Академический Документы
Профессиональный Документы
Культура Документы
Vallibel One
Diversified
Research Analyst
Samalka Athuraliya |
Investment Summary
Vallibel One
Rs. 28.5
Rs. 23.0
Bloomberg
VONE SL Equity
25.0
178.8
1,086.6
764.4
23.0-23.5
31.7
13.3
31 st March
FY 2013/14
48,331
43,450
49,753
54,953
46%
14,655
-10%
17,618
15%
20,857
10%
23,284
GP Growth (Y-o-Y)
42%
20%
18%
12%
3,832
7,349
9,981
10,975
-6%
1,574
92%
2,891
36%
4,275
10%
4,712
-27%
84%
48%
10%
1.45
2.66
3.93
4.34
NAVPS2
29.90
31.97
35.50
39.34
0.40
0.50
0.50
DPS
0.70
28
6000
21
4500
14
3000
1500
0
Jul-11
VONE
September 2015
Jul-14
Mr. K D D Perera
7500
Jul-15
ASPI Level
Price Rs.
35
Jul-13
Jul-12
Diversified
63.48%
9.35%
8.46%
8.46%
0.62%
0.48%
0.30%
0.26%
0.24%
0.21%
ASPI
Page 2
Table 0f Contents
Vallibel One
Investment Overview
| 4
Segment Review
Tiles and Sanitary Ware to Grow on Favorable Macro Factors
| 6
| 11
| 16
Valuation
RCL and LFIN to drive VONEs Equity Value
Summary Financials
September 2015
Diversified
| 18
| 20
Page 3
Diversified
Investment Overview
RCL and LFIN to Determine VONEs Performance
LKR Mn
50%
40,000
40%
30,000
30%
20,000
20%
10,000
10%
6,000
4,000
2,000
0
2012
2013
Gross Profit
2014
2015
2016E
EBIT
Source: VONE Annual Reports, Acuity Estimates
0%
2011
2012
Revenue
2013
2014
2015
EBIT Margin
Source: VONE Annual Reports
Pawning
Lease Finance
Residential Housing
SME Lending
0%
3%
6%
9%
Average Interest Rates
12%
15%
Source: CBSL
September 2015
Page 4
Diversified
Investment Overview
VONE Rated a BUY on SOTP Valuation
Moreover, we also expect LFINs loan book growth to be
supported by: (1) growth in three-wheeler leasing due to
lower fuel prices; (2) increase in small car sales due to
changes in tax regulation; and (3) potential in the Small
and Medium Enterprises (SME) segment. Our positive
outlook for the company is also backed by LFINs betterthan-peer diversification of its loan book combined with
its better than industry-average performance in Net
Interest Margins and Cost to Income Ratios. While we are
bullish on LFIN and believe that the Group has robust
short-medium term prospects, we remain slightly cautious
regarding its higher-than-peer Gold loan exposure (~1/5th
of its total lending portfolio), which we percieve as a
significant risk for the company.
Although earnings volatility has defined much of the recent
performance in the Consumer, Lifestyle and Healthcare
segments, we expect the signs of recovery seen in Q115 to
continue into the remainder of the year. Recent
restructuring efforts, lower fuel/electricity costs and the
likely increase in private consumption levels are expected
to improve performance in FY 2015/16E. We note though
that VONEs Plantation segment is likely to continue
weighing on Group margins due to several challenges in
the industry. Over-reliance on the Middle-Eastern markets
and the ongoing geo-political unrest in these markets,
coupled with low global commodity prices and domestic
industry concerns such as higher wages are likely to
dampen overall industry prospects. Despite these
challenges however, we remain positive on HOPLs
medium-term prospects as it focuses on: (1) investing in
replanting and upgrading its factories; and (2) crop
diversification including Palm Oil.
Driven by the strong short-medium term growth prospects
in VONEs subsidiaries and associates, we see a 26.0%
upside on the stock and recommend a 12M BUY. Based on
our SOTP valuation methodology, we have valued each of
VONEs business segments and derive a target price of LKR
28.5, which with an average historical dividend yield of
2.2% translates to a total return of 26.0%.
