Lucky Lanka Milk Processing Co.

Ltd
Initial Public Offering of Ordinary Shares
38 Mn Voting Shares | 24 Mn Non-Voting Shares

Sector: Food & Beverage

Rs.6.00 & Rs.3.00

July 2014

SUBSCRIBEMediumTermBuy

AbouttheCompany
The company is engaged in the process of making yoghurt and other milk
products,anddistributingthemislandwideunderthebrandnameLUCKY.

ThecompanyistheonlyyoghurtmanufacturerwithaSLScertificationinSri
Lanka.Ithasitsowncolddistributionnetworkthatconsistsof120delivery
vehiclescoveringtheentireIsland.

LuckyLankaMilkProcessingCompanyLimitedwasincorporatedon15June
2007asalimitedliabilityCompany,andtodayLUCKYisawellestablished
localdairybrand.Thecompanyisnowenteringitsgrowthphaseexpanding
itsoperationsandmarketshare.

CaseforInvestment

NonVoting

GrowingEarnings:

EPS(Rs.)
+/Growth
PE(x)Voting
NonVoting
NAV(Rs.)
PBV(x)Voting
NonVoting

3.00

No.ofsharesofferedviaIPO
Voting

38.0Mn

NonVoting

24.0Mn

TotalNo.ofsharesinissue
subsequenttotheIPO

200.0Mn

Voting

176.0Mn

NonVoting

24.0Mn

ResultantMarketCapitalization

Rs.1,128Mn

PostIPOshareholding

6.00

Issueprice(Rs.)Voting

2015(F)
0.38
270%
15.9
8.0
3.64
1.65
0.82

2016(F)
0.59
57%
10.2
5.1
4.18
1.44
0.72

PromoterShareholders

75.57%

PublicHolding

24.43%

Capitaltoberaisedthrough
theIPO

Rs.300Mn

OpeningdateoftheIssue

07th July 14

Closingdate

24th July 14

Minimumsubscription

1,000 Shares

AllotmentStructure

Company will be almost debt free: Rs.200mn of Interest bearing

borrowingswillbesettledthroughIPOproceeds.Thecompanywill
makeasignificantsavingonfinanceexpenses
Improvedproductioncapacity:Rs.75mnoftheIPOproceedswillbe
used to improve and expand the production capacity of the milk
processingplant
Increasing Demand for Locally Manufactured Dairy Products: Due
totherisingpriceofimportedpowderedmilkandtherecenthealth
hazards of imported dairy; consumers are shifting to use locally
manufactureddairyproducts.
Strategiesareinplacetopenetratenewmarketsegmentsthrough
newdistributionchannels:Thiswillincreasesalesandprofits

LuckyLankaMilkProcessing
CompanyLimitedIPO

No.ofShares
Offered(Mn)

Category
*RetailindividualInvestors
UnitTrusts
**NonRetail
Total

17.10(45%)
3.80(10%)
17.10(45%)
38.00(100%)

*RetailIndividualinvestorsApplicationsfor
avalueofnotmorethanRs.100,000
**NonRetailInvestorsApplicationsfora
valueexceedingRs.100,000

FundamentalAnalysisDivision
Capital TRUST Research (Pvt) Ltd

Page|1

ShareholdingStructureOrdinaryVotingShares
Shareholder

Numberof
Shares

Mr.LalK.A.Gunawardena

93,119,850

67.5%

52.9%

Ms.B.A.Gunawardena

13,302,910

9.6%

7.6%

Ms.D.A.Gunawardena

13,302,825

9.6%

7.6%

Ms.N.A.Gunawardena

13,302,825

9.6%

7.6%

GohFamilyInvestmentHolding

5,000,000

3.6%

2.8%

SharesofferedthroughtheIPO

38,000,000

NIL

21.6%

176,028,410

100.00%

100.00%

Total

Shareholding
PreIPO
PostIPO

Note:

During February 2014 5.0mn shares of the company was issued to Goh Family
Investment Holding at Rs.6.00 per share (same as the IPO price). These shares
willbelockedinforsixmonthsfromthedateoflisting.

Outofthe133mnnonpublicshareholding,125.5mnshareswillbelockedinfor
twelvemonthsfromthedateofallotmentorsixmonthsfromthedateoflisting
whicheverislongerandthebalance7.5mnshareswillbelockedinforsixmonths
fromthedateoflisting.

ObjectiveoftheInitialPublicOffer
1. Rs.200mnoftheIPOproceedswillbeusedfordebtretirement
This will make the company almost debt free, and reduce the finance
costsignificantly.

