What is ailing RICH?

Is it because of the over-all Market gloom prevailing at the moment or the company is not performing well?

Any comments please?

overall market gloom+ Rich is rather dependant on plantations for big chunck of profits right now.
However it is good to note that Rich's other sectors are also showing some improvement. Rich has a not so hidden benefit. Due to rubber based manufacturing, when even rubber prices are down it can offset and benefit a bit from plantation volatility. This quarter its plantations are not expected to report profit as last quarter due to rubber dip.Mask is also a big concern presently.

this is not a short term share . Their 15:1 split made it a bit too much liquid also. Btw, Rich's insurance business it supposed to kick off in the near future from what I read. ( to be confirmed)

I think RICH is also going down with the market trend. And plantations also caused to the down trend.But if you can hold it 2 or 3 years it can give us a good return.But prices can go down little more, if market comes down further more.As a fundamental lover, I am collecting RICH at even these prices.

slstock wrote:overall market gloom+ Rich is rather dependant on plantations for big chunck of profits right now.
However it is good to note that Rich's other sectors are also showing some improvement. Rich has a not so hidden benefit. Due to rubber based manufacturing, when even rubber prices are down it can offset and benefit a bit from plantation volatility. This quarter its plantations are not expected to report profit as last quarter due to rubber dip.Mask is also a big concern presently.

this is not a short term share . Their 15:1 split made it a bit too much liquid also. Btw, Rich's insurance business it supposed to kick off in the near future from what I read. ( to be confirmed)

I would like to add my views also to this explanation.

1. RICH hasn't come down comparatively to other diversified shares, it's down fall is less than the market.

2. Before the announcement of the split share was trading around 100-110. So the people who bought before the split are at a profit, even at current prices.

3. As slstock stock explained, their incomes from plantations are declining. Until September 30th rubber prices were good. But now rubber prices are down more than 40%. I think even the company didn't expect this much of fall in rubber prices. They were continued to buy KGAL, NAMU from the market until 1st week of October.

ie : http://www.cse.lk/cmt/uploadAnnounceFiles/111317898142_711.pdf

They may have thought to have a bigger share from rubber profitability. I think it's not going to work well now.

http://forum.srilankaequity.com/t14633-should-we-invest-in-rubber-plantations-now?highlight=rubber

4. But as slstock shown they have some exposure to rubber manufacturing. REXP and unlisted rubber and tyre manufacturing sectors were at lost in the past. But from march 2012 quarter these sectors will come into profitability.

5. Most attractive segment in RICH is retailing, which grows at a very fast rate. Even in 2011 most of their profits came on retailing and this will continue to grow.

6. As price of share has come down, RICH is now in an area where we can take short positions. See the high/low price for the current year. It's 9.20 and 8.60, with a 7% margin. In a small rally it will easily give a 15% return.

SO WITH RICH, NOW WE HAVE BOTH INVESTING AND TRADING OPPERTUNATIES.

Thanks all for the responses.
I am not in a hurry and share below 9 is very inviting.
No doubt MASk is a real concern but their Super Market chain is having a thriving business.
Isn't It?

Rich -good fundamental, but wanted 2 keep 3-4 years 2 get double

hariesha wrote:

slstock wrote:overall market gloom+ Rich is rather dependant on plantations for big chunck of profits right now.
However it is good to note that Rich's other sectors are also showing some improvement. Rich has a not so hidden benefit. Due to rubber based manufacturing, when even rubber prices are down it can offset and benefit a bit from plantation volatility. This quarter its plantations are not expected to report profit as last quarter due to rubber dip.Mask is also a big concern presently.

this is not a short term share . Their 15:1 split made it a bit too much liquid also. Btw, Rich's insurance business it supposed to kick off in the near future from what I read. ( to be confirmed)

I would like to add my views also to this explanation.

1. RICH hasn't come down comparatively to other diversified shares, it's down fall is less than the market.

2. Before the announcement of the split share was trading around 100-110. So the people who bought before the split are at a profit, even at current prices.

