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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » LOLC HOLDINGS PLC (LOLC.N0000)

LOLC HOLDINGS PLC (LOLC.N0000)

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61LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty LOLC leaps to top league Fri Feb 18, 2011 8:27 pm

shevy191073


Stock Trader
# Makes more established conglomerates look minnows as aggressively diversifying Group revenue tops Rs. 25 b
# Pre-tax profit exceeds Rs. 7 b
# Net profit up 315% to Rs. 3.2 b
# Assets surpass Rs. 100 b mark
# Rs. 5.7 b cumulative investment in subsidiaries

Making the fastest leap to top the league, Lanka Orix Leasing Group proved its true mettle this week by announcing a mega Rs. 7.1 billion pre-tax profit in just nine months of 2010/11 financial year and a net profit attributable to equity holders of Rs. 3.2 billion aided by a top line gross revenue of Rs. 25.5 billion.

Gross revenue saw 172% growth in the first nine months whilst profit before tax rose by 485% and after tax figure by 647% to Rs. 6 billion. Profit attributable to equity holders was up by 315%.


This unprecedented performance has firmly placed LOLC much above some of the older conglomerates such as Hayleys (whose net profit was only Rs. 580 million), Aitken Spence (whose turnover was Rs. 18 billion and net profit was Rs. 1.65 billion) and Carson Cumberbatch (with Rs. 25 billion turnover and Rs. 2.8 billion net profit).

Interim results for nine months released show financial services sector, trading sector and the other sectors contributing exceptionally well.

However LOLC has benefited substantially from other income of Rs. 4.2 billion, up by 302% over last year. They included Rs. 2.6 billion on sale of investments, Rs. 1.8 billion in marked market valuation of quoted shares held for trading purpose.

An analysis of the cash flow statements reveals Rs. 1.56 billion as proceeds from sale of subsidiaries, associates and shares and Rs. 3.1 billion in sale of property, plant and equipment. Interestingly LOLC had invested Rs. 5.7 billion in subsidiary companies, up from Rs. 7.5 million a year earlier.

The financial services sector showed excellent performance with pre-tax profits of Rs. 5.5 bn a growth of 354% over last year. The rest of the group contributed Rs. 1.6 bn to the bottom line. With a contribution of taxes of Rs. 1.1 bn, the Group recorded post-tax profits of Rs. 6 bn, a growth of 647% over last year.

LOLC said the increase in total revenue kept its momentum in line with the aggressive growth in the financial services sector and the trading sector. The revenue grew by 172% over last year to reach an all time high of Rs. 26 bn for the nine months. The revenue from the financial services sector saw a growth of 41% to reach Rs. 13 bn while the contribution from the rest of the sectors was Rs. 12.4 bn. The borrowing costs continued to come down in line with the sliding interest rates with the Group raising funds at attractive rates. LOLC’s ability to source long-term funding from foreign multilateral and bilateral agencies at attractive rates contributed well to the reduction in borrowing costs. The total borrowing costs reached Rs. 4.9 bn by December reflecting the lower interest margins demanded by the Group.

LOLC Group’s core business, the lending operations and its strategic investments contributed well to the bottom line positioning the Group on a strong footing to reap steady growth in profitability in the medium to long term. “The Group’s expansion strategies augers well with the economic growth forecasted in the near future,” LOLC said.

The balance sheet grew along with the business growth of the Group, with total assets crossing the Rs. 100 bn mark reaching Rs. 108 bn by December. This is almost a 100% growth over last year. The corresponding liabilities grew by 60% represented by the borrowings of the Group mainly coming from the financial services cluster and the holding company. The total assets of the financial services cluster reached Rs. 68 bn, a growth of 20% over last year. The corresponding liability grew by 20%.

The advances grew by 49% to reach Rs. 49 bn. which is an indication of the strong portfolio growth as a result of the growth in executions. The newly set up branches in the North and the East contributed significantly to this growth.

