Looking
at the performance of Sri Lankan blue chips
Our columnist examines the financial performance of the top six
conglomerates listed on the Colombo bourse and evaluates how they
fare according to different criteria.
Comparison
of the performance of Sri Lankan corporates is a very challenging
task. The key issues are which corporates to compare and what measures
to use. I picked six blue chip companies trading in the Colombo
Stock Exchange and attempted to evaluate their performance through
several financial measures. The measures considered were namely:
·
Profit before Tax
· Profit attributable to Shareholders
· Earnings per Share
· Dividends Per Share
· Return On Capital Employed
· Price Earnings Ratio
· Net Assets Per Share
The
corporates selected for comparison were: John Keells Holding (JKH),
Aitken Spence Group, Hayleys, Richard Pieris, Hemas and DFCC. Their
published financial reports for 2003/2004 were used in this regard.
Profit
Before Tax (PBT)
This would be the profits earned from operations after
financial charges. JKH had the highest PBT of Rs 2,376mn and it
had experienced a 31 percent growth from the previous year. Aitken
Spence was number two with a PBT of Rs 1,889mn with a growth of
113.6 percent. DFCC was in the third slot with a PBT of Rs 1,874mn
and a percentage change of 28 percent.
Profit
Attributable to Shareholders (PAS)
This would be the profit which the company could allocate
to its shareholders if it so wishes. It would be the profit after
tax and minority interest.
JKH was dominating in this measure and had posted Rs 1,930mn with
a growth of 46 percent. DFCC was number two with PAS of Rs 1,293m
and 14 percent growth. Aitken Spence retained the third position
with a PAS of Rs 1,276 mn and a growth of 142.9 percent.
Earnings
per Share (EPS)
This is the measure of the profit earned per share after
interest, tax, preference dividend and minority interest.
Aitken Spence was no. 1 with an EPS of Rs 47.36 per share. DFCC
was number two with an EPS measure of Rs 22.7 and Hayleys retained
the third position with an EPS of Rs 13.26 per share.
Dividends
per Share (DPS)
This is the measure of what was distributed to the shareholders
per ordinary share. A corporate would only distribute part of its
earnings to its shareholders.
Aitken Spence has distributed the highest DPS of Rs 6 per share
and had achieved a growth of 33.3 percent.
The
second highest distributor was DFCC, which had paid a dividend of
Rs 5.5 per share without a growth for the period. Hayleys had posted
a DPS of Rs 3.5 per share without a growth from the previous year.
Return
on Capital Employed (ROCE)
This is a percentage return of the profits a company has
earned when compared to the capital which it had invested.
The return is a measure which can be compared with the return provided
by other investment opportunities in an economy.
Among the blue chips Hemas provided the highest ROCE of 28.4 percent.
This was a 8.4 percent growth from the previous period. Aitken Spence
had achieved an ROCE of 22.6 percent with a growth of 92 percent.
Richard Pieris had achieved a ROCE of 20.7 percent to occupy the
third position among the above corporates.
Price
Earnings Ratio
This is a measure of the confidence the market places
on a company. It is the multiple on which shares are valued when
compared to their present earnings.
A higher PE ratio is likely to indicate confidence from the point
of the shareholders.JKH dominates this league with a P/E multiple
of 15.8. The number two in the rank is Richard Pieris and number
three is the relatively new entrant to the listed corporate league,
Hemas.
Net
Assets per Share
This is a measurement of the amount of assets a firm has
for a share in issue.
Aitken Spence appears to be the most asset rich company with assets
per share of Rs 244.7. The number two position is occupied by DFCC
which has assets to the value of Rs 154.4 per share. Hayleys is
number three with Rs 142.97 per share.
Message
to the investor
The above is an analysis of performance purely based on
a financial perspective.
Based on the information it appears that investors seem to have
the highest confidence on JKH whereas Aitken Spence has generated
the highest EPS for them. The highest ROCE has been from the relative
new comer, Hemas.
One
has to understand that financial performance alone is not adequate
to understand the suitability of an investment.
There is a need to look at the strategy of the business as well
as qualitative performance. I will look at that aspect in another
analysis.
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