Rated BUY with a Total Return of 26.0%
Stock Price LKR
30.0
25.0
20.0
Valuation
Method
Royal Ceramics
DCF
L B Finance
PBV
Delmege
Diversified PER
Horana Plantations
PBV
Sampath Bank
Justified PBV
The Fortress Resorts
Market Value
Waskaduwa Beach Resort Market Value
Equity Value
Adjustments
Price
Multiple
Value Per Share
(x)
(LKR Mn)
Value
-
20,752.2
19.10
1.92
19,599.8
18.04
11.12
2,504.7
2.31
0.42
607.5
0.56
5,631.7
5.18
253.1
0.23
240.5
0.22
49,589.4
45.64
(18,676.3)
(17.19)
28.45
15.0
10.0
5.0
0.0
Mar-12
Mar-13
Mar-14
Mar-15
Sep-15
12M TP
September 2015
Diversified
250
200
150
100
50
2007
2009
2010
2011
Vallibel One
2012
2013
2014
Construction sector
Source:
Source:Department
Departmentof
ofCensus
Censusand
andStatistics
Statistics
Royal Porcelain
(Pvt) Ltd (100%)
RCL (51%)
2008
60%
45%
30%
15%
0%
WP
GDP
CP*
SG
NC
UP
Construction
NW
Avg. GDP
EP
SP
NP
Avg. Construction
September 2015
Page 6
Diversified
7.5
6.0
Replacement
Housing
0.5Mn
4.5
New
Housing
1.0Mn
3.0
1.5
0.0
2015
2030
Source:
Vertical
Living
Beyond
2020,
KPMG
Source:
Vertical
Living
Beyond
2020,
KPMG
8.0
8.0
7.3
5.0
6.0
4.0
6.0
3.3
2.8
1.4
2.0
0.8
0.0
China
Vietnam
Indonesia
Sri Lanka
Source: ICCTAS (2013), World Bank, Acuity Research
Diversified
450,000
12%
400,000
10%
350,000
8%
300,000
6%
Jun-12
Dec-12
Jul-13
Interest rates
Jan-14
Aug-14
250,000
Mar-15 Source: CBSL
Construction Loans
Source: CBSL
Sq.m (Mn)
500,000
14%
150
100
50
0
2013
USA
Germany
Saudi Arabia
Russia
Iraq
Thailand
France
Nigeria
Source: Acuity
South Korea
UAEResearch
Source: Infotile (2013)
160%
Source: Infotile (2013)
LKR (Mn)
16%
18,000
120%
12,000
80%
6,000
40%
0%
2012
2013
2014
Revenue
2015
2016E 2017E
YoY Growth
Source: VONE Annual Reports, Acuity Research
September 2015
Page 8
Diversified
9,000
50%
7,500
47%
6,000
44%
4,500
41%
3,000
38%
1,500
0
Margin (%)
FY
35%
2012
2013
2014
Gross Profit
35%
4,000
30%
3,000
25%
2,000
20%
1,000
15%
Margin (%)
LKR (Mn)
RCL, like much of the rest of the tiling industry is facing the
challenge of obtaining consistent and high quality raw
material due to a lack of streamlining in the mining and
quarrying industries. We note that this has led to weaker
production yields and thus resulted in an increase in the
cost of production. This in turn has also resulted in local
tile manufacturers such as RCL being unable to compete
with the low priced and poor quality imports, resulting in
pressure on margins. In 2014 however, with stricter
Source:
Annualauthorities,
Reports, Acuity Research
regulation being implemented by the
local
the
supply issue was for the most part resolved. Consequently,
VONEs Tiles and Sanitary Ware segments collectively
reported a gross profit of LKR 6.42Bn in FY 2014/15
(margin of 39.71%, up ~220bps Y-o-Y). The improvement
in margins was also driven by lower energy costs (which
account for ~40% of RCLs cost base), combined with
continued focus on cost efficiency improvements. For
instance, RCLs subsidiary, Lanka Tiles reported that the
company was able to reduce its total energy costs by
19.0% in FY 2014/2015, owing to the reduction in LP Gas
prices. Given RCL Groups significant production capacity,
we believe that it would be in a better position to negotiate
the price of its raw materials, thus allowing it to largely
contain its costs in the short-medium term.