The strong growth of the lending business, propelled by the rapid expansion of the customer base, was facilitated through a strong growth in the Group’s footprint, especially in the rural sectors. The footprint continued to grow, with several key branches and “Isuru Diriya” centres being opened during the quarter. On a monthly basis, four “Isuru Diriya” centres are being opened, strengthening the presence in the rural areas.

The total count of the financial services sector outlets now exceeds 140, of which, Lanka Indian Oil Company outlets and “Isuru Diriya” centres account for 65. The company’s entry into the North and East is already reaping benefits with significant business volumes coming from these largely untapped markets.

Reflecting this aggressive growth, Lanka ORIX Finance Company, Commercial Leasing Ltd., and LOLC Micro Credit Ltd. contributed exceptional results to the bottom line of the Group. Economies of scale from operations, and multiplying synergies from shared distribution channels and shared services are deriving benefits to these companies. The collections efforts of the Group continue to be of utmost importance to the sustainable profit growth, and strategies are continuously evaluated and improved to maintain the desired level of collections.

LOLC’s 100% owned subsidiary, Lanka ORIX Finance Company continues to grow from strength to strength, with its deposits base increasing to Rs. 14 bn, a significant growth of 61% over the same period last year. The company is well positioned in all regions to reap the benefits of the common distribution channels of the Group. Commercial Leasing Company and LOLC Micro Credit Ltd. too grew its lending business in the SME/Micro sectors especially in the rural sectors of the country, contributing well to the bottom line of the Group.

The trading and plantation sectors too contributed well to the performance of the Group with steady profits flowing to the Group, a Rs. 1.6 bn as at December.

The leisure sector saw significant activity during the peak season and is also gearing up for the upcoming refurbishment. LOLC is finalising its management agreements with renowned international hoteliers to manage these hotels once the refurbishments are concluded.

LOLC Insurance Co., and LOLC Securities Ltd., — the latest additions to the group are drawing up their plans and are expected to commence operations within the next few months.

LOLC Group Managing Director and CEO Kapila Jayawardena said: ‘Sri Lanka is on the threshold of Economic Prosperity with new opportunities beckoning from the North and East of the country as well.

LOLC has been able to break new ground in profit diversity with vigorous implementation of initiatives taken in developing its Core business, as well as embracing the quest for new opportunities. This performance, which reflects a quantum leap when compared to the previous year, was due to the implementation of the Group’s road map which enabled us to capture opportunities well ahead of time.”

source - www.ft.lk



Last edited by Quibit on Sat Feb 19, 2011 9:08 am; edited 1 time in total (Reason for editing : Format condensed)

62LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Fri Feb 18, 2011 9:48 pm

Academic


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@mono wrote:Look the thing with LOLC is that the people buying this share in large numbers are institutional investors. those chaps don't care too much about PE or financials. if they want financials they can get it from the horse's mouth long before the CSE published them. what they are look at is where this company will be 3-4-5 years down the line. that is the story i've been told at least
Your argument can be broken down as follows

I. Institutional investors deal in large quantities
II. Today LOLC dealt in large quantities.
III. Thus institutional investors bought LOLC today

But if I refer to your statement, which I also think true, "if they want financials they can get it from the horse's mouth long before the CSE published them", I have following questions.

1.
Why did the institutional investors wait until quarterly reports are published and price goes up by few rupees, rather collecting before reports comev,say after 1st feb, in this period substantial amount of LOLC shares were traded at 136-137.9 range as they knew LOLC is a good company, since they knew when reports come?

2.
If I drop the premise that "if they want financials they can get it from the horse's mouth long before the CSE published them", core of above argument is unaffected.

To see this, my second question is: as institutional investors are not interested on financials (as you say) since they know company is good, why could't (and didn't) they collect enough at 125-130 in end December and January period instead of waiting for today (to buy at 138-145!, see Figure 1)? Aren't they rational?

So do you still say today's price up and/or large volume is due to institutional buying? I doubt.

There are two possible scenarios.

1. Retail investors became interested in LOLC after financials are published (as opposed to my opinion) but NOT institutional investors as you say

2. There was a initial price/volume manipulation (that is why price/volume doped eventually? see Figure 2).

Hope you would select scenario 1.

