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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » SHL is too risky

SHL is too risky

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1SHL is too risky Empty SHL is too risky Sun Dec 23, 2012 10:58 pm

dineshfernando


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
SHL is becoming very dangerous. The IPO price was Rs.28/= but the price is no way justifiable when you look at their earnings. They basically cheated the investors by forecasting very attractive future earnings.

The loans that SHL is going to obtain from IFC is in US$. I personally feel this cause a huge risk. When they repay the loan, a rupee would have depreciated to Rs170/= to a US$.

It's up to you to decide whether you want to invest in SHL which has huge debt and low earnings. Day-by-day their debts are increasing. There are plenty of attractive companies with less debt and attractive earnings in CSE.

2SHL is too risky Empty Re: SHL is too risky Sun Dec 23, 2012 11:32 pm

Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
@dineshfernando wrote:SHL is becoming very dangerous. The IPO price was Rs.28/= but the price is no way justifiable when you look at their earnings. They basically cheated the investors by forecasting very attractive future earnings.

The loans that SHL is going to obtain from IFC is in US$. I personally feel this cause a huge risk. When they repay the loan, a rupee would have depreciated to Rs170/= to a US$.

It's up to you to decide whether you want to invest in SHL which has huge debt and low earnings. Day-by-day their debts are increasing. There are plenty of attractive companies with less debt and attractive earnings in CSE.
Another vanik coming to my memory.

3SHL is too risky Empty Re: SHL is too risky Mon Dec 24, 2012 12:40 am

salt

salt
Vice President - Equity Analytics
Vice President - Equity Analytics
Dinesh,
It looks like that the quality of their portfolio is improving with restructuring of massive amount of debt on the balance sheet. Further, it should be taken as positive signal that reputed institutions like IFC, DEG & FMO are tied up with them. Dollar borrowing is not a problem as long as they have dollar denominated earnings ( such as Movenpick hotels)

None of local analyst noticed these issues in advance and everybody recommended it at Rs 28.00. It goes without saying that it’s worth at current price if it worth at Rs 28.00 per share as the risk has subdued much now. They have taken huge overhauling at the group level in order to align the shareholding in more rational way. Hope things will be much better in the future.

4SHL is too risky Empty Re: SHL is too risky Mon Dec 24, 2012 8:47 am

Fresher


Moderator
Moderator
There was a budget proposal that companies can borrow upto $10mn without CBSL approval and the govt will bear the exchange rate risk right? Does this apply to this?

5SHL is too risky Empty Re: SHL is too risky Mon Dec 24, 2012 10:14 am

Arena


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

I am not a analyst but i Strongly asked all my friends to not to participate this crap IPO. Some employees also didnt Subscribe due to my small request.

U dont want an analytical knowledge to understand SHL IPO. It was that much overvalued. Only thing some Brokers from JK ect promoted heavily purely due to personal agendas.



Last edited by Arena on Mon Dec 24, 2012 11:15 am; edited 1 time in total

6SHL is too risky Empty Re: SHL is too risky Mon Dec 24, 2012 10:57 am

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
YEs I whould not called this company crap and the price has come down 60% from the very much overvalued IPO. So now to see how they perform in the coming quarters.

But , we all have to agree that IPO was very much overvalued and brokers blew this share up with far from correct forecasts.



@Arena wrote:Dear Salt ,

I am not a analyst but i Strongly ask all my friends to not to participate this crap IPO. Some employees also didnt Subscribe due to my small request.

U dont want an analytical knowledge to understand SHL IPO. It was that much overvalued. Only thing some Brokers from JK ect promoted heavily purely due to personal agendas.

7SHL is too risky Empty Re: SHL is too risky Mon Dec 24, 2012 11:07 am

Arena


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@ npp.

I think that special Gov. Facility is available for 2 banks. Not for all individual transactions. It is sure that $ loans carry a very low interest rate. Should be below 10% for sure. SHL has a great synergy value with Asiri and AAIC. This is what Mr. HJ wanted when he was the owner for both Apello and Sri Lanka Insurance.

As long as Mr. Pathirage alive, We can see this company is running. But if some thing goes wrong with him, that will be the end of all these Subsidiaries since he runs one man show at all levels. That is the 2nd risk of holding SHL other than the Debt Issue.

He is like the Local Richard Brandson. There was an article which says that the end of virgin group will start with the end of the owner. Which can be applicable for SHL as well. But Lever brothers also a family company when it was started.

We need to wait and respect these risk takers who always add the maximum value to the society by sacrificing more than 18 hours per day. And if SHL is lucky enough we will see another Good JKH type company in 15 to 20 years time.


8SHL is too risky Empty Re: SHL is too risky Mon Dec 24, 2012 11:07 am

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
When this was in IPO stage many of us opposed the pricing due to many discussed reasons.
It was argued, as to how, a higher price such as 28 rupees per share was decided when their earnings suggested below 15. So many of us have avoided footing their bills.
But some poor souls went ahead and participated just for the name "softlogic". In fact when Mr. Pathirage was buying back shares many again argued that its a good sign. But he never managed to keep the momentum raised know?