LKR (Mn)
10%
2012
2013
EBIT
2014
September 2015
Page 9
Diversified
RCL, 34%
Imports, 60%
Mack
Tiles,
Source: Company Data (2015)
6%
Source: Company Data (2015)
Page 10
Diversified
100%
30%
80%
24%
60%
18%
40%
12%
20%
6%
0%
0%
Q4 13
Q1 14
Q2 14
CB
LSB
CB Credit to Pvt. Sector
Q3 14
Q4 14
Q1 15
LFC
LFC Credit to Pvt. Sector
Source: CBSL
Source: Monthly Bulletin, CBSL
Source:Annual
AnnualReports
Reports
Source:
20%
15%
10%
SDF Window
Rationalized
Credit-Guarantee on
Pawning Loans
5%
0%
Jun'13
September 2015
Page 11
Diversified
LKR Mn
56,000
42,000
28,000
45%
14,000
30%
0
2012
2013
2014
2015
2016E
2017E
50%
25%
0%
2012/13
Gold Loans
2013/14
Mortgage Loans
2014/15
Vehicle Loans
2015/16E
Other
15%
0%
-15%
-30%
2006
2007
2013
2014
Diversified
80%
60%
180
40,000
160
30,000
140
20,000
120
10,000
100
LKR/Litre
80
2013
2014
2015
40%
20%
0%
2010
Motor Cars
2011
2012
Motor Tricycles
2013
2014
2015 (YTD
June)
Motor Cycles
Other
Source: Department of Motor Traffic
Diversified
100%
75%
50%
25%
0%
LFIN
CFIN
PLC
LOFC
Industry
Average
LFIN
12.67%
7.91%
39.45%
58.47%
2.30%
1.94%
16.02%
11.22%
19.70%
12.24%
Return on Equity
30.88%
20.32%
September 2015
Page 14
Diversified
200
150
100
50
2010/11
2011/12
2012/13
2013/14
2014/15
Gold Loans
Page 15
Diversified
110
Healthcare
Lifestyle
Tiles
Consumer
LKR mn
Other
VONE
Benefits
from a
Well
Diversified
Portfolio
140
6%
80
4%
50
2%
20
0%
(10)
-2%
(40)
-4%
(70)
Plantation
Q1 2013/14
Sanitary wear
Banks &
Finance
8%
Margin (%)
-6%
Q3 2013/14
Q1 2014/15
EBIT
Q3 2014/15
Q1 2015/16
Source:
Annual Reports
Near Term
Continues |
Pressure
on
Plantation
Sector
Diversified
September 2015
Page 17
Diversified
Valuation
Target Price of LKR 28.5 Yields a Total Return of 26.0%
Target Price of LKR 28.5 Based on a Sum-of-theParts Valuation |
We use a sum-of-the-parts (SOTP) valuation to arrive at
our target price for VONE and based on this methodology,
we derive a target price of LKR 28.5 per share, implying
total return of 26.0%. The valuation has been carried out
using a series of metrics ranging from DCF to relative
valuation (PBV & PER) to market based valuation (market
value of subsidiaries/associates). On this basis, RCL (Tiles
and Sanitary Ware segments) accounts for 41.85% of our
target equity value, while LFIN (Banks & Finance)
generates 39.52% of the value. We assume Sampath Bank
should contribute 11.36% to VONEs target value.
RCL and LFIN Contribute over 80% to VONEs Equity
Value
Delmege,
5.05%
Other, 2.22%
Sampath
Bank,
11.36%
Royal
Ceramics,
41.85%
L B Finance,
39.52%
September 2015
Valuation
Method
Royal Ceramics
DCF
L B Finance
PBV
Delmege
Diversified PER
Horana Plantations
PBV
Sampath Bank
Justified PBV
The Fortress Resorts
Market Value
Waskaduwa Beach Resort Market Value
Equity Value
Adjustments
Price
Multiple
Value Per Share
(x)
(LKR Mn)
Value
-
20,752.2
19.10
1.92
19,599.8
18.04
11.12
2,504.7
2.31
0.42
607.5
0.56
5,631.7
5.18
253.1
0.23
240.5
0.22
49,589.4
45.64
(18,676.3)
(17.19)
28.45
Page 18
Diversified
Valuation
Risk to Valuation on a Super Gains Tax
Discount to Peers Expands Post Q215 Results, as
Growth Prospects Not Priced In
VONE's Expanded Discount to Peers
Unwarranted
PER (x)
18
14
10
6
Apr-13
Aug-13
Dec-13
Apr-14
Aug-14
VONE
Dec-14
Apr-15
Aug-15
Peer Avg.
