Cargills (Ceylon) CARG – Rs.193.0 Disclaimer: CT CLSA Securities (Pvt) Ltd is an associate of C T Holdings PLC, the parent of CARG Chayanika Ranasinghe Key Highlights Email :
[email protected] Phone : +94 77 2379731 3Q18 Results Update . 3Q18 recurring net profit of Rs.636mn (largely unchanged YoY), broadly in line with our expectations. Earnings are adjusted for CARG‟s proportion of the Rs.481mn capital gain received by associate Cargills Bank from disposal of subsidiary Colombo Trust Finance (CALF) . CARG group net profit forecasts broadly maintained at Rs.2,535mn for FY18E (+20% YoY) and Rs.3,055mn for FY19E (+21% YoY), particularly driven by the Retail and Restaurants sectors. Retail sector to marginally overtake FMCG earnings contribution in FY19E given the significant expansion plans in the pipeline - targeting to double its retail network in the medium term . On 01 Feb 2018, CARG announced a capitalisation of reserves amounting to Rs.6.4bn (out of reserves of Rs.9.4bn as at 30 Sep 2017), via the issuance of 32mn shares in the proportion of 01:07 at a consideration of Rs.200.0 per share; XC : 20 Mar 2018 . The CARG share has outperformed the market rising +13% both during the past 3 months and 12 months (vs. the ASI‟s gains of +1% and +2% respectively during the same period) ASI . CARG is trading at PER multiples of 19.5X FY18E and 16.2X FY19E whilst offering ROEs of 17- CARG 130 1,200 19% (up from low single digits in FY15) Share Volume ('000) - RHS 10 April 2018 1,000 Our estimated Sum-of-the-parts (SOTP) valuation suggests that CARG is currently trading at a 120 .