CTSmith recommend to subscribe for softlogic IPO

This is how they concluded the report

Attractive Valuations
Net profit is projected to rise significantly to Rs.1,770mn (up 142% YoY) in FY12E and Rs.2,589mn (up 46% YoY) in FY13E, due to higher returns from retail and consolidation of the healthcare sector. The Group consequently trades at attractive valuations of 12.0X FY12E and 8.7X FY13E, at a discount to sector peers whilst offering superior ROEs of 32% FY12E and 27% FY13E.

We thus recommend, SUBSCRIBE.

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Full text of their mail is given below

From: C T Smith Stockbrokers - Research
To: C T Smith Stockbrokers - Research
Sent: Thursday, June 02, 2011 12:35 AM
Subject: CTS - Softlogic Holdings IPO Report - 01 June 2011


Company Description and IPO Details

Softlogic Holdings, founded in 1991 as a software development and IT solutions company, has since expanded into lucrative sectors of the local economy, such as telecommunication services, retail (consumer electronics, branded apparel and furniture), automobiles, healthcare, financial services and leisure.

Softlogic will make an offer for subscription to the public for 139.0mn ordinary voting shares (17.8% of the Group post- IPO) at a price of Rs.29.00 per share, to be listed on the Diri Savi Board of the Colombo Stock Exchange (CSE) under the "Diversified Holdings" sector. The IPO will raise approximately Rs.4, 031mn, primarily to retire debt taken on recently to increase its stake in ASIR, acquire Softlogic Capital and Ceysand Resorts and fund working capital, whilst Rs.27mn will be utilized to part fund the cost of the IPO.

Investment Thesis:

Exposure to Key Sectors of the Economy[/b]
Retail, Tourism, Finance, ICT are all thrust sectors that will benefit from the peace dividend. Management has a proven track record in adding value to acquisitions it has made, particularly in the healthcare and retail businesses.

Reaping the Benefits of Timely Investments
The group has expanded aggressively since 2006 into key sectors, via leveraged acquisitions when asset prices were low. Softlogic now stands to reap benefits of these acquisitions given a conducive operating environment; rising per capita incomes, low interest rates and a vibrant capital market to raise equity and re-align its balance sheet.

Following a Multi-Brand, Multi-Channel Strategy
Softlogic has a diverse portfolio of global brands catering to a range of consumer segments, and is in a prime position to take advantage of increased discretionary income. Pursuing a multi-brand strategy will reduce single-brand dependency, whilst enabling a “Softlogic” store franchise expansion method.

Several Near-Term Catalysts
Near-term catalysts include the likelihood of expanding its brand portfolio, signing up with a reputed international operator for its resort property and plans to gain scale in its financial services business.

Attractive Valuations
Net profit is projected to rise significantly to Rs.1,770mn (up 142% YoY) in FY12E and Rs.2,589mn (up 46% YoY) in FY13E, due to higher returns from retail and consolidation of the healthcare sector. The Group consequently trades at attractive valuations of 12.0X FY12E and 8.7X FY13E, at a discount to sector peers whilst offering superior ROEs of 32% FY12E and 27% FY13E.

We thus recommend, SUBSCRIBE.

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I have serious doubt about the professional conduct of the stock brokers. In this analysis report they predict the revenue to go up from 9,274.7mn in 2011 to 20,473.4mn in 2012.

Open for discussion.

There is no any question in investing in softlogic...it is acompany with bright future....Problem is this IPO is overpriced and also that PP...Share price may go down and we may be able to buy it at a lower cost. At the same If this IPO can be undersubscribed(may be a day dream) other companies will also learn a lesson(not to do this type of junky things)

[quote="rijayasooriya"]There is no any question in investing in softlogic...it is acompany with bright future....Problem is this IPO is overpriced and also that PP...Share price may go down and we may be able to buy it at a lower cost. At the same If this IPO can be undersubscribed(may be a day dream) other companies will also learn a lesson(not to do this type of junky things) [/quo

Same as expolanka

retailers should avoid this over priced and unfair IPO.

Easy for brokers to promote. They win any way on first day.

I have read the report. CT Smith has a good reputation. The increase in revenue looks very achievable when it consolidates the Asiri Holdings revenue next year.The retail and healthcare sectors looks very good. If the PER is 12x thats very good. I will certainly invest.

Mano wrote:I have read the report. CT Smith has a good reputation. The increase in revenue looks very achievable when it consolidates the Asiri Holdings revenue next year.The retail and healthcare sectors looks very good. If the PER is 12x thats very good. I will certainly invest.

This is not mono but mano - a newcomer

tinyman wrote:

Mano wrote:I have read the report. CT Smith has a good reputation. The increase in revenue looks very achievable when it consolidates the Asiri Holdings revenue next year.The retail and healthcare sectors looks very good. If the PER is 12x thats very good. I will certainly invest.

This is not mono but mano - a newcomer

May be a invester who has bought shares in that pp....If not so I am very sory..

CT Smith are part of same group as CT Capital, the co-managers to the Softlogic IPO.So what can you expect other than a BUY recommendation? It was same with Expolanka too.CTSmith always promote the large issues and larger companies such as DIAL and JKH.

The forecast revenue increase for Softlogic is part believable, as Softlogic will consolidate Asiri Hospital group for first time this year after gaining 50% control lately, after previously counting it as an associate, with share of revenue not being consolidated.