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Sri Lanka Equity Forum » Stock Market Talk » Benchmarking Richard Pieris Exports with Hayleys Fibre

Benchmarking Richard Pieris Exports with Hayleys Fibre

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EquityChamp

EquityChamp
Moderator
I think it would be beneficial to conduct a simple benchmarking exercise between Richard Pieris Exports (REXP) & Hayleys Fibre (HEXP) since these days some people are saying REXP went to 240 from 40 so as HEXP will move to 80 from 40. And they further says HEXP has turned around and recording significant profits boosted by the decline of Sri Lanka rupee. Please read below.

Main Business
REXP - Exporting value added products in the form of hard rubber, latex based and minerals
HEXP - Exporting value added products made from coconut fibre

Last five year annual compounded revenue growth rate
REXP - 9.2%
HEXP - (4.2%)

PAT margin
REXP - Improved from a negative 4.2% in 2010/11 to 10.7% in 2014/15
HEXP - Improved from a negative 7.2% in 2010/11 to 0.5% in 2014/15

REXP is 4 times greater than HEXP in terms of revenue so incidentally their current share price also reflects the same ratio.

But how REXP grew their revenue 9.2% per year where as HEXP losing revenue at the rate of 4.2% per year. Key difference is the effectiveness of the management and the compelling appeal of the product portfolio to customers. Rubber based products appear more superior than to coconut fibre base product. If you get a rubber based mattress and coir based mattress what would be getting the first choice...

Also how REXP earns 10.7% where as HEXP only earns 0.5%. REXP have adopted stringent productivity improvement methods with clear focus on reducing costs which HEXP side looks more unproductive and unorganised.

So now really HEXP enjoy the benefits of rupee depreciation. Majority of the rupee depreciation happened in Q3 15 so logically these companies should show a growth in profits and margins. In Q3 REXP reports a NPAT margin of 10% while HEXP reports a margin of 4%. Compared to Q2, in Q3 HEXP NPAT increased by Rs2mn whereas NPAT margin gained by 2 pp.

Now with these performances I can explain the REXP share price movement from 30-40s in 2010/11 to 250-300 in 2015/16. But REXP moving 40/ in 2010/11 to 80-100 in 2015/16 is a big question for me . Also the so called change by some people on HEXP business fortunes is too a big question mark unless they change things radically like REXP did in 2011/12.

So movement of HEXP is highly unsupportive of its business performances but the other supports the share price have is some thing not known to the market.

Thanks

EquityChamp

EquityChamp
Moderator
Question

Chinwi

Chinwi
Associate Director - Equity Analytics
Associate Director - Equity Analytics
No response ne?  


ඕව වැඩක් නෑ.  අපි හිතන් ඉන්නෙ මේක නගන්න​.
ලංකාව කියන්නෙ ඕන බොරුවක් දිගටම කිව්වම ඒක ඔස්සේ දුවන්න සෙට් වෙන හරක් රංචු ඉන්න රටක් බව දැන් ඔප්පු වෙලා ඉවරයි.
අපි ඒකෙන් ප්‍රයෝජන අරන් මර්සඩිස් බෙන්‍ස් වල යනව​. HEXPල  කොහු ලණු  නෙවි හුලං එක්ස්පෝර්ට් කලත් අපට කමක් නෑ . අපේ ලණු කන උන් ඉන්නකං අපි ගොඩ​.

Teller

Teller
Moderator
HEXp has a strong oderbook even falling market. 56 is having a good support

EquityChamp

EquityChamp
Moderator
Yes Chinwi. The HEXP favourites are silent on my comparison. They arguing that REXP went from 40 to 250 so why can't HEXP move in the same way. But they fail to answer why REXP growing their annual revenue by 9.2% compound rate while HEXP decline the revenue by 4.2% compound rate. Can a declining revenue company improve the profitability in an inflationary environment is a very big question to answer.

On a separate matter HEXP share price can be taken to even 200 if the players behind this wants to through manipulation. The low level of liquidity has created that possibility. But the question is whether the share price can sustain at that price. In very short term once the players wash their hands it will be again 40. So what is the situation of the investor who buys this for 100 or 200? They were effectively eliminated from their positions isn't it. The promoters must look at this aspect as well.

EquityChamp

EquityChamp
Moderator
Just compare and include last quarter also into the picture.

EquityChamp

EquityChamp
Moderator
Since the 6M financials are out thought to compare these two again and to see where they are. Both of them are very illiquid counters and export oriented companies.

HEXP Financials
Revenue 15/16 Rs442Mn, 16/17F Rs451Mn
Revenue growth 2%
GP margin 15/16 9.2% , 16/17F 10.2%F
PAT 15/16 Rs16Mn, 16/17F Rs41Mn
EPS 16/17E Rs5.1
NAV 16/17E Rs64.4

REXP Financials
Revenue 15/16 Rs3,048Mn, 16/17F Rs3,809Mn
Revenue growth 25%
GP margin 15/16 31.5% , 16/17F 34.3%F
PAT for Equity Holders 15/16 Rs364Mn, 16/17F Rs475Mn
EPS 16/17E Rs42.6
NAV 16/17E Rs99.6

Valuation Parameters

HEXP trading at a PE ratio of 16.7x declined from a PE of 18.5x as at 31st March 16. HEXP trading at a PBV of 1.33x improved from a PBV of 0.64x as at 31st March 16.

REXP trading at a PE ratio of 5.4x declined from a PE of 6.5x as at 31st March 16. REXP trading at a PBV of 2.31x declined from a PBV of 3.71x as at 31st March 16.

Industry PE is 8.4x and PBV is 1.5x.

So according to these data what do you think of HEXP and REXP prices. Should one decline and the other rise or both should rise/decline or one remain the same and the other rise/decline.

What are your ideas. Question

Brinthan

Brinthan
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@EquityChamp wrote:Since the 6M financials are out thought to compare these two again and to see where they are. Both of them are very illiquid counters and export oriented companies.

HEXP Financials
Revenue 15/16 Rs442Mn, 16/17F Rs451Mn
Revenue growth 2%
GP margin 15/16 9.2% , 16/17F 10.2%F
PAT 15/16 Rs16Mn, 16/17F Rs41Mn
EPS 16/17E Rs5.1
NAV 16/17E Rs64.4

REXP Financials
Revenue 15/16 Rs3,048Mn, 16/17F Rs3,809Mn
Revenue growth 25%
GP margin 15/16 31.5% , 16/17F 34.3%F
PAT for Equity Holders 15/16 Rs364Mn, 16/17F Rs475Mn
EPS 16/17E Rs42.6
NAV 16/17E Rs99.6

Valuation Parameters

HEXP trading at a PE ratio of 16.7x declined from a PE of 18.5x as at 31st March 16. HEXP trading at a PBV of 1.33x improved from a PBV of 0.64x as at 31st March 16.

REXP trading at a PE ratio of 5.4x declined from a PE of 6.5x as at 31st March 16. REXP trading at a PBV of 2.31x declined from a PBV of 3.71x as at 31st March 16.

Industry PE is 8.4x and PBV is 1.5x.

So according to these data what do you think of HEXP and REXP prices. Should one decline and the other rise or both should rise/decline or one remain the same and the other rise/decline.

What are your ideas. Question
No doubt REXP is 100% better then HEXP.ALSO REXP IS GOOD DIVIDEND PAID COMPANY.NEXT YEAR I EXPECT AROUND RS.15-18 DIVIDEND..

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