LOLC HOLDINGS PLC (LOLC.N0000)

mono wrote:that 3.779 involves a capital gain from disposing SEYB shares.

I don't think it's the wisest decision to look at LOLC simply by looking at PE, i don't think thier operating EPS for year will exceed 6. but the thing with LOLC is that they have aggressively expanded over past 6-9 months and are under good management. There is a general impression among the corporate community here that LOLC will do well in the future and that's why it's attracting big investors.

Thanks Mono for pointing out an important fact that I have missed.

However your point is in-supportive of my argument. As it hinders operating profit reported.

After removing the gain of disposing SEYB (Rs 1.7 billion), Q2 EPS hangs around 1.5 - 1.6, making this year's adjusted profit around 6-7. Thus Q3 result is not drastic change in performance.

In principle I agree with you that leading PE is the important factor not tailing (reported).

Nevertheless, finance being the core-business of LOLC this is a bit stagnating situation, as I perceive. It is my thinking that market expected something more than this (it is some-other matter that what the market should have expected from LOLC).

By considering current market condition also, I still expect price of LOLC to go down.

Academic wrote:

mono wrote:that 3.779 involves a capital gain from disposing SEYB shares.

I don't think it's the wisest decision to look at LOLC simply by looking at PE, i don't think thier operating EPS for year will exceed 6. but the thing with LOLC is that they have aggressively expanded over past 6-9 months and are under good management. There is a general impression among the corporate community here that LOLC will do well in the future and that's why it's attracting big investors.

Thanks Mono for pointing out an important fact that I have missed.

However your point is in-supportive of my argument. As it hinders operating profit reported.

After removing the gain of disposing SEYB (Rs 1.7 billion), Q2 EPS hangs around 1.5 - 1.6, making this year's adjusted profit around 6-7. Thus Q3 result is not drastic change in performance.

In principle I agree with you that leading PE is the important factor not tailing (reported).

Nevertheless, finance being the core-business of LOLC this is a bit stagnating situation, as I perceive. It is my thinking that market expected something more than this (it is some-other matter that what the market should have expected from LOLC).

By considering current market condition also, I still expect price of LOLC to go down.

Further it was disappointing to read following line on 30.9.2010 (q2) report note.

"The adjustment to bring the investment [SEYB] to market value resulted in the group recognizing a gain of Rs.1.7Bn in the Consolidated financial statements."

Two implications are there
1. This (1.7 billion) is not a realized gain (not a dispose as Mono pointed out, anyway credit should go to Mono for bringing this out). It is a result of reclassification. No cash in flow.

2. Since SEYB was 114 end September and which had declined to 97.8 by end December, for q3 they may have reported unrealized loss on SEYB (reversing part of this unrealized gain).

Berryfund wrote:

mono wrote:hmm...

good results. so they should be able to make around 8 for the year.

I believe that current share price is fair. I would say that it is not undervalued.

Totally agree with Berryfund. This is not undervalue & good for medium/long term.

Price appreciated from Rs 400 to Rs 1400 within few months (before the 1:10 split) .

Most investors in Sri Lanka have extremely high expectations & they all looking for fast cash. unbelievable..!!!!
We all like profits but i have no words to explain the situation in sl market. SHOCKING...

LOLC results outstanding
http://www.dailynews.lk/2011/02/18/bus01.asp

Profits top Rs 7.1 billion in nine months:
LOLC has continued to show exceptional performance recording outstanding pre-tax profits of Rs 7.1 billion for the nine months to December. This is a 485 percent growth over last year, with the financial services sector, trading sector and the other sectors contributing exceptionally well. The financial services sector showed excellent performance with pre-tax profits of Rs 5.5 billion, a growth of 354 percent over last year.


Group Deputy Chairman
Ishara Nanayakkara

Managing Director and CEO Kapila Jayawardena
The rest of the group contributed Rs 1.6 billion to the bottom line. With a contribution of taxes of Rs 1.1 billion, the Group recorded post-tax profits of Rs 6 billion, a growth of 647 percent over last year.

