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JKSB: Quarterly Highlights: Hemas Holdings PLC (HHL): 1QFY20

HHL concluded 1QFY20 posting a decline in revenues (-2.3% YoY) while profits saw a sharp contraction by 199.9% (YoY) mainly due to 1) the economic slowdown seen overall in the aftermath of the Easter Sunday attacks, 2) impacts to the business mix which saw high margins segments such as FMCG been severely affected during the quarter, 3) losses in the leisure segment due to the after effects from tourism with a sharp drop in arrivals in the months of May and June and 4) overall subdued consumer environment affecting segments across the group. GP margins saw a contraction from 34.58% to 32.08% while EBIT margins were further impacted by the adoption of SLFRS 16 resulting in one off ’s totaling to Rs. 130 Mn.

 We expect a gradual pickup in economic activity with tourism arrivals gradually increasing. However, consumer segment will continue to witness sluggish market conditions in the aftermath of the April 21^st attacks together with uncertainty looming around the political arena. Our revised FY20E earnings are expected to reach Rs. 2,150Mn due to sharp reductions in bottom-line in the FMCG segment along with the slowdown seen in the Leisure segment. At the current price of Rs.75.00, HHL trades at a FY20E P/E of 20.8x.