CT CLSA - Sunshine Holdings (SUN) Initiation Report - 29 July 2016

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90

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29-Jul-15 24-Nov-15 30-Mar-16 29-Jul-16

ASI

Sunshine Holdings

SUN – Rs.50.5

1 CT CLSA SECURITIES (PVT) LIMITED | A Member of the Colombo Stock Exchange

Key Highlights

Initiation Report Sunshine Holdings, is a conglomerate with presence in Healthcare, Plantations, FMCG, Renewable

Energy and Packaging. SUN is the second largest private player in the pharmaceutical industry holding ~14% market share in Sri Lanka’s pharmaceutical imports and distribution

SUN’s NP forecast at Rs.628mn for FY17E (+7% YoY) and Rs.753mn for FY18E (+20% YoY), driven by the healthcare and FMCG sectors. Further, plantation sector is anticipated to recover, with the new strategies adopted in the tea segment and increased bottom-line contribution from the palm oil segment

SUN’s share declined -4% YoY (vs. ASI -13% YoY). The share outperformed the broader market in the past five years rising at a CAGR of +5% (vs. ASI -2%), reaching an all-time high of Rs.63.4 in November 2014

SUN share is trading at PER multiples of 10.9x FY17E and 9.1x FY18E (vs. diversified sector trailing 12 month TTM per of 14.9x), whilst offering an ROE of ~10%-11% in the medium term. We believe, a partial discount is warranted given SUN’s relatively high exposure to the volatile plantation sector, limited effective holding in growing FMCG sector and relative illiquidity. SUN is currently trading at a 16% discount to its SOTP value though we believe share seems to lack a near term catalyst to narrow this gap

Share may find favour among medium to long term investors given SUN is well positioned to leverage on the expected growth in the local pharmaceutical industry amid anticipated rise in the disposable income, ageing population and rise in Non Commutable Diseases. Further, we anticipate an increased contribution from the FMCG sector to bottom line given the rising demand for branded tea in the domestic market

Shares in Issue (mn) 135.0

Market Cap (US$ mn) 47.0

Estimated Free Float (%) 32.0

3M Avg Daily Volume 11,282

3M Avg Daily Turnover (US$) 3,956

12M High / Low (Rs) 62.0 / 46.2

3M / 12M Price Change (%) 0.6 / -3.8

Relative Share Price Movement (%)

SUN: Valuation Ratios

Note: Valuations are based on recurring EPS, Adj. for Capital Issues (if any); Historic Ratios are based on Y/E MPS

Source: SUN and CT CLSA

Key Figures & Ratios 3Q15 3Q16 % YoY 1-3Q16 1-3Q16 % YoY

Net Revenue (Rs mn) 15,171 18,073 19.1 46,833 52,590 12.3

Gross Profit (Rs mn) 1,440 2,020 40.3 4,241 5,736 35.3

Operating Profit (Rs mn) 368 917 >+100.0 1,204 2,466 >+100.0

Net Finance Income (Rs mn) -209 -156 -25.4 -709 -445 -37.3

Profit Before Tax (Rs mn) 141 779 >+100.0 466 1,983 >+100.0

Recurring Net Profit (Rs mn) 9 463 >+100.0 -74 1,211 >+100.0

Earnings per Share (Rs) 0.0 2.1 >+100.0 -0.3 5.4 >+100.0

Net Debt (Rs mn) 12,372 8,974 -27.5 12,372 8,974 -27.5

Net Debt to Equity (%) 100.8 67.7 -33.1 100.8 67.7 -33.1

Capex (Rs mn) 324 525 62.0 1,462 1,487 1.7

Note: Valuations and ratios on a recurring basis; Adjusted for capital issues (if any) Source: Company Interims

