Asia Capital - Research Paper - Diamond Equity Research

Please enable JavaScript to view the full PDF

ASIA CAPITAL PLC (ACAP.N000) Rays of Resilience…. Net Asset Value (NAV) : LKR 18.50 Asia Capital PLC (ACAP.N0000) is an investment bank engaged in both fund and fee based activities for more than 30 years. Fee based activities include corporate ACAP share price movement during 12 months NET ASSET VALUE Net Asset Value @Q2x2020 LKR 1,087 mn Revaluations (Page-2) LKR 325 mn Divestments (Page-3) LKR 1,133 mn Less: Loss for 2Hx2020 LKR 90 mn NET ASSET VALUE LKR 2,455 mn Issued Shares: 131.32 m Net Assets per share: LKR 18.6 Majority shareholdings of Asia Capital PLC is held by Dato Vijayeshwaran a Malaysian business magnate who over 71.61% shareholdings. n 9 Page 2 Investment in subsidiaries to mature in 2021 Assets per share of the company prior to revaluation is LKR 27.92 whereas the for the group is LKR 35.98 ACAP Investments in subsidiaries and associated companies as at 30th September 2020 amounted to LKR 1,130mn and LKR 398mn respectively . Source: Quarterly Accounts 2Q2020 (table 1) Asia Leisure Holding Source: Annual Report 2020 (table II) As per audited nancial statement of ALH given in the Table III, the Net Asset Value (NAV) of ALH as at 31st March 2019 amounted to LKR 893 mn and gross asset value amounted to LKR 1,666mn Fair market value of ALH determined on the basis of 1.5xNAV is expected to increase the total value of the investment subsidiary companies by LKR 325 m Source: Annual Accounts 2019 (table III) n fi g Page 3 Investments with Japanese JV’s to realise REALISABLE INVESTMENT Asia Capital PLC together with its partner Belluna Group of Japan, have collaborated in multiple projects in Sri Lanka under joint venture partnership whereby company entitled to a share of pro ts and equity Luna Tower LKR 277mn Marine Square LKR 244mn 447 Luna Tower is one such joint venture for development of 44 oor storey Miriandhoo Maldives LKR 462mn apartment tower located in Union Place Sri Lanka. Project expected to be completed in May 2021. Asia Capital PLC expected to derive LKR 277mn consideration upon Le Grand LKR 150mn divestment/settlement of 10% pro t/equity share for the investment. (Note-1) Marine Tota LKR 1133mn Square, a project consist of 297 hotel room in joint venture agreement with Belluna Group Japan expected to yield LKR 244mn to Asia Capital PLC upon settlement and divestment of 8% equity/pro t share for the investment. (Note-2 Asia Capital PLC together with Balluna group has successfully completed a 70 room luxury property on the island of Miriandhoo, located in the silk sanded coral Baa Atol Maldives. Marriott International together with Westin Hotels & Resorts in the Republic of Maldives manages. The Westin Maldives Miriandhoo Resort since October 2018.. Asia Capital PLC owned 8% shareholding in Miriandhoo expected to be divested for LKR 462mn. (Note-3) Similarly the Asia Capital PLC jointed partnership with Belluna Group in respect of Le Grand Galle 50 room hotel located in Galle is expected to yield LKR 150mn upon divestment Divestment of respective equity share held by Asia Capital PLC in multiple joint venture with Balluna Group Japan is expected to yield upto LKR 1.133mn in 2021. These investments are not shown in the nancial statements due to the accounting standard adopted by the auditors of the company. 447 Luna Tower Set in the heart of the city of Colombo, 447 Luna Tower will transform the landscape of Union Place. Constructed on prime real estate, the tower stands 44 floors tall and consists of 194 upscale apartments. Scheduled Completion Q2 2021 Note-1 Total Project Cost (As at 31st March 2020) : USD 50mn Expected pro t @30%Project ROI : USD 15mn ACAP Share of Ownership/Pro t : 10% Expected value of divestment : USD 1.5mn Impact to ACAP Net Book Value : LKR 277mn Marine Drive Located at the centre of Colombo’s busiest commercial hub, Marine Drive is a 297 room hotel that is an ideal destination for both business and leisure travellers. Scheduled Completion: Q1 2022 Note-2 Total Project Cost (As at 31st March 2020) : USD 55 Mn Expected pro t @30% ROI : USD 16.5mn ACAP Share of Ownership/Pro t : 8% Expected value of divestment : USD 1.32 mn Impact to ACAP Net Book Value : LKR 244 mn Miriandhoo, Maldives 70 room luxury property on the island of Miriandhoo, situated in the silk sanded coral Baa Atoll in Maldives. Marriott International together with Westin Hotels & Resorts in the Republic of Maldives manages The Westin Maldives Miriandhoo Resort since October 2018. Note-3 Hotel was Jointly developed with Belluna Co. Ltd, under JV ACAP Share of Ownership/Pro t : 8% Expected value of divestment : USD 2.5mn Impact to ACAP Net Book Value : LKR 462mn l fi fi fi fi fi fi fi S fi . ) fi fl . Page 4 Manageable Debt Asia Capital PLC maintains a healthy debt to asset ratio of near 50% with total liabilities of LKR 2,579mn against the total assets of LKR 5,124mn. Total liabilities of the company is approximately 35% of the Enterprise value. Net surplus assets exceeds liabilities by LKR 2,545mn, Company’s total interest bearing liabilities of LKR 1,547mn is less than 