JKSB: Quarterly Highlights: Lion Brewery Ceylon PLC (LION): 4QFY19
LION’s earnings for FY19 grew by 75% YoY supported by healthy growth in topline (+44% YoY) while an expansion in GP margins from 20.43% to 25.27% further strengthened bottom-line for the group. The re-adjustment of excise duty policies in November 2017 alongside steady growth in tourist arrivals over the past 18 months were key factors in the growth of revenues. Operating earnings continued to demonstrate strong growth (+72.10% YoY) due to a reduction in the operating costs to revenue ratio from 12.45% to 10.91%. Reduction in net finance costs (-29.81% YoY) owing to a decline in loans and borrowings (-17.87% YoY) during 4QFY19 resulted in a robust growth in PBT (+74.54% YoY).
We currently project LION’s full year FY20E earnings to reach Rs. 3,850 mn slightly lower than our previous estimate of Rs.4,282 mn due to negative market conditions arising from a significant reduction in tourist arrivals together with amendments made to excise duties resulting in increasing pressure caused by the illicit and spirit segments in the market. However, we expect an uptick in export volumes during the year with LION possessing the capacity to fulfill large export demands in driving earnings growth for FY20E. At the current price of Rs.539.30, LION trades at an FY20E P/E of 11.21x in comparison to a multiple of 12.91x in our beverage food & tobacco sector of 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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