Investor Presentation Review of 2Q FY2019 Version 1.0 This - - PowerPoint PPT Presentation
Investor Presentation Review of 2Q FY2019 Version 1.0 This Investor Presentation should be read in conjunction with the JKH Annual Report 2017/18 to obtain a more comprehensive understanding of the drivers and strategies of our businesses
Version 1.0
This Investor Presentation should be read in conjunction with the JKH Annual Report 2017/18 to obtain a more comprehensive understanding of the drivers and strategies of our businesses
▪ Market cap of USD 1.10 billion ▪ No controlling shareholder - 98.5% free float ▪ Debt : Equity ratio of 16% ▪ The Board comprises of three Executive Directors and six Independent Non-Executive Directors
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2015/16
Note: The above excludes the contribution from Other including Information Technology and Plantations services
2016/17 PAT attributable to equity holders 2017/18
▪ The Group has consciously driven the shift in the composition of its earnings with a greater contribution from higher ROCE earning industry groups such as Consumer Foods, Retail and Financial Services ▪ 2017/18 excludes the one-off surplus transfer of Rs.3.38 billion at Union Assurance PLC ▪ The decline in contribution from the Property industry group is due to revenue of residential apartments at Cinnamon Life not being recognised
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23% 32% 4% 17% 10% 15% 21% 31% 10% 16% 7% 14% 22% 20% 5% 11% 8% 34%
Transportation Leisure Property Consumer Foods Retail Financial Services
PAT to equity holders of JKH
Total PAT 21,021 16,275 29 Diluted earnings per share (Rs.) 15.15 11.84 28 Recurring PAT 18,320 16,119 14 Refer page 62 of the JKH Annual Report 2017/18 for commentary on recurring adjustments
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Industry Group FY2018 FY2017 YoY Growth (%) (Rs. Million) (Rs. Million) Transportation 3,073 2,968 4 Leisure 2,822 4,165 (32) Property 745 508 47 Consumer Foods 1,515 2,192 (31) Retail 1,145 1,306 (12) Financial Services 8,016 1,978 305
PAT to equity holders of JKH
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Total PAT# 7,282 6,560 11 Industry Group 1H FY2019 (Rs. Million) 1H FY2018 (Rs. Million) YOY Growth (%) Transportation 1,882 1,810 4 Leisure* 108 701 (85) Property (22) 86 (126) Consumer Foods 420 797 (47) Retail 53 588 (91) Financial Services** 2,280 609 274
*Profitability was impacted by the partial closure of “Ellaidhoo Maldives by Cinnamon” and the closures of “Cinnamon Hakura Huraa Maldives” and “Bentota Beach by Cinnamon” for the construction of new hotels. Both hotels are scheduled to open by end 2019. ** During the quarter under review, the insurance sector of the Group recognised a deferred tax asset amounting to Rs.1.53 billion arising from brought forward tax losses as at 31 December 2017.
#The increase in profitability is mainly attributable to the higher exchange gains recorded at the Holding Company on its foreign
currency denominated cash holdings.
PAT to equity holders of JKH
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Industry Group Q2 FY2019 (Rs.Million) Q2 FY2018 (Rs.Million) YOY Growth (%) Transportation 1,055 1,040 1 Leisure* 332 601 (45) Property (20) 43 (146) Consumer Foods 226 431 (48) Retail (91) 305 (130) Financial Services** 1,753 374 368 Total PAT# 5,095 3,730 37
*Profitability was impacted by the partial closure of “Ellaidhoo Maldives by Cinnamon” and the closures of “Cinnamon Hakura Huraa Maldives” and “Bentota Beach by Cinnamon” for the construction of new hotels. Both hotels are scheduled to open by end 2019. ** During the quarter under review, the insurance sector of the Group recognised a deferred tax asset amounting to Rs.1.53 billion arising from brought forward tax losses as at 31 December 2017.
