The Investor Sentiment - Equity and investments forum for Sri Lankans

Join the forum, it's quick and easy

The Investor Sentiment - Equity and investments forum for Sri Lankans
The Investor Sentiment - Equity and investments forum for Sri Lankans
Would you like to react to this message? Create an account in a few clicks or log in to continue.
Please send an email to if you face any technical difficulties when posting
Display results as :
Advanced Search
Latest topics
CCS.N0000 ( Ceylon Cold Stores)Wed Mar 20, 2024 11:31 amHawk Eye
When Will It Be Safe To Invest In The Stock Market Again?Wed Apr 19, 2023 6:41 amකිත්සිරි ද සිල්වා
Dividend AnnouncementsWed Apr 12, 2023 5:41 pmකිත්සිරි ද සිල්වා
MAINTENANCE NOTICE / නඩත්තු දැනුම්දීමThu Apr 06, 2023 3:18 pmකිත්සිරි ද සිල්වා
SEYB.N0000 (Seylan Bank PLC)Thu Mar 30, 2023 9:25 amyellow knife
The Korean Way !Wed Mar 29, 2023 7:09 amකිත්සිරි ද සිල්වා
In the Meantime Within Our Shores! Mon Mar 27, 2023 5:51 pmකිත්සිරි ද සිල්වා
What is Known as Dementia?Fri Mar 24, 2023 10:09 amකිත්සිරි ද සිල්වා
SRI LANKA TELECOM PLC (SLTL.N0000)Mon Mar 20, 2023 5:18 pmකිත්සිරි ද සිල්වා
THE LANKA HOSPITALS CORPORATION PLC (LHCL.N0000)Mon Mar 20, 2023 5:10 pmකිත්සිරි ද සිල්වා
Equinox ( වසන්ත විෂුවය ) !Mon Mar 20, 2023 4:28 pmකිත්සිරි ද සිල්වා
COMB.N0000 (Commercial Bank of Ceylon PLC)Sun Mar 19, 2023 4:11 pmකිත්සිරි ද සිල්වා
REXP.N0000 (Richard Pieris Exports PLC)Sun Mar 19, 2023 4:02 pmකිත්සිරි ද සිල්වා
RICH.N0000 (Richard Pieris and Company PLC)Sun Mar 19, 2023 3:53 pmකිත්සිරි ද සිල්වා
Do You Have Computer Vision Syndrome?Sat Mar 18, 2023 7:36 amකිත්සිරි ද සිල්වා
LAXAPANA BATTERIES PLC (LITE.N0000)Thu Mar 16, 2023 11:23 amකිත්සිරි ද සිල්වා
What a Bank Run ?Wed Mar 15, 2023 5:33 pmකිත්සිරි ද සිල්වා
104 Technical trading experiments by HUNTERWed Mar 15, 2023 4:27 pmkatesmith1304
GLAS.N0000 (Piramal Glass Ceylon PLC)Wed Mar 15, 2023 7:45 amකිත්සිරි ද සිල්වා
Cboe Volatility Index Tue Mar 14, 2023 5:32 pmකිත්සිරි ද සිල්වා
AHPL.N0000Sun Mar 12, 2023 4:46 pmකිත්සිරි ද සිල්වා
TJL.N0000 (Tee Jey Lanka PLC.)Sun Mar 12, 2023 4:43 pmකිත්සිරි ද සිල්වා
CTBL.N0000 ( CEYLON TEA BROKERS PLC)Sun Mar 12, 2023 4:41 pmකිත්සිරි ද සිල්වා
COMMERCIAL DEVELOPMENT COMPANY PLC (COMD. N.0000))Fri Mar 10, 2023 4:43 pmyellow knife
Bitcoin and Cryptocurrency Fri Mar 10, 2023 1:47 pmකිත්සිරි ද සිල්වා
CSD.N0000 (Seylan Developments PLC)Fri Mar 10, 2023 10:38 amyellow knife
PLC.N0000 (People's Leasing and Finance PLC) Thu Mar 09, 2023 8:02 amකිත්සිරි ද සිල්වා
Bakery Products ?Wed Mar 08, 2023 5:30 pmකිත්සිරි ද සිල්වා
NTB.N0000 (Nations Trust Bank PLC)Sun Mar 05, 2023 7:24 amකිත්සිරි ද සිල්වා
Going South Sat Mar 04, 2023 10:47 amකිත්සිරි ද සිල්වා
When Seagulls Follow the TrawlerThu Mar 02, 2023 10:22 amකිත්සිරි ද සිල්වා
Re-activatingSat Feb 25, 2023 5:12 pmකිත්සිරි ද සිල්වා
SAMP.N0000 (Sampath Bank PLC)Wed Nov 30, 2022 8:24 amකිත්සිරි ද සිල්වා
APLA.N0000 (ACL Plastics PLC)Fri Nov 18, 2022 7:49 amකිත්සිරි ද සිල්වා
Banks, Finance & Insurance Sector ChartTue Nov 15, 2022 5:26 pmකිත්සිරි ද සිල්වා
VPEL.N0000 (Vallibel Power Erathna PLC)Sun Nov 13, 2022 12:15 pmකිත්සිරි ද සිල්වා
WATA - WatawalaSat Nov 05, 2022 8:44 amකිත්සිරි ද සිල්වා
KFP.N0000(Keels Food Products PLC)Sat Nov 05, 2022 8:42 amකිත්සිරි ද සිල්වා
Capital Trust Broker in difficulty?Fri Oct 21, 2022 5:25 pmකිත්සිරි ද සිල්වා
IS PIRATING INTELLECTUAL PROPERTY A BOON OR BANE?Thu Oct 20, 2022 10:13 amකිත්සිරි ද සිල්වා
What Industry Would You Choose to Focus?Tue Oct 11, 2022 6:39 pmකිත්සිරි ද සිල්වා
Should I Stick Around, or Should I Follow Others' Lead?Tue Oct 11, 2022 9:07 amකිත්සිරි ද සිල්වා
DV-2024 Program: Online RegistrationThu Oct 06, 2022 11:26 amකිත්සිරි ද සිල්වා

