NDB Bank : Net profit up 75% YoY in 3Q2009

● National Development Bank's (NDB) net profit has risen by a sharp 75% YoY to LKR615.9 mn in 3Q2009 enabling the cumulative 1-3Q2009 net earnings to increase by 50% to LKR1,600.2 mn.

● The net profit growth in 3Q2009 is ahead of our forecast and was driven by other income (including equity income, capital gains, fee income and forex income) growing by 75% YoY, net interest income increasing by 16% YoY and a 18% YoY dip in total provisioning cost.

● The bank has grown its deposit base by 52% YoY to LKR43.5 bn, continues to benefit from the highest quality loan book with net NPL ratio of 0.88% and is well capitalized with Tier 1 capital adequacy ratio (CAR) of 19.3% and Total CAR of 22.9%.

● Further with other income (mainly capital gains from the Treasury portfolio and equity income) having grown faster than initially projected, the forecast 2009 net profit is revised up by 26% to LKR2,130 mn whilst the projected 2010 net earnings (expected to be derived chiefly from core bank ing income) is maintained at LKR1,951 minute

● Therefore the share continues to be good value trading on 7.0X expected 2009 EPS, 7.6X forecast 2010 EPS and 1.1X PBV.

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Colombo Dockyard : 3Q2009 net profit doubles

Ship builder and repairer Colombo Dockyard's net profit has doubled YoY to LKR721.4 mn in 3Q2009, whilst lifting the cumulative 1-3Q2009 net profit by a strong 80% YoY to LKR1,821.1 mn.

DOCK's 3Q2009 net earnings were bolstered on the back of a strong performance from Ship building. The Ship building segment's sharp earnings growth can be attributed to the two Cargo Vessels and the Anchor Handling Tug Supply Vessel delivered during the nine months, whilst the ship repair segment's net earnings growth was slightly hampered during the quarter under review.

Forecast 2009E net profit expected to grow by 48%YoY toLKR2.1 bn.

Considering the increased ship building activities supported by heavy and off-shore engineering projects, we forecast 2009E net profit to grow by 48% to LKR2,156 mn and projected 2010E net profit to LKR2,508 mn, up 16%YoY.

Share is highly attractive on 5.6X forecast 2009E earnings and just 4.8X forecast 2010E earnings and also trading at a discount to similar sized re-gional peers such as ABG Shipyard (5.9X).

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Lube Luck in 3Q09 boost net earnings by 65.6%YoY

● Chevron Lubricants (LLUB) has posted a net profit of LKR486.8 mn (up 65.6% YoY) in 3Q09 due to high gross profit margin enjoyed on the back of low raw material cost whilst cumulative net earnings too have increased to LKR1,118.9 mn (up 22.1% YoY).

● The turnover has dipped by 11.3% YoY in 3Q09 whilst the sales volume has witnessed a circa 6%-8% drop. However, the gross profit grew by a strong 61.5% YoY during 3Q09 mainly due to a near 40%-50% dip in base oilprices which reached US $ 1800 levels per MT in October 2008.

● LLUB has planned (subject to shareholder approval) to increase the number of shares by way of a sub division of each existing ordinary share to two shares (two for one). This will increase the issued number of shares from its current 60mn to 120 mn and thus increasing the liquidity.

● We revise up the forecast net profit to LKR1,432.5 mn (up 26.4% YoY) in 2009E supported by the better performance in 3Q09 whilst expecting stable earnings in 4Q09. Further, 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 33% YoY given the base oil prices remain relatively stable.

● The share is attractive on 8.5XFY09E forecast net profit and 6.3%  dividend yield.
SRI LANKA EQUITY ANALYTICS
World Trade Center
Colombo
Sri Lanka
Email: sriventure@gmail.com
Web: www.srilankaequity.com

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Ceylon Tobacco : 3Q09 net earnings up 37.7% YoY

● Ceylon Tobacco (CTC) has posted a net profit of LKR832 mn in 3Q09 (up 37.7% YoY) whilst cumulative 1-3Q09 earnings are also up by a strong 39.9% YoY to LKR2,094 mn.

● Earnings have been driven by a 7% YoY growth in net revenues to LKR3,030 mn, supported by a shift into high margin brand/product mix along with the company's focus on effective cost rationalization.