LOLC Group Managing Director and CEO Kapila Jayawardena, said ‘Sri Lanka is on the threshold of economic prosperity with new opportunities beckoning from North and East of the country as well.

“LOLC has been able to break new ground in profit diversity with vigorous implementation of initiatives taken in developing its Core business, as well as embracing the quest for new opportunities. This performance, which reflect a quantum leap when compared to the previous year, was due to the implementation of the Group’s road map which enabled us to capture opportunities well ahead of time’, he said.

The increase in total revenue kept its momentum in line with the aggressive growth in the financial services sector and the trading sector. The revenue grew by 172 percent over last year to reach an all time high of Rs 26 billion for the nine months.

The revenue from the financial services sector saw a growth of 41 percent to reach Rs. 13 billion while the contribution from the rest of the sectors was Rs 12.4 billion. The borrowing costs continued to come down in line with the sliding interest rates with the Group raising funds at attractive rates.

LOLC’s ability to source long-term funding from foreign multilateral and bilateral agencies at attractive rates contributed well to the reduction in borrowing costs. The total borrowing costs reached Rs 4.9 billion by December reflecting the lower interest margins demanded by the Group.

LOLC Group’s core business, the lending operations and its strategic investments contributed well to the bottom line positioning the Group on a strong footing to reap steady growth in profitability in the medium to long term. The Group’s expansion strategies augurs well with the economic growth forecasted in the near future.

The balance sheet grew along with the business growth of the Group, with total assets crossing the Rs 100 billion mark reaching Rs 108 billion by December. This is almost a 100 percent growth over last year. The corresponding liabilities grew by 60 percent represented by the borrowings of the Group mainly coming from the financial services cluster and the holding company. The total assets of the financial services cluster reached Rs 68 billion, a growth of 20 percent over last year. The corresponding liability grew by 20 percent. The advances grew by 49 percent to reach Rs 49 billion; this is an indication of the strong portfolio growth as a result of the growth in executions. The newly set up branches in the North and the East contributed significantly to this growth.

UKboy wrote:

Berryfund wrote:

mono wrote:hmm...

good results. so they should be able to make around 8 for the year.

I believe that current share price is fair. I would say that it is not undervalued.

Totally agree with Berryfund. This is not undervalue & good for medium/long term.

Price appreciated from Rs 400 to Rs 1400 within few months (before the 1:10 split) .

Most investors in Sri Lanka have extremely high expectations & they all looking for fast cash. unbelievable..!!!!
We all like profits but i have no words to explain the situation in sl market. SHOCKING...

For an instance, lets take this is not undervalued.. Have u seen Mono's post? I bet u have.. Now u can understand why ppl interested in LOLC.. their business is growing.. main business being leasing could be easily benefited by the vehicles coming in to the market at a pace.. This shows us a more vibrant result for next 2 qtrs.. But in reality if Govt. put a stop to tax freedom, we'll see this declines after teh next 2qtrs.. But it doesn't mean the company is not doing their best to grow their business know? U cant expect a company to perform if the policies are adjust negatively for the industry to grow..

So we have to keep in mind this possibility is a fact for leasing/motor sector business after next 6 months.. we never know how govt. thinks..

Commodity Prices are going up..Inflation is going up.. it cannot be halted for so many months even if a govt. wants.. ultimately they'll have to give up.. now we hear single digit loan interest rates... I thought this would be a reality. .but its not.. how the banks gonna keep the profit margins up if they put down rates drastically? Yes, the Central Bank will brin down lending rates lower to these private banks but can these private banks come up more than a 0.5% reduction to the current interest limits?
Guess we'll have to sit and wait till April to whats gonna happen..

But a management like LOLC will have some trumps on their hands to play if favourable conditions doesn't prevail in long run.. I think this is the reason people are more bullish towards this...

Academic wrote:

Right or wrong, I’m not afraid to express my opinion even which goes against the all others or majority.

See quarterly performance of LOLC (After adjusting for split)
Q1 --> 1.528
Q2 --> 3.779
Q3 --> 1.51 (Latest)

Tell me who can see a growth here?

The EPS for 9 months is 6.82, if this is annualized EPS is 9.09.

