Please assess LFIN's potential;
|Price prior to|
|LFINN0000||LB Finance||B||Bonus||2 for 5||15-Aug-2006||79.75||52.25||-27.50||09-Oct-2006|
|LFINN0000||LB Finance||R||Rights||1 for 2 @17.00||19-Sep-2007||41.50||25.00||-16.50||28-Nov-2007|
|LFINN0000||LB Finance||D||Dividend||2.25||1st & Final||02-Jun-2008||22.75||19.25||-3.50||29-Jul-2008||04-Aug|
|LFINN0000||LB Finance||R||Rights||1 for 7 @17.00||02-Jun-2008||22.75||19.25||-3.50||29-Jul-2008|
|LFINN0000||LB Finance||D||Dividend||3.00||1st & Final||26-May-2009||22.50||36.00||13.50||01-Jul-2009||10-Jul|
|LFINN0000||LB Finance||B||Bonus||1 for 1||12-Jan-2011||309.40||147.10||-162.30||07-Mar-2011||View|
|LFINN0000||LB Finance||D||Dividend||3.50||1st & Final||08-Jun-2011||185.00||175.80||-9.20||01-Jul-2011||07-Jul|
|LFINN0000||LB Finance||D||Dividend||5.00||1st & Final||08-Jun-2012||100.00||121.20||21.20||02-Jul-2012||09-Jul|
|LFINN0000||LB Finance||D||Dividend||6.50||1st & Final||03-Jun-2013||129.90||123.00||-6.90||01-Jul-2013||09-Jul|
|LFINN0000||LB Finance||D||Dividend||6.50||1st & Final||02-Jun-2014||116.00||123.80||7.80||01-Jul-2014||09-Jul|
|LFINN0000||LB Finance||D||Dividend||10.00||1st & Final||22-May-2015||202.00||224.60||22.60||02-Jul-2015||10-Jul|
|LFINN0000||LB Finance||S||Sub-Division||1 INTO 2||20-May-2015||185.90||226.60||40.70||09-Jul-2015||View|
LFIN has gradually increased its Dividend payout ratio during the history and EPS is Rs 5.6 for 1Q 2015.(Annualized - Rs 22.4). Hence the PE is 5.3 times.
Therefore if we calculate the expected market value of LFIN @ following PE levels;
Market PE @ 8 = Rs 179.2
Market PE @10 = Rs 224.0
Sector PE @ 12.93 = Rs 289.63
Therefore in the worse case any investor would be in the safe side since it is trading at a PE of 5.3 times.
Further LFIN maintaining a diversified portfolio of business. It contains Leasing/hire purchase, Islamic Financing, Mortgage Loans, Factoring, Micro Finance, Pawning, Margin Trading, etc. Also recently company has introduced an innovative product to capture an untapped market of informal money lenders @ a lower rate. I guess this would bombard the market @ lower rate compared to informal lenders with aggressive marketing strategies of LFIN coupled with riders recoveries at business points. This is first time a bank or a finance company approached this market.
Company has made losses with Gold pawning business during 2012. However company now have diversified its portfolio to minimize the risk. Currently LFIN concentrates only 8%-10% on pawning business out of their total advances portfolio. Hence diminishing Gold rate in global market is less impact-full compared to 2012. Further global gold rates are at the rock /bottom since 1970.
Further LFIN main business is leasing. During 2014, the imports of electric hybrid vehicles to Sri Lanka accelerated by 175% in terms of volume and 223% in terms of value. Reduction of duties for hybrid electric vehicles during 2014 was the reason for this boom. Japan is the major import source of hybrid electric motor cars to Sri Lanka accounting for more than 95% of the market followed by Germany.
Hybrid Vehicles imports during 2010-2014(Source - Chamber of Commerce)
In the mean time Gold has settled its pricing after a long downfall. However, commodity researches believe that gold prices to escalate from this point. This is a favorable indication for the Banking and finance companies where they can convert Question Mark product of Gold to a Star product in portfolio matrix.
Therefore considering the above facts I would like to recommend LFIN as a highly undervalue counter with high potential. Many investment funds, corporate investors eye as a medium/Long term investment due to its earnings potential and Dividend Yield .
In my purview LFIN would be the next SDB....! For stock to perform it should have fundamentals together with drivers of the market creeping in. However no one knows exact timing of the counter breaking the shackles.