NDB Securities (Pvt) Ltd,

5
th
Floor,
# 40, NDB Building,
Nawam Mawatha,
Colombo 02.
Tel: +94 11 2131000
Fax: +9411 2314180
+9411 2314181

Research Team Waruna Singappuli, Suvimal De Costa, Akila Devendra, Vaishalie Shakespeare

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Main Shareholders As At 31.03.14 No. of Shares %
Mr S E Captain 143,340,253 14.5
Broga Hill Investments Limited 104,084,164 10.5
Janus Overseas Fund 57,182,777 5.8
Paints and General Indusries Limited 51,994,412 5.3
Melstacorp (Private) Limited 36,498,341 3.7
0
5
10
15
20
25
30
190
210
230
250
270
290
Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14
Volume Price Adjusted ASPI
LKR,
Volume,Mn
Market Price As at 27.06.2014
52 Week Range
Shares in Issue (as at 31.03.2014)
Average Daily Volume (52 Weeks)
Estimated Free Float (%) 76.21
Share Data
LKR 220.00
LKR 200.50 - 262.50
990,270,618
947,975
LKR Mn FY11/12 (A) FY12/13 (A) FY13/14 (A) FY14/15 (E) FY15/16 (E) FY16/17 (E)
Turnover 77,690 85,408 89,256 99,126 104,202 112,198
Profits Attibutable to Equity Holders 9,687 12,201 12,202 14,666 14,052 14,639
EPS (LKR) 11.48 14.23 12.32 14.81 13.59 13.58
Forward P/E*(X) 17.95 17.36 18.46 14.88 16.21 16.23
DPS (LKR) 3.50 3.50 2.50 3.00 3.00 3.00
Dividend Yield (%) 1.70 1.42 1.10 1.36 1.36 1.36
BV (LKR) 84.51 104.72 124.10 135.52 148.21 160.70
PBV* (X) 2.44 2.36 1.83 1.63 1.49 1.37
ROE (%) 16.70 16.73 12.23 12.14 10.40 9.54
Total Debt/Equity (%) 25.10 19.88 19.52 33.94 39.48 40.96
EV/EBITDA (X) 11.50 11.64 12.48 11.11 12.16 12.29
*P/E and PBV from FY11/12-FY13/14 have been calculat ed using t he year-end share price,whilst current share price has been used for FY14/15-FY16/17.
John Keells Holdings PLC (JKH)
Earnings update


Advancing Waterfront to propel the property segment
Despite the increase in revenue for the segment in FY13/14,
the segmental results ended 18.8% below our forecast amidst
non materialisation of expected margins. However, in light
of the last tranche of On Three 20 being due during the year
coupled with the recognition of apartment sales pertaining to
the Seventh Sense are expected to bolster the performance in
FY14/15. According to company sources, close to 70% of
the apartments in Seventh Sense were pre sold while the
figure remained approximately 93% for On Three 20.
Meanwhile, company has received bookings close to 50% of
Waterfronts apartments. However, JKH has decided to
recognize the full amount at the end of the project in four
years time. Accordingly, we have estimated the revenue and
segmental profits to increase by 41.3% and 75.6%
respectively in FY14/15. However, this is a drop from our
initial forecast.
Capital gains to enhance bottom line We expect JKH to
accept the mandatory offer of Expolanka Holdings at LKR
10.70. Considering the initial cost of the investment at LKR
6.00 through the private placement in December 2010, this is
expected to generate a capital gain of approximately LKR
392 Mn. Since the investment is categorised as available for
sale, the unrealized gains should be reflected in the profit
and loss statement once the gain is realized. We expect this
to bolster the profits in FY14/15. Furthermore, excluding
dividends, the gain is equivalent to a CAGR of 18%.
Maintain buy Since our last update in February, the
counter has given a negative return of 3.7% adjusted for
dividends. This is in comparison to the 3.2% gain in the
ASPI. With the drop in the share price, the estimated
intrinsic value indicates a notable upside. Therefore, we
reiterate our recommendation.