Also think you are intelligent enough to not to take arguments personally. I just attacked your thinking not you. Smile

Attached charts are extracted form www.cse.lk

LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Lolc10

63LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Fri Feb 18, 2011 10:17 pm

hettdas


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
LOLC is one of a giant in the Finance industry. LOLC rally would start soon.

64LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Fri Feb 18, 2011 10:35 pm

mono


Vice President - Equity Analytics
Vice President - Equity Analytics
i don't know who bought today, i didn't follow the share today. what i'm saying is that there is institutional interest in this share and it's growing. sooner or later someone will want to buy a million odd shares and if that chap can't find a cross that's when we'll see action.

65LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Fri Feb 18, 2011 11:06 pm

Academic


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Evil or Very Mad Question

66LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Fri Feb 18, 2011 11:09 pm

mono

mono
Vice President - Equity Analytics
Vice President - Equity Analytics
@Academic wrote: Evil or Very Mad Question

Question

67LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Sat Feb 19, 2011 10:51 am

tubal


Vice President - Equity Analytics
Vice President - Equity Analytics
You must have been on holiday. It went upto 145 last friday, before coming down.

68LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Sat Feb 19, 2011 10:55 am

smalta

smalta
Senior Equity Analytic
Senior Equity Analytic
@tubal wrote:You must have been on holiday. It went upto 145 last friday, before coming down.


yeah


if i add more it was started up at the high but recently came down so big guys must collecting
if i m correct BRWN has a partnership with LOLC (correct me ) so the partner is now moving and that would also be affect to the LOLC but anything can happen cuz this is CSE where non others like Very Happy

69LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Sat Feb 19, 2011 11:54 am

mark

mark
Expert
Expert
LOLC is a diversifying company,it recently invested in sierra constructions.....but sierra construction was not seems to be a good profitable company.... but there is high potential,because of economic growth......

70LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Sat Feb 19, 2011 11:56 am

mark

mark
Expert
Expert
@smalta wrote:
@tubal wrote:You must have been on holiday. It went upto 145 last friday, before coming down.


yeah


if i add more it was started up at the high but recently came down so big guys must collecting
if i m correct BRWN has a partnership with LOLC (correct me ) so the partner is now moving and that would also be affect to the LOLC but anything can happen cuz this is CSE where non others like Very Happy

ya both of them together bought 20% stake of SIERRA CONSTRUCTION.....

71LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Sat Feb 19, 2011 11:59 am

Academic


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Why this article does not mention anything about 1.7 billion unrealized gain (non cash gain) reported in 7.1 billion profit? See my thinking here.

http://forum.srilankaequity.com/t827p30-lolc-interim-report-released

72LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Sat Feb 19, 2011 12:34 pm

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
I've merged "LOLC - Interim report released" with this topic, hope this will continue as the official thread for LOLC talk Very Happy
Guys contribute more...

73LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty LOLC Share holding Sat Feb 19, 2011 3:24 pm

limestone

limestone
Manager - Equity Analytics
Manager - Equity Analytics
20 institutions +people are holding 93.55% shares of LOLC . only 30,574,840 shares out of 475,000.000 shares are available for real trading !

74LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Fri Apr 08, 2011 9:04 am

milanka

milanka
Vice President - Equity Analytics
Vice President - Equity Analytics
LOLC is to be converted in to a Holdings company as per CB approval. In that case it would be under diversified sector and not under Banking and Finance sector. Isnt it ?. DIV PER is currently at 36 levels. Earning per share as discussed above is arround 8/=.

What would happen to LOLC share today in that case ?

http://forum.srilankaequity.com/u188

75LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty lolc.............. Fri Apr 08, 2011 10:57 am

asitha


Senior Equity Analytic
Senior Equity Analytic
lolc will be moved to 1xx



Last edited by Meta Trader on Fri Apr 08, 2011 9:08 pm; edited 1 time in total (Reason for editing : May lead to speculation and manipulation)

76LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Fri Apr 08, 2011 2:57 pm

Academic


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

1.
The immediate reason for going LOLC down is its earning quality and downgrading debt rating based on double leverage.

Can any of you explain how name change to Holding address above issues? Isn't it the same LOLC?