This is a clear and a classic example of failure to impress investors...

9SHL is too risky Empty Re: SHL is too risky Mon Dec 24, 2012 9:33 pm

WildBear


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
SHL IPO was probably the most horrible one in recent history. However despite all argurment, we saw significant foreign interest in to SHL group via Equity,Debt And Management agreements such as
- Foreign fund Actis group in to Asiri Hospital group.
-Above debt agreements with reputed financial bodies, they might not give loans for rottened companies.
-2 Europian funds in to Asian Alliance- I think this move will significantly reduce their high cost borrowings which eroded the balance sheet of last couple of quarters.
-Swiss hotel brand Movenpick and another asian brand Centara agreed to manage their hotels.
-Mr Pathirage hinted a possible private placement for their retail stores in near future
with a foreign business partner

It's worth to monitor this share in next few quarters especially where interest rates are on downward trend.












10SHL is too risky Empty Re: SHL is too risky Tue Dec 25, 2012 12:07 pm

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@WildBear wrote:SHL IPO was probably the most horrible one in recent history. However despite all argurment, we saw significant foreign interest in to SHL group via Equity,Debt And Management agreements such as
- Foreign fund Actis group in to Asiri Hospital group.
-Above debt agreements with reputed financial bodies, they might not give loans for rottened companies.
-2 Europian funds in to Asian Alliance- I think this move will significantly reduce their high cost borrowings which eroded the balance sheet of last couple of quarters.
-Swiss hotel brand Movenpick and another asian brand Centara agreed to manage their hotels.
-Mr Pathirage hinted a possible private placement for their retail stores in near future
with a foreign business partner

It's worth to monitor this share in next few quarters especially where interest rates are on downward trend.


Surely financial support will not be provided for any rotten company and foreigners may not be interested too.. However, I think the image Softlogic had at pre-IPO stage was somewhat deteriorated post-IPO with the pricing structure and the attempt of Mr. Pathirage to justify such a high price.
But there are other fish to fry than looking at this know?

11SHL is too risky Empty Re: SHL is too risky Tue Dec 25, 2012 1:11 pm

WildBear


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@smallville wrote:
@WildBear wrote:SHL IPO was probably the most horrible one in recent history. However despite all argurment, we saw significant foreign interest in to SHL group via Equity,Debt And Management agreements such as
- Foreign fund Actis group in to Asiri Hospital group.
-Above debt agreements with reputed financial bodies, they might not give loans for rottened companies.
-2 Europian funds in to Asian Alliance- I think this move will significantly reduce their high cost borrowings which eroded the balance sheet of last couple of quarters.
-Swiss hotel brand Movenpick and another asian brand Centara agreed to manage their hotels.
-Mr Pathirage hinted a possible private placement for their retail stores in near future
with a foreign business partner

It's worth to monitor this share in next few quarters especially where interest rates are on downward trend.


Surely financial support will not be provided for any rotten company and foreigners may not be interested too.. However, I think the image Softlogic had at pre-IPO stage was somewhat deteriorated post-IPO with the pricing structure and the attempt of Mr. Pathirage to justify such a high price.
But there are other fish to fry than looking at this know?

Absolutely Yes, I'm suggesting only to monitor their balance sheet in coming quarters to check whether any favorable improvement due to restructuring,low interest environment and other factors. I shall buy this if this further drop below 8/= Very Happy . However SHL is trading around it's NAV now, but we can find plenty of other stocks which are trading at steep discount to their NAV and attractive P/E ratios than SHL.

12SHL is too risky Empty Re: SHL is too risky Tue Dec 25, 2012 1:19 pm

WildBear


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Suddenly I found this article on SHL, by CT smith.

http://www.ft.lk/2012/12/25/softlogic-holdings-fy14-profit-forecast-revised-upwards-by-22/

13SHL is too risky Empty Re: SHL is too risky Tue Dec 25, 2012 11:38 pm

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@WildBear wrote:
I shall buy this if this further drop below 8/= Very Happy .

Hats off friend.. U got the pricing correct Wink
Sometime back I also suggested to buy this ard 10..

But technically this has shown a double bottom in August and climbed to 12 before falling to 10.
Sometimes it may not come to 8. It can also stay ard 10 - 10.50 in coming days.

Not a bad pick technically but doesn't look promising to me as an investment at this time.



14SHL is too risky Empty Re: SHL is too risky Wed Dec 26, 2012 1:29 am

Chinwi

Chinwi
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@Arena wrote:@ npp.

I think that special Gov. Facility is available for 2 banks. Not for all individual transactions. It is sure that $ loans carry a very low interest rate. Should be below 10% for sure. SHL has a great synergy value with Asiri and AAIC. This is what Mr. HJ wanted when he was the owner for both Apello and Sri Lanka Insurance.

As long as Mr. Pathirage alive, We can see this company is running. But if some thing goes wrong with him, that will be the end of all these Subsidiaries since he runs one man show at all levels. That is the 2nd risk of holding SHL other than the Debt Issue.

