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FINANCIAL CHRONICLE™ » CORPORATE CHRONICLE™ » why ccs went up

why ccs went up

4 posters

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1why ccs went up Empty why ccs went up Sat Apr 09, 2011 10:07 pm

waruna dha


Stock Trader

is any news about price rising

2why ccs went up Empty Re: why ccs went up Sun Apr 10, 2011 2:41 am

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics

waruna dha wrote:is any news about price rising

Some people think due to future investments of a company we have to buy shares at a premium. This could be the reason

3why ccs went up Empty Re: why ccs went up Sun Apr 10, 2011 2:57 am

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics

waruna dha wrote:is any news about price rising

People sometimes pay huge premiums on expectation not based on fundamentals. When a share is also illiquid it further helps to increase in price ? Is it sustainable increase is the question.

4why ccs went up Empty Re: why ccs went up Mon Apr 11, 2011 10:46 am

cse.alpha


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

Ceylon Cold Stores - CCS

CCS Book value was Rs 126 per share at 31.12.2010 - land last revalued in 31.3.2008 (page 51 of latest CCS Annual Report)
- CCS's Slave Island land (5 acres freehold, 3 acres leasehold - page 78 of last CCS Annual Report) will have appreciated since then (especially with long term plans to develop Galle Face and moving out of Army), but will book value have risen so far as to justify current share price of Rs 800+ ?

9 months to 31.12.2010 net profit of CCS was Rs 161 mn, giving 9 month EPS of Rs 7.5. Annualised EPS of Rs 10 - which again, even after allowing for future growth, does it support share price of Rs 815 ?

The future is rosy for most F&B companies, but investors seem to be paying a very high premium for this growth at these kind of prices.

CCS Super market losses (though Keells Super) have fallen last year, and new K-Zone (Moratuwa) concept is interesting, but CCS super markets are still a distant second or third to CARG. And super marketing is a low margin scale business, where location is key. More investment may be needed to ramp up presence.

Ice cream and carbonated drinks divisions of CCS also face strong competition (new Pepsi franchisee in Sri Lanka). KIK Cola may provide short term boost, but why has CCS not entered other large F&B categories such as milk, yogurt, bottled water, cheese etc in a meaningful way? Current hot weather will help ice cream and soft drinks sales, but it is dangerous for the portfolio to be so weather dependent.

But there are also a few potential catalysts to support share price:
* Will the Slave Island land be sold or transferred to parent JKH at a premium price ?
* Will Keells Super supermarket chain be sold (fully owned by CCS at present) ?
* Will a share split be announced (other JKH group companies JKL and TRAN did so), even though it creates no real value ?

- Investors though should recall that CCS is a very illiquid share, that can be manipulated quite easily
Keells group owns 80% of CCS
Only 30,000 shares needed to enter Top 20 shareholders, and share has not traded more than 15,000 shares per day during past month
Delmege Forsythe group and Paints & General Industries (Rusi Captain) have been among recent buyers

If you decide to invest, know the facts first, and make an informed decision - also compare valuations with peers.

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