-12 if I am not mistaken.
I personally believe ASI should trade at least at PE of 18 or above due to the strong future prospect. It is proven by foreigners being the net buyer for the entire year with very minimal selling. Even the share trades at PE of 90 (Like GM traded In 1990 under world best CEO Mr. Welch) It doesn’t matter if there is a good prospect.
When we take all these factors in to account, CSE is trading at a huge bargain at the movement so I would like to predict at least a stable chart for this bear December Season. Rather will see a good up trend beating all historic patterns created for December.
When it was at 4800 I personally bought Lot of shares. I sold those at 5600 level and entered in to another set of shares and now at a considerable Loss. “Losing is a part of the game but not the entire game”.
I may badly wrong so this is not a buy or sell recommendation. “I am Still Learning so I don’t think anybody can earn from my analysis “
All the best and comments are well come as usual.


3Next Bull .... 2014 ?  Empty Re: Next Bull .... 2014 ? Mon Dec 10, 2012 11:46 am

salt

salt
Vice President - Equity Analytics
Vice President - Equity Analytics
Sri Lanka’s PER 11-12 ( if you are right) are in line with other regional markets. Contrary to your belief , Sri Lanka does NOT offer extraordinary growth prospects when it comes to regional comparison. Rather , Sri Lanka can be put in a group of counties such as Myanmar & Vietnam in term of prospective growth in Asian ring.

Hence, expectation of 18 PER is unrealistic. However, as we can draw comparison elsewhere, when economy is growing at 8%per annum with inflation of 7-8%, market can record 15% -20% nominal earning growth. This with slight expansion of PER from the current level to 12-14 range, could give you a return of 20% to 25%.

(You have to watch political & other risk factors too, though I am not that much concern as of now)

4Next Bull .... 2014 ?  Empty Re: Next Bull .... 2014 ? Mon Dec 10, 2012 1:23 pm

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Just note that when overall market goes up by 20% some shares can go up double due to their value.


@salt wrote:Sri Lanka’s PER 11-12 ( if you are right) are in line with other regional markets. Contrary to your belief , Sri Lanka does NOT offer extraordinary growth prospects when it comes to regional comparison. Rather , Sri Lanka can be put in a group of counties such as Myanmar & Vietnam in term of prospective growth in Asian ring.

Hence, expectation of 18 PER is unrealistic. However, as we can draw comparison elsewhere, when economy is growing at 8%per annum with inflation of 7-8%, market can record 15% -20% nominal earning growth. This with slight expansion of PER from the current level to 12-14 range, could give you a return of 20% to 25%.

(You have to watch political & other risk factors too, though I am not that much concern as of now)

5Next Bull .... 2014 ?  Empty Re: Next Bull .... 2014 ? Mon Dec 10, 2012 2:01 pm

DUWI


Senior Equity Analytic
Senior Equity Analytic
For the PER to rise to 18, the risk free yield would have to fall below 5%. This is unlikely for any sustainable period as Sri Lanka's inflation is highly volatile and has hitherto risen to highs of 20-25% and fallen to lows of 5-7% in very short time frames due mainly to structural (high Government and personal consumption) as well as cyclical (i.e. weather) factors.

6Next Bull .... 2014 ?  Empty Re: Next Bull .... 2014 ? Mon Dec 10, 2012 2:31 pm

Arena


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Dear DUWI and Salt ,

Appreciate your comments and accept the facts given. U all know how CSE traded at PE of 27.At that time our risk free rate was not at 5%-7%.

If i am not mistaken Russia still trailing at 30+............
What is the country we see a constant growth for an open market. We just see sharp Bulls and bears.

7Next Bull .... 2014 ?  Empty Re: Next Bull .... 2014 ? Mon Dec 10, 2012 4:17 pm

salt

salt
Vice President - Equity Analytics
Vice President - Equity Analytics
Amal Mudunkotuwa wrote:Dear DUWI and Salt ,

Appreciate your comments and accept the facts given. U all know how CSE traded at PE of 27.At that time our risk free rate was not at 5%-7%.

If i am not mistaken Russia still trailing at 30+............
What is the country we see a constant growth for an open market. We just see sharp Bulls and bears.


Good for thoughts... as a matter of facts, we all know that it (PER 27) was the sentimental effect. You can do reasonable prediction.... but anything can happens... market can go to 20K or come down to 1K if we think this way.
( As i know Russia trades 6x-7x PER)

8Next Bull .... 2014 ?  Empty Re: Next Bull .... 2014 ? Mon Dec 10, 2012 5:06 pm

Arena


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Sorry it may not be Russia..............

What my point is if companies can increase their profits automatically PE get neutral. And we saw a good Rev. and profits figures from last quarter statements. Any way i am always quite optimistic but you people make it realistic.

Thanks




9Next Bull .... 2014 ?  Empty Re: Next Bull .... 2014 ? Tue Dec 11, 2012 9:07 am

wiki


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Current market is very dull. I mean number of treads per day and the turn over.

I dont know whether all the markets around the world are dull during a bear phase. what was the market activity during the war time. Can someone let us know about the activity of the market during those time.

I dont want a bull run as we experienced after the war.. but there should to be sufficient room for to trade. What I see is very low level of liquidity.

10Next Bull .... 2014 ?  Empty Re: Next Bull .... 2014 ? Tue Dec 11, 2012 10:00 am

sriranga

sriranga
Co-Admin
@wiki wrote:Current market is very dull. I mean number of treads per day and the turn over.

I dont know whether all the markets around the world are dull during a bear phase. what was the market activity during the war time. Can someone let us know about the activity of the market during those time.

I dont want a bull run as we experienced after the war.. but there should to be sufficient room for to trade. What I see is very low level of liquidity.


Here are some figures of No of Trades and Turnover for the year.

Next Bull .... 2014 ?  200610

Next Bull .... 2014 ?  200912

Next Bull .... 2014 ?  201112
Source: CSE Annual reports

http://sharemarket-srilanka.blogspot.co.uk/

11Next Bull .... 2014 ?  Empty Re: Next Bull .... 2014 ? Thu Dec 13, 2012 6:16 am

wiki


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Thanks

12Next Bull .... 2014 ?  Empty Re: Next Bull .... 2014 ? Thu Dec 13, 2012 11:57 am

Arena


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
seems You all have reacted to my post. Thanks for making a bull run......

Very Happy

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