Textured Jersey Lanka PLC

Transcription

1 Textured Jersey Lanka PLC Interim Update (Q4 FY ) 04 th July 2014 Manufacturing Sector Sales for FY20 reached LKR 12.7bn, 16% higher YOY while TJL maintained its gross margin for FY20 at 11% levels and was able to obtain a 15% YOY growth in gross profit to LKR 1.5bn. TJL s growth would be driven upon the recovery in US, Euro economies coupled with cost-structure streamlining measures expected to take place in next year. Q3 FY 12/13 Q4 FY 12/13 Q1 FY Q2 FY Q3 FY TJL s European order book remained strong with the recovery of the regional economy. However, US demand was impacted by the adverse weather conditions prevailed in certain regions in the country. Global Textile price index has also been stagnant for couple of years. Recent slight appreciation of Rupee is not expected to impose a big impact on exports with the strong customer relationships. TJL was able to maintain its debt-free balance sheet and strong cash position throughout FY20, resulting in LKR 90 Mn net finance income for FY20. However, in the operational side, yarn prices continued to rise, putting pressure on cost of sales. TJL is taking measures to mitigate the cost increase through effective inventory management. Also according to company sources, the multi-fuel boiler plant should be in operation in 2Q FY2014/15 which would save energy cost. TJL has been able to maintain good GP and NP margins in the fourth quarter. The 10-12% capacity added through the modernization and expansion project is expected to be utilized during 1Q FY2014/15. Q4 FY Revenue 3,106 2,868 3,234 3,378 3,245 3,106 Gross Profit PBIT Net Profit PE (X) PBV (X) *Figures are in LKR Mn while PE is calculated using trailing 12 months earnings. Forward PE is at 9.02X and forward PBV is around 1.73 X while the dividend yield is 4.44%. Share Details Bloomberg Ticker LKR Recommendation: BUY LOLC SEC Valuation: LKR 26 TJL SL Share Price (LKR) Market Cap (LKR Mn) 12,455 Issued Quantity (Mn) 655 Share Price Performance 1m 6m 12m Absolute Relative To ASPI W High/Low (LKR) 19.30/ W Avg. Volume 448,218 Beta (6 months) Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Business Nature Textured Jersey is engaged in manufacturing knitted fabric and exporting to international textile brands. Shareholder Details Pacific Textured Jersey Holdings 40.00% Brandix Lanka Ltd 30.08% Y S H I Silva 2.44% Employees Provident Fund 2.11% Melstacorp Limited 1.93% Valuation Our Free Cash Flow Model values the stock (cost of equity-13% and terminal growth-5%) at LKR 26 (price upgrade from our previous intrinsic value of LKR 22 due to revised earnings and lower hurdle rate). The price has moved from LKR to LKR (23% up) since our last recommendation in March At the current share price, forward PE multiple is circa 9.02X. We, maintain our recommendation BUY. Analyst: Damith Wasantha damithwa@lolcsecurities.com

2 Terminal Growth Rate 09/14/11 11/14/11 01/14/12 03/14/12 05/14/12 07/14/12 09/14/12 11/14/12 01/14/13 03/14/13 05/14/13 07/14/13 09/14/13 11/14/13 01/14/14 03/14/14 05/14/14 8/1/ /1/ /1/2011 2/1/2012 4/1/2012 6/1/2012 8/1/ /1/ /1/2012 2/1/2013 4/1/2013 6/1/2013 8/1/ /1/ /1/2013 2/1/2014 4/1/2014 Interim Update: Textured Jersey Lanka PLC 04 July 2014 Revenue has grown despite the stagnation of global textile prices LKR Mn % Margins intact despite raw material cost increase % % 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Quarterly Revenue FIBETEXT Index Gross Margin Yarn Price Index Source: Interim Financial Statements, Bloomberg Table 1: Valuation Sensitivity Matrix Cost of Equity Share price in LKR 11% 12% 13% 14% 15% 3% % % % % Source: LOLC SEC Research 2 LOLC Securities Limited

3 Table 2: Forecast Income Statement and Balance Sheet Figures in LKR Mn FY 11/12 FY 12/13 FY FY 14/15 (F) FY 15/16 (F) Income Statement Revenue 12,364 10,951 12,725 15,148 16,860 Cost of Revenue (11,088) (9,682) (11,268) (13,233) (14,519) Gross Profit 1,275 1,270 1,456 1,915 2,341 Distribution cost Administration cost (488) (340) (426) (470) (523) Operating Income ,078 1,502 1,886 Net Non-Operating Gains (Losses) (118) (75) (116) (122) (124) Pretax Income 662 1,014 1,193 1,380 1,762 Income Tax Expense 33 (2) Profit After Tax 629 1,016 1,157 1,380 1,762 Net Profit att. to shareholders 629 1,016 1,157 1,380 1,762 Balance Sheet Cash & Near Cash Items 1,279 2,197 2,122 1,713 2,693 Accounts & Notes Receivable ,306 1,555 1,731 Inventories 2,075 1,795 1,925 2,260 2,480 Total Current Assets 4,820 5,375 5,353 5,528 6,903 Total Long-Term Assets 2,752 2,491 3,108 3,847 3,585 Total Assets 7,572 7,866 8,460 9,375 10,488 Accounts Payable Other Short-Term Liabilities 1,082 1,373 1,373 1,373 1,373 Total Current Liabilities 1,961 1,993 1,895 1,981 2,037 Total Long-Term Liabilities Total Liabilities 2,088 2,115 2,090 2,175 2,232 Share Capital 2,797 2,797 2,797 2,797 2,797 Retained Earnings & Other Equity 2,687 2,953 3,574 4,402 5,459 Total Equity 5,484 5,750 6,371 7,199 8,256 Total Liabilities & Equity 7,572 7,866 8,460 9,374 10,488 Source: Company Data and LOLC SEC Research 3 LOLC Securities Limited