3. As slstock stock explained, their incomes from plantations are declining. Until September 30th rubber prices were good. But now rubber prices are down more than 40%. I think even the company didn't expect this much of fall in rubber prices. They were continued to buy KGAL, NAMU from the market until 1st week of October.

ie : http://www.cse.lk/cmt/uploadAnnounceFiles/111317898142_711.pdf

They may have thought to have a bigger share from rubber profitability. I think it's not going to work well now.

http://forum.srilankaequity.com/t14633-should-we-invest-in-rubber-plantations-now?highlight=rubber

4. But as slstock shown they have some exposure to rubber manufacturing. REXP and unlisted rubber and tyre manufacturing sectors were at lost in the past. But from march 2012 quarter these sectors will come into profitability.

5. Most attractive segment in RICH is retailing, which grows at a very fast rate. Even in 2011 most of their profits came on retailing and this will continue to grow.

6. As price of share has come down, RICH is now in an area where we can take short positions. See the high/low price for the current year. It's 9.20 and 8.60, with a 7% margin. In a small rally it will easily give a 15% return.

SO WITH RICH, NOW WE HAVE BOTH INVESTING AND TRADING OPPERTUNATIES.

Hariesha Thanks for the updated points.

For point 3.

Yes as you mentioned the rubber drop was drastic and possibly RICH did not expect that much. But I also think RICH buying some KGAL was for 2 other reasons. KGAL is special as it holds considerable shares of a group company which should get into business soon ;- ) Also maybe RICH was thinking to stabilize KGAL prices a bit then.

There retail supermarket chain is growing . I also saw a report that highlighted the potential to expand supermarket business especially in North/East.

What ever the recent short term trends and valuations , I too still think this is a solid company ( without having to loose sleep) if one holds for several years.

Supermarket business certainly is expanding rapidly.
However 2011 is not a good year to assess RICH as the plantation wage hike impacted its bottom line during the first quater. However RICH very prudently charged the wage arrears and increased gratuity provisioning totaling to 567Mn to its P&L in the first quater itself, although it resulted in a loss during that quater.
Also during the 2nd qtr a capital gain of 717Mn was made by the disposal of an associate company.
To guage RICH's performance during the first 02 qtrs we have to discount these two one off items and compare with 2010:


1ST QTR 2010 PROFIT = 343.0Mn
2ND QTR 2010 PROFIT = 534.0Mn

1ST QTR 2011 PROFIT = (91.0Mn)
2ND QTR 2011 PROFIT = 1,328Mn

But after you adjust for the extraordinary items:

1ST QTR 2011 PROFIT = (91.0Mn) + 567.0Mn = 476.0Mn
2ND QTR 2011 PROFIT = 1,328Mn - 717.0Mn = 661.0Mn

So it is obvious that during both quaters RICH has performed better than in 2010.

hariesha wrote:

slstock wrote:overall market gloom+ Rich is rather dependant on plantations for big chunck of profits right now.
However it is good to note that Rich's other sectors are also showing some improvement. Rich has a not so hidden benefit. Due to rubber based manufacturing, when even rubber prices are down it can offset and benefit a bit from plantation volatility. This quarter its plantations are not expected to report profit as last quarter due to rubber dip.Mask is also a big concern presently.

this is not a short term share . Their 15:1 split made it a bit too much liquid also. Btw, Rich's insurance business it supposed to kick off in the near future from what I read. ( to be confirmed)

I would like to add my views also to this explanation.

1. RICH hasn't come down comparatively to other diversified shares, it's down fall is less than the market.

2. Before the announcement of the split share was trading around 100-110. So the people who bought before the split are at a profit, even at current prices.

3. As slstock stock explained, their incomes from plantations are declining. Until September 30th rubber prices were good. But now rubber prices are down more than 40%. I think even the company didn't expect this much of fall in rubber prices. They were continued to buy KGAL, NAMU from the market until 1st week of October.

ie : http://www.cse.lk/cmt/uploadAnnounceFiles/111317898142_711.pdf

They may have thought to have a bigger share from rubber profitability. I think it's not going to work well now.

http://forum.srilankaequity.com/t14633-should-we-invest-in-rubber-plantations-now?highlight=rubber

4. But as slstock shown they have some exposure to rubber manufacturing. REXP and unlisted rubber and tyre manufacturing sectors were at lost in the past. But from march 2012 quarter these sectors will come into profitability.

5. Most attractive segment in RICH is retailing, which grows at a very fast rate. Even in 2011 most of their profits came on retailing and this will continue to grow.

6. As price of share has come down, RICH is now in an area where we can take short positions. See the high/low price for the current year. It's 9.20 and 8.60, with a 7% margin. In a small rally it will easily give a 15% return.

