analysis of sectoral performance & market · pdf file17 ceylon tobacco company plc 230.9...

15 AUGUST 2017

Analysis of Sectoral Performance

& Market Opportunities

Expert Analysis & Insight

Candor Research

© Candor Equities LimitedLicensed and Regulated by the Securities & Exchange Commission of Sri Lanka

By Ravi Abeysuriya, CFA

Group Director, Candor

President, Colombo Stock Brokers Association (CSBA)

President, Association of Alternate Financial Institutions (AAFI)


Candor Research


2© Candor Equities LimitedLicensed and Regulated by the Securities & Exchange Commission of Sri Lanka

Content

➢ All time high net foreign inflows in 1H2017

➢ Possible reasons for foreign interest

➢ Sectoral analysis – where foreign investors see value

➢ Foreign favorites – net foreign purchases as of end July 2017

➢ Are local investors missing out?

➢ How local investors can capitalize on market opportunities


Candor Research


Disclaimer

The information and opinions contained herein are based upon information obtained from sources believed to be reliable and made in good faith. Such information has not been independently verified and no guarantee, representation or warranty, express or implied is made as to their accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This is for information purposes only, and the description of any company or their securities mentioned herein is not intended to be complete and this document is not, and should not be construed as, an offer, or solicitation of an offer, to buy or sell any securities or other financial instruments.

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Candor Research


Market performance closely correlated with net foreign inflows

4

4.8%

23.4%

-5.5% -9.7%

7.8%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

-10

-5

0

5

10

15

20

25

30

2013 2014 2015 2016 2017 (YTD - July)

ASPI Performance

Source: CSE Annual Report 2016, Bloomberg, Candor

Net

Fo

reig

n In

flo

w (

Rs.

Bn

)


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Gradual growth in foreign turnover compared to domestic turnover

5

0

50

100

150

200

250

300

350

400

2013 2014 2015 2016 2017 (YTD - June)

Foreign (Rs. Mn)

Domestic (Rs. Mn)

Source: CSE Annual Report 2016, Bloomberg, Candor Research

42.0%

36.0%

Rs.

Bn

64.0% 72.4% 65.6% 58.0% 53.1%

27.6%

34.4%

46.9%


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0.6%

0.1%

0.4%

1.0%

-0.4%

0.4%

-0.6%

-0.4%

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

Malaysia Indonesia India Sri Lanka Pakistan Vietnam

Source: CSE Annual Report 2016, Bloomberg, Candor Research* PER as at January 2017 – Bloomberg PE Values

Sri Lanka attracted highest net foreign Inflow

as a % of total market cap in 1H2017

6

PER* 16.53 23.26 19.70 11.80 10.45 15.50


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SL is one of three Asian countries in the MSCI Frontier Markets Index

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Top countries that contributed to YTD net foreign inflows to SL

8

9.39

5.74

2.77

1.48 1.08 0.97

0.55

-

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

Luxembourg United States CaymanIslands

Ireland Virgin Islands(Br.)

Norway Australia

LKR

Bill

ion

Source: CSE , Candor Research


Candor Research


Three sectors with top YTD return had highest foreign inflows

9

14,377

6,970

1,483 970 614 605

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

LKR

Mill

ion

Net Foreign Inflow (LKR Mn)

Source: CSE , Candor Research

Industrials 27.6

Financials 17.0

Consumer Staples18.0

Consumer Discretionary

2.4

Materials19.2

Telecommunication Services

5.5

-

5.0

10.0

15.0

20.0

25.0

30.0

%

Sector Performance % (YTD - July)


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Key stocks within the performing sectors

10

Sector (GICS)

Key StocksNet Foreign Inflow (LKR

Mn)

YTD -Total

Return (%)*

PE(x) -Jan

2017

Current PE(x)

Industrials 14,377.00 27.59 JOHN KEELLS HOLDINGS PLC 10,239.52 28.29 12.47 13.49

HEMAS HOLDINGS PLC 1,453.00 54.24 17.46 23.77

RICHARD PIERIS AND COMPANY PLC 312.17 69.94 6.22 7.72

EXPOLANKA HOLDINGS PLC 1,180.85 9.05 13.95 13.06

Financials 6,970.20 16.99

SAMPATH BANK PLC 1,145.89 10.67 4.85 4.89

HATTON NATIONAL BANK PLC 811.53 8.00 6.13 6.32

LB FINANCE PLC 210.46 17.67 4.20 4.67

Source: CSE, Bloomberg, Candor Research

* Bloomberg Total Return – Return with dividend Reinvested


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Key stocks within the performing sectors

11

Sector (GICS)

Key StocksNet Foreign Inflow (LKR

Mn)

YTD -Total

Return (%)*

PE(x) -Jan

2017

Current PE(x)