Target Price LKR 254.20

Recommendation Accumulate

Analyst Suvimal De Costa

Date 27.06.2014

Price Performance

NDB Securities (Pvt) Ltd John Keells Holdings PLC 27
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June 2014 2

Bunkering down despite the gain in market share The subdued industry
conditions continued with Sri Lankan volumes seeing a 10% dip during FY13/14.
Furthermore, the year saw an entry of two new players increasing the total
number of bunkering operators to five which resulted in intense price competition
causing margins to erode. The transport segment top line saw a 14.1% dip for
FY13/14 while ending 3.5% below our initial forecast. However, LMS managed
to increase its market share to 46% from 42% level a year ago, which helped to
maintain volumes. Furthermore, in light of increasing regional competition and
continuing lacklustre industry conditions, we do not expect volumes to pick up
significantly in FY14/15. Therefore, we have reduced our revenue forecast for
FY14/15 by 7.5%. Accordingly, we estimate the revenue to grow by 5.7% in
FY14/15 while segmental profits to grow by 24.3%.
In addition, SAGT saw its volume falling by approximately 10% during
FY13/14. The drop came from the fall in domestic volumes coupled with certain
shipping alliances shifting to other terminals at Colombo port. We expect the
performance to remain subdued in FY14/15 with 7.1% increase in associate
profit.
Leisure to drive profits The leisure segment contributed 54% of JKHs
operational profits in FY13/14 up from the 50% recorded in FY12/13. The Sri
Lankan resorts posted robust results due to the full year operation of Cinnamon
Citadel and Cinnamon Bey in addition to average occupancy levels hovering
around 71%. This is in comparison to the 51% levels recorded during FY12/13.
However, the average room rate (ARR) was brought down by approximately 8%.
Given the healthy occupancy levels, we expect the ARR to be increased slightly
to maintain margins. Accordingly, we estimate Sri Lankan resort revenue to grow
by 16.9% in FY14/15. The Maldivian resorts also recorded a 10.4% growth in
revenue helped by the improved ARR and occupancy levels. We do not
anticipate a significant increase in occupancy levels from the current 90% level.
Therefore, we estimate the revenue from Maldivian resorts to increase by 5.2% in
FY14/15.
The city hotels also witnessed an improvement in occupancy levels mainly driven
by Cinnamon Grand. The segments revenue grew by 4.7% in FY13/14 in line
with our initial forecast. We estimate the city hotels segment to post a top line
growth of 7.0% in FY14/15. Accordingly, we have estimated the leisure segment
revenue to grow 9.5% in FY14/15 largely in line with our initial forecast.
Consumer segment gains steam Amidst the realignment of the retail
segments operations, the segment managed to record robust results with
operating profits increasing by 224%. Focussing on upscale larger super markets
while closing down several smaller super markets have augured well for the
segment. We expect the retail segment to maintain the momentum in FY14/15
where we estimate the revenue to grow by 13.7%. Despite being below our initial
forecast, we estimate consumer segments revenue to grow by 10.3% in FY14/15
while operational profits to grow by 7.7%.


NDB Securities (Pvt) Ltd John Keells Holdings PLC 27
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June 2014 3

LKR Mn FY11/12 (A) FY12/13 (A) FY13/14 (A) FY14/15 (E) FY15/16 (E) FY16/17 (E)
Turnover 77,690 85,408 89,256 99,126 104,202 112,198
Expenses (67,233) (75,285) (79,076) (87,376) (92,466) (100,063)
Segmental Results 10,456 10,123 10,180 11,750 11,735 12,136
Adjustments and Finance Income (399) 1,242 3,009 4,643 4,403 5,060
Finance Expenses (1,416) (1,081) (1,224) (2,096) (2,885) (3,556)
Change in Fair Value of Investment Property 1,413 2,012 470 931 838 754
Profit from Associates 2,765 3,369 2,964 3,238 3,602 4,038
PBT 12,820 15,665 15,399 18,465 17,692 18,432
Taxation (1,842) (2,185) (2,388) (2,863) (2,743) (2,858)
PAT 10,978 13,481 13,011 15,602 14,949 15,574
Profits Attibutable to Equity Holders 9,687 12,201 12,202 14,666 14,052 14,639
Minority Interest 1,291 1,280 809 936 897 934
LKR Mn FY11/12 (A) FY12/13 (A) FY13/14 (A) FY14/15 (E) FY15/16 (E) FY16/17 (E)
Non Current Assets
Property, Plant & Equipment 34,290 49,273 47,536 48,856 50,107 51,294
Lease Rentals Paid in Advance 10,278 9,514 9,096 8,446 7,843 7,283
Intangible Assets 2,633 2,690 2,472 2,244 2,037 1,849
Investments 36,976 43,836 40,322 41,725 43,643 45,609
Deferred Tax Assets 129 212 147 176 169 176
Other Non - Current Assets 2,405 3,576 19,712 47,572 72,572 92,572
86,712 109,100 119,285 149,019 176,371 198,781
Current Assets
Inventories 4,350 3,999 6,966 7,697 8,146 8,815
Amounts due from Related Parties 11 207 313 313 313 313
Trade and Other Recievables 11,347 12,775 12,564 13,953 14,668 15,793
Other Current Assets 2,923 2,896 2,837 2,837 2,837 2,837
Short Term Investments 24,847 26,586 54,553 58,203 62,288 66,855
Cash in Hand and at Bank 4,267 3,555 5,955 9,970 16,295 23,223
47,746 50,018 83,188 92,974 104,546 117,837
Total Assets 134,458 159,118 202,474 241,993 280,917 316,618
Equity and Liabilities
Stated Capital 25,111 26,480 49,749 49,749 57,888 66,467
Revenue Reserves 33,001 42,704 51,301 62,604 73,553 84,958
Other Components of Equity 12,797 20,635 21,845 21,845 21,845 21,845
Equity attributable to shareholders 71,338 89,819 122,894 134,198 153,286 173,270
Minortiy Interest 8,863 11,366 11,616 12,351 13,020 13,716
Total Equity 80,201 101,185 134,510 146,549 166,306 186,986
Non Current Liabilities
Insurance Contract Liabilities 14,711 17,388 20,273 22,300 24,530 26,983
Interest Bearing Borrowings 12,221 11,858 9,969 32,970 48,717 59,358
Deffered Liabilities 711 1,272 1,418 1,700 1,629 1,697
Employee Benefit and Other Liabilities 2,146 1,915 1,934 2,070 2,215 2,370
29,788 32,434 33,594 59,040 77,091 90,409
Current Liabilities
Trade and Other Payables 14,875 14,608 14,737 16,284 17,233 18,648
Borrowings 7,908 8,259 16,287 16,774 16,942 17,230
Other Current Liabilities 1,686 2,632 3,345 3,345 3,345 3,345
24,468 25,499 34,369 36,404 37,520 39,223
Total Equity and Liabilities 134,458 159,118 202,474 241,993 280,917 316,618
Financials
















