Current sector PE 21 is . Which is tailing PE ratio not leading. It can be easily understood if you have basic mathematical knowledge, when economy is expected to grow, tailing PE is greater that leading PE (as EPS is expected to grow). Thus BFI’s leading PE should be less than tailing PE ratio.

If we take the conservative figure 15, then the LOLC price would be 15*9.09=136.4.
However considering current market situation, and the fact that investors expected LOLC EPS to grow than what is reported here, I expect the downward pressure for LOLC would be severe on Friday.

Thus I expect LOLC to go down at least by Rs 2 to 4 on Friday.

An opinion can be right or wrong. Anyway we will see by Friday evening.

Thus is not an investment advice or recommendation

I accept the fact that the market has proven my opinion (prediction) is wrong by clossing LOLC green.

However, I still hold my opinion for couples of weeks!

I don’t have any more patience. I disposed it for 143.90 in the morning.

Look the thing with LOLC is that the people buying this share in large numbers are institutional investors. those chaps don't care too much about PE or financials. if they want financials they can get it from the horse's mouth long before the CSE published them. what they are look at is where this company will be 3-4-5 years down the line. that is the story i've been told at least

Monster wrote:I don’t have any more patience. I disposed it for 143.90 in the morning.

If I were you I would have bought back at 138 just to see where this goes. I am also of the opinion that the published earnings aren't as good as the press releases would have us believe (academic's point of view). However I also think that what mono says is not without merit.

how come such a high minority interests in LOLC group ??
profit for share holders is lower than minority interests..

# Makes more established conglomerates look minnows as aggressively diversifying Group revenue tops Rs. 25 b
# Pre-tax profit exceeds Rs. 7 b
# Net profit up 315% to Rs. 3.2 b
# Assets surpass Rs. 100 b mark
# Rs. 5.7 b cumulative investment in subsidiaries

Making the fastest leap to top the league, Lanka Orix Leasing Group proved its true mettle this week by announcing a mega Rs. 7.1 billion pre-tax profit in just nine months of 2010/11 financial year and a net profit attributable to equity holders of Rs. 3.2 billion aided by a top line gross revenue of Rs. 25.5 billion.

Gross revenue saw 172% growth in the first nine months whilst profit before tax rose by 485% and after tax figure by 647% to Rs. 6 billion. Profit attributable to equity holders was up by 315%.


This unprecedented performance has firmly placed LOLC much above some of the older conglomerates such as Hayleys (whose net profit was only Rs. 580 million), Aitken Spence (whose turnover was Rs. 18 billion and net profit was Rs. 1.65 billion) and Carson Cumberbatch (with Rs. 25 billion turnover and Rs. 2.8 billion net profit).

Interim results for nine months released show financial services sector, trading sector and the other sectors contributing exceptionally well.

However LOLC has benefited substantially from other income of Rs. 4.2 billion, up by 302% over last year. They included Rs. 2.6 billion on sale of investments, Rs. 1.8 billion in marked market valuation of quoted shares held for trading purpose.

An analysis of the cash flow statements reveals Rs. 1.56 billion as proceeds from sale of subsidiaries, associates and shares and Rs. 3.1 billion in sale of property, plant and equipment. Interestingly LOLC had invested Rs. 5.7 billion in subsidiary companies, up from Rs. 7.5 million a year earlier.

The financial services sector showed excellent performance with pre-tax profits of Rs. 5.5 bn a growth of 354% over last year. The rest of the group contributed Rs. 1.6 bn to the bottom line. With a contribution of taxes of Rs. 1.1 bn, the Group recorded post-tax profits of Rs. 6 bn, a growth of 647% over last year.

LOLC said the increase in total revenue kept its momentum in line with the aggressive growth in the financial services sector and the trading sector. The revenue grew by 172% over last year to reach an all time high of Rs. 26 bn for the nine months. The revenue from the financial services sector saw a growth of 41% to reach Rs. 13 bn while the contribution from the rest of the sectors was Rs. 12.4 bn. The borrowing costs continued to come down in line with the sliding interest rates with the Group raising funds at attractive rates. LOLC’s ability to source long-term funding from foreign multilateral and bilateral agencies at attractive rates contributed well to the reduction in borrowing costs. The total borrowing costs reached Rs. 4.9 bn by December reflecting the lower interest margins demanded by the Group.

