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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » SHL Analysis

SHL Analysis

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1SHL Analysis Empty SHL Analysis Fri Aug 26, 2011 5:12 pm

Genting


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
SHL Analysis

For Quarter ended 30.06.2011
Revenue - 4,396,141,060 //Year ended 31.03 .2011 its 10,788,466,990
Gross Profit - 1,549,249,467 // Year ended 31.03 .2011 its 2,880,429,922
Profit for the Period - 368,794,625

Attributable to: Equity Holders - 275,545,421
Ordinary shares - 779,000,000

EPS – 0.35

Note: Finance Expenses - (432,638,391) – Can expect this to come down by utilizing IPO funds and may increase EPS significantly.


Total Assets/ Total Equity and Liabilities - 34,369,666,451
Net asset per share 9.93

Segmental income

IT
Total Revenue - 1,510,245,156
Profit after tax - 86,240,789

Leisure
Total Revenue - 18,754,240
Profit after tax - (6,370,159)

Retail
Total Revenue - 923,185,231
Profit after tax - 99,188,351

Automobiles
Total Revenue - 264,037,468
Profit after tax - 30,949,432---- Can expect to increase due to increase in car sales

Healthcare
Total Revenue - 1,380,783,048
Profit after tax - 129,299,021 --- Can expect to increase due to recent outbreaks

Financial Services
Total Revenue - 299,135,917
Profit after tax - 17,380,671---- Loans are given to SHL employees to purchase SHL shares 


Looking at above figures we may can expect an annual of EPS 1.5-2.0

If we take PE of 20 – this share worth Rs30-40
CSE PE – 27.7 --> Rs40-55

IPO price – 29
Current Price - 23

Public holding – 18% - 140mn
Foreign Holding – 20Mn and increasing


This may be one of the best performing shares in coming years.

2SHL Analysis Empty Re: SHL Analysis Fri Aug 26, 2011 6:05 pm

WildBear


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@Genting wrote:SHL Analysis

For Quarter ended 30.06.2011
Revenue - 4,396,141,060 //Year ended 31.03 .2011 its 10,788,466,990
Gross Profit - 1,549,249,467 // Year ended 31.03 .2011 its 2,880,429,922
Profit for the Period - 368,794,625

Attributable to: Equity Holders - 275,545,421
Ordinary shares - 779,000,000

EPS – 0.35

Note: Finance Expenses - (432,638,391) – Can expect this to come down by utilizing IPO funds and may increase EPS significantly.


Total Assets/ Total Equity and Liabilities - 34,369,666,451
Net asset per share 9.93

Segmental income

IT
Total Revenue - 1,510,245,156
Profit after tax - 86,240,789

Leisure
Total Revenue - 18,754,240
Profit after tax - (6,370,159)

Retail
Total Revenue - 923,185,231
Profit after tax - 99,188,351

Automobiles
Total Revenue - 264,037,468
Profit after tax - 30,949,432---- Can expect to increase due to increase in car sales

Healthcare
Total Revenue - 1,380,783,048
Profit after tax - 129,299,021 --- Can expect to increase due to recent outbreaks

Financial Services
Total Revenue - 299,135,917
Profit after tax - 17,380,671---- Loans are given to SHL employees to purchase SHL shares 


Looking at above figures we may can expect an annual of EPS 1.5-2.0

If we take PE of 20 – this share worth Rs30-40
CSE PE – 27.7 --> Rs40-55

IPO price – 29
Current Price - 23

Public holding – 18% - 140mn
Foreign Holding – 20Mn and increasing


This may be one of the best performing shares in coming years.

Thanks for the analysis. Little correction, CSE P/E is not 27.7, now it's closer to 15.

Yes, since their presence in some future growth sectors, it is reasonable to assume a Forward P/E of 20.