#The increase in profitability is mainly attributable to the higher exchange gains recorded at the Holding Company on its foreign
currency denominated cash holdings compared to the corresponding quarter of the previous financial year.
Note the following adjustments: 1) The above graph excludes the capital employed at Cinnamon Life as it is a project under development 2) Investment property and revaluation gains/losses for FY16 ,FY17 and FY18 3) 2013 Rights issue funds, 2015 and 2016 Warrant funds and debt drawn at Cinnamon Life 4) Capital employed in non-operational properties of the Group has been allocated to “Property Excl. Cinnamon Life” 5) The adjusted capital employed considers the effective share based on the ownership Adjusted effective capital employed (Rs.bn)
10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 10 20 30 40 50 60
Industry group % of effective capital employed Financial Services 5 Retail 2 Consumer Foods 3 Information Technology 1 Transportation 9 Leisure 20 Property (Excl. Cinnamon Life) 10 Cinnamon Life 20 Financial Services - 54% Retail - 36% Consumer Foods - 34% IT - 21% Transportation - 18% Leisure - 8% Property (Excl. Cinnamon Life) - 6% Cinnamon Life – (0.1%)
▪ In addition, the Holding Company accounts for 28 per cent of effective capital employed (Rs.45 bn), which consists primarily of cash Hurdle Rate - 15%
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▪ Aggressive investment pipeline exceeding USD 600 million over the next two years. Given the gestation period, the realisation of benefits from these investments is expected to accrue from FY2021 onwards ▪ Approximately USD 160 million of these investments to be funded through available/internally generated cash. Some of the key projects include:
Project Expected completion Cinnamon Life CY2020 Reconstruction of Bentota Beach by Cinnamon End 2019 Reconstruction of Cinnamon Hakura Huraa Maldives End 2019 Cinnamon red Kandy FY2021 Frozen Confectionery manufacturing plant Completed 1Q FY2019 Roll out of 80 Retail outlets FY2019 & FY2020 Retail Centralised Distribution Centre 2H FY2019 JK Logistics - construction of a warehouse FY2020
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▪ Chain of Resort hotels in Sri Lanka ‾ 8 Resort hotels in strategic tourist destinations (1,000 rooms) ‾ 10% of the country’s 4-5 star class tourist accommodation ▪ 2 five star city hotels in Colombo (847 rooms) ▪ 240 roomed lean luxury hotel managed by Cinnamon; “Cinnamon red” ▪ 3 Resort properties in the Maldives (340 rooms) ▪ Established hotel brand – Cinnamon ▪ Leading inbound tour operator in Sri Lanka ▪ Tour operator partners include global players such as Thomas Cook, Kuoni, Hotel Plan and Virgin Holidays
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▪ Greater focus on asset light investment models as a part of the strategy to enhance the ‘Cinnamon’ footprint in Sri Lanka ▪ Land bank of 173 acres of freehold and 127 acres of leasehold land in addition to 517 acres of leasehold land in Digana ▪ Of the total freehold land acreage owned, a total of 96 acres of freehold land are in key tourist hotspots: ▪ Ahungalla (Southern Province) : 10.9 acres ▪ Trincomalee (Eastern Province) : 14.6 acres ▪ Nilaveli (Eastern Province) : 41.7 acres ▪ Wirawila (Southern Province) : 25.2 acres ▪ Nuwaraeliya (Central Province) : 3.4 acres
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Sector FY2018 FY2017 Occupancy (%) ARR(US $) EBITDA Margin (%) Occupancy (%) ARR (US $) EBITDA Margin (%)
City Hotels* 64 127 27 69 133 36 Resorts in Sri Lanka 81 91 28 80 93 33 Resorts in Maldives 82 263 24 89 261 33
Sector Q2 FY2019 Q2 FY2018 Occupancy (%) ARR (US $) Occupancy (%) ARR (US $)
City Hotels* 52 127 66 127 Resorts in Sri Lanka 81 85 85 87 Resorts in Maldives 79 257 69 268
*City Hotels occupancy and ARR excludes Cinnamon red
