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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Softlogic, Asian Alliance merge synergies

Softlogic, Asian Alliance merge synergies

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Quibit


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Ravi Ladduwahetty

Softlogic Holdings’ proposed acquisition of Asian Alliance Insurance will see the merging of synergies of the businesses of the parent company in terms of health, motor and retail sectors.

Asiri and Central Hospitals are both owned by Softlogic Holdings and the acquisition of Asian Alliance Insurance would give these hospitals a tremendous boost and the competitive advantage of offering healthcare policies through AAIC, Softlogic Holdings Chairman Ashok Pathirage told Daily News Business yesterday.

“This is the only instance now in the Colombo Stock Exchange of a hospital company which is listed also owning a listed insurance company and there will be lots of opportunities of providing health cover to patients. “We see a definite growth in the sector. We will also be shortly going for new insurance products which will come under the Asiri brand,” he said.

Softlogic Finance currently offers leasing facilities for motor vehicles. The general insurance arm of Asian Alliance Insurance together with Daihatsu and new Ford agency both held by Uniwalkers, whose ownership and management of Softlogic group will provide synergies any business conglomerate would dream of, Pathirage said. “The insurance arm will also provide the large amount of consumer goods marketed by the retail divisions also to come under the Softlogic Group such as the National television and computer software and hardware as well,” he said.

“All consumer items sold by Softlogic Holdings will automatically be covered by insurance from AAIC which would tremendously boost the sales and there will be lots of synergies within the group, he said.

He said Softlogic was fortunate to buy Asian Alliance act Rs 120 per share when the current market price was Rs 140 per share. “It is a well managed company and we struck a deal in our bid to take the company to the next level of business,” he said. Asian Alliance Insurance Director and CEO Ramal Jasinghe said this was a very good move and he welcomed the new owners. “We would like to go to the next level of market development with the acquisition, consolidating the market position as the force to be reckoned with,” he said. Market sources also point out that Asian Alliance (AAIC) Price Earnings Ratio was lower than that of Softlogic and as a result of the proposed acquisition, Softlogic shares would be cheaper and attractive.

This was something investors have been expressing concern prior to the Initial Public Offering, they said. Asian Alliance Insurance Company’s Life insurance funds, under management, is around Rs 3 billion. This will give Softlogic Capital a tremendous fee based income from the fund management.

Sourece : Daily News
http://www.dailynews.lk/2011/07/15/bus01.asp

maalinda


Manager - Equity Analytics
Manager - Equity Analytics
it looks AAIC is going to have a good future. Q what you think ? Will rich exit from AAIC ?

Quibit


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
RICH exit price and expectation are lot higher than the current market price of AAIC. RICH is expecting a price above Rs 175/=. It is very unlikely RICH will accept the mandatory offer of Rs 120/= that will be made by Softlogic.

AAIC as per internal estimates without new synergies were in line to reach the target of Rs 1bn profit per annum within 5 years. With the synergies of Softlogic may be able to reach target in less than 5 years.

This would make the market value of AAIC approximately Rs 20bn (Assuming PER of 20X Rs 1bn = R 20bn). The proposed acquisition value of AAIC by Softlogic is about Rs 4.5bn (for the entire company). This is less than 25% of the future value of AAIC.

suja


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
So if the share is trading at 132 and the expected price from the next highest shareholder is 175 isnt it a good investment for us in the short term?

All depends on whether the 175 will be taken.

Rajaraam


Vice President - Equity Analytics
Vice President - Equity Analytics
As Quibit says with the synergies of Softlogic(Asiri,Asiri medical,Asha Central Hospitals)AAIC will reach revenue targets much faster than they expected. Therefore we can expect upward trend in its share price early. I have some shares of AAIC but this is not the time for me to exit I think.

cse.alpha


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Looks like the Daily News journalist Ravi Ladduwahetty is a follower of this forum, and not worried about plagiarism.

The article below by Quibit appeared on 10th July 2011 - it is very similar to Ravi's story in the Daily News on 15th July 2011.

Did Ravi copy the story or was he fed the story I wonder?

http://forum.srilankaequity.com/t6474-softlogic-entry-into-insurance-likely-to-pave-way-for-unimaginable-synergies

Softlogic entry into Insurance would make way for unimaginable synergies
by Quibit on Sun Jul 10, 2011 8:54 pm

Softlogic's proposed acquistion of AAIC likely to be the best news market would have heard for long long time. It is different from Vallibel One's purchase of Delmege group due to so many reasons. This acquisition is expected to make Softlogic share attractive to investors leaps and bounds due to following reasons;

A) Asian Alliance (AAIC) PER is lower than the Softlogic and as a result of the proposed acquisition, Softlogic shares would be more cheaper and attractive. This was something investors have been complaining prior to the IPO.

B) Asiri and Central Hospitals are owned by the Softlogic and the acquisition of AAIC would give these hospitals a tremendoys boost and the competitive advantage of offering health care policies through AAIC. Currently no insurance company is owned by a hospital. Only possible opportunity that prevailed was between appollo hospital and Sri lanka insurance corporation. This is now far from reality after the governments repossession of the insurance corporation.

C) AAIC life insurance funds under management is approximately Rs 3bn. This will give Softlogic Capital a tremendous fee based income from the fund management. Currently these fees have boosted the Asia Capital income. Please read the Asia Capital and AAIC annual reports for more details.

D) Softlogic Finance (CRL) currently offers leasing facilities for motor vehicles. General insurance arm of AAIC together with the new ford agency under the management of Softlogic group will provide synergies any business conglomerate would dream. CRL is presently going to raise Rs 1 bn by way of a rights issue. This is likely to make CRL one of the top 5 finance companies in Sri Lanka.

E) All consumer items sold by the Softlogic group would automatically be covered by insurance from AAIC which would tremendously boost the sales.

These are just few... There will be plenty more benefits and synergies.

I am sure Softlogic starting trading price would take into consideration of all these synergies.

Quibit


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
This is not the first time I have noticed this. It simply reflects the credibility and popularity of the forum. We publish their articles and they publish our articles. It is a very nice feeling!

chandimal


Stock Trader
what will happen to gran.will it come to 60

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