● We are revising up our forecast 2009E net profit by 20.4% to LKR3,325 mn whilst raising projected 2010E net profit up by 10% to LKR3,658 mn on the back of the company's continued focus on improving its brand mix coupled with successful cost rationalization exercises.

● The share is fairly valued on 10.1X forecast 2009E net profit and 9.2X projected 2010E net earnings. Further given the historical dividend payout ratio of circa 85%, we believe the share would continue to be a dividend play.
SRI LANKA EQUITY ANALYTICS
World Trade Center
Colombo
Sri Lanka
Email: sriventure@gmail.com
Web: www.srilankaequity.com

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Commercial Bank : Net profit up 4% YoY in 3Q2009

● Commercial Bank's (COMB) net profit has grown by 3.6% YoY to LKR971.0 mn in 3Q2009 despitethe cumulative 1-3Q2009 net earnings still down by 2.3% to LKR2,984.6 mn.

● The net profit growth in the latest quarter is inline with our forecast and was driven by a 65.5% YoY dip in total provisioning cost and a 21% YoY re duction in the total tax cost.

● Continues to be the largest private sector bank with a total asset base of LKR311 bn and 184 strong branch network

● Enjoys a relatively lower cost/income ratio of 49% and remains well capitalised with a Core CAR of 10.9% and a Total CAR of 13.5%

● Both the voting and non-voting shares continue to be attractive with the voting share trading on 9.9X forecast 2009 net profit, 9.0X projected net earnings, 1.4X PBV with the non voting share trading on 6.5X forecast 2009 net profit, 5.9X projected 2010 net earnings and 0.9X PBV
SRI LANKA EQUITY ANALYTICS
World Trade Center
Colombo
Sri Lanka
Email: sriventure@gmail.com
Web: www.srilankaequity.com

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NDB Bank : Net profit up 75% YoY in 3Q2009

● National Development Bank's (NDB) net profit has risen by a sharp 75% YoY to LKR615.9 mn in 3Q2009 enabling the cumulative 1-3Q2009 net earnings to increase by 50% to LKR1,600.2 mn.

● The net profit growth in 3Q2009 is ahead of our forecast and was driven by other income (including equity income, capital gains, fee income and forex income) growing by 75% YoY, net interest income increasing by 16% YoY and a 18% YoY dip in total provisioning cost.

● The bank has grown its deposit base by 52% YoY to LKR43.5 bn, continues to benefit from the highest quality loan book with net NPL ratio of 0.88% and is well capitalized with Tier 1 capital adequacy ratio (CAR) of 19.3% and Total CAR of 22.9%.

● Further with other income (mainly capital gains from the Treasury portfolio and equity income) having grown faster than initially projected, the forecast 2009 net profit is revised up by 26% to LKR2,130 mn whilst the projected 2010 net earnings (expected to be derived chiefly from core banking income) is maintained at LKR1,951 minute

● Therefore the share continues to be good value trading on 7.0X expected 2009 EPS, 7.6X forecast 2010 EPS and 1.1X PBV
SRI LANKA EQUITY ANALYTICS
World Trade Center
Colombo
Sri Lanka
Email: sriventure@gmail.com
Web: www.srilankaequity.com

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AHPL' net earnings grow 26% YoY to LKR121.9 mn in 2QFY10 thanks to the treatment in minority interest

● Asian Hotels & Properties (AHPL) has recorded a near 26.1% YoY increase in earnings to LKR122.0 mn in 2QFY10 due to the minority loss of LKR39.1 mn (vs a minority profit of LKR16.1 mn in 2QFY09). However, despite the LKR23.3 mn minority loss the 1HFY10 net profit has dipped 24.7% YoY to LKR176.1 mn (vs a minority profit of LKR18.3 mn in 1HFY09).

● Earnings have been affected by the Property Development sector (net profit of LKR61.2 mn in 1HFY10 vs LKR235.2 mn in 1HFY09) with sales of the apartment tower 'Emperor' being sluggish and delays in receiving payment for already sold units.

● Thanks to the insurance claim for damages in Cinnamon Lakeside (TRAN) the hotel sector (Cinnamon Grand and TRAN) earnings increased to LKR114.9 mn during 1HFY10 vs a loss of LKR1.3 mn in 1HFY09, weathering the impact of lower average occupancy levels of circa 55%. TRAN was not operational for more than two months during the first half of FY10 as it was closed for refurbishment.