NDB Securities (Pvt) Ltd John Keells Holdings PLC 27
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June 2014 4

LKR Mn FY14/15 (E) FY15/16 (E) FY16/17 (E)
Net Profit 15,602 14,949 15,574
Adjustments
Depreciation and Amortization 3,558 3,559 3,562
Increase in Investment Properties (931) (838) (754)
Associate Profits (3,238) (3,602) (4,038)
Interest Expense 2,096 2,885 3,556
(Increase)/ Decrease in Deferred Tax Asset (29) 7 (7)
Increase/ (Decrease) in Deferred Tax Liabilities 282 (71) 68
Increase/ (Decrease) in Other Liabilities 135 145 155
Increase/ (Decrease) in Insurance Provision 2,027 2,230 2,453
Adjustments and Finance Income (4,643) (4,403) (5,060)
(Increase)/ Decrease in Inventory (731) (448) (669)
(Increase)/ Decrease in Receivables (1,389) (714) (1,126)
Increase/ (Decrease) in Payables 1,547 949 1,416
Cash Generated From Operations 14,287 14,648 15,130
Other Income 2,266 2,521 2,827
Interest Income Received 2,238 2,548 2,945
Interest Paid (2,096) (2,885) (3,556)
Cash Flow From Operating Activities 16,694 16,832 17,346
Cash Flow From Investing Activities
Investments in Property & Plant (4,000) (4,000) (4,000)
Proceeds from Sale of Investments 891 0 0
Investment in Waterfront Project (20,000) (25,000) (20,000)
Other Investments (2,027) (2,230) (2,453)
(25,136) (31,230) (26,453)
Cash Flow From Financing Activities
Loans Obtained 2,000 2,000 2,000
Loans Obtained to Finance the Waterfront Project 16,732 16,861 11,421
Proceeds from Shares 0 8,139 8,579
Repayment of Loans (3,103) (2,946) (2,492)
Ordinary Dividends (2,971) (3,103) (3,235)
Payments to Minority Shareholders (201) (228) (238)
12,457 20,723 16,035
Net Increase/(Decrease) in Cash & Cash Equivalents 4,015 6,325 6,928
Cash & Cash Equivalents at the Beginning of Period 5,955 9,970 16,295
Cash & Cash Equivalents at the End of Period 9,970 16,295 23,223
Key Ratios FY11/12 (A) FY12/13 (A) FY13/14 (A) FY14/15 (E) FY15/16 (E) FY16/17 (E)
Growth Ratios
Turnover Growth (%) 28.41 9.93 4.51 11.06 5.12 7.67
Segement Result Growth (%) 76.24 (3.19) 0.56 15.42 (0.12) 3.41
Net Profit Growth (%) 21.13 22.80 (3.48) 19.91 (4.19) 4.18
Profitability Ratios
Net Profit Margin (%) 14.13 15.78 14.58 15.74 14.35 13.88
ROE (%) 16.70 16.73 12.23 12.14 10.40 9.54
Share Ratios
EPS (LKR) 11.48 14.23 12.32 14.81 13.59 13.58
DPS (LKR) 3.50 3.50 2.50 3.00 3.00 3.00
Dividend Yield (%) 1.70 1.42 1.10 1.36 1.36 1.36
BV (LKR) 84.51 104.72 124.10 135.52 148.21 160.70
Gearing
Total Debt/Equity (%) 25.10 19.88 19.52 33.94 39.48 40.96

















