Kavindu Ranasinghe

Email : [email protected] Phone : +94 76 9108973

Sri Lanka

Diversified

29 July 2016

Key Trading Information

FY11 FY12 FY13 FY14 FY15

Net Revenue (Rs mn) 47,045 59,316 67,820 56,768 62,452

Reported Net Profit (Rs mn) 864 1,137 1,977 1,431 720

Net Profit (Rs mn) 1,165 1,141 1,034 1,127 396

Earnings per Share (Rs) 6.8 6.3 5.6 6.2 2.2

Earnings per Share Growth (%) 248.8 -7.8 -10.5 9.1 -64.8

Price / Earnings Ratio (X) 29.3 23.8 22.4 21.9 59.1

Price / Earnings Growth (X) 0.1 N/A N/A 2.4 N/A

Gross Dividends per Share (Rs) 1.2 2.1 2.3 8.3 3.4

Gross Dividend Yield (%) 0.6 1.4 1.8 6.1 2.7

Net Book Value per Share (Rs) 48.0 66.2 92.7 92.6 94.8

Price / Book Value (X) 4.2 2.3 1.4 1.5 1.4

Return on Equity (%) 13.7 10.9 7.1 6.6 2.3

Market Price per Share (Rs) 189.6 189.6 189.6 189.6 189.6

CTHR: Valuation Ratios

Note: Valuations are based on recurring EPS, Adj. for Capital Issues (if any); Historic Ratios are based on Y/E MPS Book value adjusted for Super Gains Tax liability of Rs.58mn

Source: CTHR, CT CLSA

CT CLSA SECURITIES (PVT) LIMITED | A Member of the Colombo Stock Exchange

Y/E 31 March FY12 FY13 FY14 FY15 FY16 FY17E FY18E

Revenue (Rs mn) 10,859 13,068 14,697 16,327 17,422 18,862 20,949

Recurring Net Profit (Rs mn) 448 612 599 546 587 628 753

Earnings Per Share (Rs) 3.4 4.6 4.5 4.1 4.3 4.6 5.6

Earnings Per Share Growth (%) -10.3 36.4 -2.1 -8.8 6.4 7.0 19.9

Price/Earnings Ratio (X) 6.0 5.8 6.6 11.8 12.0 10.9 9.1

Price/Earnings Growth (%) N/A 0.2 N/A N/A 1.9 1.5 0.5

Gross Dividend Per Share (Rs) 0.3 0.5 1.0 1.0 1.1 1.1 1.4

Gross DIvidend Yield (%) 1.5 1.9 3.2 2.0 2.0 2.3 2.8

Net Book Value Per Share (Rs) 23.6 28.0 36.2 39.6 42.8 46.4 50.8

Price/Book Value (X) 0.8 0.9 0.8 1.2 1.2 1.1 1.0

Return on Equity (%) 14.2 16.3 12.3 10.3 10.1 10.0 11.0

Market Price Per Share (Rs) 20.0 26.6 29.4 48.0 52.0 50.5 50.5

SUN

EQUITY REPORT TITLE | Date EQUITY REPORT TITLE | Date A CT HOLDINGS GROUP AND CLSA GROUP COMPANY 2

CARGILLS (CEYLON) PLC

Cargills Food Co. (Pvt) Ltd (92%)*

Cargills Quality Foods Limited

(100%) Investments Restaurants

Cargills Quality Dairies

Cargills Quality Confectionaries

CPC Lanka (Kist, My Choice)

Cargills Food Processors (KFC)

Cargills Agrifoods

CT Properties (25%)

Cargills Bank (20%)

Sectoral Information (Rs mn) 2Q14 2Q15 % YoY Composition (%)

2Q14 2Q15

Net Revenue 20,879.6 22,164.9 6.2 100 100

Transportation 4,135.8 3,230.8 -21.9 19.8 14.6

Leisure 5,268.2 5,480.8 4.0 25.2 24.7

Property 547.9 1,099.5 >+100.0 2.6 5.0

Consumer Foods & Retail 5,946.4 7,040.1 18.4 28.5 31.8

Financial Services 2,336.5 2,606.8 11.6 11.2 11.8

Information Technology 1,751.5 1,750.8 0.0 8.4 7.9

Others 893.3 956.0 7.0 4.3 4.3

Profit After Tax 2,302.4 2,976.9 29.3 100.0 100.0

Transportation 696.1 552.8 -20.6 30.2 18.6

Leisure 1,031.7 1,022.1 -0.9 44.8 34.3

Property 8.4 322.5 >+100.0 0.4 10.8

Consumer Foods & Retail 175.7 364.4 >+100.0 7.6 12.2

Financial Services 216.2 318.3 47.2 9.4 10.7

Information Technology 31.2 91.0 >+100.0 1.4 3.1

Others 143.1 305.8 >+100.0 6.2 10.3

CARG Operating Structure

Sunshine Holdings

Source: Company Filings * 8% stake held by IFC

The Business Sunshine Holdings (SUN) is a conglomerate with presence in Healthcare, Plantations, FMCG,

Renewable Energy and Packaging. SUN is largely a family owned business with the “Sathasivam” family owning majority of shares (~32% as at 31 March 2016)

