PEOPLE’S LEASING COMPANY [PLC: LKR10.6]
Excerpts of the attached:
Earnings Talk :
People’s Leasing Company’s net profit suffered a dip of 58% YoY to LKR710 mn (including the one – off reversal of LKR1.5 bn during 1QFY12). The earnings on a recurrent basis remained largely flat YoY with a slight 4% growth. The slowdown in lease & hire purchase disbursements (0.2% dip QoQ whilst growing by 28% YoY) coupled with sharp rise in funding expenditure with the rising interest rates justified the setback in earnings growth. Further a 22% QoQ growth in operating expenses amidst higher provision charges also reflected on the earnings.
Analyst Talk :
With the sharp rise in interest rates we bring down our normalised net profit forecast for PLC by 5.3% to LKR3.6 bn in FY13E (up 4.9% YoY). With the anticipated recovery in the economy towards 3Q-4QFY13E, we expect PLC disbursements to improve from its current slow pace. Amidst a FY14E lending portfolio rise of c.26%, we forecast net earnings to touch LKR4.6 bn in FY14E (up 25.9% YoY).
At LKR10.6, PLC currently trades at highly attractive valuations of PER 4.6X FY13E recurrent net earnings and PER 3.6X FY14E net earnings. The counter currently trades at a PBV of 0.7X FY13E book value. We believe PLC holds strong upside potential in the medium to long term given its highly discounted valuations whilst being among the high dividend play counters in the banking & finance sector with a DY of 7.6% FY13E.