Name and address:
CARGO BOAT DEVELOPMENT COMPANY PLC
328,Galle Road, Colombo 3.
Telephone : 011-2448968-9 | Fax : 011 2574137
• Established: 1980
• Quoted Date: 1981
• Financial Year Ends: 31st March
• Secretaries: Mrs. M. A. Jayawardena
• Auditors: BDO Burah Hathy
• Sector: Land & Property
Officers and Directors:
R. B. Thambiayah: Executive Chairman of the Board, Managing Director
M. A. Jayawardena: Company Secretary, Executive Director
Arnila Lakshmi Thambiayah: Executive Director
Subodhini R. Thambiayah: Executive Director
Niruja Rajeswari Thambiayah: Director
N. A. Thambiayah: Non-Executive Director
Merril J. Fernando: Independent Non-Executive Director
R. S. Tissanayagam: Independent Non-Executive Director
Clement Sunimal Wijeyeratne: Independent Non-Executive Director
Cargo Boat Development Company PLC engages in property development activities in Sri Lanka. It primarily involves in renting out premises.
Balance Sheet Analysis
Company’s Investment Property:
Accordingly information gathered from last available annual report (2009/2010), the company the company owns following investment properties.
1. Property at No. 41, Janadhipathi Mawatha, Colombo 1
2. Property at No. 29, Braybrook Street, Colombo 2
3. Property at No. 35, 35 1/1 & 37 at Janadhipathi Mawatha, Colombo 1
The carrying value of these properties is Rs. 140.3 million and are recorded in the Balance Sheet based on cost less depreciation. Accordingly the market value of these properties are not reflected in the Balance Sheet and therefore the reported NAVPS is considerably low.
For an example, the carrying value of property at No. 41, Janadhipathi Mawatha, Colombo 1 is approx Rs. 34.6 million whereas Mr. T. Hilmy Farook (Fellow member of Institute of Valuers in SL) has valued this property at Rs. 252 million on 19th August 2009. Note that this valuation includes a discount of market value by 25% to reflect the risk of reduction of market value due to poor investment market, global recession and high security zone risk. The market value of this property is Rs. 336 million if not for this adjustment and that is about 10 times of the carrying value of this property in the Company’s balance sheet.
The other two properties have been acquired recently and the Board of Directors have confirmed that the carrying values of these properties in the Balance Sheet as of 31st March 2010, represents the fair market values.
Considering the substantial increase in the value of property at No. 41, Janadhipathi Mawatha, Colombo 1, the market value of the investment properties held by the company should be in the region of Rs. 450 million if not more than that.
The company maintains a considerable investment in listed and unlisted companies. (Approx 95% of this investment is in listed companies as per last annual report). Similar to company’s investment in properties, these investments in listed/unlisted companies are also reflected in the Balance Sheet at cost less a provision for fall in value.
As per last available annual report (2009/2010), the companies investment are recorded in the Balance Sheet at Rs. 373 million whereas the market value of the same as of 31st March 2010 was at Rs. 884 million (864+20). The share prices of most of the companies held in CABO’s portfolio had appreciated as of 31st March 2011 and therefore we can expect an increased market value for these investments in the forthcoming annual report for 2010/2011. Let’s try to calculate this figure.
Company’s major investments in listed companies, extracted from 2009/2010 annual report are as follows.
1. DFCC Bank – 1,024,000 shares (CABO still holds onto this as per DFCC’s report for May 2011 – quantity doubled due to split)
2. Chevron Lubricants – 2,000,000 shares (CABO still holds onto this as per LLUB’s report for May 2011)
3. Renuka City Hotel – 455,440 shares (CABO still holds onto this as per RENU’s report for May 2011)
Change in the market value of above investments from 31st March 2010 to 31st March 2011 is analyzed below.
1. DFCC – Market value increased to Rs. 351.8 million (Rs. 171.80 X 2,048,000) from Rs. 184.8 million
2. LLUB – Market value decreased to Rs. 320 million (Rs. 160.00 X 2,000,000) from Rs. 340 million.
3. RENU – Market value increased to Rs. 151.5 million (Rs. 332.70 X 455,440) from Rs. 105.5 million
Therefore aggregate market value above investments has increased to Rs. 823.3 million from Rs. 630.3 million. This is approx 30% increase. When company’s total investment in listed companies factored by this percentage, it is standing at Rs. 1123 million. Therefore we can reasonably expect a market value of CABO’s investment at Rs. 1143 (1123+20) where 20 million is other investments which are not valued at market price. Note that this value is based on the assumption that CABO did not engage with any significant share dealings within the fiscal year ended 31st March 2011.
Also note that the market value of investments in listed company’s will fluctuate with the market behavior. I have used the prices as of 31st March 2011 to ascertain the market value that will be reported in CABO’s pending annual report.
The value of company’s current assets is Rs. 190.4 million as per the provisional financial statement for the year ended 31st March 2011.
NAVPS Based on Estimated Market Value of Assets
The NAVPS bases on estimated market value of company’s assets can be calculated as below.
Investment property – Rs. 450 million
Investments – Rs. 1143 million
Current Assets – Rs. 190.4 million
Total Assets – Rs. 1783.4 million
NAVPS adjusted for estimated market value is approx Rs. 175 (Rs. 1783.4 / 10.2 shares)
The reported NAVPS in the financial statement is Rs. 66.61.
As of 24.06.2011, the market price of share is Rs. 133.60 which is 24% discount to the estimated NAVPS and approx 100% premium to reported NAVPS.
The PE ratio at Rs. 133.60 based on current earning is 8.74 (133.60/15.28 – where 15.28 is EPS as per provisional financial report for the year ended 31/03/2011)
I will post an earnings based analysis for this company in due course if time permits. (For the moment, I will just mention about the huge dividend declared by DFCC which is Rs. 7 per share and this dividend income will be reflected in CABO’s next financial report for June 2011 – Rs. 7 X 2,048,200 shares = Rs. 14.34 million. This itself will contribute Rs. 1.41 (Rs 14.34/10.2) to EPS of CABO’s June 2011 quarter.)
I recommend further research before making a decision buy/hold/sell this share.
Like to hear comments from fellow members.