Sri Lanka Equity Analytics

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Wednesday, March 3, 2010

Hatton National Bank : Net profit up by 58% YoY in FY2009

Hatton National Bank Plc (HNB) is Sri Lanka's second largest private commercial bank with 186 customer centers (4302 employees). In FY2010E we expect net earnings to be driven by loan book expansion, given the revival of business sentiment and fresh markets in north and east (Bank has 20 branches in the region).Branch network is expected to be increased to 200 at the end of FY2010.

HNB net profit for FY09 was up by approximately LKR 1.7 Bn to LKR 4.5 Bn from LKR 2.8 Bn for FY08 showing a 58% increase .This was mainly boosted by strong 4Q FY09 performance showing a 156% increase YoY to LKR 1.8 Bn from LKR 0.7 Bn.

Net Interest income (NII) shows a YoY growth of 16% for FY09 where it has increased to LKR 14.5 Bn from LKR 12.5 Bn.4Q FY09 shows a similar pattern albeit at 11% YoY.NII for the 4Q FY09 is LKR 3.8 Bn and 4Q FY08 is LKR 3.4 Bn.

Interest expenses remain consistent for FY09 and FY08 hovering around approximately LKR 20 Bn even though for 4Q FY09 it has dropped by 18% YoY to LKR 4.5 Bn.

Upward trend in profitability of the Bank is evident by increases to ROE and ROA which at end of FY09 stands at 19.89%( up 3.39percentage points YoY from 16.5%) and 2.21%(up 0.23percentage points YoY from 1.98%) respectively. Further Interest Margin for the Bank has increased by 0.21% for FY09 to 5.45% from 5.24%.

Deposit base of HNB has grown by 13% over FY09 to LKR 213.8 Bn from LKR 189.8 Bn.

NPL has come down by 8% over FY09 to LKR 12.4 Bn (at the beginning of FY09 the NPL were at LKR 13.5 Bn) where the majority contribution to that comes from overdrafts which has undergone a drop by 29% (from LKR 2.1Bn to LK 1.5 Bn) over the same period.

Group EPS for FY 2009 is LKR 19, which is an increase of LKR 6 from previous year's EPS of LKR 12.Further Group BVPS for FY09 is at LKR 111.86 ,up by 15% from LKR 97.32 for FY08 -Maintain BUY


Sri Lanka Equity Analytics
World Trade Centre
Colombo, Sri Lanka
Email: info@srilankaequity.com
Web: www.srilankaequity.com
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Tuesday, March 2, 2010

Nations Trust Bank : Net profit up 16% YoY in FY2009

Nations Trust Bank's (NTB) net profit has grown by 5% YoY to LKR181.2 mn in 4Q2009 supporting the 2009 net earnings to grow by 16% YoY to LKR 686.1 mn.

The net profit growth in the last quarter is in line with our forecast and was mainly driven by a 23% YoY increase in net interest income and a 8% YoY reduction in operating cost.

NTB enjoys a cost/income ratio of 59% and the bank is well capitalized with Tier I CAR at 11.89% and Tier II CAR at 16.11%.

Despite NTB having a market share of near 3%, we believe the bank is poised to grow on the back of industry wide upside. Therefore, we are maintaining our forecast 2010E net profit at LKR969.7 mn (up 41% YoY) and projected 2011E net earnings at LKR1,296.9 mn (up 34% YoY)

The share is attractive on 8.9X forecast 2010E net profit, 6.6X projected net 2011E earnings, 1.2X PBV. BUY.


Sri Lanka Equity Analytics
World Trade Centre
Colombo, Sri Lanka
Email: info@srilankaequity.com
Web: www.srilankaequity.com
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Chevron Lubricants : Lube Luck in 2009 boost net earnings by 57.7%YoY

Chevron Lubricants (LLUB) has posted a net profit of LKR375.9 mn in 4Q09 (vs LKR31.5 mn 4Q08) due to high gross profit margin enjoyed on the back of low raw material cost whilst 2009 net earnings too have increased to LKR1,494.9 mn (up 57.7% YoY), broadly inline with our expectation.

The turnover grew by a marginal 2.1% YoY in 4Q09 whilst the revenue during 2009 dipped by 2.4%. Sales volume during 2009 has witnessed a circa 8% drop. However, the gross profit grew by a strong 162.4% YoY during 4Q09 and 45.6% in 2009 mainly due to a near 40%-50% dip in base oil prices which reached US $ 1800 levels per MT in October 2008.

On the back of rising economic activity in the North & East especially the anticipated revival in agriculture and fisheries we project 2010E net profit to grow by 31.5% YoY to record LKR1,965.8 mn given the base oil prices remain relatively stable.

The share is attractive on 10.3X2010E forecast net profit and 9.7% dividend yield. Maintain BUY.


Sri Lanka Equity Analytics
World Trade Centre
Colombo, Sri Lanka
Email: info@srilankaequity.com
Web: www.srilankaequity.com
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Sri Lanka Telecom : Tough going affirmed

SLTL had made a net loss of LKR379 mn in 4Q2009 vs. the net profit of LKR2.9 bn in 4Q2008 owing to the increased losses made in the mobile telephony operations and the core fixed line operations. Furthermore increased depreciation (on the back of heavy investments in Mobitel for their service expansions) and the Voluntary Retirement Scheme have led SLTL to a loss.

Forecast net profit revised down to LKR3, 115.4 mn in 2010E. SLTL's lackluster performance has driven us to revise down our forecast 2010E net profit to LKR3,115.4 mn. We believe the company is absorbing costs to modernise its network infrastructure, improve quality and to strengthen marketing activities to successfully combat competition in the future.

Share is evenly valued on 22.3X forecast 2010E earnings. Therefore given the high multiples which are normally attracted by the telecom sector the counter is evenly valued at 22.3X forecast 2010E net profit. However on the back of reduced profits and fairly high CAPEX costs, we maintain our recommendation - HOLD


Sri Lanka Equity Analytics
World Trade Centre
Colombo, Sri Lanka
Email: info@srilankaequity.com
Web: www.srilankaequity.com
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Monday, March 1, 2010

Colombo Dockyard : It is the Odyssey of Excellence….

Ship builder and repairer Colombo Dockyard's net profit has soared 48% YoY to LKR2,156.6 mn in 2009, whilst lifting the cumulative EBITDA by a strong 51% YoY to LKR2,683.1 mn.

DOCK's 2009 net earnings were bolstered on the back of strong performance from Ship building. The Ship building segment's sharp earnings growth can be attributed to the two Cargo Vessels and the two Anchor Handling Tug Supply Vessels delivered during the year, whilst the ship repair segment's net earnings growth was slightly hampered during the quarter under review.

Forecast 2009E net profits are in line with the actual with a moderate variance of 6%. Considering the increased ship building activities supported by heavy and off-shore engineering projects, we forecast 2010E net profit to LKR2,508 mn.

The share is attractive and trading on 8.5X forecast 2010E earnings and just 2.7X projected 2010E PBV - maintain BUY


Sri Lanka Equity Analytics
World Trade Centre
Colombo, Sri Lanka
Email: info@srilankaequity.com
Web: www.srilankaequity.com
»»  read more