Look at how their earnings grew from 2009. Other than the
decline in 2012, they had YOY growth.
Their long term liabilities has started decreasing too..
(Source for all images - TJL AR 2013, reproduced using the data available)
Look at the growth in DPS & EPS.. Though it's not good for a growing company, many of our investors also be happy about it. Besides, due to foreign ownership, we gotta expect they take much out of their EPS to their originating country
And its not only Admin expenses that contributed their profit growth in 2013, its also net-finance income that played a vital role together with Admin expenses..
As per their AR 2013, the reduction is losses of foreign transaction and interest expense on short term working capital loans.
In addition, tax also helped in arriving the profitability cuz Tax calculated at a tax rate of 12% for 2013 as compared to the 15 in 2012.
Due to the agreement with the BOI of Sri Lanka, profit and income of TJL is exempted from income tax for a period of 15 years commenced from 12 September 2001.
Therefore, what's taxed have been local sales and interest income.
But after September 2015, where the 15 yrs will cease, the tax rate (current 12%) will be apply on their profits and income. Therefore, a deduction in revenue and PAT could be expected.
The following is a world price chart of Cotton for last 5yrs;
As per the chart in Cotton Prices, from Aug 2011 to Dec 2011, there was a decrease in cotton prices in the world market. Then it marginally went up and was somewhat stabilized till Apr 2012.
We see a gradual decline in prices till June 2012 and again a stabilization price till Dec 2012. After that it went up till March 2013 and now somewhat stabilized.
So if Revenue goes down due to Cotton prices, it has to be in;
Qtr ended Dec 2011
Qtr ended June 2012
Period ended July 2012 - Dec 2012
But looking at the following, I dont see much evidence to support their low revenues in FY 11/2012 other than
for few facts.
In conclusion, I would rule out TJL being a bad investment.. Enter at right time though. We need to keep in mind that after Sep 2015, the tax structure come in to play so profitability could be decreased. And we need not to worry if invest on this knowing that.