▪ City Hotels occupancies and ARRs were impacted by the increase in room inventory ▪ The decrease in EBITDA margins of the Sri Lankan Resorts segment is on account of the closure of “Bentota Beach by Cinnamon” ▪ The Maldivian Resorts segment was affected by the partial closure of “Cinnamon Dhonveli Maldives” and refurbishment of “Ellaidhoo Maldives by Cinnamon”
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Year Tourist arrivals (In 000’s) Growth (%) 2010 654 46 2011 856 31 2012 1,006 18 2013 1,275 27 2014 1,527 20 2015 1,798 18 2016 2,051 14 2017 2,116 3 Jan-Sep’18 1,732 12
Arrivals from China and India
Year China India 2014 128,166 242,734 2015 214,783 316,247 2016 271,577 356,729 2017 268,952 384,628 Jan-Sep ‘18 209,912 301,784
▪ Tourist arrivals from January- September 2018 was 1,731,922, a growth of 11.6%, as compared to the 1,551,931 recorded in the comparative period of the previous year ▪ Arrivals for the quarter (July-September 2018) increased by 4.8%
Source: Sri Lanka Tourism Development Authority
1,000 1,500 2,000 2,500
Annual tourist arrivals to Sri Lanka (‘000)
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Source: Sri Lanka Tourism Development Authority
13 200,000 400,000 600,000 800,000 1,000,000 1,200,000 2010 2011 2012 2013 2014 2015 2016 2017 Tourist Arrivals Calendar Year
Source: Governmental tourism websites
5 10 15 20 25 30 35 40 Malaysia Indonesia Thailand Vietnam Cambodia Sri Lanka Arrivals (Mns) 1990 2017 Actual/Target
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60,000 31,790 30,114 26,113 9,100 7,600 5,019 Bangkok Manila Kuala Lampur Jakarta Ho Chi Minh Hanoi Colombo
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▪ Colombo is increasingly becoming an attractive location for City Hotel developments ▪ Expected 5-star room supply:
Development
Year of completion Cinnamon Life 800 2020 ITC 350 2021 Ritz Carlton 473 2022 Total rooms 1,623
▪ “Cinnamon Life” is slated for completion in the calendar year 2020 with the residential apartments and office complex ready for hand over and
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▪ “John Keells Properties”; explore property development
▪ Focused strategies for expansion via developer/landowner tie ups ▪ Catering to different target market segments: ▪ Luxe Spaces ▪ Metropolitan Spaces ▪ Suburban Spaces ▪ High-rise apartment complexes completed ▪ “7th Sense” on Gregory’s Road ▪ OnThree20 ▪ The Emperor ▪ The Monarch
“7th Sense” on Gregory’s Road OnThree20 17
▪ Low levels of urbanisation within Sri Lanka in comparison to regional peers ▪ Annual condominium supply far below regional peers
Source: KL: CBRE property market outlook 1Q 2018 (forecast for 2018) HCMC: CBRE Vietnam property overview Q1 2017 (forecast for 2018) CMB: Internal Estimates (forecast for 2018)
18 53,796 38,000 2,187 KL Ho Chi Minh City Colombo
Annual condominium supply in regional cities
▪ Prime developable land bank of over 36 acres held in central Colombo ▪ Opportunities for development at land banks held in Crescat City and Cinnamon Lakeside Vauxhall street land bank: ▪ Prime freehold land extent of 9.38 acres, to be developed with Finlays Colombo Limited ▪ Located in close proximity to the Beira lake water front which is earmarked for development of recreational and residential projects by the UDA
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Cinnamon Lakeside 7.40 acres leasehold land Vauxhall Street 9.3 acres freehold land Union Place 1.5 acres Crescat City 8.03 acres freehold land Cinnamon Life 7.1 acres freehold 3.03 acres leasehold
▪ Greater connectivity and reduction in travel time to Colombo city post construction of the
▪ Direct connectivity to the Port City Colombo and a multi modal transportation hub to be developed ▪ Opportunity to expand into residential apartment projects in proximity to the Colombo city
Colombo - Katunayake expressway/ outer circular expressway connecting to the southern expressway Port access elevated highway
