Multi Finance Company Ltd - Introduction review

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Introduction – The Multi Finance Company Limited May - 2011

Asha Phillip Securities Ltd – Equity Research Division 1

The Multi Finance Company LimitedThe Multi Finance Company Limited (MFCL) is a registered finance company & a

specialized leasing establishment under the Central Bank of Sri Lanka (CBSL). The

company is to list their ordinary shares on the Diri Savi Board of the CSE with the

objective of compliance with the mandatory listing requirement of CBSL prior to end

of June 2011 in order to broad base the share ownership structure and to improve the

transparency of the firm.

Company Profile

MFCL was incorporated in 1974 under the Companies Act No 17 of 1978 as a

subsidiary of Entrust Limited. MFCL is a mid scale registered finance company

(RFC) with 5 fully fledged branches operating in key cities in the island.The company’s major business interests are in the areas of Finance Leasing, Hire

Purchase Financing, Consumer loans/ Business loans including Mortgage Loans &

Pawning.

Future Business Plans

MFCL intends to increase the present branch network including pawning centers to

capitalize the future growth in economic activities in the country. Further the

company plans to introduce new products such as real estate financing so that the

company can venture in to the real estate business. The company plans to further

increase its activity in the pawing segment of the business and therefore plans to

move in to new locations to cover a larger geographic location.

The company intends to introduce Shariah Compliant products & services in near

future.

Key Financials - MFCL

LKR Mn 31.12.2010 31.03.2010 31.03.2009 31.03.2008

Interest Income 92.6 73.8 41.8 25.9

Net Interest Income 58.8 57.2 30.6 16.8

Profit Before Tax 24.3 8.1 0.25 6.9

Profit After Tax 18.6 5.9 (3.8) 3.4

Loans & Advances 596.8 321.7 193.8 54.0

Total Assets 689.4 423.3 343.1 222

Deposits 146.1 129.4 61.5 64

Shareholders Funds 265.7 247.9 242.1 141

EPS (LKR) 1.38* 0.33 (0.39) 1.64

NAVPS (LKR) 14.7 13.7 13.5 7.8

* Annualized EPS

Major Revenue StreamsMajor Revenue StreamsMajor Revenue StreamsMajor Revenue Streams

Total No of Shares17,976,325

CSE Listing Dirisavi Board

Issue Type Introduction

Key Features

Shareholder Shareholder Shareholder Shareholder % Stake% Stake% Stake% Stake

Entrust Limited 86.30

Mrs. Jayanthi Kalubowila 1.70

Mr. Vageesha Ranepura 1.20

Dr. Nihal Wilfred Karunaratne 0.70Capital Alliance Holdings Ltd 0.60

Top 05 Shareholders

15%

67%

5%

8%

3% 2%

Lease Finance Hir Purchase

Loans Treasury Bills

Treasury Bonds Pawning





Key Ratios

RFC Industry

Registered finance companies (RFC) in Sri Lanka are presently undergoing a rapid

transformation phase fueled by the competition between industry incumbents and

stringent regulatory barriers by the Central Bank of Sri Lanka.

Presently, the industry possesses LKR 233.6 billion worth assets accounting for 3.4%of the financial sector assets. The industry had been a duopoly earlier recording 50%

of the industry assets shared amongst the largest two firms ,The Finance PLC & the

Central Finance PLC, dropped down to 37% in 2009 .Further, largest 9 RFCs

account for approximately 73% of the total assets, while 18 medium size RFCs

record only 24% of total assets.

Finance Companies business had to face difficulties in 2009 due to high

interest rates and the increased credit and liquidity risks caused due to the

collapse of certain unregulated finance companies, leading to a loss of investor confidence, which spread across the entire sector. The sector is

steadily recovering as a result of the good governance and well adapted

business practices undertaken by the RFCs together with the stringent

regulations and supervision undertaken by the CBSL.

Asset Quality of RFC Industry

Dr. Asoka Nimal Jinadasa

Mr. Abdul Hassan Mohamed Riyaz

Mrs. Thirugnanam Kanagasabai

Mr. Chanuka Upendra Ratwatte

Mrs. Romesha Dushyanthi Senerath

Mrs. Lakmali Priyani Ann Ratwatte Wickremasooriya

Mr. Kangara Pathirannehelage Nadika Sanjeewa Da

Mr. Balapuwaduge Niloshan Romelo Mendis

Mr. Isira Dharmapriya Bandara Dassanayake

Board Of DirectorsBoard Of DirectorsBoard Of DirectorsBoard Of Directors

0

2

4

6

8

10

12

0

2

4

6

8

10

12

14

16

18

2006 2007 2008 2009 2010

%

R s

. b i l l i o n

Gross NPA's (Rs Bn) Gross NPA Ratio(%) Net NPA Ratio(%)

Key Ratios 31-Mar-10 31-Mar-09

Gross NPL Ratio 1.22% 2.84%

Capital Adequacy Ratio 53.33% 78.51%

ROE 2.41 -2.01%ROA 2% -1%





Competitor Analysis

This document has been prepared and issued by Asha Phillip Securities Ltd, on the basis of publicly available information, internallydeveloped data and other sources, believed to be reliable. Whilst all responsible care has been taken to ensure that the facts stated araccurate and the opinions given are fair and reasonable neither Asha Phillip Securities Ltd, nor any Director, Officer or employee, shallin any way be responsible for the contents. Asha Phillip Securities Ltd may act as a Broker in the investments which are the subject ofthis document or related investments and may have acted upon or used the information contained in this document, or the research oranalysis on which it is based, before its publication. Asha Phillip Securities Ltd., Its Directors, Officers or Employees may also have position or be otherwise interested in the investments referred to in this document. This is not an offer to sell or buy the investmentsreferred to in this document.

Multi Finance Swarnamahal Chilaw Finance Central Finance The Finance Company L B Finance Softlogic Fina2009/2010 2009/2010 2009/2010 2009/2010 2009/2010 2009/2010 2009/2010

LKR LKR LKR LKR LKR LKR LKR

Income 80,643,915 425,680,931 122,217,218 7,601,262,000 5,203,999,903 4,130,993,392

Net Interest Income 57,185,344 143,750,578 67,473,984 2,664,593,000 -1,011,656,895 1,703,227,212

Operating profit 13,517,112 25,676,676 43,042,851 1,842,517,000 -3,692,079,619 1,038,033,655

Profit/ (loss) before tax 13,589,126 23,392,952 33,974,513 2,040,094,000 -4,285,937,282 878,290,108

Net Profit 5,896,930 16,782,611 25,975,281 1,124,835,000 -4,285,937,282 500,161,124

Total assets 423,290,818 2,418,684,523679,610,678 35,477,281,000 27,454,894,383 17,185,262,704 1,867,7

Total equity 247,949,486 230,984,854296,621,943 9,126,954,000 -2,916,806,296 1,756,432,609 217,5

Operating Profit Margin 16.76% 6.03% 35.22% 24.24% -70.95% 25.13% Net Profit Margin 7.31% 3.94% 21.25% 14.80% -82.36% 12.11%

Return on Equity 2.38% 7.27% 8.76% 12.32% 146.94% 28.48%

EPS 0.33 0.72 0.95 51.53 -209.9 14.44

DPS - - 0.75 2.50 - 5.00 1.0

Equity/Total Assets 59% 10% 44% 26% -11% 10%

Net Assets value per share 13.79 9.24 10.07 449.6 -142.85 50.72

Documents

Multi Finance Company Ltd - Introduction review