JKSB: Full Year Highlights: Access Engineering PLC (AEL): FY19
AEL reported a marginal decline in PAT (-1.07% YoY) for FY19 amid moderate growth in top line (+23.78% YoY) supported by steady order book growth for the company. Gross margins improved slightly from 15.59% to 16.04% during FY19 while margins for 4QFY19 contracted 56 ppt to 14.20%. Operating margins witnessed a sharp decline from 17.74% to 11.70% during FY19 owing to a FV gain on investment property in FY18. An increase in net finance costs by 70.06% YoY during FY19 further added pressure to the bottom-line of the company.
We currently project AEL’s full year FY20E earnings to reach Rs. 2,464 mn supported by steady order book growth during the year. Overall earnings will remain muted due to a slowdown in the construction industry which declined by 2% for CY18 (GNI at constant 2010 prices). However, AEL has been able to maintain a steady growth of 8% YoY during FY19 in its construction segment which is well over the industry performance. We are bullish about the construction sector with vast opportunities available for expansion with the commencement of constructions in the port city and LRT projects in line with the government’s aim of modernizing infrastructure as part of its development plan for Colombo. At the current price of 15.20 AEL trades at a P/E of 6.2x which is at a discount to our coverage universe.
•JKSB is one of 15 founding members of the Colombo Stock Exchange with roots in share trading dating back to 1896, and is a subsidiary of John Keells Holdings PLC (JKH), the largest listed entity on the Colombo Stock Exchange with a market capitalization of US$ 1.3bn.
•JKSB’s core client base is Foreign Institutional Investors, Local Institutions and HNWI’s
•JKSB has a co-branded Research tie up with CIMB and a Research Referral agreement with Credit Suisse, along with trade execution relationships with several other global and regional securities firms.
•JKSB’s trade execution partners include Credit Suisse, CIMB, Merrill Lynch, Exotix, Daiwa, Convergex, Deutsche Asia Securities and Morgan Stanley
•JKSB is a research contributor to Bloomberg on ‘KEEL’
•The JKSB Research Universe covers 72 stocks across 15 sectors, with most Research efforts focused on approximately 45 of the more liquid counters.
•The JKSB Universe constitutes 67% of total market cap and approximately 80% of turnover at the CSE.
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