All investors should be THANKFUL to the Research Team of First Capital[FC], in coming out and bold enough at this juncture to publish a VALUATION for EXPO which was HIGHLY OVERDUE by a Stock brokering firm. [link - https://www.firstcapital.lk/wp-content/uploads/2020/11/EXPO-VALUATION-NOTE-25-11-20.pdf]
The VALUATION of Rs 23/- for EXPO is HIGHLY DISCOUNTED and prepared purely off-setting the one-off gains realized from PPE transportation by EXPO during the C19 pandemic. However, FC could have CONSIDERED about the Geographical Expansions made by EXPO during 2020 and INCREASE OF PRODUCT BASKET, which are KNOW as a KEY GROWTH STRATEGIES TO increase PROFITS. Additionally, EXPO has penetrated new KEY LARGE CLIENTS catering massively to its earnings.
The impact of GENERAL BUSINESS GROWTH of EXPO in a post C19 world?
The RETAIL and TECH categories from China mostly which are some of the new business channels for EXPO on top of traditional apparel forwarding. EXPO is the largest forwarder for some of the LARGEST TECH brands and is linked to the pipe line of supplies of largest online retail business. The well know giants have tied up partnerships considering the low/competitive pricing of EXPO and agile "JIT" delivery/service. Hence, NEWLY SECURED KEY CLIENTS, NEW MARKET EXPANSION and HANDLING of NEW PRODUCT RANGE on TOP OF APPAREL are KEY PROFIT CONTRIBUTORS of EXPO in YEARS to come.
FC, expects a NET PROFIT of Rs 3.0Bn for the FY22 [This figure could have been forecasted much higher, if FC considered the KEY GROWTH STRATEGIES already implemented by EXPO and WORLD's biggest LOGISTICS OPPORTUNITY which is the C19 VACCINE TRANSPORTATION [if EXPO managed to get the business]. Therefore, these items likely add more VALUE to the TOP/BOTTOM lines of EXPO during FY22.
In CONTRAST, the market value for EXPO remain @ Rs 43/- and was justified by DISCOUNTING the 2Q20 EPS BY 75% and considered only 25% of the EPS equally for 3Q20 [EPS Rs 0.58] and 4Q [EPS Rs 0.58] which was felt as highly conservative model, leaving a high level of provision for PROFIT EROSION GENERATED BY ONE-OFF ITEMS as a result of C19.
Not a BUY or SELL Recommendation; Just sharing my views. Please read more about the company in depth and take your positions taking calculated risk as EXPO reached many heights from very low levels.