JKSB Quarterly Highlights_Overseas Realty (Ceylon) PLC_1QCY17
OSEA reported earnings of Rs.881mn (+21% YoY) for 1QCY17. A moderate increase in Total Revenue (+6% YoY) stemmed from marginal increases in both Rental Income (+6% YoY) and Other Services (+8% YoY). Construction on both phase III and phase IV of the Havelock City project was launched during 1HCY16 and is expected to be completed by CY2019 with reservation for residential units currently on going (during 1QCY17, the recognition of apartment sales was not realised). A marginal contraction was seen in Gross margins (-2.5 ppts YoY to 74.5%) which was driven by an increase in Direct operating Expenses (+17% YoY) whilst operating margins expanded (+13.5 ppts YoY 139.0%) having been aided by a substantial Exchange Gain of Rs.139.4mn given the LKR’s volatility against the USD. A significant increase in net finance income (+83% YoY) was recorded through returns generated from short term investments raised with the proceeds from the recently concluded rights issue.
We maintain our expectation of OSEA’s full year earnings to grow to Rs.3,092mn for CY2017 (+3.8% YoY) in order to account for the recognition of apartment sales from Havelock City Residential. The counter currently trades at a CY2017E P/E of 8.2x and a P/BV of 0.7x (based on last reported book value) at a market price of Rs.20.40. The resumption in the construction and marketing of phases III & IV of the Havelock City project will be a key driver of growth for OSEA going forward with WTC facing a challenging year ahead in maintaining higher rental and occupancy rates.
•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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