Bandaranaike International Airport Port City Development
Thudella 18 Acres freehold Kapuwatta 6.6 Acres freehold
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1. Cinnamon Life
2. “Tri-Zen”- an 891 apartment residential development in central Colombo, with expected completion in FY2022/23 (~14 per cent pre-sold as at 30 September 2018) 3. Master planning has been initiated for the 18-acre land under JK Thudella Properties (Private) Limited 4. Master planning has been initiated for the jointly held 9.38-acre property under Vauxhall Land Development (Private) Limited (VLDL) 5. Finalising the acquisition of approximately 100 perches of land located in the heart of Colombo, for a niche residential development which is expected to be launched in 4Q FY2019 6. Future development of the land bank held at Rajawella Holdings Limited discussed in detail
Cinnamon Life Total units Number of units sold as at 30 September ‘18 The Residence at Cinnamon Life 231 137 The Suites at Cinnamon Life 196 108 Cinnamon Life - commercial complex 10 floors 4 floors
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Rajawella Holdings Limited (RHL) ▪ Owners of a majority stake in RHL to complement the Group’s leisure and property portfolios ▪ The 500 acre land in Digana includes an 18-hole, Donald Steel designed, Golf Course and developable land extent of approximately 80 acres ▪ Currently developing the master plan to maximise the development potential of the land plot ▪ Troon International has taken over the management of the course and the refurbishment of the course commenced in February 2018 ▪ Expected appreciation of land value with the completion of the central expressway ▪ Development and sale of properties such as villas, club house facilities, activity zones and possible operation of a hotel in the long term
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26 Image as at 31 March 2018
27 Image as at 30 September 2018
Conferencing ; capacity (4,837 pax) in three venues and car park facility (2,450 slots) 800 guest room hotel, including conferencing, banqueting, 7 specialty restaurants and entertainment facilities Rentable mall and entertainment space of 372,000 Sq. Ft (Gross – 518,000 Sq. Ft) First residential development of approximately – 358,000 Sq. Ft (231 units). Second residential development of approximately – 255,000 Sq. Ft (196 units). A standalone office development - 254,000 Sq. Ft rentable area
Note: Areas are subject to change based on final drawings 28
▪ 42% stake in SAGT ▪ SAGT capacity: 2 million TEUs ▪ Largest cargo and logistics service provider in the country ▪ Leading bunkering services provider ▪ Joint Ventures with Deutsche Post for DHL air express and A P Moller for Maersk Lanka ▪ GSA for Jet Airways, KLM Royal Dutch airlines and Gulf Air. Other
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KARACHI GWADAR BAHL MUMBAI CHENNAI VISHAKHAPATNAM KOLKATA CHITTAGONG YANGON MOMBASA LAMU DAR-ES-SALAM CAPE TOWN PORT LOUIS ADEN KOCHI
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4.31 4.91 5.19 5.74 6.21 2013 2014 2015 2016 2017 Million TEUs
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▪ Container handling capacity in the region ▪ Port of Colombo estimated utilisation CY2017 : 78 per cent ▪ SAGT Domestic : Transshipment volume mix (FY2018): 18:82
Port Container handling capacity (TEUs) Colombo 8 million Hong Kong 21 million Singapore 40 million Shanghai 36 million
Sources: Government websites/ Sri Lanka Ports Authority
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Volumes (TEU) Q2 FY2019 Q2 FY2018 % Change SAGT
538,723 480,187 12
SLPA
592,551 480,925 23
CICT
676,710 629,885 7
Total
1,807,984 1,590,997 14
Sources: Government websites/ Sri Lanka Ports Authority
