JKSB Quarterly Highlights_LB Finance PLC (LFIN)_1QFY19
LFIN reported 23.2% YoY earnings growth for 1QFY19 which was complemented by robust growth in net interest income (+32.7% YoY) and fee and commission income (+28.9% YoY) coupled with an improvement in cost to income ratio (-4.2ppts YoY). Sharp growth in impairment charges of Rs.279.6mn (+307.4% YoY) was experienced during the quarter, on the back of the 1) the adoption of a more conservative NPL classification policy on certain asset classes; and 2) increase in gross NPL levels seen in property mortgage loans and certain classes in the vehicle leasing segment (i.e. motor coaches/bus and motorbikes). Growth in net interest income stemmed from loan book growth coupled with an expansion in NIMs stemming from better deposit cost management amidst a moderate decline in lending rates.
We maintain our earnings forecast of Rs.4.5bn for FY2019E (+6.6% YoY). We expect muted NIM expansion for CY18. We expect the recent import duty hikes to dampen demand for smaller vehicles which would in turn impact leasing disbursements for 2HFY19. At its current price of Rs.116.00, LFIN trades at a FY19E P/E of 3.5x, at a discount to its peer average, and at a P/BV of 1.0x (based on last reported NAVPS) which represents a premium to the industry average.
•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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