● Forecast net profit to dip by 13.2% YoY to LKR461.0 mn in FY10E whilst projected FY11E earnings are estimated at LKR790.2 mn (up 72% YoY). This is mainly on the back of improving tourist arrivals and more percentage of property sector earnings recognized in FY11.

● The share is attractive on just 1.3X PBV even though it trades at a high multiple of 36.0X forecasted FY10E earnings and 21.0X forecasted FY11E net profit. Further share offers good value due to its dynamism (derived from the John Keells group), ability to develop and market premium properties and also the envisaged dominant position of its five star hotel properties.
SRI LANKA EQUITY ANALYTICS
World Trade Center
Colombo
Sri Lanka
Email: sriventure@gmail.com
Web: www.srilankaequity.com

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Ait. Spence Hotel Hold.-Net earnings grow by 119% YoY in 2QFY10

● Aitken Spence Hotel Holdings' (AHUN) has recorded a net profit of LKR8.6 mn in 2QFY10 compared to LKR45 mn loss in 1QFY09, whilst recording a cumulative loss of LKR105.8 mn for 1HFY10.

● The earnings growth in 2QFY10 is directly attributable to the reviving domestic tourism with higher occupancies and earnings from Maldivian hotels which were above expectations.

● With the complete end to the 3 decade long terrorist conflict coupled with the favourable macro economic outlook, we believe the hotel sector would mark a turnaround in the near future. AHUN will be a prime beneficiary of this situation, with 09 properties in all strategic locations in the island which are upgraded and ready for the boom.

● Having factored the strong earnings outlook of an industry poised for growth, we forecast AHUN to reach a net profit of LKR712 mn (up by 20.2% YOY) in FY10E and a LKR925 mn (up by 29.8% YoY) in FY11E.

● The share has gained 83% since the end of war on 18th May 2009 and we believe further upside is possible with growing earnings in the coming quarters. AHUN offers good value on 11.8X forecast FY10E net profit and 9.1X projected FY11E earnings whilst it is trading on a PBV of 1.6X,

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Aitken Spence : 2QFY10 net earnings up by 16% YoY

Conglomerate, Aitken Spence's (SPEN) net profit has grown by a sharp 16% YoY to LKR 470mn in 2QFY10, whilst the cumulative 1HFY10 net earnings have recorded a dip of 3.6% YoY.

● Profit growth during 2QFY10 is directly attributable to the reviving local tourism and the booming services sector of the conglomerate, whilst the global economic slowdown has hindered 1HFY10 growth compared to the previous year.

● Tourism, SPEN's main business's operating profit has grown by a sigificant 115% YoY in 2QFY10 (compared with 2QFY09). However profits for 1HFY10 is still at a dip due to the global economic downturn which has affected the Maldivian up market resort earnings.

● SPEN's services sector has further strengthen the growth of the bottomline of the consolidated income statement with a significant increase of 176.8% YoY in 1HFY10 profits.

● However the contribution of once most profitable power business (under strategic investments) further declined due to reduced fuel prices leading to lower tariffs.

● We forecast FY10E net profit to reach LKR2,122.9 mn (up by a slower 4.1% YoY) on the back of global economic slowdown. However with the revived local tourism and recovery of Maldivian tourism coupled with improved activity in the North and East, we project FY11E net profit to grow up by 15.9% YoY to LKR 2,460.9 mn.

● Share offers fair value on 11.4X projected FY10E earnings and 9.8X forecast FY11E net profit whilst trading on 1.3X PBV
SRI LANKA EQUITY ANALYTICS
World Trade Center
Colombo
Sri Lanka
Email: sriventure@gmail.com
Web: www.srilankaequity.com

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RCL's net profits up 18.0%YoY in 1HFY10 despite 7.4% YoY dip in 2QFY10 whilst outlook continues to be positive

● Royal Ceramic's (RCL) net earnings have increased by 18.0%YoY to LKR283.8 mn in 1HFY10 whilst the bottom-line has dipped by 7.4%YoY to LKR151.4 mn during 2QFY10.

● RCL's gross turnover has dipped 7.1% YoY to LKR1,101.2 mn on the back of a near 10%-15% dip in sales volumes in 2QFY10 despite a marginal increase in sales price. The cost of sales has dipped 10.7% YoY to LKR532.4 mn in 2QFY10 owing to the ongoing vigorous cost cutting mechanisms(despite the increase in energy cost (mainly due to the rise in LPG and kerosene oil prices) which accounts for around 40% of the total cost of production). Accordingly, RCL's gross margin has improved to 41.4% in 2QFY10 (from37.4% in 2QFY09).

