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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ »  Textured Jersey posts Rs.1.2 bln profit for FY 2013/14

Textured Jersey posts Rs.1.2 bln profit for FY 2013/14

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Jayashantha

Jayashantha
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Textured Jersey Lanka PLC (TJL) reported a strong 14 per cent year-on-year growth in net profit to Rs. 1.2 billion for the year ended 31st March 2014, supported by growth in turnover.

The company’s strong cash position has allowed TJL to maintain its trend of very generous dividend pay-outs with Rs. 0.80 per share being declared as the final dividend for FY2013/14. According to Mr. Bill Lam, Chairman of Textured Jersey, the company managed another year of “impressive results despite recent adverse weather conditions faced in the United States, softening retailer demand growth”, according to a company release.

During the year under review, sales reached Rs. 12.7 billion, 16 per cent higher than that of last year. The company maintained its gross margin for FY2013/14 at 11 per cent levels, and was able to achieve a 15 per cent year-on-year growth in gross profit to Rs. 1.5 billion. The gross profit for 4Q FY2013/14 also increased 14 per cent year-on-year reaching Rs. 403 million. The same trend continued at the operating profit level, with FY2013/14 margins maintained around 8 per cent, with Rs. 1.1 billion reported as the annual operating profit, up 10 per cent year-on-year. This annual operating profit was achieved on the back of a strong quarterly profit of Rs. 313 million for 4Q FY2013/14 up 9 per cent year-on-year, it was noted.

http://www.sundaytimes.lk/140525/business-times/textured-jersey-posts-rs-1-2-bln-profit-for-fy-201314-99871.html

Market R

Market R
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Growth in fourth quarter earnings attributable to higher revenues (+7% YoY) coupled with non-operating income of Rs. 24.3mn

sorce JKSB

Market R

Market R
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Full year earnings +14% YoY supported by higher revenue & non operating income contribution TJL reported a 14% YoY increase in full year earnings for full year FY14, supported by higher revenues (+16% YoY), coupled with first time contribution of technical expertise fees from its agreement with Ocean India Pvt Ltd (recorded as non operating income of Rs. 48.6mn). Margins remained broadly stable at both the gross and operating level, despite the company having to outsource some business volumes to external fabric mills due to insufficient internal capacity (outsourced business typically generates lower margins). Given a debt free balance sheet and FCF (free cash flow) generation of >Rs. 900mn over the last three years, TJL continued to maintain a generous dividend payout for FY14, despite higher capex spend during the year and the expected acquisition of a regional fabric mill. The company declared a full year dividend of Rs. 1.30 per share (interim dividend of Rs. 0.50 per share; final dividend of Rs. 0.80 per share). This amounts to a 74% payout and a healthy dividend yield of 7%

We expect 25% YoY earnings growth for full year FY15 despite a slightly weak first quarter Indexed performance of TJL against ASPI for FY14 ASPI - IndexedTJL - Indexed 180 170 160 150 140 130 120 110 100 90 28-Mar-2013 28-Apr-2013 28-May-2013 28-Jun-2013 28-Jul-2013 28-Aug-2013 28-Sep-2013 28-Oct-2013 28-Nov-2013 28-Dec-2013 28-Jan-2014 We expect 1QFY15 to be a slightly weaker quarter for the company due to the dual impact of 1) a slowdown in orders from US retailers during April, as adverse weather conditions led to inventory build ups amid a softening of consumer demand; and 2) lower capacity utilization during April as TJL’s factory - which is a 24hr, 7 day operation - generally closes for around 10 days during the Sinhala/Tamil New Year period. However, demand from Europe remained strong during April and the company is now seeing a pick-up in orders from the US as well. Factoring in 1) the 10%-12% capacity increase, which came on-stream in Feb 2014; 2) full year fees of US$780,000 from the OCI agreement (which commenced during the latter half of FY14); and 3) an expected ~2ppt margin improvement stemming from energy cost savings (once the company’s multi-fuel boiler plant becomes operational in 2QFY15), we expect TJL to grow earnings by ~25% YoY in full year FY15. We believe the full impact of the recent capacity expansion/modernisation project should be felt from 2QFY15 onwards in the form of both margin improvement and volume growth - the majority of the capex relating to this project was spent on new dyeing and finishing machines, which should result in an increase in contribution from high margin, value added products (from current level of 25%-30% of sales to 35%-40% of sales over the next 1-2 years)

Management looking at a minimum 20% USD ROE on any investment We have not factored in the impact of the expected acquisition of a regional fabric mill into our FY15 earnings forecasts, given a lack of visibility regarding the timeline of the acquisition. Our discussions with TJL’s management indicate that the company plans to gradually improve overall ROE over the medium term (currently at a healthy 19.1%), and, as such, would look at a minimum USD ROE of 20% on any investment/acquisition. As per management, efforts are underway to assess the business integration of the potential acquisition target, and a decision to proceed would be made once management is comfortable that it would add to long term shareholder value by meeting the target 20% ROE. Substantially outperformed the ASPI over the last year; 67% shareholder return TJL’s share price has appreciated by 58% over the last year (vs. a 2% decline in the ASPI), generating a total shareholder return of 67% (including dividends) during this period. Nevertheless, the counter still trades at a FY15E P/E of 8.5x, in-line with the manufacturing sector average, but at a substantial 24% discount to the market.

Sorce:
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