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| Monday, 9 August 2004 |
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HNB Stockbrokers' weekly market review: Market remained mixed in active trading The ASPI maintained its positive momentum during the first two days of trading before going through a technical correction and turning towards a downward shift from Wednesday. However the index rose fractionally on Friday closing the week on 1456.4 points, which was up 2 points or 0.14% from last weeks closing. Meanwhile the Milanka Price Index (MPI) dropped by 29.1 points (1.33%) to end the week at 2163.3 points. Bourse maintained its strong activity level as the weekly turnover was at a high of Rs.2.65 billion at a daily average of Rs.530.58 million. Foreign purchases for the week amounted to Rs.164.7 million while the sales totaled to Rs.243.7 million resulting in a net outflow of Rs.79 million for the week. Foreign participation during the week was 7.69 % of total activity, which was a decline from last weeks 12.74%. Investors were bullish on low valued property sector counters such as Colombo Land, CT Land, Overseas Reality, Ceylinco Seylan Developmnts etc, as the sector index gained momentum. Colombo Land, Vanik Incorporation, Blue Diamond, Marawilla Resorts and Ceylinco Seylan were among the heavily traded shares this week. Indices to remain volatile amid profit taking Market remained mixed in active trading as the retail investors continued the buying spree in relatively smaller counters. However the indices went through a technical correction towards the latter part of the week, as the investors booked profits in selected counters. We expect a similar trend to continue during the next week, with the investor enthusiasm focused towards low valued counters. While we feel that most of the property stocks have now reached its fair value, we believe that most of the plantation counters trade below its fundamental value. We expect the market to remain volatile during the next week, with a mix of profit taking coupled with bargain hunting. Furthermore we continue to advise the investors to take a bottom up approach when selecting the investments, as the overall market still warrants a further correction. Aitken Spence 1Q FY2005 Results Aitken Spence 1Q FY2005 results recorded a strong growth in net revenues by 42% to Rs. 2.30 billion, while earnings dropped by 10% to Rs.225 million in the absence of capital gains, compared to 1Q last year. The main contributions to the 1Q FY2005 turnover came from Tourism sector with Rs.948 million, Infrastructure development sector with Rs.780 million and Cargo logistics with Rs.428 million. The operating profits for the quarter stood at Rs.414 million, which was up 16% from Rs.357 million during 1Q last year. The total earnings for the quarter dropped by 10% to Rs.225 million, resulting an annualised EPS of Rs.33.32 giving a PER of 8.97x. The net assets per share at end June 2004 was at Rs.248.91 resulting in a PBV of 1.2x at a share price of Rs. 298.75. Our earnings projection for FY2005 is Rs. 1.289 billion, up marginally by 1.1% over last year. The FY2006 projections are at Rs. 1.96 billion, which is up by a significant 52% with power and tourism growing sizably in FY2006. Earnings multiples based on FY2004 earnings are at a low of 6.3x, making the counter attractive even in the immediate term. With this is expected to come down further to 4.1x during the next two years we maintain our recommendation on SPEN, which is a Buy. Seylan Bank results for 1H FY2004 Seylan Bank released its results for 1H FY2004 recording a net profit of Rs.277 million, a drop of 64% compared to the 1H of FY2003. The drop in profits was largely due to a 34% decline in other income, which could be attributed to a 53% slump in profits from treasury operations. This is the main cause for the 34% drop in other income to Rs.1 billion Total interest income declined by 7%, to Rs.3.9 billion, while the interest expense also declined by 13% due to the reducing deposit rates, thus increasing the net interest income marginally by 1.5% to Rs.1.8 billion Our forecasted net profit for FY2004 stands at Rs.848 million down by 15.2%, with an EPS of Rs10.15. The forward multiples still remain attractive at 3.8x. We expect a further 9.7% jump in the profits during FY2005 to Rs.930 million to yield a PER of 3.5x. We continue to recommend the stock as a Long Term Buy. Up coming IPO's to add value Lanka IOC Ltd, Nawaloka Hospital and Housing Development Finance Corporatio of Sri Lanka are set to make island's first share sales later this year worth Rs.1.8 billion ($17 million) HDFC plan to raise approximately Rs.500 million which would be used to offer more loans to developers and homebuyers where housing demand is increasing at around 100,000 units a year. Lanka IOC Ltd. seeks to raise around Rs.1 billion to upgrade its gas stations and build a lubricant plant. Nawaloka Hospitals is hoping to raise approximately Rs.300 million through its initial public offering, in order to raise funds for expansion purposes and the servicing of finance. With the up coming IPO's we expect the investor enthusiasm to increase further, which may help to boost the present momentum in the market. Asian Hotels & Properties 1Q FY2005 Results Asian Hotels and Properties (Pvt.) Ltd. 1Q FY2005 results saw an 8% drop in revenue to reach Rs.539 million while the earnings fell by 9% to Rs.95 million with the slow down in apartment sales. The total earnings after minority interest were down by 9% to Rs.95 million resulting in EPS of Rs0.43. At a market price of Rs.26.75 and an annualized EPS of Rs.1.72 this resulted in a PE multiple of 15.6x. The Net assets per share as at the end of June, 2004 was Rs.36.38 yielding a PBV of 0.74x With the tax and concessions available under the BOI status for the AHPL we expect that the earnings contribution from the new apartment complex 'Monarch' would be significant in the coming years with better margins. We believe that the stock is attractive in the long run. TransAsia 1Q FY2005 Results TransAsia recorded an earnings growth of 44% during 1Q FY2005 to end up at Rs.58 million. The top line grew by 15% to Rs.206 million driven mainly by the high occupancy levels, which averaged around 58% for the quarter. The net earnings were up 44% to Rs.58 million compared to Rs.40 million during 1Q last year. At a market price of Rs.62.00 and an annualized EPS of Rs.4.60 this gave a PER of 13.48x. The soft refurbishment of the hotel would go ahead as planned and once the rooms are done, we believe that an increase in room rates would be justified, thereby increasing the hotel's earnings potential in the coming years. The views based herein are expressed with no malafied intension to any party whatsoever based on already published data and from the information obtained by the research team. No matter published as above creates any liability of any kind whatsoever on HNB Stock Brokers Pvt Ltd or its associates. The views cannot be reproduced in any form without the explicit (written or otherwise and photocopied) permission from HNB Stock Brokers (Pvt) Ltd. |
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