He is like the Local Richard Brandson. There was an article which says that the end of virgin group will start with the end of the owner. Which can be applicable for SHL as well. But Lever brothers also a family company when it was started.

We need to wait and respect these risk takers who always add the maximum value to the society by sacrificing more than 18 hours per day. And if SHL is lucky enough we will see another Good JKH type company in 15 to 20 years time.




Very well said.

Most of us are not comfortable about SHL at the moment. (Actually since IPO )
I was to take a risk and buy recently. It never happened.

As someone said, it reminds us Vanik. Again , if they gradually escape from this self inflicted high debt scenario SHL will appear as another JKH like conglomerate, as you said.

If my memory is still good, COMB was @ 17/- and JKH was @ around 20/- or 25/- and SAMP was @ 8/- when we left high school. Of course , with no debt like this.

15SHL is too risky Empty Re: SHL is too risky Wed Dec 26, 2012 10:35 am

Arena


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@ Chinwi.....

Given old prices force us to go long term. Please tell us the year also but it will tell your age as well.....ha ha

I would recommend SUN for any long term investor......It looks promising and well transparent and also very well diversified.........

16SHL is too risky Empty Re: SHL is too risky Wed Dec 26, 2012 11:25 am

Zero1


Equity Analytic
Equity Analytic
hmmm

17SHL is too risky Empty Re: SHL is too risky Wed Dec 26, 2012 12:02 pm

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
@Arena wrote:
I would recommend SUN for any long term investor......It looks promising and well transparent and also very well diversified.........

How would you compare RICH vs SUN according to your opinion.

18SHL is too risky Empty Re: SHL is too risky Wed Dec 26, 2012 4:27 pm

Chinwi

Chinwi
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@Arena wrote:@ Chinwi.....

Given old prices force us to go long term. Please tell us the year also but it will tell your age as well.....ha ha

I would recommend SUN for any long term investor......It looks promising and well transparent and also very well diversified.........

I think my comment should be corrected a bit.

SAMP was offered @ 8/- ( IPO ) in 1985. In 1986 it was @ 20/- and then came down to 10/- before climbing to 60/- within 1 or 2 years.

For JKH it should be after 1986 because that is the year they came in to the stock market.

I am not sure about COMB, I think in around 1976. It was listed in 1970.

---
About SUN:
I invested in SUN few years ago because it was looking good, fundamentally. Dropped later due to its performances and behavior in the market. Thank you for mentioning it again.


BTW, you look familiar to me.

19SHL is too risky Empty Re: SHL is too risky Wed Dec 26, 2012 6:39 pm

Arena


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Ha ha ,,,,,,,,We got your age from those figures.
SUN went up with the subdivision they did. And it came from 90 level to 30 ( Current ). It looks a good price at 30 ?........

@ Slsock

.just a simple analysis.......

RICH is very mature company than SUN. SUN has a higher risk that RICH when its come to long term survival. So foreign funds will defa go for RICH not sun.

And RICH has a great land portfolio located at several key areas. So it is Like MCDonald......
And also RICH is having over 1 b shares so doubling the EPS is not that much easy.
These two counters are for two different types of investors. But at these levels both are like Gems.......Sun will be a rich if they again sub divide it in next 5 years time.

@ Chinwi .
Yep..... you are correct and thanks for the figures.

But the best prediction i can never forget is BFL at Rs. 9 level............to 650............with in 2 years...Better not divert the topic.........SHL is too risky......

20SHL is too risky Empty Re: SHL is too risky Wed Dec 26, 2012 7:09 pm

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Very mature explanation. Yes both of these are attractive diversifieds presently. However looking at their trading patterns , people SEEMS to categorize these shares with more preference to their plantations holdings. SUN:WATA and RICH:KGAL/NAMU/MASK . So we need to keep an eye on that sector also.

RICH profit was once dominated by plantation earnings but now retail. SUN earning are still dominated by WATA.

One thing to note is both these companies manage some of the best and strongest plantations in the above companies. Even during wage issues there companies somehow survives from the front.

BTW talking about diversified, I don;t think many people expected SHL to come close to RICH prices and even now after drop from 28 to 10 and looking at earnings RICH is better valued than SHL. On NAV SHL is ahead of RICH.

SUN going back to previous high ( Rs 90) will take some serious news and serious earnings.

All in also value/dividend wise I will still go with RICH. If one is adventurous then SUN is away to go. If one is a Risk taker and believes in longer term turn around SHL is an option.

BTW, thanks to SHL and EXPO people will not look at IPO the same way I guess.






@Arena wrote:

@ Slsock

.just a simple analysis.......

RICH is very mature company than SUN. SUN has a higher risk that RICH when its come to long term survival. So foreign funds will defa go for RICH not sun.

And RICH has a great land portfolio located at several key areas. So it is Like MCDonald......
And also RICH is having over 1 b shares so doubling the EPS is not that much easy.
These two counters are for two different types of investors. But at these levels both are like Gems.......Sun will be a rich if they again sub divide it in next 5 years time.


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