Consumer Staples 1,483.06 18.00

SUNSHINE HOLDINGS PLC 757.86 30.98 12.24 13.58

CEYLON TOBACCO COMPANY 230.87 21.17 12.13 14.16

CEYLON COLD STORES PLC 261.37 15.41 19.03 22.68

Materials 614 19.2

TOKYO CEMENT PLC 1,137 53.0% 6.19 9.00

CHEVRON LUBRICANTS PLC -607 -6.8% 11.6 12.5

Source: CSE, Bloomberg, Candor Research

* Bloomberg Total Return – Return with dividend Reinvested


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Foreign favorites – net foreign inflow YTD July 2017

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Company Name Net Foreign Inflow - Rs. M YTD - Price Return PE(X) Jan 2017 PE(X) Aug 2017

1 John Keells Holdings plc 10,239.5 24.1% 12.56 14.33

2 Commercial Bank of Ceylon plc 5,284.7 -0.5% 8.79 8.10

3 Hemas Holdings plc 1,453.0 47.0% 18.15 24.10

4 Expolanka Holdings plc 1,180.9 4.9% 14.19 13.06

5 Sampath Bank plc 1,145.9 8.1% 4.87 4.54

6 Tokyo Cement company (Lanka) plc - (NV) 1,137.5 53.0% 6.19 9.00

7 Sunshine Holdings plc 757.9 22.4% 12.83 13.93

8 Hatton National Bank plc 658.6 4.9% 6.13 6.31

9 Access Engineering plc 656.3 7.7% 9.88 9.64

10 Dialog Axiata plc 605.1 9.5% 9.48 11.76

11 Teejay Lanka plc 462.9 -3.5% 12.80 16.14

12 Royal Ceramics Lanka plc 351.8 12.6% 4.02 4.53

13 Richard Pieris and company plc 312.2 50.6% 6.22 7.73

14 The Kandy Hotels company plc 285.1 -8.8% 13.08 14.42

15 Ceylon Cold Stores plc 261.4 12.3% 19.03 23.41

16 DFCC Bank plc 231.1 2.2% 9.46 7.15

17 Ceylon Tobacco Company plc 230.9 16.9% 12.13 14.01

18 Lb Finance plc 210.5 7.3% 4.29 4.77

19 Tokyo Cement company (Lanka) plc 182.5 55.2% 6.19 9.00

20 Hatton National Bank plc – (NV) 152.9 1.8% 6.13 6.31

21 Commercial Bank of Ceylon plc – (NV) 147.8 -4.6% 8.79 8.10

22 Lanka IOC plc 133.2 7.9% 3.18 19.37

23 Lanka Tiles plc 97.1 19.9% 4.84 5.00

24 Hayleys plc 72.8 9.3% 7.00 9.72

25 Piramal Glass Ceylon plc 67.0 14.8% 10.80 12.16

26 Renuka holdings plc 66.9 20.0% 2.32 3.61

27 Cargills (Ceylon) plc 56.8 6.9% 18.39 21.57


Candor Research


Increasing % foreign holdings of performing stocks

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JOHN KEELLS HOLDINGS PLC EXPOLANKA HOLDINGS PLC SAMPATH BANK PLC

HEMAS HOLDINGS PLC TOKYO CEMENT PLC SUNSHINE HOLDINGS PLC

Foreign Holding % August 2017 Foreign Holding % Jan 2017

Source: CSE, Candor Research

26.11%

31%

50.92%

57%70.72%

82%

16.84%

19%

29.89%

32%37.65%

49%


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Declining market PE levels resulted in increased foreign participation

while domestic participation decreased

14

0

2

4

6

8

10

12

14

16

18

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

2013 2014 2015 2016 2017 (YTD - June)

PE(

x)

Fore

ign

& D

om

esti

c Pa

rtic

ipat

ion

(%

)

Average PE(x) Foreign (%) Domestic (%)

Source: CSE Annual Report 2016, Bloomberg, Candor Research


Candor Research


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Are local investors missing out? Behavioral aspects explain

Source: The 4 Psychological Phases of Asset Bubbles


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How local investors can capitalize on market opportunities

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Use screens to identify bargains & Invest based on fundamentals

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JKH 11.26 -1.9% 16.9% 20.07 14.26 13.40 12.25 12.59 2.19 1.47 1.17 120.91 6.13 4.32

TKYO 9.95 17.8% 130.6% 12.03 5.73 6.47 6.50 6.23 2.10 1.10 1.54 40.19 1.56 2.51

HEMS 5.60 37.7% 0.6% 18.19 10.85 16.23 19.69 19.36 2.70 1.53 2.61 41.51 1.50 1.38

Bloomberg

Code

Forec

asted

EPS

Earnings Growth (%) P/E Analysis (1x) PBV Analysis (1x)

Dividend

AnalysisFi

nanc

ial

Year

Late

st

Qua

rter

3 Y

R A

vg

Hig

h P/E

3 Y

R A

vg

Low

P/E

2016/03

/02

2017/03

/02

Forw

ard

PER

3 Y

R A

vg

Hig

h P/B

3 Y

R A

vg

Low

P/B

PBV

BV

PS

(LKR)