The future EPS will boost significantly due to following factors,

-Reduction of financial cost after they pay off their borrowings with IPO money.
-Listing of softlogic capital(Which might utilize to pay off Acquisition cost of Asian Alliance) and Asiri Central
-Their Leisure sector will start deliver from 2014, esp The 24 story Movenpick City hotel will be iconic Hotel project in Sri Lanka
-Softlogic finance will be in better position specially after the fresh capital from recently concluded rights issue amid strong credit/leasing demand.
-Recently Acquired Asian Alliance will further improve their earning in future, They can go for many synergies, esp with Health insurance policies with Asiri Group Hospitals. moreover they have Significantly large insurance fund including an equity portfolio.
-Increased demand for health care-Increased aging population,increased income,increased non-communicable diseases like Diabetes which need longer term medical care.
-They are planning to build a 100 bed hospital in Kandy,Kandy is a huge city only second to Colombo,but lacks a high end Private hospital. They will enjoy a Monopoly in that area for some time.
-Expected growth in IT(I think we know enough about it Razz )
-Their consumer electronic and mobile phone business in rapid expansion, which will benefit from increased per capita income. Nowadays people don't use a mobile phone for more than a year or two, rather many use more than one mobile phone

I also feel it's really worth to analyse the Investment portfolio of Asian Alliance, which may be around 2-3 billions from which softlogic Capital going to get fund management fees.

I think we should look at SHL with a new angle, They have positioned to get maximum benefit from many growth areas in years to come.
This might become next JKH in few years

PS-These are some Macro Economic and other factors that I have considered before I invested in SHL for long term.
this is not a buy/sell recommendation.

3SHL Analysis Empty Re: SHL Analysis Fri Aug 26, 2011 7:41 pm

Genting


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@WildBear wrote:
Thanks for the analysis. Little correction, CSE P/E is not 27.7, now it's closer to 15.


Thank you for mentioning. And yes market PE is around 15.

However, I was referring to Diversified Sector PE.

4SHL Analysis Empty Re: SHL Analysis Fri Aug 26, 2011 8:06 pm

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
Good one.. I see that ur learning Wink SHL's growth is really on to good side
1Q net profit of Rs. 276 mn, up from 1Q last year net profit of Rs. 103 mn means a good growth.

They could use the IPO money to get rid of their long term debt. Recently acquired AAIC - shows some future potential too..

5SHL Analysis Empty Re: SHL Analysis Fri Aug 26, 2011 8:19 pm

cse.alpha


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@Genting wrote:

Note: Finance Expenses - (432,638,391) – Can expect this to come down by utilizing IPO funds and may increase EPS significantly.


Using IPO funds to pay off debt, will boost profits, but impact on EPS will be lower due to the increased share capital after the IPO.

With the after-tax cost of debt for a blue chip company such as SHL likely to be under 8%, the boost to EPS will in fact probably be very low.

In terms of capital structure, raising relatively higher cost equity to pay off lower cost debt, is not usually optimal, unless the company has a crippling debt burden.

Anyhow, almost all of the 4 billion rupees raised by SHL in IPO will be going to fund the takeover of AAIC now, not to repay debt. 3.3 billion rupees already paid, and mandatory offer pending.

6SHL Analysis Empty Re: SHL Analysis Fri Aug 26, 2011 8:19 pm

Rajaraam


Vice President - Equity Analytics
Vice President - Equity Analytics
Genting and Wildbear,

Many thanks for both sharing your findings with other members and guest. These information would be very useful anyone to make proper assesment of this share.Genuinely for me both posts are realy realy worth and useful.

7SHL Analysis Empty Re: SHL Analysis Fri Aug 26, 2011 8:44 pm

Genting


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@cse.alpha wrote:
@Genting wrote:

Note: Finance Expenses - (432,638,391) – Can expect this to come down by utilizing IPO funds and may increase EPS significantly.


In terms of capital structure, raising relatively higher cost equity to pay off lower cost debt, is not usually optimal, unless the company has a crippling debt burden.

Anyhow, almost all of the 4 billion rupees raised by SHL in IPO will be going to fund the takeover of AAIC now, not to repay debt. 3.3 billion rupees already paid, and mandatory offer pending.

Equity is the cheapest source of funding to get rid of debt. Always equity is cheaper than debt. That's why more companies issuing rights, warrants and IPOs. There won't be any reduction of profits to the company due to increased equity. Infact, if those funds raised are used to get rid of debt, interest paid for maintaining that debt will get reduce and hence increase company's net profit.
Only downside with equity is that original owners will have to share the profits with new stake holders. In that sense equity is costly for original owners, not for the new ones.

Regarding AAIC,
AAIC is under Softlogic Capital, which they are hoping to list by introduction at CSE. By doing so, SHL may recover part of capital that they have spent in acquiring AAIC.

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