Bunkering Business (Lanka Marine Services) ▪ Total volumes at LMS grew by 2 per cent during 2Q FY2019 Port of Hambantota ▪ Strong opportunities for private bunkering service providers with infrastructure in place for inland storage of petrochemicals and a pipeline to the Port ▪ The Port will occupy an area of 1,815 hectares and have a capacity to accommodate 33 vessels at a time ▪ Positioned within 10 nautical miles of the world’s busiest shipping lanes in which 200 to 300 ships sail through on a daily basis Logistics Business (John Keells Logistics) ▪ Total warehouse space under management grew up to approx. 250,000 CBM in the year 2017/18
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▪ Market leader in soft drinks, ice creams and processed meats ▪ Custodians of the consumer brands “Elephant House”, “Keells” and “Krest”: high brand equity Key performance indicators (%) FY2016 FY2017 FY2018 Growth of ice cream volumes 15 11 (4) Growth of beverage volumes 22 10 (16) Growth of convenience food volumes 11 (4) 3 PBT growth- Consumer Foods 65 19 (31) EBIT margin - Consumer Foods 22 24 17 Key performance indicators (%) Q2 FY2019 Growth of ice cream volumes 8 Growth of beverage volumes (31) Growth of convenience foods volumes 12 ▪ A sugar tax on carbonated beverages was implemented from 9th November 2017 onwards, which resulted in the selling prices across the CSD portfolio being increased by approximately 40 per cent. Other mitigation strategies are discussed overleaf ▪ Beverage : Frozen Confectionary revenue mix stood at 50:50 as at 30 September 2018
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52.0 39.0 31.4 19.0 10.0 Philippines Thailand Singapore Malaysia Sri Lanka
Carbonated Soft Drinks - Per Capita Consumption (Litres)
▪ The bulk-impulse mix of regional markets are highly skewed towards the impulse markets, demonstrating the significant growth potential for the impulse category ▪ CCS reformulated its flagship flavours to replace approximately 40 per cent of sugar content with the natural sweetener Stevia while also implementing the following initiatives;
▪ Launch of sugar free CSD variants - branded “GO Sugar Free ▪ Acceleration of non-CSD product launches (flavoured milk and water branded under Elephant House, and additional flavours of fruit juice branded under “Fit-O”)
70% 30% 8% 92% Sri Lanka Thailand 56% 44% Malaysia
Bulk vs. Impulse Split - Regional
Impulse Bulk
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Sources: Central Bank of Sri Lanka, Nomura Research Institute, Unilever Corp, Web articles
70 49 48 43 40 16 Singapore Malaysia Hong Kong Taiwan Thailand Sri Lanka
Modern Retail Penetration (%)
Present share of modern retail
Keells * 88 Cargills 363 Arpico 45 Laugfs 35
* As at 30 September 2018
▪ “Keells” is a chain of ~10,000 square foot modern grocery retail outlets
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▪ Comparatively higher modern trade density – population per store ratios as against regional peers ▪ High potential for expansion due to lower penetration of modern trade in Sri Lanka ▪ Over 160 outlets expected by FY2019/20
132 47 30 21.0 7.3 4.7 4.5 3.7 3.6 3.4 3.0 2.5 1.9 0.9 Modern trade density – population (’000) per store
Source: Retail and shopper trends in the Asia Pacific, AC Nielsen
FY2018/19
Keells Super forecasted coverage
FY2019 40 FY2020 40
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Key performance indicators FY2015 FY2016 FY2017 FY2018 FY2019-Q2 Same store sales growth (%) 15.3 12.5 9.5 5.7 0.8 Same store foot fall growth (%) 10.6 10.1 6.8 3.8 2.7 Profitability margin FY2015 FY2016 FY2017 FY2018 EBIT margin (%) 3.2 5.8 5.4 4.0 PBT margin (%) 3.1 5.4 5.6 4.0 ▪ The Q2 FY2019 same store sales were impacted by a decline in average basket value as a result of subdued market sentiment, in addition to the temporary impact stemming from the rapid store expansion plans of the sector and the corresponding “cannibalisation” effect it entailed.
