Softlogic holding is a highly geared company

Captain · 1 Softlogic holding is a highly geared company Mon Sep 16, 2013 8:32 pm

Captain

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look out for their gearing that is over 70% (D/D+E), (considered their short term loans also).

will their future profits enough to pay interests in the future, their most of the short term funds are stuck in the Non current assets.

Therefore, this is a risky investment for me

But, they might declared dividend (0.25 to 0.3) from a few days, with that, i hope there will be a small run in this month end. (to Rs 10/= to 12/=)

Redbulls · 2 Re: Softlogic holding is a highly geared company Mon Sep 16, 2013 8:36 pm

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http://forum.srilankaequity.com/t30762-is-shl-is-getting-ready-for-a-come-back

traderathome · 3 Re: Softlogic holding is a highly geared company Mon Sep 16, 2013 9:36 pm

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@Captain wrote:look out for their gearing that is over 70% (D/D+E), (considered their short term loans also).

will their future profits enough to pay interests in the future, their most of the short term funds are stuck in the Non current assets.

Therefore, this is a risky investment for me

But, they might declared dividend (0.25 to 0.3) from a few days, with that, i hope there will be a small run in this month end. (to Rs 10/= to 12/=)

Planning to collect few more lots around the 8Rs levels.

Just trying the MACD Divergence on SHL.N Smile

On that i bought a small qty.

TAH

hariesha · 4 Re: Softlogic holding is a highly geared company Mon Sep 16, 2013 10:23 pm

hariesha

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@Captain wrote:look out for their gearing that is over 70% (D/D+E), (considered their short term loans also).

will their future profits enough to pay interests in the future, their most of the short term funds are stuck in the Non current assets.

Therefore, this is a risky investment for me

But, they might declared dividend (0.25 to 0.3) from a few days, with that, i hope there will be a small run in this month end. (to Rs 10/= to 12/=)

As at what date you calculated the gearing ratio? Please explain! Why expect a dividend from a highly geared company?

Captain · 5 Re: Softlogic holding is a highly geared company Mon Sep 16, 2013 11:21 pm

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Gearing as at 30.06.2013 and eventhough they are highly geared. their still having gud earnings (0.39 EPS last year 12/13), Bz softlogic operational profits is more than their Interest cost, but if operational profits is going down (If sales are going down next year), then there is a risk of reduce EPS of the company. and there by value of the share will go down.

Highly geared company is not a loss making company, gearing is gud untill can earn something above the interest cost, then share value also wil go up. But it's risk will be high

But company like softlogic is a growing company will have business future too, But funding to the growth through more loans would be a risk factor to the company.

econ · 6 Re: Softlogic holding is a highly geared company Tue Sep 17, 2013 7:01 am

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of course it is highly geared. they have done too many investments using debt in short period time.

hariesha · 7 Re: Softlogic holding is a highly geared company Tue Sep 17, 2013 10:39 am

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Don't their gearing coming down. Their June figure is much better than March. And very much better than December.

Yes, gearing is risky. But who knows to manage this risk in Sri Lanka better than Ashok. He is a master of this. Throughout Softlogic growth story, it's all about gearing. Ashok built this vast group on borrowings.

If you look at his recent business model he is always going into cash business. Targeting four main sectors, Finance, Retailing, Healthcare and Leisure. So what it means by Softlogic group is making an operational loss: "A severe downturn in the economy."

In such a scenario people who invest in SHL now will lose Rs.8/- if the whole company goes bankrupt. But people who invest in Singer, another retailer with exposure to finance might lose about ten times of that.

If you look at the institutions that invest in SHL group companies, they are all global recognized entities, such as IFC (Private sector investing arm of World Bank), DEG and FMO, etc. Don't they know to analyze risk than us? After what Guardian group did on SHL debut, Ashok is not relying on local investment funds. Instead he has managed to attract long term, world class investment funds into his companies. Just think who else in Sri Lanka managed to attract investors of such caliber. Study the prices they paid for the equity in AAIC and Asiri Group. Much more than the market prices that prevailed.

I think in a falling interest rate scenario, highly geared companies will show improved performances. So these prices may OK of SHL. Monitor the market movement and invest in a staggered manner. If interest rates started to move up, which is highly unlikely during next 24 months, EXIT?

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Softlogic holding is a highly geared company

1 Softlogic holding is a highly geared company Mon Sep 16, 2013 8:32 pm

Captain

2 Re: Softlogic holding is a highly geared company Mon Sep 16, 2013 8:36 pm

Redbulls

3 Re: Softlogic holding is a highly geared company Mon Sep 16, 2013 9:36 pm

traderathome

4 Re: Softlogic holding is a highly geared company Mon Sep 16, 2013 10:23 pm

hariesha

5 Re: Softlogic holding is a highly geared company Mon Sep 16, 2013 11:21 pm

Captain

6 Re: Softlogic holding is a highly geared company Tue Sep 17, 2013 7:01 am

econ

7 Re: Softlogic holding is a highly geared company Tue Sep 17, 2013 10:39 am

hariesha

8 Re: Softlogic holding is a highly geared company

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