NDB Securities (Pvt) Ltd John Keells Holdings PLC 27
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June 2014 5

Mrs. Prasansani Mendis Chief Executive Officer prasansini@ndbs.lk 011 2131005
Sales Branches
Head Office CSE
Mr. Gihan R. Cooray gihan@ndbs.lk 011 2131010 Mr. Sujeewa Athuorala sujeewa@ndbs.lk 011 3135495
Mr. !ayantha Sa"arasin#he jayantha@ndbs.lk 011 2131011 Mrs. Shiro"i $e Silva shiromi@ndbs.lk 011 2335054
Mr. Channaa Munasin#he channaka@ndbs.lk 011 2131014 Kiribathgoda
Mr. Aroos %aleel aroosaleel@ndbs.lk011 2131012 Mr. Gayan Pathirana gayan@ndbs.lk 011 290!515
Mr. Au&urn Senn auburn@ndbs.lk 011 2131013 Galle
Mr. 'ditha Silva uditha@ndbs.lk 011 213101" Mr. '(ul )ettiarachchi upul@ndbs.lk 091 222544!
Mr. *aa"ara $e Silva taamara@ndbs.lk 011 213101# Gampaha
Mr. +"ran Reyal imran@ndbs.lk 012 2131021 Mr. Cha"esh )ettiarachchi chamesh@ndbs.lk 033 223111!
Mr. Ra"esh Anthony ramesh@ndbs.lk 011 2131023 Kaluthara
Mr. ,i"al -u"ara kumara@ndbs.lk 011 2131022 Mr. Ran#anath .ijethun#e ranganath@ndbs.lk 034 22215#9
Mr. Sanjaya Pra&ath sanjaya@ndbs.lk 011 2131024 Mr. A A !eewantha jeewantha@ndbs.lk 034 22215#9
Mr. Ara" *hadani akram@ndbs.lk 011 2131025 Jaffna
Mr. +shana %ernando ishanka@ndbs.lk 011 2131054 Mr. C Pad"anathan chandru@ndbs.lk 021 22249!#
Mr. )arsha Sritharan harsha@ndbs.lk 011 213101! Ms. Sanjia Ranjithu"ar sanjika@ndbs.lk 021 5"!1155
Mr. Sajed Sallay sajed@ndbs.lk 011 2131019 Mr. S. /i&ushan
$ibusha.@ndbs.lk 021 5"!1155
Mr. Stefan $e Alwis stean@ndbs.lk 011 2131015 Rathnapura
O(erations Mr. 'ddee(a Peiris uddeepa@ndbs.lk 045 2230#00
Ampara
Contacts 's mail@ndbs.lk 011 2131000 Mr. Ravi $e Mel ra$i@ndbs.lk 0"3 2224245
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NDB Securities (Pvt) Ltd John Keells Holdings PLC 27
th
June 2014 6

Disclaimer
This document is based on information obtained from sources believed to be reliable, but NDB Securities
(Pvt) Ltd., (NDBS) accepts no responsibility or makes no warranties or representations, express or
implied, as to whether the information provided in this document is accurate, complete or up-to-date.
Furthermore, no representation or warranty is made by NDBS as to the sufficiency, relevance, importance,
appropriateness, completeness or comprehensiveness of the information contained herein for any specific
purpose. Prices, opinions and estimates reflect our judgment on the date of original publication and are
subject to change at any time without notice. NDBS reserves the right to change their opinion at any point
in time as they deem necessary. There is no guarantee that the target price for the stock will be met or that
predicted business results for the company will be met. NDBS accepts no liability whatsoever for any
direct or consequential loss or damage arising from any use of these reports or their contents. References
to tax are based on our understanding of current law and Inland Revenue practices, which may change
from time to time.
Any recommendation contained in this document does not have regard to the specific investment
objectives, financial situation and the particular needs of any specific addressee. This document is for the
information of addressee only and is not to be taken as substitution for the exercise of judgment by
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or the solicitation of an offer to buy, or recommendation for investment in, any securities within Sri Lanka
or any other jurisdiction. The information in any research report is not intended as financial advice.
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the distribution of such research report is unlawful. Past results do not guarantee future performance.
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