SO WITH RICH, NOW WE HAVE BOTH INVESTING AND TRADING OPPERTUNATIES.

Appreciate both of your views.
Thanks lot for the infos.

Thanks for the information

Thanks Slstock and hareisha for your views.. Even early has done a good deed in analysing financials

RICH's attempt to stabilize KGAL price has gone in vain.. so can it be another impairment on their accounts? but eventually it would decrease the liquidity of KGAL..
So I'm thingkin whether now RICH is trading at an attractive dicsount?

early wrote:Supermarket business certainly is expanding rapidly.
However 2011 is not a good year to assess RICH as the plantation wage hike impacted its bottom line during the first quater. However RICH very prudently charged the wage arrears and increased gratuity provisioning totaling to 567Mn to its P&L in the first quater itself, although it resulted in a loss during that quater.
Also during the 2nd qtr a capital gain of 717Mn was made by the disposal of an associate company.
To guage RICH's performance during the first 02 qtrs we have to discount these two one off items and compare with 2010:


1ST QTR 2010 PROFIT = 343.0Mn
2ND QTR 2010 PROFIT = 534.0Mn

1ST QTR 2011 PROFIT = (91.0Mn)
2ND QTR 2011 PROFIT = 1,328Mn

But after you adjust for the extraordinary items:

1ST QTR 2011 PROFIT = (91.0Mn) + 567.0Mn = 476.0Mn
2ND QTR 2011 PROFIT = 1,328Mn - 717.0Mn = 661.0Mn

So it is obvious that during both quaters RICH has performed better than in 2010.

early, you have analyzed it nicely.

Even though plantation sector of RICH has recorded a loss in first Q (that is due to payment of arrears in wages and adjustment made to gratuity provision as per increased wage rates) in the 2 nd Quater Planation sector has made a good operating profit. However we can’t expect a profit during the 3 rd Q as rubber price was further dropped.
I think most significant development in RICH group is rapidly increasing Revenue and profit in Retail sector. (hariesha also has stated this point). Compared to other major competitors, results in Retail sector of RICh are highly encouraging. As per financial statements published for the Sep 2011, we can compare figures relating to Retail business of three major private sector players as given below;

(figures in Rs. Mn.)
Keels
Revenue - 2010 =10,610
- 2011 = 8,890
Operating Profit - 2010 = 588
- 2011 = 349
Profit increase % - 68.4%
Average Monthly revenue - 2011 = 1,768
Average Monthly revenue
per outlet -2011 = 36.84
Cargills

Revenue - 2010 = 17,591
- 2011 = 23,148
Operating Profit - 2010 = 935
- 2011 = 1,082
Profit increase % - 15.7%
Average Monthly revenue - 2011 = 3,858
Average Monthly revenue
per outlet -2011 = 22.96

Arpico

Revenue - 2010 = 6,470
- 2011 = 5,004
Operating Profit - 2010 = 344
- 2011 = 820
Profit increase % - 138.3%
Average Monthly revenue - 2011 = 1,078.33
Average Monthly revenue
per outlet -2011 = 82.94

(Cargills profits figures above are after deducted overhead cost)

As per Operating profit, Arpico has become now No. 2 by surpassing Keels. RICH has achieved this higher growth only with 13 outlets compared to 48 of Keels and 168 of Cargills.Average monthly turnover of Arpico outlet is Rs. 82.94 mn compared to Rs.36.84 mn in keels and Rs. 22.96 mn in Cargills. These figures indicates higher consumer attraction to Arpico and the vast opportunity it has for further expansion.
Another important point is recent development in service sector. RICH recently re-entered in to security and finance business through it's subsidiaries, M/s RP Securities(pvt) Ltd and RP Financial Ltd. During the first 6 months of 2011/2012 financial year they have shown a tremendous improvement in service sector reporting a huge profit of Rs. 374 mn compared to Rs 15 mn loss for the same period of last financial year. Further, a considerable growth has been achieved in Rubber production sector as well(mainly tyre)recording a significant increase in both revenue and profit .

One of the most wonderful threads, I have seen in this forum. Lot of arguments and lot of information in different angles. Rich in information. I think this is the way a forum should act, really encouraging. Thanks everybody for the contribution.

Early Bird and Rajaraam,

Thanks for the very useful updated info.

Expecting this kind of constructive posts more.