Interim Financial Statements 31-03-2013 - RICH,KGAL,NAMU & MASK

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Slstock

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http://www.cse.lk/cmt/upload_report_file/509_1369997171324.pdf

http://www.cse.lk/cmt/upload_report_file/725_1369993677264.pdf

http://www.cse.lk/cmt/upload_report_file/711_1369994105425.pdf

http://www.cse.lk/cmt/upload_report_file/723_1369993859026.pdf

suja

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Have the got a working capital issue based on their Balance sheet they have. Please advice

Arena

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Yes RICH is heavily need the support from subsidiaries. Dividends

Gaja

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Arena wrote:Yes RICH is heavily need the support from subsidiaries. Dividends

Is the subsidiaries is in the position to declare heavy dividends?

Arena

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Yes Gaja y not........... If i am not mistaken any where.........

Namu is having 2.3b Short term investments 25 m shares it is around Rs. 45 per share.
REXP is having 92m ( Company also small ) Rs. 9per share

MASK having 300m Short term investments Around Rs5 per share

KGAL also having 2.3b Short term investments. Rs 45 per share

Have they really gone mad. They have enough cash to pay all these short term liabilities in the group. It is just matter of Paying a dividend or transferring the ownership of an entity for cash..

I think they are planing a big move with all these short term investments. May be a huge acquisition like what KOTA did.

They just shows 11b as the value of their PPE but i think they have not revalued those properties located at Maharagama, Town Hall an all...........So they are really well balanced..........?

salt

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Yes, Arena
They have not revalued properties as it seems
Their performance is not bad given the tough quarter for retail segment
Otherwise, profits maintained in a sense of capital gains from sale of assets

Arena

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What is happening with MASK...........

A dividend or the plantation rally starting with MASK.............
Right issue was at 12
No dividend paid yet ..........

Any idea ?

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I mentioned several times in the forum.

These tea companies, might have a lot of expenses in June quarter. So it might be best for them to reserve some money.
Giving a big dividend maybe not be wise.

Arena

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SLstock

Please remind me What are the main reasons for the cost escalation.
Wages 18% ?

But at least these companies should trade at OE of 5..at least.
And still tea prices average above Rs. 420

Slstock

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I am not saying they don;t deserve better valuation than now.

BUt there will be higher gratuity and wage hike issues for some Tea only companies.

Arena wrote:SLstock

Please remind me What are the main reasons for the cost escalation.
Wages 18% ?

But at least these companies should trade at OE of 5..at least.
And still tea prices average above Rs. 420

salt

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Wage hike will impact, but it will not severe as speculated
Plantations have been coping with wages for decades
Nothing to worry, if there is value buy, just buy it

Arena

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There are better plantations than MASK. ( But i have MASK at 12.80)

For me MPRH is the Best undervalue plantation.......I have it averaged below 30....

Lets wait and see..................

innam

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salt wrote:Wage hike will impact, but it will not severe as speculated
Plantations have been coping with wages for decades
Nothing to worry, if there is value buy, just buy it

Fair enough point but even last time we had plantation experts saying that wage hike not be an issue. And while you are right that the hit will not be as severe as last time a loss is a loss and the retailers holding these shares are likely to run for the exits after June results (just as they are rushing to buy after March results)
The following data range should show anyone interested the upcoming hole for the plantation companies

-2=2.12, -1=1.15, +1= -7.56, +2= -11.78

-2 and -1 are the two quarters immediately prior to the 2011 wage hike +1 and +2 are the two quarters post (in MASKs case nearly 3 years worth of profits got wiped out in 2 quarters)
The only difference from 2011 is that the plantation shares are at a lower trading range but the profits will take a massive hit.

Gaja

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Innam

I thought to took this as example,

For Agalawatte Plantations Plc reported 138 Million as the Profit from the Continued operations!

This is what Chairman says

The RPCs have just signed a new wage agreement, which has granted an
increase of 20% on the daily wage from April 2013 in the expectation of
increased productivity and efficiency. With wages contributing to more than
60% of cost of production, this increase will have a significant effect on
profitability, and the annual impact of the increase on your company will be
Rs. 200Mn, without considering the related gratuity adjustments. As stated in my previous reviews, with Sri Lanka’s cost of production already being high, and the emergence of low cost producers like Vietnam, India and Kenya, it is imperative that we strive towards a productivity linked wage so that our plantation industry can be globally competitive and thereby viable and sustainable in the long term.

Also if am not mistaken i watch a video where RICH Chairman told once the wage increase take place it will be red for MASK Immediately.

I might be wrong this time, i have to wait and see

Arena

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@Innam,
Your point is noted,

What about the Tea prices in the auction.........

Now they are at the highest ever in last 3 years.
For an example Jan 2013 Avg. at 423.8 while Jan 2012 is 348
Feb 2013 422 and Feb 2012 is just 349

Like wise i have the entire analysis done for last 3 years ( Weekly )
If these prices are not reduces any cost escalation can be absorbed for sure.

