The Searle Company (SEARL): 4QFY18 EPS Rs1.9 -41% YoY (-44% QoQ); DPS Rs 5/share; Bonus issue 15%,(In-line with expectations)
- SEARL announced consolidated earnings of Rs353mn (EPSRs1.9) down 41% YoY in 4QFY18, broadly in-line with our expectations. Lower earnings are attributed to lower GP margins of 42% (down 8ppts YoY) in 4QFY18 amidst rupee devaluation, we believe.
- Further, sharp increase in selling & distribution and finance cost by 49% and 306% YoY respectively weighed on earnings growth. The former was higher than sales growth due to higher travelling expenses amidst increasing fuel cost, while latter increased on account of rising interest bearing liabilities coupled with higher in benchmark policy rate.
- Other income during FY18 was down by 43% YoY, as last year company wrote back its liability of Rs113mn that was no longer payable.
- Effective tax rate during 4QFY18 clocked in at 30% (up 14ppts YoY), taking full year tax rate to 17% (flat YoY).
- Company also declared final dividend of Rs5/share along with bonus shares of 15%.
- We flag 1) lower than expected volumetric growth, 2) regulatory and legal issues restricting price increase, 3) delay in introducing new products and 4) higher than anticipated distribution expenses as key risks for SEARL.
The Searle Company Limited is a holding company, which is principally engaged in the manufacture of pharmaceutical products and other consumer products. In addition, the Company is engaged in sale of food and consumer products, and manufacture of pharmaceutical products for other companies. The Company operates through three segments: Pharma, Consumer and Investment property. The Company's geographical segments include Pakistan, South Asia, East Africa, South-East Asia and Middle East. The Company's portfolio includes three divisions: Pharma, Consumer Health and Nutrition. Its products include Selanz SR, Levoxin, Lomotil, Xaroban, Vitrum, Rhulef, Canderel, Peditral, Ezium, Hydryllin, Xadine, Zenbar, Extor, Adronil, Nuberol/Nuberol Forte and Byscard. The Company has pharmaceutical range across therapeutic areas, such as cardiovascular, respiratory care, gastroenterology, pain management, orthocare, neuropsychiatry, probiotics, antibiotics and nutritional care.
Topline Securities is one of the fastest-growing brokerage houses in Pakistan. It has strong Equity Brokerage, Economic/ Equity Research, Commodity Trading and Corporate Finance & Advisory functions.
Topline Securities has been endowed with numerous awards by renowned international financial organizations. The highlights of which consists of the award for ‘Best Local Brokerage House of Pakistan’ by Asiamoney Brokers Poll (the largest Asia-focused equity services provider poll) in 2016 and ‘Best Equity Brokerage House’ by CFA Society Pakistan in 2015.
Previously, Topline Securities held the title for ‘Best Brokerage House’ for 4 consecutive years (2011-2014) by Asiamoney Brokers Poll. Other awards include the ‘Best Salesperson’ award by Asiamoney for 6 consecutive years (2011-2016), the ‘Arabia Fast Growth 500’ award and ‘Pakistan Fast Growth 100’ award in 2012 and 2013 by AllWorld Network.
JCR-VIS, a credit rating agency providing independent rating services in Pakistan has assigned initial rating of “A-2” for short term and “A” for long term to Topline Securities. Topline Securities is registered as Underwriter, Book Runner and Research Entity with Securities & Exchange Commission of Pakistan (SECP).
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