LOFC Initiating Coverage - STRONG BUY - 29 03 17 - FC Research

[CSE.SAS]

LOLC FINANCE PLC

Initiating Coverage - STRONG BUY

Current Price: LKR 2.1 Fair Value: LKR 3.7

“Gearing up for the Future”

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LOFC has the second largest individual asset base in the Non-Banking Financial Institution (NBIF) sector in Sri Lanka, and is expected to grow at an impressive CAGR of c.25% in earnings during the period FY16-FY19E, to reach LKR 3.5Bn in FY19E. The company is expected to grow its earnings mainly through an increase in lending at a CAGR of c.15% to LKR 145.2Bn in FY19E along with improved Net Interest Margins (NIMs) of c.10.0% during the same period. FC Research expects LOFC to provide a total return of 76% at LKR 3.7. STRONG BUY

Change in Lending Portfolio mix to counter asset liability mismatch: In response to the past rising interest rate environment, a shift in the focus of the loan portfolio from long term products, leasing and loans, towards a short term product, factoring. This would help match the predominantly short term liabilities with the more long term asset base, and thereby reduce the exposure to NIM deterioration caused by the higher interest rates.

NIMs to improve with interest rate decline: NIMs expected to improve from c.8.5% in FY17E to c.8.7% and c.10.0% in FY18E and FY19E respectively. This is due to the time lag between the borrowings and lending re-pricing, where borrowing rates would decline at a faster rate than the lending rates in a declining interest rate environment which would in turn expand NIMs.

Reduced NPLs with improvements in the secondary market for vehicles: Reduction in NPLs with improvements in the second hand market for vehicles will have indirect positive effect on earnings through reduction in the loan loss provisions.

Investment Risk: Operating in the finance sector, LOFC is exposed to credit, market and regulatory risks.

LOFC to provide a total return of 76%: FC Research expect LOFC to achieve a fair value of LKR 3.7 providing a total return of 76% (Capital Gains 76%, Dividend yield 0%) over a 12-month period. [RI based LKR 3.5, Justified PBV based LKR 3.8, PER based LKR 5.0 and illiquidity discount of 10%].

Disclosure on Shareholding:

First Capital Group and its affiliates do not hold shares in LOFC. Neither First Capital Group nor its affiliates have traded in the shares in the three trading days prior to this document, and will not trade in the shares for three trading days following the issue of this document.

Discount for liquidity:

The fair value of LOFC has been adjusted 10% downwards to reflect the lower trading volumes of the share compared to the average trading volume of the market.

[stockback]

SLSTOCK. please give me your idea about current situation about LOFC.

Di-Listing plan.

if they wants to di-list. idea about Stock Value(Price)

LOFC Reference Price 5 ----- 2011

[slstockVeteran]

SLSTOCK. please give me your idea about current situation about LOFC.

Di-Listing plan.

if they wants to di-list. idea about Stock Value(Price)

LOFC Reference Price 5 ----- 2011

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[stockback]

LOFC has very good performance

EPS 1.42. Net assets around 5.4

last month also they are saying De-list..

any idea......

[sereneTop contributor]

LOFC has very good performance

EPS 1.42. Net assets around 5.4

last month also they are saying De-list..

any idea......

Surprise to see that no regards to Rights but De-List in your comment.

[stockback]

LOFC has very good performance

EPS 1.42. Net assets around 5.4

last month also they are saying De-list..

any idea......

Surprise to see that no regards to Rights but De-List in your comment.

that is very good point.

RI =4.65 then what is De-list price. EPS 1.42 , NAVP = 5.42

today they have announcement still they saying about de-listing. if they de list then they will offer good price according to current situation.

if they wants to sale RI to another company then they can avoid de-listing. then they has to keep stock price up. to sale RI to another company. please think logically

according to my view this is best share in the CSE for this moment...

please give me your idea...

[stockback]

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LOFC chart.

[Fireandwater]

On LOFC
PE is 2.7
PBV is 0.7
1% out of about 5Bn shares in the market. Rest owned by top 20%
LOLC ownes 93%

SLS or anyone genuine know any other information please.
Looks a decent share even if they de-list dont they have to give the shareholders close to book value which is Rs.5.40??

[OSEAD]

LOFC, NAV is Rs.5.96.
LOLC holds 94.3% shares from LOFC issued shares.
LOFC further announce to remove equity shares and list only debt securities. they awaiting regulatory approval.

[b]recent delist financial co. CSEC. JINS paid over 2 times from NAV.
we hope the best delisting price for LOFC.
I think, they already find an investor invest in debt securities in LOFC.

only need regulatory approval..

better to buy LOFC below NAV.
Good Luck..

[Rational Investor]

Hope for the best.It will be a very handy return if this is going ahead.