COCR - Earnings Update - 16 03 16 - FC Research

[CSE.SAS]

Commercial Credit and Finance PLC

Earnings Update - BUY

Current Price: LKR 43.5 Fair Value: LKR 50.0

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Earnings Performance

Shifting to Lease and Hire Purchase lending: Net interest income grew by 31%YoY to LKR 2.4bn in 3QFY16 opposed to LKR 1.8bn in 3QFY15 in line with the growth experienced in lending portfolio. Interest income grew by 40%YoY during the same period to LKR 4bn from LKR 2.9bn in 3QFY15 but growth was stagnant on a QoQ basis. Resultant to the low interest regime coupled with high level of new vehicle registrations in the country, Company’s loan portfolio grew 34%YoY to LKR 53bn, primarily attributing to 64%YoY growth in Lease and Hire Purchase portfolio which is valued at LKR 25.8bn. On a quarterly basis the total lending portfolio grew by 8%QoQ from LKR 49bn in 2QFY16. Other income stagnated at LKR 294mn despite the growth in loan portfolio.

Borrowing increase by 76%: COCR interest expense saw sharp increase of 54% well above the interest income growth despite lower interest rates on a YoY basis, due to higher borrowings and deposits. With COCR’s plan to exploit lower interest rates by locking in more borrowings at lower rates the company issued LKR 3.0bn debentures during the FY16, increasing the total borrowings of the company to LKR 8.8bn in 3QFY16 opposed to LKR 5bn in 3QFY15 recording a growth of 76%YoY. Deposit base of COCR registered a 39%YoY growth to LKR 50.8bn as opposed to LKR 36.5bn a year ago (LKR 51.2bn in 2QFY16).

Mounting NPAs: Provision for impairment during 3QFY16 was recorded at LKR 764mn (+72%YoY and +50%QoQ) dominated by the increase in irregular payment patterns witnessed in micro finance and SME portfolio followed by gold loans resultant to the decline witnessed in gold prices.

Declining Operational expenses: Operating Expenses for 3QFY15 was LKR 1.1bn (+24%YoY) with other operating expenses accounting for 40%, while on a quarterly basis it declined by 25% with LKR 1.5bn recorded in 2QFY16.


Disclosure:

First Capital Equities (Pvt) Ltd and any of its affiliates do not hold shares in COCR and will not trade in this share for the seven trading days following the issue of this document.[/quote]

[nihal123Top contributor]

Thanks CSE.SAS

[First Guy]

Noted few interesting things. Credibility again is a question.