Information posted in this forum are entirely of the respective members' personal views. The views posted on this open online forum of contributors do not constitute a recommendation buy or sell. The site nor the connected parties will be responsible for the posts posted on the forum and will take best possible action to remove any unlawful or inappropriate posts.
All rights to articles of value authored by members posted on the forum belong to the respective authors. Re-using without the consent of the authors is prohibited. Due credit with links to original source should be given when quoting content from the forum.
This is an educational portal and not one that gives recommendations. Please obtain investment advises from a Registered Investment Advisor through a stock broker

Go down
stocks hunter
stocks hunter
Top contributor
Top contributor
Posts : 1280
Join date : 2014-03-16

CAL cautions investors despite Softlogic’s fair cash offer  Empty CAL cautions investors despite Softlogic’s fair cash offer

Tue Oct 21, 2014 6:26 am
"It is still uncertain as to how Pathirage will re-structure Odel going forward with this massive cash pile. He could either retire the entirety of the existing long and short term debts amounting to Rs.1.3 billion (as of June 30) or invest that in the business given the significant synergies within the two groups as claimed in offer document"

Though the mandatory offer price of Rs.22 per share for Odel PLC (Odel) shareholders is a fair price, an investment bank has cautioned investors over its highly subjective nature and the valuation being entirely based on historical figures.

According to Capital Alliance Partners Limited (CAL), even to justify this Rs.22 share and to hold the share for a reasonable period of return, it requires Odel’s earnings to grow significantly during FY 2015 and 2017.

CAL’s recommendation to ‘accept’ the offer is purely based on the Net Asset Value (NAV) and historical Price Earnings Ratio (PER) and company earnings but an ideal valuation is offered through forward earnings and discounted cash flows which demonstrate the company’s future potential.

Odel’s NAV per share as of June 30, 2014 was Rs.17.10 and CAL said the offer price relating to the NAV was preferable.

Odel’s net profits had been declining during the two years to FYE 2013 before it increased by 22.44 percent to Rs.192.55 million (71 cents a share), but
revenues and the gross margin were growing continuously.

On September 12, Ashok Pathirage-led Softlogic group acquired 45 percent of Odel in a Rs.2.6 billion deal, with Otara and her two siblings completely divesting stakes.

On October 15, Softlogic group—Softlogic Holdings PLC (SHL) and Softlogic Retail (Pvt) Ltd (SRL) announced a mandatory offer on Odel which was accepted by Parkson Retail Asia Limited to dispose of its 47.46 percent stake booking an estimated capital gain of Singapore dollars 601, 000— approximately Rs.61.3 million.

Further, Odel’s valuations become subjective as there are no close Colombo Stock Exchange listed substitutes.

Even though a substitute could be searched based on Odel’s consumer peers which include Cargills (Supermarkets), Richard Pieris (Arpico Stores, manufacturing plus plantations) and Singer (consumer finance and white good sales), they are quite different from one another and are substantially larger than Odel.

“Thus point valuation relative to peer group does not express an accurate picture,” CAL stated.

Further Odel operates with Rs.2.0 billion worth of unutilized assets of which majority is cash. However CAL believes it is unusual for a company with a going concern to sit on a massive cash pile

without re-investing on revenue generating assets.

As of June 30, 2014 Odel had Rs.1.3 billion worth of cash and Rs.800 million worth of property which were not utilized. It is still uncertain as to how Pathirage will re-structure Odel going forward with this massive cash pile. He could either retire the entirety of the existing long and short term debts amounting to Rs.1.3 billion (as of June 30) or invest that in the business, given the significant synergies within the two groups as claimed in their offer document.
Softlogic has also mentioned they would ‘evaluate developing the existing property at Kannangara Mw and Ward Place, Colombo 7 in to a multi-story high end department store.

“While CAL believes these are plausible value added strategies and synergies which could improve Odel’s share price.CAL also believes that it may take a reasonable length of time for benefits to materialize,” CAL stated.

Following Odel acquisition, Fitch Ratings Lanka Limited downgraded SHL by two notches to BBB- and left the rating watch on ‘Negative’ due to the aggressive investments and capital structure and weaknesses in SHL’s liquidity profile and financial metrics.

“SHL’s recent acquisition of a 45 percent stake of Odel, as announced on September 11, 2014, is expected to further increase its debt levels, at least in the near-term,” Fitch stated.
Back to top
Permissions in this forum:
You cannot reply to topics in this forum