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Monday, June 20, 2011

Vallibel One’s FY12 earnings forecast upgraded after Delmege buy

Acuity Stockbrokers has upgraded earnings forecast for Vallibel One Ltd., (VOL) to a post-tax profit of Rs. 4.1 billion for financial year 2011/12 following last week’s major acquisition of 100% ownership of Delmege Forsyth Group.

“We estimate VOL to record a consolidated post tax profit of Rs. 4.1 b for FY 2011/12E (including Delmege – nine months of FY2011/12E) with the Profit attributable to Equity holders of VOL being Rs. 2.3 b,” Acuity said in an update to its original report on VOL’s IPO.

Previously Acuity had forecast an after tax profit of Rs. 3.8 billion for FY2012 for VOL.

Acuity also said the PE based on the IPO price of LKR 25.00 remains attractive at 11.85x and the share is offered at a 69% discount to its relative valuation on a PE multiple of 20x.

VOL’s Rs. 533 million IPO’s official opening is on Tuesday. Business leader Dhammika Perera’s first holding company of select stakes as well as leisure and mini-hydro-interest VOL is offering 21.3 million shares at Rs. 25 each.

Acuity, which is the financial advisor and managers to the IPO, in its update said Vallibel One acquired directly a 51% stake in Lewis Brown and Company, the holding entity of Delmege Forsyth and Company Ltd. and its Group of Companies, on 16 June 2011, while Royal Ceramics Lanka PLC, a subsidiary of VOL, purchased a 19% stake, giving VOL an effective control of 60.7% of the Delmege Forsyth Group.

The balance stake of 30% will be taken up by K.D.D Perera, W.D.N.H Perera (Chairman/Managing Director and Executive Deputy Chairman of VOL), A.M. Weerasinghe and T.G. Thoradeniya, Chairman and Executive Director respectively of Royal Ceramics.

Total value of the above acquisition is Rs. 3.1 b of which Rs. 1.581 b amounting to 51% will be financed through VOL. The management has announced that internal funds and borrowings will be the main sources of funds: proceeds of the IPO will not be used to finance this acquisition.

The Delmege group is a widely diversified group of companies, with offices and warehouses on two acres of prime property in the heart of the city of Colombo. The conglomerate has its operations in sectors such as transportation services, insurance broking, trading (import/export), medical and laboratory equipment, pharmaceuticals, construction, interior décor and distribution.

The acquisition of the Delmege Forsyth Group of companies will give VOL access to a wide range of sectors and synergies in particular with RCL and the interior décor operations once the companies are integrated.

Acuity Stockbrokers expects the Group to contribute significantly to the growth and expansion strategies of VOL, thereby enhancing the overall earnings potential and asset value of VOL in the medium to long term.

source - www.ft.lk