2. Rs.75mnwillbeusedtoimprovetheexistingproductionplant
a. Rs.35Mnwillbeutilizedimmediatelytobuildanewcoldroom
complexwithanammoniarefrigerationsystem
b. Rs.30MnwillbeutilizedtoaddanextensiontotheexistingUHT
milkprocessingbuilding
c. Rs.10Mnwillbeinvestedinnewmachinery

3. Rs.25mnwillbeusedtofinancethefollowingnewprojects
a. GedarataKiriDoortodoorsellingofMilk
b. MilkBarOutletandSchoolCanteen

LuckyLankaMilkProcessing
CompanyLimitedIPO

FundamentalAnalysisDivision
Capital TRUST Research (Pvt) Ltd

Page|2


Finan
ncialHighlights&R
Ratios

EBITD
DA
Rs.M
Mn

Rs.Mn

200.0
0

120.0
0

ProfitAfte
erTax

150.0
0
80.0
0
100.0
0
40.0
0
0
50.0

2012

2013

2014

2015
5F

2016F

2013

2012

2014

2015
5F

2016F

Summ
marizedInco
omeStatem
ment
YearEnded31stM
March
Rs.M
Mn
Revenue
+/G
Growth(%)
EBITD
DA
+/G
Growth(%)
PAT
+/G
Growth(%)

2
2012

2013

68
81.7
8
88.0
4.8

2014

2015F

2016
6F

841.8
23%
105.3
20%
18.2
276%

896.5 986.2
7%
10%
135.7 164.9
29%
21%
20.3 75.3
12%
270%

1,134
4.1
15
5%
188
8.4
14
4%
118
8.2
57
7%

EPS(Rs.)PostIP
PO

0
0.02

0.09

0.10 0.38

0.5
59

PE(x)Voting

24
48.9

66.1

59.1 15.9

10
0.2

PE(x)Nonvotingg

8.0

5.1

DPS((Rs.)

0.01 0.04

0.0
06

DividendYield(%
%)

DividendYield(%
%)

0.2%

0.6%

1.0
0%

1.3%

2.0
0%

ROE((%)

1
1.7%

5.9%

5.6%

10.3%

14.1
1%

ROA(x)

0
0.7%

2.5%

2.7%

8.6%

11.1
1%

LuckyLLankaMilkProcessing
Compa
anyLimitedIPO

FundameentalAnalysiisDivision
Capital TR
RUST Researcch (Pvt) Ltd

Page|3

SummarizedStatementofFinancialPosition
Asat31stMarch
Rs.Mn

2012

2013

2014

2015F

2016F

NonCurrentAssets

557.1

536.2

513.2

588.2

663.2

CurrentAssets
TotalAssets

123.4
680.5

183.6
719.8

252.6
765.8

289.7
877.9

402.7
1,065.8

Equity
NonCurrentLiability

292.2
166.2

310.2
194.6

360.5
123.3

728.3
7.0

835.7
7.0

CurrentLiabilities
TotalEquity&Liability

222.1
680.5

214.9
719.8

282.0
765.8

151.6
886.9

160.9
1,003.6

NAVpershare(Rs.)PostIPO

1.46

1.55

1.80

3.64

4.18

PBVVoting

4.11

3.87

3.33

1.65

1.44

0.82

0.72

PBVNonvoting

GearingRatio[Debt/(Debt+Equity)]
CurrentRatio

44%

45%

39%

4%

0%

0.56

0.85

0.90

1.91

2.50

Valuation&Recommendation

Repayment of interest bearing borrowings will make a significant saving of

financecost.Thus,thenetprofitmarginswillsignificantlyimprove.
Thedemandforlocallymanufactureddairyproductsisincreasingasmoreand
more consumers are shifting to local brands to counter the price increase and
healthhazardsofimporteddairyproducts.Hence,thecompanyisoperatingina
growingindustry.
Scheduled expansion of production capacity, penetrating in to new markets
through new distribution channels; will improve future earnings of the
company.BasedonaconservativeforecasttheshareisissuedataforwardPE
of16.0x(voting)and8.0x(Nonvoting)basedofFY2014/15earnings.
LuckyLanka
FY2014/15(F)
Voting
NonVoting

Food&
BeverageSector

Market

PE(x)

15.9

8.00

22.77

17.33

PBV(x)

1.65

0.82

5.03

2.06

The information and the opinions contained herein were compiled by Capital TRUST Research (Pvt) Ltd, and are based on information obtained from reliable sources in
good faith. However, such information has not been independently verified and no guarantee, representation or warranty expressed or implied is made by Capital TRUST
Research (Pvt) Ltd and its related companies as to its accuracy or completeness. This report is not and should not be construed as an offer to sell or a solicitation of an
offer to buy any security. Neither Capital TRUST Research (Pvt) Ltd nor its related companies, directors and employees can be held liable whatsoever for any direct or
consequential loss arising from any use of this report or the information contained herein

LuckyLankaMilkProcessing
CompanyLimitedIPO

FundamentalAnalysisDivision
Capital TRUST Research (Pvt) Ltd

Page|4

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