DPS

Dividen

d Yield

%

CLND 4.16 761.9% -1656.0% 68.16 18.08 - 7.94 6.02 2.49 1.49 1.01 24.76 - -

LGL0.38 -11.3% -169.9% 12.63 9.06 9.54 16.68 79.46 2.22 1.59 1.39 21.58 0.75 2.50

Source: Candor Stock Tracker 31 Mar 2017, (based on Bloomberg data)


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Use screens to identify bargains & Invest based on fundamentals

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JKH 11.26 -1.9% 16.9% 20.07 14.26 13.40 12.25 12.59 2.19 1.47 1.17 120.91 6.13 4.32

TKYO 9.95 17.8% 130.6% 12.03 5.73 6.47 6.50 6.23 2.10 1.10 1.54 40.19 1.56 2.51

HEMS 5.60 37.7% 0.6% 18.19 10.85 16.23 19.69 19.36 2.70 1.53 2.61 41.51 1.50 1.38

Bloomberg

Code

Forec

asted

EPS

Earnings Growth (%) P/E Analysis (1x) PBV Analysis (1x)

Dividend

AnalysisFi

nanc

ial

Year

Late

st

Qua

rter

3 Y

R A

vg

Hig

h P/E

3 Y

R A

vg

Low

P/E

2016/03

/02

2017/03

/02

Forw

ard

PER

3 Y

R A

vg

Hig

h P/B

3 Y

R A

vg

Low

P/B

PBV

BV

PS

(LKR)

DPS

Dividen

d Yield

%

CLND 4.16 761.9% -1656.0% 68.16 18.08 - 7.94 6.02 2.49 1.49 1.01 24.76 - -

LGL0.38 -11.3% -169.9% 12.63 9.06 9.54 16.68 79.46 2.22 1.59 1.39 21.58 0.75 2.50

Source: Candor Stock Tracker 31 Mar 2017, (based on Bloomberg data)

Return

YTD

(%) -

July

24.14

55.19

47.00

-5.88

-18.24


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Regularly review portfolio returns

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Portfolio A

Stock Quantity Avg Cost Total CostMarket Value as

at 31st July 2017

Portfolio Value as at 31st July 2017

Unrealized Gain/Loss

Total Return%

Annualize Return %

JOHN KEELLS HOLDINGS PLC 100 140 14,000.00 173.80 17,380.00 3,380.00 24.14% 45.63%

HEMAS HOLDINGS PLC 100 100 10,000.00 147.00 14,700.00 4,700.00 47.00% 95.35%

RICHARD PIERIS & CO PLC 100 8.1 810.00 12.20 1,220.00 410.00 50.62% 103.78%

SUNSHINE HOLDINGS PLC 100 49.41 4,941.00 60.50 6,050.00 1,109.00 22.44% 42.20%

CEYLON COLD STORES PLC 100 740 74,000.00 831.00 83,100.00 9,100.00 12.30% 22.33%

SAMPATH BANK PLC 100 248.38 24,838.00 268.50 26,850.00 2,012.00 8.10% 14.50%Total Portfolio Return 27.43% 53.97%ASPI Return 7.80% 12.80%S&P SL20 Return 9.74% 17.54%

Portfolio Btfolio B

Stock Quantity Avg Cost Total CostMarket Value as

at 31st July 2017

Portfolio Value as at 31st July 2017

Unrealized Gain/Loss

Total Return%

Annualize Return %

COLOMBO LAND & DVLP CO PLC 100 25.5 2,550.00 24.00 2,400.00 (150.00) -5.88% -10.00%

BLUE DIAMONDS JEWELLERY WORL 100 1.4 140.00 1.30 130.00 (10.00) -7.14% -12.09%ADAM INVESTMENTS PLC 100 0.95 95.00 0.60 60.00 (35.00) -36.84% -55.00%

LANKEM DEVELOPMENTS PLC 100 3.9 390.00 3.00 300.00 (90.00) -23.08% -36.62%

ADAM CAPITAL PLC 100 1.3 130.00 1.00 100.00 (30.00) -23.08% -36.61%Total Portfolio Return -19.20% -30.06%ASPI Return 7.80% 12.80%S&P SL20 Return 9.74% 17.54%


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20

Do not make these amateur mistakes

1. Investing based on Rumors or Gossip (unproven facts)

2. Believing that the stock market is inherently risky


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• It takes a lot of hard work to be a successful investor

• Invest in your financial education before you invest

• The goal of enlightened stock analysis – is to identify underpriced securities relative to their true intrinsic value

• Take time to learn about the company before you buy, to be sure it meets your criteria for achieving your goal(s)

• If you don't have the time, or interest in following individual stocks, unit trust funds are a more efficient way to invest

21

Educate yourself & gain experience on investing before you start


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THANK YOU

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analysis of sectoral performance & market · pdf file17 ceylon tobacco company plc 230.9...

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