JKSB: Quarterly Highlights: Citizens Development Business Finance PLC (CDB): 4QFY19
CDB concluded the fourth quarter of FY19 with a marginal decline in earnings stemming from significantly higher total taxation upon the introduction of the Debt Repayment Levy in October 2018 and higher operating expenses, despite healthy growth in NII and net fee & commission income coupled with a steep reduction in impairment charges owing to an aggressive recovery campaign during the quarter.
We project full year earnings of Rs.1.3bn for FY20E (-30% YoY). We expect CDB to increase its exposure in the gold loans segment while moving to lower markets in vehicle financing (i.e. two-wheelers & three-wheelers) which will have an unfavorable impact on asset quality. CDB announced issue of shares by way of a rights issue in order to strengthen its Tier 1 capital and support asset growth. As expected, CDB has managed to achieve full subscription on its rights and raise Rs.1.0bn, which is fairly below the amount of capital raised by other companies in the market. At its current prices, the voting and non-voting shares trade at P/BVs of 0.52x and 0.39x respectively (based on NAV as at end March 2019) and FY20E P/Es of 3.69x and 2.74x.
•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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