Source: Bloomberg
Page 19
Company Financials
FY
Diversified
2013/14*
2014/15
2015/16E
2016/17E
Revenue
48,331
43,450
49,753
54,953
EBIT
5,149
7,546
9,931
11,470
576
1,146
1,272
1,378
3,832
7,349
9,981
10,975
770
2,003
2,813
3,073
1,574
2,891
4,275
4,712
EPS
1.45
2.66
3.93
4.34
FY
2013/14
2014/15
2015/16E
2016/17E
14,199
14,825
18,196
19,791
Sanitary Ware
1,125
1,354
1,426
1,504
Plantation
2,069
2,165
2,176
2,198
13,492
14,647
15,826
17,938
Tax
LKR Mn
Revenue (Excluding Associates)
Investment
Tiles
Segmental Performance
Leisure
Consumer
2,151
2,834
3,276
3,669
Lifestyle
1,288
1,394
1,578
1,786
Healthcare
1,175
1,691
2,364
2,837
Apparel
9,781
Other
3,051
4,540
4,911
5,231
(71)
(2)
(69)
(62)
2,452
2,859
3,769
4,255
Sanitary Ware
361
392
389
421
Plantation
220
123
58
66
Tiles
3,465
3,929
5,130
5,916
Leisure
(23)
(19)
(16)
(13)
Consumer
(61)
(32)
73
Lifestyle
64
90
103
152
Healthcare
96
172
227
Apparel
82
Other
31
322
385
434
2013/14
2014/15
2015/16E
2016/17E
Revenue Growth
46.0%
-10.1%
14.5%
10.5%
EBIT Growth
21.0%
46.5%
31.6%
15.5%
-26.8%
83.7%
47.9%
10.2%
EBIT Margin
10.7%
17.4%
20.0%
20.9%
NP Margin
3.3%
6.7%
8.6%
8.6%
Dividend Yield
3.0%
1.7%
2.2%
2.2%
FY
September 2015
Page 20
Research Team
Sales Team
Chethana Ellepola
(+94) 112 206 256
chethana@acuitystockbrokers.com
Deva Ellepola
(+94) 112 206 220/221
deva.e@acuitystockbrokers.com
Dhammika Wanniarachchi
(+94) 112 206 229
dhammika.w@acuitystockbrokers.com
Anjula Nawarathna
(+94) 112 206 255
anjula@acuitystockbrokers.com
Prashan Fernando
(+94) 112 206 222
prashan@acuitystockbrokers.com
Shivane Wijayaratnam
(+94) 112 206 236
shivane@acuitystockbrokers.com
Aethra de Silva
(+94) 112 206 253
aethra@acuitystockbrokers.com
Kapila Pathirage
(+94) 112 206 227/228
kapila.p@acuitystockbrokers.com
Sameera Rajawatte
(+94) 112 206 279
sameera@acuitystockbrokers.com
Samalka Athuraliya
(+94) 112 206 254
samalka@acuitystockbrokers.com
Naren Godamunne
(+94) 112 206 225
naren@acuitystockbrokers.com
Anouk Weerasinghe
(+94) 112 206 254
anouk@acuitystockbrokers.com
Arjuna Dasanayake
(+94) 112 206 235
arjuna@acuitystockbrokers.com
Prasanna Semasinghe
(+94) 814 474 443
hnbkandy@sltnet.lk
Amarasena Liyanage
(+94) 112 206 231
amarasena.l@acuitystockbrokers.com
Thehani Weerasinghe
(+94) 112 206 224
thehani.w@acuitystockbrokers.com
Susil Fernando
(+94) 112 206 234
susil@acuitystockbrokers.com
Chathura Siyambalapitiya
(+94) 112 206 232
chathura.s@acuitystockbrokers.com
S. Vasanthakumar
(+94) 112 206 250/251
vasantha.k@acuitystockbrokers.com
Disclaimer:
Distributed in Sri Lanka and abroad by Acuity Stockbrokers (Private) Limited (ASB) and its authorized representatives. ASB is
fully owned by Acuity Partners (Pvt) Ltd (APL) and APL is a joint venture of DFCC Bank and Hatton National Bank PLC. The
Information contained herein has been compiled from sources that ASB (The Research Institution) believes to be reliable but
none of the Research Institution holds itself responsible for its completeness or accuracy. It is not an offer to sell or a solicitation
of an offer to buy any securities. The Research Institution and its affiliates and its officers and employees may or may not have a
position in or with respect to the securities mentioned herein.
The Research Institution and its affiliates may from time to time have consulting relationship with any company, which is being
reported upon. This may involve the Research Institution providing significant corporate finance services or acting as the
companys official or sponsoring broker.
All opinions and estimates included in this report constitute judgment as of this date of the Research Institution and are subject
to change or amendment without notice. The Research Institution has the copyright for this report and the views herein cannot
be reproduced and/or distributed in any form without the explicit (written or otherwise) permission from Research Institution.