FUTURE SHARE PRICE OF COCO LANKA

SECTOR               -      BEVERAGE FOOD & TOBACCO

ASI                         -     3385.55


SHARE PRICE     -      RS 48.50

SECTOR PRICE EARNING RATIO    -   14.8

Coco Lanka owns 221,000,000 shares of Renuka Agri Foods Ltd which represents 78.6% of the issued capital of RAFL before its public offering of 120,000,000 new ordinary shares.

Coco has reported improved results for the first six months as at 30/09/2009 . Profit for the period was Rs 110 m.n. as against Rs 66.6 m.n.in year 2008, an increase of 65% YOY. Earnings per share appreciated for Rs 6.73 for same period as against Rs 3.56 in year 2008. NAV for the share stands at Rs 38.49 as at 30/09/2009.

The recent public issue of shares of RAFL does not reduce the no. of shares originally owned by Coco Lanka in RAFL, however it reduces the holding % in RAFL by Coco accordingly.

Value of  Coco Lanka may increase in future once the shares of RAFL commence trading from Monday onwards(04/01/2010).

Number of shares owned  by Coco in RAFL     =    221,000,000- shares
Share capital of   Coco lanka                             =   12,600,000- shares
Issued price of RAFL (IPO Price)                     =    Rs 2.25
Additional value created for  Coco -                  =    221,000,000 * Rs 2.25
                ( From listing of RAFL)                     =    Rs 497,250,000 / 12,600,000 (shares)
                                                                         =    Rs 39.46 per share

The value of Coco Lanka shares may vary according to the trading price of RAFL in future. This is one  reason to increase the share prices of the Ceylon Guardian (GUAR), Ceylon investment (CINV) etc, recently since these two companies have considerable stakes in most valued (Blue chips) companies listed in the Colombo stock market. This has already happened in Browns where its share price increases rapidly due to their large stake in Sri Lanka's largest private commercial bank HNB. Further share price of DFCC has a direct link to the COMB( N) trading price since DFCC has a considerable stake in COMB (N) etc.

Additional value for Coco  if  RAFL  trade  @ Rs 2.50 /share   =  ( 221,000,000 * Rs 2.50) /12,600,000
                                                                                                =  Rs 43.85 / share
Additional value for Coco  if  RAFL  trade  @ Rs 2.75 /share   =  Rs 48.24 / share
Additional value for Coco  if  RAFL  trade  @ Rs 3.00 /share   =  Rs 52.61 / share
Additional value for Coco  if  RAFL  trade  @ Rs 3.25 /share   =  Rs 57.00 / share
Additional value for Coco  if  RAFL  trade  @ Rs 3.50 /share   =  Rs 61.30 / share
Additional value for Coco  if  RAFL  trade  @ Rs 3.75 /share   =  Rs 65.70 / share
Additional value for Coco  if  RAFL  trade  @ Rs 4.00 /share   =  Rs 70.10 / share

These values for Coco Lanka arrived at, are purely considering  the future trading price of RAFL. Further Coco Lanka has its own business interests in the field of coconut based products, organic products, manufactures & exports ceylon tea etc. From these business interests Coco has reported E.P.S. of Rs 6.73 & NAV per share of Rs 38.49 as at 30/09/09. Since Coco lanka is in the field of Agricultural related business activities we can expect continuous improvements in their bottom line in future.  

There for we believe that listing RAFL in Colombo stock exchange will directly has a relationship in the future share price of COCO LANKA

How ever investors reacted negatively for the recently announced rights issue by Coco lanka. Main reason for this may be many of them expect a subdivision from the company. If we looked at the recent past investors who subscribe for rights issues were winners in all corners. ( CHL, LDEV,MARA,RHL,LION,)etc.

BUY LION BREWARY

SECTOR                   -   BEVERAGE FOOD & TOBACCO


SECTOR  P.E.          -   14.8

SHARE PRICE        -    Rs 74.50

ASI                            -    3344.89

28/12/2009 - Lion brewery is a Carson group company.The holding company of lion is Ceylon brewery limited.
The company has performed well for the first six months of the year 2009 by reporting a profit of Rs 237 m.n. as against a loss of Rs 21,900/- an increase of 1183% YOY . Net asset per share is Rs 64.93.

During last couple of weeks we saw large parcels of lion changing hands between Rs 65 - 70 range.
We can expect a steady growth in profits in LION in future due to the increased tourists arrivals to the country after the war.

The joint venture company in India is the future of the LION. That Company now operates 4 breweries,one each in Maharashtra, Rajasthan, Himachal and Kolkata. It’s distribution reach has expanded to cover 23 of India’s 35 states and Union Territories. And in the first 4 months of 2009, it has all but reached the sales volume achieved during the 12 months of 2008.

RECOMMEND  - BUY