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TJL recorded a 11.6% YoY revenue growth in 3QFY14/15 with revenue crossing the LKR 3.7 Bn mark. This was due to the growth in demand from TJL’s main customers (Victoria Secret, Marks & Spencer, Intimissimi and Lidl). The higher volumes were successfully met by operating at full capacity after the 10-12% capacity expansion that was carried out last year. TJL’s long standing relationship with its main clients, guarantees a strong order book in the medium term. Hence, we forecast a three year revenue CAGR of 6.8%.
Growth in value added products enhance margins
An increase in the volumes of value added products positively impacted TJL’s margins. Margins improved to 12.8% in 3QFY14/15 from 10.6% in the corresponding quarter of FY13/14. Additionally, the higher volumes led to cost savings from economies of scale positively impacting margins. Furthermore, despite the 20.5% drop in cotton prices YoY, TJL managed to maintain its selling prices during the quarter. However, this could be due to a possible 3-4 month time lag between cotton and yarn prices which may impact TJL’s selling prices in 4QFY14/15. In anticipation of this pricing risk, the management indicated that TJL is looking at negating the impact by proactively working towards boosting order volumes. Hence, we maintain the three year net profit CAGR of 10.1%.
Reiterates Buy
Since our last update in November 2014, the counter has gained 9.6% in comparison to the 5.0% decline in the ASPI. TJL continues to maintain its sustainable dividend policy, attractive balance sheet position and strong growth potential generating an intrinsic value of LKR 26.50. The target price creates a potential upside of 16.6% to the current price. Hence, we recommend a BUY.
Cash rich, debt free balance sheet
TJL managed to maintain its near debt free balance sheet with a net cash position of LKR 1.65 Bn. However, higher requirement for working capital from the capital expansion combined with the decline in interest rates on dollar deposits led to the net cash balance declining by 29.0% YoY as at December 2014.
Extended testing phase for multi fuel boiler plant
The anticipated cost savings through the multi fuel boiler plant was not materialised due to fine tuning work being undertaken to achieve the expected efficiencies during the testing phase in accordance to the management. We contemplate that the savings will materialise from FY15/16. Nevertheless, TJL benefited by the cost savings on electricity after the decline in electricity tariffs of 25.0% that was initiated in November last year.
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Thanks & Best Regards.
NDB Securities (Pvt) Ltd.
5th Floor, NDB Building,
40, Nawam Mawatha,
Colombo 02
Sri Lanka.
Email: research@ndbs.lk
Web: www.ndbs.lk
Tele: +9411 2131000
Fax: +9411 2314181
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NDB Securities (Pvt) Ltd,5th Floor, NDB Building, No 40, Nawam Mawatha, Colombo 02, Sri Lanka, Email: mail@ndbs.lk , Tel:+94112131000
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TJL Earnings Update 05.02.15.pdf
Page 1 of 5
N D B Securities (Pvt) Ltd,
5
th Floor,
# 40, NDB Building,
Nawam Mawatha,
Colombo 02.
Tel: +94 11 2131000
Fax: +9411 2314180
+9411 2314181
Research Team – Sidath Kalyanaratne, Vaishalie Shakespeare, Raguram Raamakrishnan, Upul Atapattu, Dhinali Peiris, Tharindra Gooneratne
Manufacturing Sector
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Volume Price Adjusted ASPI
LKR Volume, Mn
FY11/12(A) FY12/13(A) FY13/14(A) FY14/15(E) FY15/16(E) FY16/17(E)
Turnover (USD) 109,393,204 84,443,330 97,867,362 106,066,588 108,718,253 118,720,332
Net Profit (USD) 5,614,423 7,833,657 8,894,969 10,417,661 10,868,199 11,865,368
Gross Profit Margin 10.87% 11.59% 11.45% 12.20% 12.76% 13.09%
EPS (LKR) 0.96 1.55 1.76 2.08 2.24 2.52
Forward P/E (X)* 7.40 6.39 8.98 9.89 9.20 8.18
DPS (LKR) 0.48 1.24 1.30 1.35 1.46 2.01
Dividend Yield 6.76% 12.53% 8.23% 6.57% 7.06% 9.78%
BV (LKR) 8.35 8.78 9.73 11.12 12.29 13.19
PBV (X) 0.85 1.13 1.62 1.85 1.68 1.56
*Forward P/E for the forecast period has been calculated using the current share price. P/E for FY11/12 to FY13/14 has been
calculated using year end share price.
