JKSB: Quarterly Highlights: Central Finance PLC (CFIN): 4QFY19
CFIN reported a 38% YoY decline in earnings for 4QFY19 with significantly higher impairment charges (+2499% YoY) eroding improved total operating income (+16% YoY). Full year earnings declined by 7% YoY mainly due to the higher impairment charges despite healthy growth in topline. NII grew by 15% YoY during FY19 supported by increased leases in 2QFY19 & 3QFY19 while other revenue grew by 20% YoY during the year supported by increased contributions from the manufacturing and trading segment (+21% YoY). Impairment charges increased by 459% YoY during FY19 due to the growth in the loan book, elevated credit risk from subdued economic performance and change in accounting standards from LKAS 39 to SLFRS 9. CFIN managed to improve its cost to income ratio from 34.70% to 31.50% at the end of the year and maintain its NIMs. The NPL ratio was contained at 5.61%, below the industry average of 7.7%.
We project full year earnings of Rs.4.7bn for FY20E (-7% YoY). We expect the subdued consumer activity after the Easter Sunday attacks to continue and negatively impact the performance of the company. At its current price of Rs.86.90, CFIN trades at a P/BV of 0.47x (based on NAVPS as at end March 2019) and a FY20E P/E of 4.06x.
•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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