and operating new stores coupled with the cost associated with rebranding and refitting stores
resulted in margin contraction in the short term as a result of the ramp up period of a new outlet
aggressive expansion of the store footprint and construction of a centralised Distribution Centre. The projects will be funded via debt given the low gearing ratio of the business
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▪ Union Assurance (JKH Stake : 90%) ▪ Highest new business growth in the year 2017 ▪ Committed to a “digital first” business model with an investment of over Rs. 800Mn to become the largest digital insurer in Sri Lanka ▪ Developing Bancassurance channels - 53% growth in 2017
0% 1% 2% 3% 4% 5% 6%
Life Insurance Penetration as a % of GDP - 2016
Global average – 3.47%
45 54 64 71 2014 2015 2016 2017
Life Insurance Gross Written Premiums
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Key performance indicators CY2013 CY2014 CY2015 CY2016 CY2017 Market share 14% 13% 13% 13% 14% GWP growth 8% 8% 17% 19% 22% Recurring net profit growth 48% 11% 23% 17% 205% Recurring net profit (Rs. Mn) 791 881 1,127 1,313 4,002* Surplus from Life Fund (Rs. Mn) 612 750 800 1,100 3,642 Life Fund (Rs. Bn) 19.3 23.1 26.3 30.3 29.1 Capital Adequacy Ratio N/A N/A N/A 411% 352%
*Excludes a one-off surplus of Rs. 3.38 billion arising from the change in policy liability valuation
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Key performance indicators Q1 FY 2019 (Apr-Jun 2018) Q2 FY 2019 (Jul- Sep 2018) GWP growth (YoY) 13% 4% Net profit
Rs.1,638 million* Net profit growth (YoY) 349% 1,693%
*The company recognised a deferred tax asset amounting to Rs.1.53 billion arising from brought forward tax losses as at 31 December 2017
▪ Nations Trust Bank (JKH effective economic interest : 32.16%) ▪ Focus on SME / retail strategy ▪ Franchise for American Express cards
Key performance indicators CY2013 CY2014 CY2015 CY2016 CY2017 Loans and advances growth 12.1% 19.5% 22.4% 23.7% 25.0%
Industry (LCB’s) 8.5% 12.3% 23.5% 17.7% 19.2%
Return on equity 19.6% 19.8% 18.2% 17.7% 17.4%
Industry (LCB’s) 17.3% 16.8% 15.7% 17.3% 17.5%
Net Interest Margin 5.8% 5.8% 5.5% 5.1% 4.4%
Industry (LCB’s) 3.7% 3.6% 3.5% 3.5% 3.5%
NPL ratio (%) 3.51 4.16 2.77 2.80 2.72 Deposit base (Rs. Bn) 95.7 111.0 129.1 151.5 194.3 Asset base (Rs. Bn) 142.1 158.8 176.3 211.2 268.3 Net Profit (Rs. Mn) 2,136 2,537 2,614 2,869 3,372
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Key performance indicators Q1 FY2019 (Apr-Jun 2018) Q2 FY2019 (Jul-Sep 2018) Net profit
Net profit growth (YoY) 33% 3% Loan growth (YoY) 24% 25% Net Interest Margin 5.0% 5.0% NPL Ratio 3.06% 3.71%
This document was produced by John Keells Holdings PLC for information purposes only. The information contained in this document are a review of the financial information pertaining to FY2019, and does not constitute an issue prospectus or a financial analysis. This Investor Presentation should be read in conjunction with the JKH Annual Report 2017/18 to obtain a more comprehensive understanding of the drivers and strategies of our businesses. Whilst John Keells Holdings accepts responsibility for the accuracy of the information contained in this document, it does not assume any responsibility for investment decision made by the prospective investors based on information contained herein. In making the investment decision, prospective investors must rely on their own examination and assessments of the Company including the risks involved.
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