Odel which was established as a private limited company in 1990 by Otara Guawardene has today evolved as a foremost group of companies in Sri Lanka. It recently obtained the listing on Colombo Stock exchange, whilst being the first fashion retailer to go public in Sri Lanka.
The IPO was successfully oversubscribed by 63.8 times.
Company’s success is underpinned by its correct strategic view on market expansion and diversification. The group is seeking for incessant market expansion especially in concern to the apparel sector where company has expanded up to possessing 13 outlets with 136 square feet of high quality shopping.
The flagship store at the Alexandra Place is witnessed as an enthralling tourist destination.
Today Odel is highlighted amongst the leading apparel giants in Sri Lanka.
Financial Highlights for the 3Q ended 31st December 2010
The top line of Odel Group grew by 15% QoQ while YoY growth amounted to 26%.
Group seems to have imposed control over the cost structure to improve the gross profit margin to 39%.
Other income has declined by 72% to Rs.24 million YoY while QoQ there’s a marginal decline of 9%.
Distribution expenses saw an YoY decline of 18% while administration expenses saw only a marginal increase of 1%, thus operating profit margin improved from 12% to 14.6%.
During the 3Q Bottom line of ODEL reached SLRs.76mn up by 35% YoY, and 19% QoQ.
The remarkable QoQ top and bottom line growth rates posted during the 3Q of the current
financial year are backed by the increased demand and sales that occurred during the Christmas and New Year festive season and the increase in tourist arrivals.
Glance at first 9 months FY 10/11 results of the group
During the period top line grew by a staggering 42% YoY to reach 2.5bn.
Gross profit grew by 53% YoY to SLRs.967mn, with gross profit margin improving to 39%.
Group as a whole expressed a gratifying performance as the profitability of the group shows a strong upward movement with profit before tax increasing by 61% YoY to reach 287mn. Profit After tax for the same period amounted to SLRs.176mn up by 43% YoY however net profit margin remained at 7%.
Future Outlook
With the milestones of success that Odel has marked in its expedition, the group could shunt ahead exposing a significant competition to the existing market players and creating a strapping barrier to the new entrants whilst enhancing and strengthening its brand image impressively. The
key success of the Odel group lies on the apparel sector as Odel outlets are leading as sought after destinations amongst other shopping outlets of the country, reasoning being that its flagship store is becoming comparable to international department stores in any fashion capital.
As the next walk in their massive expansion stratagem, Odel which is acknowledged as the country’s definitive and life style brand, has announced its plan to expand to Kiribathgoda and Wattala regions which are situated in the highest populated Gampaha District, whilst increasing its retail space further by 22,000 square feet and number of outlets to 15. However important consideration is raised on the other hand that such aggressive expansion strategies would lead to the dilution of their “Exclusive” brand value.
During the year Odel alsohas built up several important strategic links with corporate giants. A noteworthy one is the ODEL‐HNB co branded credit card which is a gold card that comes under VISA international brand that offers attractive benefits for the customers shop at Odel. This would strengthen the group’s sales to a greater extent.
Further the sophisticated and award winning Odel website also put in a remarkable contribution for heightening up sales, offering a comprehensive shopping experience through enhanced e‐commerce facilities.
Odel so far has carried out firm differentiation strategy offering a wider product change in their shopping outlets.
It’s products range from ladies ware, gents ware, kids ware, home ware, Sri Lankan souvenirs, food, backstage, embark collection, R&R whilst differentiating its outlets to that of other fashion retailers that Odel is hardly imitable.
An optimistic panorama is put forward specifically for Odel which is a leader in the market, by the augment in the tourism industry which is expected to grow by 40% to 850,000 in 2011 and reach 2.5million tourist arrivals by 2016 as per the Sri Lanka’s tourism authority in which case, Odel shopping outlets would play a key role in providing exceptional quality shopping facilities for the foreigners. This would grant a extraordinary backup for the boost of future demand for Odel apparel.
On 19th of November it was announced that the Odel acquired a prime land 250.4 perches in Thalangama for Rs.257.9 milion through its fully owned subsidiary Odel Lanka (Pvt) Limited witch is incorporated to plan the preliminary activities required to construct a high rise shopping mall complex. This provides an insight of a large scale strategic investment that the Odel is expecting to initiate with its hands on experience and victorious voyage whilst enjoying economies of scale and economies of scope advantages. Ability of the group as a whole for tapping superior profitability in a very healthy context in the upcoming years is thus evident.
The budget proposed on 22nd on November for year 2011 has projected many concessions favorable concessions. It proposed to reduce custom duties on selected goods and raw materials and also with the aim of promoting Sri Lanka as an attractive destination for international shopping for branded items, internationally branded items were exempted from VAT and import duty. Further the economic service charges on BOI enterprises were revised down to 0.1%. These policies would definitely have a positive impact on the Odel group creating a promising future to enhance the business.
Recommendation
Looking at the current performance together with the future outlook of the group the counter looks attractive in the medium to long term. Thus we recommend a BUY.
Courtesy-Capital Trust Research
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