I just need your advise on this assumption. ( Chinwi your idea also very important )

innam

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Arena wrote:

Like wise i have the entire analysis done for last 3 years ( Weekly )
If these prices are not reduces any cost escalation can be absorbed for sure.

I just need your advise on this assumption. ( Chinwi your idea also very important )

Are these magical tea prices translating into the EPS? Remember it's not just wages that are increasing.

If you take Gaja's example AGAL has made a profit of 1.5 million in the March quarter. This is a quarter where you say tea prices are sky high.
According to Gaja's post the management expects additional costs from wages to be 200 million+ and the gratuity provision can be another 100 to 200 million+ (Balance sheet provision figure is 500 million currently).
So how will a company like AGAL absorb nearly 400 million in costs (actual+provisions) when they are only delivering 1.5 million in profits (that too in a quarter with high tea prices)?

Arena

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I agree with your costing analysis.
I am talking about the revenue.

If you take MPRH they are keep on increasing The stock they have for last 2 quarters. Now it is around 600m if i am not mistaken. I dont know whether they want hide the revenue or to keep the higher prices by limiting the supply.

When it is come to AGAL I realy didnt have a look but for sure they have another issue where tea production should be very less compare to the same q in 2012. There is no reason to have a revenue reduction over two quarters.

If you take MAL even i personally know they want to hide the profits since the owner is controlling.

And i am not saying prices are high these figurs are taken from the Forbs tea portal weekly report. At any given time these prices can come down. And also i dont expect any further hike in the profits of these tea companies i just say profits will be sustain or slightly effected due to wage and electricity hike. But i really like to know the Chinwi"s idea on this since his analysis are really deep.

Nigel.Machado

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Some tea based plantations rallied today i guess beacause of the presidents request to make ceylon tea readily accessible for the chineese consumers during discussions in china. rather keeping it as a premium product. Some clues about the discussions were given on Sunday times main article.

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Sorry, the article was not on the times instead on the sunday leader under the heading "sri lanka & china sighns multiple deals"

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China is the wold biggest mkt but They consumes green tea than black. Any way 1% of the mkt will be good enough...........

Chinwi

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There are 20 listed plantation companies . It is very difficult to do a study, gathering all data.

I tried to do some study related to wage effect few months ago on these 20 companies . It was a very time consuminng and difficult work. I had to do it personally , gave up .
Somehow, I found some companies face this wage problem better than others and recovered fast.

I think Watawala is one of them . I cannot remember the name but another company performed even better without going red after wage increase. If someone gather and analyze quartely results we may detect them. Last time, mostly oil palm growers cope better but this time we have to consider Tea.

I will let you know the findings if I get time or someone to do it. At the moment I am operating along without any assitant on stock business and engaged in other matters . My plan to recruit some sharp youngsters to train on this was delayed due to prevailed situation in the markets. Not the salaries but due to other overheads .

Extract from WATA 2011 First quarter:

Despite the recent estate wage hike, which increased worker remuneration by 39.6%, your Company was able to report a modest profit. This commendable . cheers

Result was largely due to your companyís balanced portfolio of product range covering Tea, Palm Oil and Rubber together with its Retail and Export business segments.

Second Qtr:

The profitability of the Plantation Industry was adversely effected by a 27% wage increase which came to effect on the 1st of April 2011. Quarter ended with a loss of Rs. 41 Mn for the Group. ! Evil or Very Mad

Ayyo !

Third Qtr:
The Group continued to improve its performance over the nine months where it recorded a profit of Rs. 145 Mn. after tax. Company showed a profit of Rs. 28 Mn at the end of nine months, thereby erasing a loss of Rs. 37 Mn. reported at the end of the second quarter. The companies third quarter reported a profit of Rs. 65.7 Mn. The main improvements were recorded in the sectors of Oil Palm and in Retail Marketing. bounce

The average Cost of Production showed an increase of Rs. 34.22 per Kg. -Tea- due to the high wage cost and the enhanced Gratuity provision.

As per above rough data cost of production may increase say 40.00 per kg this time. (assumed)

We have to see what is the increase of the selling price per kg to have an idea about the effects on final results in next seasons.

From 2011 to 2013 what is the increse of the Tea price per Kg ? < 40 or >40 ? .
Is this a realistic way to project the outcome ?

Arena

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Thank you Chinwi..............

If the Avg. Cost increment is around Rs.40 per Kg it is considerable.

Avg. tea price change from last year to this year is around Rs. +75. I pasted these data earlier.

Your 40 is for the entire increment from 2011-2013 or just the proposed wage hike for this year?

Chinwi i will send you the tea 3 year data sheet did but i hv know idea how to attach it to the forum.

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Interim Financial Statements 31-03-2013 - RICH,KGAL,NAMU & MASK

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