Thursday, May 20, 2010

Sunshine Holdings projected to grow in 2011, 2012

An Equity Research Report by a leading stockbroker has projected healthy top and bottom line growth over the next two years for Sunshine Holdings PLC, the owning company of Swiss Biogenics Limited, Watawala Plantations PLC and companies in travel and packaging.

The report by a four-member research team of Bartleet Mallory Stockbrokers (BMS) expresses the view that the stock (currently trading at Rs 48.50) has a potential value of Rs 65 based on a Weighted Average Cost of Capital (WACC) of 10.5 per cent and a terminal growth rate of 3.5 per cent.

The report states that revenue growth supported by improved commodity prices and retail marketing activity in the plantation sector, and growth in pharmaceuticals and nutrition products volumes in the healthcare sector are expected to be catalysts for Year-on-Year top line growths of 7.9 per cent and 10.8 per cent in fiscal 2011 and 2010 respectively.

Projecting an EBIT (Earnings before interest and taxes) growth of 17.4 per cent for 2011 and 5.7 per cent growth in 2012, the report says expected EBIT growth from the plantation sector and healthcare sector would steer growth.

“We expect a plantation EBIT growth of 13 per cent for FY 2011, while a growth of 11.5 per cent is expected for the healthcare sector,” the report states.

It forecasts a bottom line growth of 24.5 per cent and 8 per cent for 2011 and 2012 respectively for Sunshine Holdings. “With the capital injection in 2008/09 that raised Rs 510 million, the company has more flexibility for improvement, in our view. Profits attributable to shareholders are expected to grow by 14.6 per cent and 8 per cent in 2011 and 2012,” the report adds.

Describing the stock as undervalued at current price and recommending it as a BUY, BMS estimates Earnings per Share of Rs 3.03 for 2011 and Rs 3.29 for 2012.

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