LOLC Group’s core business, the lending operations and its strategic investments contributed well to the bottom line positioning the Group on a strong footing to reap steady growth in profitability in the medium to long term. “The Group’s expansion strategies augers well with the economic growth forecasted in the near future,” LOLC said.

The balance sheet grew along with the business growth of the Group, with total assets crossing the Rs. 100 bn mark reaching Rs. 108 bn by December. This is almost a 100% growth over last year. The corresponding liabilities grew by 60% represented by the borrowings of the Group mainly coming from the financial services cluster and the holding company. The total assets of the financial services cluster reached Rs. 68 bn, a growth of 20% over last year. The corresponding liability grew by 20%.

The advances grew by 49% to reach Rs. 49 bn. which is an indication of the strong portfolio growth as a result of the growth in executions. The newly set up branches in the North and the East contributed significantly to this growth.

The strong growth of the lending business, propelled by the rapid expansion of the customer base, was facilitated through a strong growth in the Group’s footprint, especially in the rural sectors. The footprint continued to grow, with several key branches and “Isuru Diriya” centres being opened during the quarter. On a monthly basis, four “Isuru Diriya” centres are being opened, strengthening the presence in the rural areas.

The total count of the financial services sector outlets now exceeds 140, of which, Lanka Indian Oil Company outlets and “Isuru Diriya” centres account for 65. The company’s entry into the North and East is already reaping benefits with significant business volumes coming from these largely untapped markets.

Reflecting this aggressive growth, Lanka ORIX Finance Company, Commercial Leasing Ltd., and LOLC Micro Credit Ltd. contributed exceptional results to the bottom line of the Group. Economies of scale from operations, and multiplying synergies from shared distribution channels and shared services are deriving benefits to these companies. The collections efforts of the Group continue to be of utmost importance to the sustainable profit growth, and strategies are continuously evaluated and improved to maintain the desired level of collections.

LOLC’s 100% owned subsidiary, Lanka ORIX Finance Company continues to grow from strength to strength, with its deposits base increasing to Rs. 14 bn, a significant growth of 61% over the same period last year. The company is well positioned in all regions to reap the benefits of the common distribution channels of the Group. Commercial Leasing Company and LOLC Micro Credit Ltd. too grew its lending business in the SME/Micro sectors especially in the rural sectors of the country, contributing well to the bottom line of the Group.

The trading and plantation sectors too contributed well to the performance of the Group with steady profits flowing to the Group, a Rs. 1.6 bn as at December.

The leisure sector saw significant activity during the peak season and is also gearing up for the upcoming refurbishment. LOLC is finalising its management agreements with renowned international hoteliers to manage these hotels once the refurbishments are concluded.

LOLC Insurance Co., and LOLC Securities Ltd., — the latest additions to the group are drawing up their plans and are expected to commence operations within the next few months.

LOLC Group Managing Director and CEO Kapila Jayawardena said: ‘Sri Lanka is on the threshold of Economic Prosperity with new opportunities beckoning from the North and East of the country as well.

LOLC has been able to break new ground in profit diversity with vigorous implementation of initiatives taken in developing its Core business, as well as embracing the quest for new opportunities. This performance, which reflects a quantum leap when compared to the previous year, was due to the implementation of the Group’s road map which enabled us to capture opportunities well ahead of time.”

source - www.ft.lk

mono wrote:Look the thing with LOLC is that the people buying this share in large numbers are institutional investors. those chaps don't care too much about PE or financials. if they want financials they can get it from the horse's mouth long before the CSE published them. what they are look at is where this company will be 3-4-5 years down the line. that is the story i've been told at least

Your argument can be broken down as follows

I. Institutional investors deal in large quantities
II. Today LOLC dealt in large quantities.
III. Thus institutional investors bought LOLC today

But if I refer to your statement, which I also think true, "if they want financials they can get it from the horse's mouth long before the CSE published them", I have following questions.

