JKSB: Quarterly Highlights: Overseas Realty (Ceylon) PLC (OSEA): 2QCY19
Modest growth in rental income (+9% YoY) along with strong support from sale of apartments (+79% YoY) has resulted in a 43% YoY growth in total revenue during the first half of the year. Sharply higher cost of sales of apartments (+99% YoY) during 1HCY19 was from higher construction costs through taxes & levies on imports and building materials as well as the steep depreciation of the SL rupee. Construction costs in Sri Lanka are 30-50% higher than in regional countries. Significant tax expenses (+721% YoY) in 1HCY19 eroded earnings resulting in a marginal increase in earnings.
We project full year earnings of Rs. 4.6bn for CY19 (-6% YoY). Our current earnings projection accounts for moderate growth in rental income from WTC along with an expected pick up in apartment sales in 2HCY19. We expect the trend of significantly higher taxes seen in 1HCY19 to continue and erode total earnings for the year. At the current price of Rs. 16.00, OSEA trades at a CY19E P/E of 4.28x and P/BV of 0.49x (based on NAV as at end June 2019). We expect DPS to be maintained at Rs. 1.25.
•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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