John Keells Stock Brokers - Cargills (Ceylon) PLC (CARG.N0000) JKSB_Full Year Highlights_Cargills (Ceylon) PLC (CARG)_FY2017

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John Keells Stock Brokers

Abdul Ariff

EUR 4.56 For Business Accounts Only

JKSB_Full Year Highlights_Cargills (Ceylon) PLC (CARG)_FY2017

Note Summary:

Cargills (Ceylon) PLC reported full year earnings of Rs.2.14bn (+31.8% YoY) for FY2017, driven by topline growth (+18.6% YoY) and margin expansion (gross margin +0.7 ppt YoY to 11.9% and operating margin +1.2 ppt YoY to 6.0%). Group full year results include a one-off expense of Rs.132mn on restructuring of the property portfolio. Topline growth for the year was supported by favourable contributions from the Retail (+19.8% YoY), FMCG (+13.6% YoY) and Restaurant (+16.2% YoY) segments. Net finance costs increased sharply (+86.2% YoY to Rs.1.1bn) amid an increase in borrowings to fund Capex and investments in the Retail and FMCG segments coupled with rising interest rates. The Group earnings decline in 4QFY17 primarily reflects the negative impact of a slowdown in consumer spending on the retail and FMCG businesses during the quarter.

We project Group earnings of Rs.2,540mn (+18.7% YoY) for full year FY18. The counter currently trades at a FY2018E P/E of 17.6x at a market price of Rs.200.00. We expect growth to be driven by virtue of retail outlet expansion and higher contributions from the FMCG segment.

29/06/2017 2 EN

Underlying

Cargills (Ceylon) PLC

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LK0020N00004 Colombo Stock Exchange Sri Lanka

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John Keells Stock Brokers

•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’ , Thomson First Call, Reuters Knowledge and FactSet

•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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Analysts

Abdul Ariff

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