The largest IPO since 2005 will open on June 9 when Softlogic issues 139 million shares at Rs. 29 each to raise a little more than Rs. 4 billion. Bartleet Mallory Stockbrokers (BMS) yesterday recommended the stock.
Citing a high-octane growth strategy backed by a pristine track record, BMS said the subscribe recommendation comes on the back of a strong growth story with robust forward earnings. Strong recurring cash flows, healthy margins and attractive trading multiples (21.7x trailing PER in comparison to 30.0x sector PER with FY 2012E looking attractive at 13.2x).
"We expect the retail sector to drive the earnings with strong demand and the group’s aggressive growth strategy. Retail outlets will grow from 75 to 250 by FY 2012. A multi brand- multi channel strategy will lead the expansion drive. The strong brand strength of the product will aid in healthy margins. This is further supported by the country’s increasing household spending patterns.
"As the largest player in the Sri Lankan healthcare sector, we believe the hospital sector will propel growth in the medium run for the Softlogic group. The laboratory services sector and the diagnostics will be a key revenue driver for the sector. Currently the group has 600 hospital beds under its purview and conducts 12,000 tests a day. With the country’s ageing population and the potential arising out of ‘healthcare tourism’ we believe the Healthcare sector’s PAT will rise with a four- year forward CAGR (Compounded Annual Growth rate) of 28.4 percent.
"We expect the Softlogic group 4-year forward revenue CAGR to be 78.8 percent while the Profit Attributable for Shareholders to grow by a steeper 181 percent. The counter trades at an attractive 21.7x PER (Trailing Twelve Month) and a 13.1x forward PER on FY 2012 earnings. We recommend subscribe," BMS said.
source - www.island.lk
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