Corporate Update - STRONG BUY
Current Price: LKR 54.9/45.1 Fair Value: LKR 83.0/66.0
“Pillars of Success”
Click the below link to download the Report of FC Research - TKYO - Corporate Update - STRONG BUY - 20 09 16
[You must be registered and logged in to see this link.]
Tokyo Cement Company (Lanka) PLC, one of the two cement manufacturers in Sri Lanka is expected to grow its earnings at a CAGR of c.20% FY16-FY19E reaching c.LKR 3.0Bn in FY18E and c.LKR 3.4Bn in FY19E. TKYO is expected to grow its earnings mainly through increase in its topline by seizing the opportunities created by the boom in the construction sector coupled with enhanced capacity. FC Research expect TKYO.N and TKYO.X to provide a return of 39% and 37% at LKR 54.9 and LKR 45.1 respectively. STRONG BUY
Construction sector boom to improve topline: TKYO’s topline is expected to register a YoY growth of c.15% and c.17% to reach c.LKR 34.8Bn and c.LKR 40.8Bn in FY17E and FY18E respectively resultant to the boom in the construction sector coupled with the investment into capacity enhancement to reach total plant capacity to 2.8Mn MT that’s coming into effect by end 2016 and increased Maximum Retail Price (MRP) of cement towards the latter part of the 1H2016.
Improved Margins driven by increased volumes and cost efficacies: GP, EBIT and NP margins are expected to register at c.24%, c.11% and c.7% respectively in FY17E as opposed to 23%, 10% and 6.5% recorded in FY16 on the back of lower cost of production coupled with the comparatively lower commodity prices that are yet to recover and cost savings resulting from the increase in renewable energy generation.
Risks associated: Given the nature of the industry TKYO is exposed to exchange rate, fluctuations in commodity price, change in government policy and rivalry competition risks.
TKYO to provide a 58% and 55%return over 18-months period: FC Research expect TKYO.N to achieve a fair value of LKR 83.0 providing a total return of 58% (Dividend yield 7%) over 18-month period. [DCF based LKR 83.8 and PER based LKR 81.4] while TKYO.X to provide a return of 55% at LKR 66.0.
Disclosure:
FFirst Capital Group and its affiliates holds 86,980 shares in TKYO. 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.
» CCS.N0000 ( Ceylon Cold Stores)
» Sri Lanka plans to allow tourists from August, no mandatory quarantine
» When Will It Be Safe To Invest In The Stock Market Again?
» Dividend Announcements
» MAINTENANCE NOTICE / නඩත්තු දැනුම්දීම
» ඩොලර් මිලියනයක මුදල් සම්මානයක් සහ “ෆීල්ඩ්ස් පදක්කම” පිළිගැනීම ප්රතික්ෂේප කළ ගණිතඥයා
» SEYB.N0000 (Seylan Bank PLC)
» Here's what blind prophet Baba Vanga predicted for 2016 and beyond: It's not good
» The Korean Way !
» In the Meantime Within Our Shores!
» What is Known as Dementia?
» SRI LANKA TELECOM PLC (SLTL.N0000)
» THE LANKA HOSPITALS CORPORATION PLC (LHCL.N0000)
» Equinox ( වසන්ත විෂුවය ) !
» COMB.N0000 (Commercial Bank of Ceylon PLC)
» REXP.N0000 (Richard Pieris Exports PLC)
» RICH.N0000 (Richard Pieris and Company PLC)
» Do You Have Computer Vision Syndrome?
» LAXAPANA BATTERIES PLC (LITE.N0000)
» What a Bank Run ?
» 104 Technical trading experiments by HUNTER
» GLAS.N0000 (Piramal Glass Ceylon PLC)
» Cboe Volatility Index
» AHPL.N0000
» TJL.N0000 (Tee Jey Lanka PLC.)
» CTBL.N0000 ( CEYLON TEA BROKERS PLC)
» COMMERCIAL DEVELOPMENT COMPANY PLC (COMD. N.0000))
» Bitcoin and Cryptocurrency
» CSD.N0000 (Seylan Developments PLC)
» PLC.N0000 (People's Leasing and Finance PLC)
» Bakery Products ?
» NTB.N0000 (Nations Trust Bank PLC)
» Going South
» When Seagulls Follow the Trawler
» Re-activating
» අපි තමයි හොඳටම කරේ !
» මේ අර් බුධය කිසිසේත්ම මා විසින් නිර්මාණය කල එකක් නොවේ
» SAMP.N0000 (Sampath Bank PLC)
» APLA.N0000 (ACL Plastics PLC)
» AVOID FALLING INTO ALLURING WEEKEND FAMILY PACKAGES.
» Banks, Finance & Insurance Sector Chart
» VPEL.N0000 (Vallibel Power Erathna PLC)
» DEADLY COCKTAIL OF ISLAND MENTALITY AND PARANOID PERSONALITY DISORDER MIX.
» WATA - Watawala
» KFP.N0000(Keels Food Products PLC)
» Capital Trust Broker in difficulty?
» IS PIRATING INTELLECTUAL PROPERTY A BOON OR BANE?
» What Industry Would You Choose to Focus?
» Should I Stick Around, or Should I Follow Others' Lead?