Share Data
Market Price as at 02.01.15 LKR 22.70
52 Week Range LKR 15.10 - LKR 23.60
Shares in Issue 660,752,465
Average Daily Volume (52 Weeks) 752,773
Estimated Free Float 30.54%
Main Shareholders As at 31.12.2014 No of Shares %
Pacific Textured Jersey Holdings Ltd 262,001,464 39.65%
Brandix Lanka Ltd 197,000,976 29.81%
Y. S. H. I Silva 19,057,500 2.88%
Melstacorp Ltd 12,622,428 1.91%
Deutsche Bank Ag Singapore-DSS A/C Navis Yield Fund 11,132,219 1.68%
Price Performance
Textured Jersey Lanka PLC (TJL)
Earnings update
Main clients boost volumes – TJL recorded a 11.6% YoY
revenue growth in 3QFY14/15 with revenue crossing the
LKR 3.7 Bn mark. This was due to the growth in demand
from TJL’s main customers (Victoria Secret, Marks &
Spencer, Intimissimi and Lidl). The higher volumes were
successfully met by operating at full capacity after the 10-
12% capacity expansion that was carried out last year. TJL’s
long standing relationship with its main clients, guarantees
a strong order book in the medium term. Hence, we
forecast a three year revenue CAGR of 6.8%.
Growth in value added products enhance margins – An
increase in the volumes of value added products positively
impacted TJL’s margins. Margins improved to 12.8% in
3QFY14/15 from 10.6% in the corresponding quarter of
FY13/14. Additionally, the higher volumes led to cost
savings from economies of scale positively impacting
margins. Furthermore, despite the 20.5% drop in cotton
prices YoY, TJL managed to maintain its selling prices during
the quarter. However, this could be due to a possible 3-4
month time lag between cotton and yarn prices which may
impact TJL’s selling prices in 4QFY14/15. In anticipation of
this pricing risk, the management indicated that TJL is
looking at negating the impact by proactively working
towards boosting order volumes. Hence, we maintain the
three year net profit CAGR of 10.1%.
Reiterates Buy – Since our last update in November 2014,
the counter has gained 9.6% in comparison to the 5.0%
decline in the ASPI. TJL continues to maintain its sustainable
dividend policy, attractive balance sheet position and strong
growth potential generating an intrinsic value of LKR 26.50.
The target price creates a potential upside of 16.6% to the
current price. Hence, we recommend a BUY.
Target Price – LKR 26.50
Recommendation – BUY
Analysts – Vaishalie Shakespeare
Date – 05.02.2015
Page 1 of 5
Page 2 of 5
NDB Securities (Pvt) Ltd – Textured Jersey Lanka PLC – 5th February 2015 2
Cash rich, debt free balance sheet- TJL managed to maintain its near debt
free balance sheet with a net cash position of LKR 1.65 Bn. However, higher
requirement for working capital from the capital expansion combined with
the decline in interest rates on dollar deposits led to the net cash balance
declining by 29.0% YoY as at December 2014.
Extended testing phase for multi fuel boiler plant – The anticipated cost
savings through the multi fuel boiler plant was not materialised due to fine
tuning work being undertaken to achieve the expected efficiencies during
the testing phase in accordance to the management. We contemplate that
the savings will materialise from FY15/16. Nevertheless, TJL benefited by
the cost savings on electricity after the decline in electricity tariffs of 25.0%
that was initiated in November last year.