1.
Why did the institutional investors wait until quarterly reports are published and price goes up by few rupees, rather collecting before reports comev,say after 1st feb, in this period substantial amount of LOLC shares were traded at 136-137.9 range as they knew LOLC is a good company, since they knew when reports come?

2.
If I drop the premise that "if they want financials they can get it from the horse's mouth long before the CSE published them", core of above argument is unaffected.

To see this, my second question is: as institutional investors are not interested on financials (as you say) since they know company is good, why could't (and didn't) they collect enough at 125-130 in end December and January period instead of waiting for today (to buy at 138-145!, see Figure 1)? Aren't they rational?

So do you still say today's price up and/or large volume is due to institutional buying? I doubt.

There are two possible scenarios.

1. Retail investors became interested in LOLC after financials are published (as opposed to my opinion) but NOT institutional investors as you say

2. There was a initial price/volume manipulation (that is why price/volume doped eventually? see Figure 2).

Hope you would select scenario 1.

Also think you are intelligent enough to not to take arguments personally. I just attacked your thinking not you.

Attached charts are extracted form www.cse.lk

LOLC is one of a giant in the Finance industry. LOLC rally would start soon.

i don't know who bought today, i didn't follow the share today. what i'm saying is that there is institutional interest in this share and it's growing. sooner or later someone will want to buy a million odd shares and if that chap can't find a cross that's when we'll see action.

Academic wrote:

You must have been on holiday. It went upto 145 last friday, before coming down.

tubal wrote:You must have been on holiday. It went upto 145 last friday, before coming down.

yeah


if i add more it was started up at the high but recently came down so big guys must collecting
if i m correct BRWN has a partnership with LOLC (correct me ) so the partner is now moving and that would also be affect to the LOLC but anything can happen cuz this is CSE where non others like

LOLC is a diversifying company,it recently invested in sierra constructions.....but sierra construction was not seems to be a good profitable company.... but there is high potential,because of economic growth......

smalta wrote:

tubal wrote:You must have been on holiday. It went upto 145 last friday, before coming down.

yeah


if i add more it was started up at the high but recently came down so big guys must collecting
if i m correct BRWN has a partnership with LOLC (correct me ) so the partner is now moving and that would also be affect to the LOLC but anything can happen cuz this is CSE where non others like

ya both of them together bought 20% stake of SIERRA CONSTRUCTION.....

Why this article does not mention anything about 1.7 billion unrealized gain (non cash gain) reported in 7.1 billion profit? See my thinking here.

http://forum.srilankaequity.com/t827p30-lolc-interim-report-released

I've merged "LOLC - Interim report released" with this topic, hope this will continue as the official thread for LOLC talk
Guys contribute more...

20 institutions +people are holding 93.55% shares of LOLC . only 30,574,840 shares out of 475,000.000 shares are available for real trading !

LOLC is to be converted in to a Holdings company as per CB approval. In that case it would be under diversified sector and not under Banking and Finance sector. Isnt it ?. DIV PER is currently at 36 levels. Earning per share as discussed above is arround 8/=.

What would happen to LOLC share today in that case ?

lolc will be moved to 1xx

asitha wrote:lolc will be moved to 1xx

How come? Can you explain?

Is this the reason for momentum?

http://www.cse.lk/cmt/uploadAnnounceFiles/7361302176811_378.pdf


LOLC group to reach a phase of exponential growth

Academic wrote:

1.
The immediate reason for going LOLC down is its earning quality and downgrading debt rating based on double leverage.

Can any of you explain how name change to Holding address above issues? Isn't it the same LOLC?

2.
Further it is no more a Finance company. A jack of all trades.

Investors attracted to its finance business which will be shifted to LOFC. Once LOFC listed people may forget LOLC. This may explain why we saw large sell orders for LOLC in last couples of days (an information leakage?)?

In addition to that widely diversified companies are subjected to a "Conglomeration discount" in calculating its fair-value.

According to the following article LOLC is already in the top list of diversified companies in par with JKH with a impressive growth of Assets and ROE.
http://www.ft.lk/2011/04/08/welcome-the-new-conglomerate/

Any comments?