30% of the total restated assets. This manifest companies long term sustainability its ability to service debt upon restructuring and divestment of non strategic assets. Source: Quarterly Accounts 2Q2020 Assets Vs Liabilities Quarterly Financial Statement 2020 of Asia Capital PLC indicates a total group liabilities of LKR 3,114mn whereas at the company level Total Assets Total Liabilities the total liabilities stands at LKR 2,579mn. Interest bearing borrowings of the group is approximately LKR 1,226mn of which LKR 426mn is due after 1 year. Company’s total interest bearing liabilities are over LKR 1,683mn of which LKR 893mn remain current. Assets Vs Liabilitie Total Assets : LKR 3,666mn Unaccounted Assets: LKR 1,458mn Total Assets (Restated) : LKR 5,124m Total Liabilities : LKR 2,579mn Total Current Liabilities : LKR 1,538mn Interest bearing Liabilitie Total Interest bearing liabilities: LKR Due within 1 year: LKR 229m 1,546mn Current: LKR 893m Bank overdraft: LKR 424m Total Interest bearing liabilities LKR1,546mn n s n n s n Restructuring and Diversi cation to drive future pro ts Asia Capital enters into share purchase agreement to buy 70% stake of Navara Capital Partners Asia Capital to re-enter Stock Broking business soon Asia Capital PLC (ACAP) the country’s leading and pioneering investment banking house recently announced to Colombo Stock Exchange (CSE) that the company has entered into a share purchase agreement on 21st December 2020 to acquire 70% stake of Navara Capital Partners Ltd. (NCPL) Speaking on the developments in the Asia Capital PLC (ACAP) Chief Executive Officer Stefan Abeyesinhe said that upon acquisition of Asia Capital to undergo restructuring NCPL, Asia Capital will re-enter and to bring value to both Malaysian, recommence Stock Broking business at a time when capital markets in the country are Japanese investors performing well due to policy certainty prevailing the current economic landscape of the country. Amidst ongoing negotiations between key Japanese and Malaysian investors of Sri Lanka’s one of the pioneering investment bank – Asia “Navara Capital Partners is currently carrying out Capital PLC (ACAP), the company has recently stepped into appoint a business as an investment holding company and legal and nancial consultant to restore con dence among the the company is having a 95% stake of Navara investors to undergo a prudent restructuring process of the group’s Securities. So we hope to recommence our assets in order to create more value for investors. Further the move is stock broking business shortly which is part of anticipated to position Asia Capital group’s future direction. our expansion plan” Abeyesinhe added. Accordingly, in an of cial letter, Asia Capital PLC has appointed The disclosure to CSE highlighted that ACAP will Frontier Capital Partners, a rm headed by renowned Investment acquire 3,536,400 ordinary voting shares representing 70% of NCPL held by Navara Banker Nishan Sumanadeera as the legal and nancial consultant to Capital Ltd as per the agreement entered by the head restructuring and to restore con dence among foreign investors parties. of Asia Capital PLC. Source: Ada Derana Business 22 December 2020 “We have appointed Mr. Sumanadeera to relook at our assets portfolio and we are con dent that he will guide the future direction of the Asia Capital group to add value and to drive innovation to the original investments made by the foreign investors Asia Capital to broad base shareholding to in the company,” said Executive Director of Asia Capital PLC, Stefan Abeyesinhe. match minimum public oat Speaking on the appointment of Frontier Capital Leading and pioneering investment bank in Sri Lanka Asia Partners, Mr. Nishan Sumanadeera went on to say Capital PLC (ACAP) will soon broad base its shareholding that he will relook at Asia Capital’s best assets and to be in compliance with public oating requirements nancially re-engineer them to be the key revenue stipulated by the Listing Rules of Colombo Stock Exchange. generating assets to sustain the balance sheet and will make sure the foreign investor con dence will “We will soon look at opportunities of broad basing our remain strong, robust and certain in Sri Lanka and public oat to match with Colombo Stock Exchange’s Rules especially in Asia Capital PLC. on minimum public holding,” ACAP Chief Executive Of cer “As a progressive, visionary corporate entity, at Asia and Executive Director Stefan Abeyesinhe said. Capital we focus our every effort on creating exceptional value for our stakeholders, ensuring the He further said that soon after Nishan Sumanadeera was foreign investment in Sri Lanka remain for the robust appointed as Legal and Financial Consultant in September growth of our economy in these turbulent times to this year, the company had undergone initial phase of press ahead with con dence, and move into the restructuring and had almost sorted all the business-related future,” Mr. Sumanadeerras said. concerns with Japanese investors. Source: Daily FT Source: Ada Derana Business November, 28, 2020 September, 11, 2020 DISCLAIMER fi fl fi fi fi fi fi fl fl fi fi fi fi fi fi fi