4 Table 3: Forecast Cash Flow Statement and Ratios Figures in LKR Mn FY 11/12 FY 12/13 FY FY 14/15 (F) FY 15/16 (F) Cash Flow Statement Net Income 629 1,016 1,157 1,380 1,762 Depreciation & Amortization Changes in Non-Cash Capital (501) (342) Cash From Operations 1,970 2,012 1,822 1,290 1,802 Capital Expenditures (68) (122) (844) (1,150) (120) Increase in Investments Cash From Investing Activities (68) (122) (882) (1,150) (120) Dividends Paid (79) (668) (707) (552) (705) Change in Short-Term Borrowings Cash from Financing Activities (295) (1,269) (707) (549) (702) Net Changes in Cash 1, (409) 980 Ratios Revenue growth 33.16% % 16.19% 19.04% 11.30% Net profit growth -8.15% 61.54% 13.84% 19.34% 27.66% GP Margin 10.32% 11.59% 11.45% 12.64% 13.88% NP Margin 5.09% 9.28% 9.09% 9.11% 10.45% Earnings per share (LKR) Book Value per share (LKR) PE ratio (X) PBV (X) Current Ratio (X) Asset turnover ratio (X) ROE 11.47% 17.67% 18.15% 19.17% 21.34% ROA 8.31% 12.92% 13.67% 14.72% 16.80% Debt to Equity Ratio Dividend per share (LKR) Dividend yield 1.20% 9.27% 5.68% 4.44% 5.66% Source: Company Data and LOLC SEC Research 4 LOLC Securities Limited

5 Recommendation Guidance BUY Stock is expected to give an annualized return over 25%. SELL Stock is expected to give an annualized return below 5%. HOLD Stock is expected to give an annualized return between 5% and 25%. Investment Horizon: 3 years Head Office Branches LOLC Securities Limited Level 18, West Tower, World Trade Center Colombo 01 Tel: Fax: Contact Us Kurunegala Branch No 06, 1st Floor, Union Assurance Building, Rajapilla Mawatha Kurunegala, Tel: Fax: Galle Branch No 18, Sri Dewamitta Mawatha, Galle Tel : Matara Branch 1 st floor, E.H. Cooray Towers, No 24, Anagarika Dharmapala Mawatha, Matara Tel: Sriyan Gurusinghe CEO/Managing Director / sriyang@ lolcsecurities.com SALES Head Office Maniesh Rodrigo Assistant General Manager / manieshr@ lolcsecurities.com Samadhi Jayasinghe Manager Institutional Sales / samadhij@ lolcsecurities.com Dinusha Gomes Assistant Manager International / dinushago@ lolcsecurities.com Imesh Fernando Sales Senior Investment Advisor / imeshf@ lolcsecurities.com Balendiran Janegan Senior Investment Advisor / janeganb@ lolcsecurities.com Naleen Sadeesh Investment Advisor / naleensa@ lolcsecurities.com Damith Chaminda Investment Advisor / damithc@ lolcsecurities.com Dushan Rajaguru Investment Advisor / dushanr@ lolcsecurities.com Asendra Wijesiri Investment Advisor / asendraw@ lolcsecurities.com Dinuka Niwantha Investment Advisor / dinukan@ lolcsecurities.com Niraj Jayamanne Investment Advisor / nirajj@ lolcsecurities.com Kurunegala Branch Rohana Chandrasiri Assistant General Manager / rohanac@ lolcsecurities.com Anurudda Rajakaruna Investment Advisor / anuruddhar@ lolcsecurities.com Nuwan Fernando Investment Advisor / nuwanfe@ lolcsecurities.com Galle Branch Bimal Malinda Branch Head / bimalm@ lolcsecurities.com Matara Branch Lalinda Liyanapathirana Investment Advisor / lalindal@ lolcsecurities.com Ahamed Aadil Investment Advisor / aadila@ lolcsecurities.com RESEARCH Shehan Bartholomeuz Head of Research / shehanb@ lolcsecurities.com Damith Wasantha Senior Research Analyst / damithwa@ lolcsecurities.com Samudrika Upendri Research Officer / samudrikau@ lolcsecurities.com LOLC Securities Limited, a trading member of the Colombo Stock Exchange (CSE), is engaged in facilitating stock trading transactions at Colombo Stock Exchange, providing investment research on n equity, providing investment planning advices with services such as portfolio construction & formulation of IPS (Investment Policy Statement) and facilitating other investment opportunities in the country including private equity. Disclaimer: This report is based on information from sources that LOLC Securities Limited believes to be reliable. Whilst reasonable care has been taken to ensure accuracy of the information presented in the report, LOLC Securities Limited does not give a guarantee on the accuracy of the information presented in the paper nor will take the responsibility on investment decisions taken based on the information provided by the report and hence LOLC Securities Limited nor its employees accepts any liability whatsoever for any loss arising from investments decisions taken using the information provided in this paper. The reader also should note this paper does not give recommendations to any particular category of investors and investor should consult investment advisors for further clarifications regarding risks involved in investing in equity market. LOLC Securities Limited or its employees may or may not hold positions in the securities discussed in the report and the information provided in the report should not be construed as a buy or sell instruction for any securities mentioned in the report. LOLC SEC Research Reports are also available at Bloomberg LOLC <GO> 5 LOLC Securities Limited