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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » SAMP buy at current levels and hold it until March

SAMP buy at current levels and hold it until March

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jayathu


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
SAMP Really gud share to buy at current levels. 1st qtr eps was around 9, annualized is 36. P/E ratio is 6.94. Very much undervalued stock n I predict it to a have at least 40eps for the financial year.
Upon above figures I expect this to run to 300-320 levels within 3 months.
Dividend payment amount also rises every yr, 2014 8bucks, 2015 5 bucks and scrip dividend. Which values the dividend payment per share at 11bucks. Can expect 12 bucks per share nxt yr, which is 4.7% dividend yield.
Reason for it come down is Fitch rating downgrading them. But don't worry they ar way above the tier 1 tier 2 minimum required level.

raider


Manager - Equity Analytics
Manager - Equity Analytics
SAMP is a good counter to get into at 250/= or even better, 244.40/=. Surely the target of Rs. 300-325 will be achieved right after the political situation is dealt with!

Going forward, I feel a rights issue is possible:

1. Fitch downgraded because of undercapitalisation and they feel retained earnings alone will not be sufficient.

2. Central Bank needs banks to be capitalised at Rs. 10 Bn. and SAMP has not met this yet.  

The only way they can get up that notch in ratings and meet the Central Bank requirement is by a rights issue or private placement (which cannot be totally ruled out given recent foreign interest in the counter).

In the near though there may be a little increase in Sampath's borrowing costs since their foreign borrowings were on very volatile terms. This is however not an immediate concern.

jayathu


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Raider I like your bullishness towards SAMP stock but analysis on SAMP nt capitalized at least 10bn is wrong. Pls go through there financials/balance sheet and state facts.
There's a issue with tier 1 & 2 reducing but they are well above central bank given levels. They even put out a statement on the cse site. There're so many ways fr them raise capital.

raider


Manager - Equity Analytics
Manager - Equity Analytics
They have to bring up stated capital to Rs. 10 Bn. was what I meant, not total equity.

And also, true enough they have enough sources of funds but they have slight issues. 

For instance, the foreign borrowing rates are subject to increased volatility and they are unable to match foreign currency lending with deposits to a large extent. 

Also, if you noticed their deposit rates (which were abnormally low) were hiked quite recently given that they witnessed a deterioration of the deposit base to some extent.

These are however not grave concerns. The personal loan segment which they were aggressive getting into is not as risky in the current environment and single client concentration is minimum.

worthiness


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
It is optimistic SAMP share price reach 300-320 level within 3 months period under on-going situations both internal & external environments.

No doubt, SAMP is strong share in the market. Price decline of share after long resistance is mainly due to, I guess, foreign selling. Foreign entry is expected again after setting up stable government where market positive trend is imminent.

worthiness


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
By downgrading SAMP credit rating from AA- to A+ rating, Fitch agency has stated “weakening of its capitalization relative to its peers”. Is this related to Rs.10b requirement discussed above? 

First quarter performance of SAMP reports that capital adequacy ratio & tier 1 ratio remain well above regulatory minimum level.

However, Fitch agency reports Capital adequacy ratio of Sri Lankan banks is boosted by the absence of capital charge on key certain key assets exposures. According to Fitch estimates, by applying higher risk weights to these exposures the banking sector’s core would be reduced by about 300bps.
 
Guidelines of opening new banks in Sri Lanka states that-


4.2.7
Initial Capital
(i)            The existence of strong banks that are resilient to internal and external shocks is important in promoting a robust and stable financial system. Accordingly, the following minimum capital requirements are currently applicable to place banks on a sound financial footing, to provide adequate protection to depositors and to encourage the entry and growth of strong, competitive banks in Sri Lanka. 
 Domestically incorporated licensed   commercial banks - Rs. 10 billion 
 Branches of foreign banks - Rs. 5 billion  
 Licensed specialised banks  - Rs. 5 billion

(ii)          The Monetary Board should satisfy itself with the ability of the promoters to raise the requisite initial capital as well as the capacity to raise any future capital requirements, subject to any restrictions on ownership limits. 


Not sure whether this regulation is applicable for existing banks too. Your contribution please.

raider


Manager - Equity Analytics
Manager - Equity Analytics
Under the Central Bank Road Map 2014 - the one that brought about consolidation and things, required banks to be capitalised at Rs. 10Bn. As such, the govt. infused capital into BOC too.

UBC met this requirement with the private placement.

COMB and HNB were already there. 

NDB, DFCC, PABC and SAMP should before 2017/18 if I am right. So we should be expecting rights issues or private placements from those counters.

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