● RCL has recorded an operating profit of LKR251.6 mn in 2QFY10 (down 14% YoY) on the back of the increased cost base.

● Despite not having a strong presence in the war affected regions, a reconstruction boom in the North and East would drum up the overall economic growth whilst RCL would strongly benefit from the growing demand in the Western and Southern provinces. Further, with the local tourism expected to rebound hotel capacity building would prompt additional demand for highy quality tiles. Hence, with the economic conditions improving we conservatively project FY10E earnings to reach LKR585 mn (up by 13.0%YoY) and FY11E earnings to reach LKR695.5 mn (up by 18.9%YoY).

● The share remains attractive on 4.7X forecast FY10E net profit and just 4.0X projected FY11E earnings whilst trading at 0.7XPBV
SRI LANKA EQUITY ANALYTICS
World Trade Center
Colombo
Sri Lanka
Email: sriventure@gmail.com
Web: www.srilankaequity.com

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HNB- 3Q09 net profit up 17% to LKR944.9 mn (vs LKR807.4 mn)

SRI LANKA EQUITY ANALYTICS
World Trade Center
Colombo
Sri Lanka
Email: sriventure@gmail.com
Web: www.srilankaequity.com

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DFCC's 2QFY2010 net profit up 74% YoY

● DFCC Bank's (DFCC) net profit has grown by a sharp 73.7% YoY to LKR823.0 mn in 2QFY20/10 largely due to a 101.8% YoY growth in Treasury interest income, 3.6% YoY dip in interest expenses, 2.7% YoY reduction in operating costs and a 20.4% YoY slide in provisioning cost.

● The strong growth reported in the 2nd quarter, has weathered the marginal YoY negative growth in 1QFY2010 whilst the 1HFY2010 net profit has increased by 31.7% YoY to LKR1,302.8 mn.

● Nevertheless we believe the outlook to be positive with NPL's to peter out (supported by an overall recovery in the broad economy), loan growth to pick up whilst maintaining spreads of +4.5% and also benefit from strong deposit mobilization (suppoted by 74 branches)

● DFCC has locked up further value by owning 27.11% of COMB, the investment which is presently carrying an unrealized gain of around LKR28 per share

● Forecast FY2010 net profit maintained at LKR2,391 mn (+16.9% YoY) whilst projected FY2011 earnings revised up 5.5% to LKR2,797 mn (+17% YoY)

● The share continues to be good value trading on 8.1X expected FY2010 EPS, 6.8X forecast FY2011 EPS and 0.96X PBV
SRI LANKA EQUITY ANALYTICS
World Trade Center
Colombo
Sri Lanka
Email: sriventure@gmail.com
Web: www.srilankaequity.com

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JKH-2QFY10 Net Profit down 43%

 ● Conglomerate, John Keells Holdings (JKH) has recorded a 11.4% YoY growth in operating profit during 2QFY10, however the bottom line has dipped 43% YoY to reach LKR575.5 mn. This is partially on the back of the one off capital gain of LKR1,025 mn from the divestment of AMW in 2QFY09. However, the 2QFY09 net earnings includes the one off charges (circa LKR725 mn) suffered by the group due to the Supreme Court Judgement relating to Lanka Marine Services (LMS).

● Key sectors such as Transportation (Net Profit up 4,496.4%), Leisure (NP up 43.2%) and Financial services (NP up 42.8%) have shown improved performance in 2QFY10. But Property Development (NP down 37.9%) and Consumer Food & Retail (NP down 143.7%) sectors have underperformed mainly on account of cyclical nature of revenue recognition and capacity building costs coupled with reduced activity levels.

● On recurring earnings we forecast JKH's FY10E net profits to grow by 5.1%YoY to LKR4,984.3 mn whilst we expect the FY11E earnings to reach LKR5,954.1 mn (up 19.5% YoY). This would be driven by better earnings growth from the Leisure sector from winter 2010 onwards and higher contribution from the Transportation and Consumer Food segments.

● The share is currently trading on 17.2X, FY10E earnings, 14.4X projected FY11E earnings and 1.7X PBV.
SRI LANKA EQUITY ANALYTICS
World Trade Center
Colombo
Sri Lanka
Email: sriventure@gmail.com
Web: www.srilankaequity.com

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