2.
Further it is no more a Finance company. A jack of all trades.

Investors attracted to its finance business which will be shifted to LOFC. Once LOFC listed people may forget LOLC. This may explain why we saw large sell orders for LOLC in last couples of days (an information leakage?)?

In addition to that widely diversified companies are subjected to a "Conglomeration discount" in calculating its fair-value.

77LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Fri Apr 08, 2011 3:00 pm

StocksWatch


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@asitha wrote:lolc will be moved to 1xx

How come? Can you explain?

78LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Fri Apr 08, 2011 3:05 pm

Aamiable


Vice President - Equity Analytics
Vice President - Equity Analytics


Is this the reason for momentum?

http://www.cse.lk/cmt/uploadAnnounceFiles/7361302176811_378.pdf


LOLC group to reach a phase of exponential growth

79LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Fri Apr 08, 2011 5:27 pm

gann

gann
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@Academic wrote:

1.
The immediate reason for going LOLC down is its earning quality and downgrading debt rating based on double leverage.

Can any of you explain how name change to Holding address above issues? Isn't it the same LOLC?

2.
Further it is no more a Finance company. A jack of all trades.

Investors attracted to its finance business which will be shifted to LOFC. Once LOFC listed people may forget LOLC. This may explain why we saw large sell orders for LOLC in last couples of days (an information leakage?)?

In addition to that widely diversified companies are subjected to a "Conglomeration discount" in calculating its fair-value.

According to the following article LOLC is already in the top list of diversified companies in par with JKH with a impressive growth of Assets and ROE.
http://www.ft.lk/2011/04/08/welcome-the-new-conglomerate/

Any comments?

80LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Fri Apr 08, 2011 8:37 pm

Academic


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@gann wrote:
@Academic wrote:

1.
The immediate reason for going LOLC down is its earning quality and downgrading debt rating based on double leverage.

Can any of you explain how name change to Holding address above issues? Isn't it the same LOLC?

2.
Further it is no more a Finance company. A jack of all trades.

Investors attracted to its finance business which will be shifted to LOFC. Once LOFC listed people may forget LOLC. This may explain why we saw large sell orders for LOLC in last couples of days (an information leakage?)?

In addition to that widely diversified companies are subjected to a "Conglomeration discount" in calculating its fair-value.

According to the following article LOLC is already in the top list of diversified companies in par with JKH with a impressive growth of Assets and ROE.
http://www.ft.lk/2011/04/08/welcome-the-new-conglomerate/

Any comments?

It is bit difficult to predict how market would react. However, FT article clearly shows ROA of LOLC is well below two largest diversifieds, JKH and Carson. In addition to that part of reported earnings of LOLC was due to SEYB investment reclassification (1.7 billion). This may have revised by 31 march as SEYB doped to 75. So I cant see a impressive ROA with LOLC. IMHO recent acquisitions made LOLC's ROA stagnant (As Fitch Ratings pointed out in below link).

See http://www.lankabusinessonline.com/fullstory.php?nid=926577279 for more details.

I think LOLC wants to remove this diluting effect of acquisitions from its main business. That is why they are going to list Financial companies. Thus, financial subsidiaries would be attractive compared to LOLC in terms of ROA , ROE etc, as all dilutions are accumulated at holding company (LOLC) level.

This is not an investment advice or recommendation

81LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Fri Apr 08, 2011 9:09 pm

Aamiable


Vice President - Equity Analytics
Vice President - Equity Analytics
@tubal wrote:Thanks for your post academic. I find myself often talking about QoQ growth but didn't bother to check it with LOLC because YoY was pretty impressive. Having said that I don't think the price will decline, this stock seems to have good support at the 136 levels. At the same time these earnings wouldn't justify a breakout.



I think most of the investors have collected at higher levels, many are not prepared to dispose at low levels.
With these new developments on an up beating market .. LOLC is an attractive stock. It has a good support level,
LOLC is a very familiar stock for most investors.

82LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Fri Apr 08, 2011 9:32 pm

tubal


Vice President - Equity Analytics
Vice President - Equity Analytics
@Aamiable wrote:
@tubal wrote:Thanks for your post academic. I find myself often talking about QoQ growth but didn't bother to check it with LOLC because YoY was pretty impressive. Having said that I don't think the price will decline, this stock seems to have good support at the 136 levels. At the same time these earnings wouldn't justify a breakout.



I think most of the investors have collected at higher levels, many are not prepared to dispose at low levels.
With these new developments on an up beating market .. LOLC is an attractive stock. It has a good support level,
LOLC is a very familiar stock for most investors.

Aamiable my friend, that's an old post that I made before the 136 support line was breached. The 116.5 support line was all set to be breached today but the released an advertisement through the CSE newswire and retailers rushed to rescue the big boys.



Last edited by tubal on Fri Apr 08, 2011 9:34 pm; edited 1 time in total (Reason for editing : Support was not at 117 as incorrectly stated)

83LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Fri Apr 08, 2011 9:38 pm

Aamiable


Vice President - Equity Analytics
Vice President - Equity Analytics

I collected at higher levels several months ago

84LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Sat Apr 09, 2011 12:00 am

Academic


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
I do not see any logic in the claims of "support levels" either for an index or stock. For example someone may say ASI support at 7330 or LOLC at 116.5. What these numbers can do with fair value of an index or stock?

It is the demand and supply that determine price. Even ASI doped to 7330, if further selling occurs, it will further go down. The same is true for a stock. So the key for determining share price is predicting demand and supply, not naively hang on to some arbitrary numbers (7330, 166.5 etc).

85LOLC HOLDINGS PLC (LOLC.N0000) - Page 4 Empty Re: LOLC HOLDINGS PLC (LOLC.N0000) Sat Apr 09, 2011 1:25 am

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
@Academic wrote:
@gann wrote:
@Academic wrote:

1.
The immediate reason for going LOLC down is its earning quality and downgrading debt rating based on double leverage.

Can any of you explain how name change to Holding address above issues? Isn't it the same LOLC?

2.
Further it is no more a Finance company. A jack of all trades.

Investors attracted to its finance business which will be shifted to LOFC. Once LOFC listed people may forget LOLC. This may explain why we saw large sell orders for LOLC in last couples of days (an information leakage?)?

In addition to that widely diversified companies are subjected to a "Conglomeration discount" in calculating its fair-value.

According to the following article LOLC is already in the top list of diversified companies in par with JKH with a impressive growth of Assets and ROE.
http://www.ft.lk/2011/04/08/welcome-the-new-conglomerate/

Any comments?

It is bit difficult to predict how market would react. However, FT article clearly shows ROA of LOLC is well below two largest diversifieds, JKH and Carson. In addition to that part of reported earnings of LOLC was due to SEYB investment reclassification (1.7 billion). This may have revised by 31 march as SEYB doped to 75. So I cant see a impressive ROA with LOLC. IMHO recent acquisitions made LOLC's ROA stagnant (As Fitch Ratings pointed out in below link).

See http://www.lankabusinessonline.com/fullstory.php?nid=926577279 for more details.

I think LOLC wants to remove this diluting effect of acquisitions from its main business. That is why they are going to list Financial companies. Thus, financial subsidiaries would be attractive compared to LOLC in terms of ROA , ROE etc, as all dilutions are accumulated at holding company (LOLC) level.

This is not an investment advice or recommendation

If one was treating LOLC purely as financial company before this announcement then LOLC share price was bordering fair value I'd say. But if one wishes to now place LOLC has holding company with the future expectation of growth from its acquisitions /subsidiaries I guess it would trade at premium like the diversified sector. Gann reference to ft.lk article would help to identify where LOLC stands in diversified.

I guess most of this affect will be in the heard mentality in the present situation. I do not know abotu short term, but I certainly believe LOLC can be a good one for Long term ( 1-2 years) if one has the patience.

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