Page 2 of 5
Page 3 of 5
NDB Securities (Pvt) Ltd – Textured Jersey Lanka PLC – 5th February 2015 3
Income Statement
Figures in USD FY11/12(A) FY12/13(A) FY13/14(A) FY14/15(E) FY15/16(E) FY16/17(E)
Sales 109,393,204 84,443,330 97,867,362 106,066,588 108,718,253 118,720,332
Cost of Sales (97,504,078) (74,653,038) (86,665,853) (93,123,623) (94,840,683) (103,179,505)
Gross Profit 11,889,126 9,790,292 11,201,509 12,942,965 13,877,570 15,540,827
Selling and Administrative Expenses (4,486,628) (2,649,605) (3,220,804) (3,529,810) (3,828,697) (4,229,397)
Operating Profit 7,402,498 7,365,043 8,106,738 10,322,969 10,572,582 11,449,150
Net Finance Cost (1,492,696) 456,168 695,687 578,099 594,854 737,968
Profit/(Loss) Before Tax 5,909,802 7,821,211 9,176,177 10,901,068 11,167,435 12,187,118
Income Tax (295,379) 12,446 (281,208) (483,407) (299,236) (321,750)
Profit/(Loss) for the Period 5,614,423 7,833,657 8,894,969 10,417,661 10,868,199 11,865,368
Balance Sheet
Figures in USD FY11/12(A) FY12/13(A) FY13/14(A) FY14/15(E) FY15/16(E) FY16/17(E)
Non-Current Assets
Property, Plant and Equipment 20,207,598 18,057,781 16,684,471 17,856,543 18,743,404 19,265,443
Capital Work-In-Progress 129,744 534,624 5,971,059 7,446,059 4,896,059 1,996,059
Intangible Assets 350,875 324,147 434,263 390,697 368,023 386,017
Receivables and Prepayments 714,955 736,905 706,827 706,827 706,827 706,827
21,403,172 19,653,457 23,796,620 26,400,126 24,714,313 22,354,346
Current Assets
Inventories 15,191,544 14,164,212 14,735,967 13,890,079 14,146,191 15,389,988
Trade and Other Receivables 11,467,043 10,910,017 10,001,146 10,839,032 11,110,007 12,132,128
Cash and Cash Equivalents 9,970,860 17,334,301 16,247,126 17,472,329 22,993,638 27,037,013
36,629,447 42,408,530 40,984,239 42,201,439 48,249,836 54,559,129
Total Assets 58,032,619 62,061,987 64,780,859 68,601,567 72,964,150 76,913,477
Equity and Liabilities
Capital and Reserves
Stated Capital 28,203,841 28,624,940 28,624,940 28,624,940 28,624,940 28,624,940
Retained Earnings 14,396,354 16,745,669 20,006,745 23,652,926 27,456,796 29,829,869
Total Equity 42,600,195 45,370,609 48,781,479 52,427,660 56,231,530 58,604,603
Non-Current Liabilities
Deferred Tax Liabilities 567,203 533,994 734,513 1,217,920 1,517,157 1,838,907
Retirement Benefit Obligations 564,723 435,175 753,358 753,358 753,358 753,358
1,131,926 969,169 1,487,871 1,971,278 2,270,515 2,592,265
Current Liabilities
Trade and Other Payables 9,178,118 12,882,560 14,114,067 13,800,615 14,055,077 15,290,863
Borrowings 5,122,380 2,839,649 397,443 402,014 407,029 425,745
14,300,498 15,722,209 14,511,510 14,202,629 14,462,106 15,716,609
Total Equity and Liabilities 58,032,619 62,061,987 64,780,860 68,601,567 72,964,150 76,913,477
Financials
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Displaying TJL Earnings Update 05.02.15.pdf.
Last edited by D.G.Dayaratne on Sat Feb 07, 2015 4:24 pm; edited 1 time in total (Reason for editing : correction)