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
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