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
Tuesday, March 2, 2010
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