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FINANCIAL CHRONICLE™ » CORPORATE CHRONICLE™ » Future of MADU

Future of MADU

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1Future of MADU Empty Future of MADU Fri Feb 11, 2011 9:08 am

marketanalyst


Equity Analytic
Equity Analytic

In the short term it will break the 70 level. However, to keep going the level of price company should have strategies to enhance the prices.

Till 2007 (if I am not mistaken) Company was able to make sound earnings which contributed to a positive EPS. However, Madulsima region earnings over took the Bogawantalawa region losses and whole company contributed a positive earnings. Unfortunately, after 2007, due to the inefficiency in estate managers bogawantalawa region costs increased drastically which couln't be covered up by madulsima region profits. Presently, El Teb, Galloola, Uvakellie, verellapatna estates makes money for the whole company as a result of superb management in estate level.

In bogawantalawa region, main reason is the inefficient management and decreased productivity of laborers. However, Madulsima PLC has appointed new superintendents who are talented in managing estates recently. As a result, estate level cost of sales can be reduced drastically by way of increased productivity and efficiency.

Another reason is to tea manufacturing below than factory capacity. As a result factories won't achieve high scale of economies. To avoid that, company has increased the production of bought crops externally from other estates.

Madulsima didn't have crops other than tea few years back. However, company has been harvesting rubber from 5 hectares from 2010. Further, company has increased rubber plantations in recent past but yet to harvest. Since the company is in developing level of rubber harvesting, rubber processing activities won't undertake and sales make to latex collection centres. In the coming years, there will be more gains from rubber and when the harvests become more, company will undertake processing activities too.

Finally, the main consideration on fuel wood bounce. in the year under review, timber sales remained below 100 million. However, with the 5 years continuous plan to replanting, conservation and realization of timber with the lesser impact to the environment, will give significant contribution to the earnings. If such a sustainable plan, environmental organisations and governmental organisations approval can be obtained effortlessly.

With the above strategies, company will enhance the earnings and will make positive earnings with less impact to environment. Finally, we can conclude on "future value gem just started emerging". Cool

As a result price can be set well above than 70. If the present price to book value continue, it will break even 140 level soon. Surprised

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