JKH shows resilience in 3Q; only leisure remains weak spot

Premier blue chip John Keells Holdings PLC (JKH) showed resilience in its key business segments during the quarter ended December 31, 2019 (3Q20), with only the leisure segment being a laggard after the Easter attacks erased the earnings and some properties remained offline for refurbishment. 

The group revenues hit the Rs.37.5 billion mark for the quarter, up 2 percent year-on-year (YoY).

JKH remains sanguine about the future business after the conclusion of the presidential election and the fiscal stimulus announced afterwards, as the group believes those would improve the consumer sentiment and economic activity. A significant segment of JKH’s business depends on consumer sentiment in the domestic market as a sizeable share of its portfolio includes consumer foods, retail, commercial banking and insurance.

Although the group’s leisure sector could not emerge unscathed from the Easter bombings, it showed faster recovery in terms of occupancy, albeit at a moderately lower room rate.
The group’s operating profit rose 40 percent YoY to Rs.2.5 billion, as a result of operational efficiencies, which triumphed uptick in direct costs.

However, the earnings for the quarter under review stood at Rs.1.82 a share or Rs.2.4 billion, compared to the earnings of Rs.3.46 a share or Rs.4.8 billion reported for the corresponding period, last year.

“The group’s year-on-year performance for the quarter was impacted by the downturn in the group’s Sri Lankan leisure business, which continued to be impacted post the Easter Sunday terror attacks, exchange losses recorded at the holding company on its foreign currency-denominated cash holdings, compared to the significant exchange gains recorded in the previous year and lower finance income as a result of the deployment of cash in new investments,” JKH Chairman Krishan Balendra said in an earnings release.

The company’s share yesterday ended 50 cents or 0.31 percent higher at Rs.161.

Meanwhile, for the nine months ended December 2019, the group reported earnings of Rs.4.31 a share or Rs.5.7 billion in total earnings, compared to Rs.8.71 a share or Rs.12.1 billion in total earnings a year ago.

The revenues were up 3 percent YoY to Rs.94.3 billion.

JKH declared a second interim dividend of Rs.1.50 a share to be paid on February 19, 2020.

This is an increase from the previous two dividend payments of Rs.1.00 each, which the company attributed to the positive momentum and outlook for the business performance.

Commenting on Cinnamon Life, the country’s largest on-shore real estate development project, which is now in the final stages, JKH said the installation of external facades, mechanical and electrical services and interior works are nearing completion for the residential and office towers, as planned.

“The handover will commence with the office tower from April 2020 onwards. The full completion of the project is on track for first half 2021,” Balendra said. Meanwhile, the foundation work of the group’s ‘Tri-Zen’ residential development project has also been completed with the super structure is now in progress.

This January, Northern Trust Co S/A Broga Hill Investments Ltd and investment vehicle of Malaysia’s sovereign fund, Khazanah National Berhad, sold their 10.8 percent stake to Ontario-based fund Fairfax in a Rs.23 billion deal.

HWIC Asia Fund, linked to Fairfax, already has a 3 percent stake in JKH. As at December 31, 2019, S.E Captain and R.S Captain had increased their stakes to 11.1 percent and 2.6 percent, from 10.9 percent and 0.9 percent, respectively, from three months ago.