Incorporated in 1967 as Lanka Medical, the company was later renamed as Sunshine Holdings in 2002. SUN was listed on the Colombo Stock Exchange (CSE) in 1983 and currently has a market capitalisation of Rs.6.8bn (~US$47mn)

SUN has been a key player in the private healthcare sector since 1967, catering to pharmaceutical (distribution), surgical, diagnostics and wellness segments. SUN has a leading presence in the pharmaceutical industry, holding a ~14% market share in Sri Lanka’s pharmaceutical imports and distribution. Further, SUN owns a pharmacy brand, Healthguard Pharmacy, which offers a range of pharmaceuticals, wellness and beauty products in 24 outlets located across the Western province

SUN’s plantation sector exposure is via Watawala Plantation (WATA), with an effective holding of ~25% (through Estate Management Services (Pvt) Ltd). WATA engages in the cultivation, manufacture and sale of Tea, Rubber and Palm Oil and has a total land extent of 12,440 hectares, of which 36% is Tea, 24% is Oil Palm and 6% is in Rubber

SUN’s FMCG segment is represented by Watawala Tea Ceylon Ltd (WTCL) with an effective holding of ~33%, where the portfolio consists of Tea and Bottled Water. WTCL the largest branded tea company with reputed brands such as ‘Zesta’, ‘Watawala Tea’ and ‘Ran Kahata’, accounting for ~36% of the total market

SUN has presence in the Power and Energy sector through Sunshine Energy Ltd, currently operating a hydro power plant of 1.62MW capacity of power, connected to the national grid

The group’s packaging business is operated by Sunshine Packaging Ltd (SPL), which specializes in the manufacture and printing of metal packaging such as tea caddies and confectionary boxes

SUN Group Structure

Source: FY16 Annual Report

A leading player in pharmaceutical

distribution

Healthguard Pharmacy Ltd

(100%)

Watawala Dairy Ltd (50%)

SUN – FY16 Net Profit Composition (%)

Source: Annual Report

50%

22%

20%

5% 3%

Healthcare

FMCG

Plantation

Energy

Packaging

Sunshine Holdings (SUN)

Sunshine

Healthcare (100%)

Healthguard Pharmacy Ltd

(100%)

Estate Management

Services Ltd (33%)

Watawala Plantations (76%)

Watawala Dairy Ltd

(50%)

Watawala Tea Australia (Pty)

Ltd (25%)

Watawala Tea Ceylon Ltd

(34%)

Sunshine Energy

Ltd (61%)

Sunshine Packaging Lanka Ltd

(60%)

EQUITY REPORT TITLE | Date EQUITY REPORT TITLE | Date CT CLSA SECURITIES (PVT) LIMITED | A Member of the Colombo Stock Exchange 3

Share Price Performance

Sunshine Holdings

Year Key Event

1967 Lanka Medical was formed as a retail pharmacy

1983 Listed on the Colombo Stock Exchange (CSE)

1992 Formed Estate Management Services (Pvt) Ltd (EMSPL), partnering with TATA Global Beverages

1997 Invested in WATA through EMSPL Entered into the branded tea business with the “Zesta” brand

2002 Launched “Watawala Kahata” tea brand Adopted the name 'Sunshine Holdings' as the holding company for its subsidiaries Diversified into travel & leisure by acquiring Sunshine Travels & Tours

2004 Established Healthguard Pharmacy, value-added healthcare, wellness & beauty outlets in Colombo

2005 Diversified into printing and packaging solutions for beverages and confectionery industry, via acquisition of Sunshine Packaging Ltd

2008 Aureos Capital acquired 25% stake in SUN Developed the first palm oil refinery by a plantation company in Sri Lanka

2010 Announced a 1:10 stock split Established Sunshine Energy Ltd

2011 Entered into the wellness segment by launching Surelife wellness brands Launched 1st own wellness brand: Pedia Plus Commissioned the group’s first renewable energy plant at Lower Waltrim

2012 Launched three additional wellness brands: Mama Plus, Enlive Plus and Diabeta Plus

2013 Aureos Fund exited. Re-launch of Enlive Senior 50+, Mama Plus and Diabeta Plus wellness brands. Launched Ring Condoms

2014 Partnered with Wilmar International to strengthen plantation business

2016 Entered into a joint venture with Singapore-based asset manager Duxton Asset Management to set up a US$11.5mn dairy operation

Timeline of Major Events


Relative Share Price Movement (%) 2011-2016YTD

20

40

60

80

100

120

140

03-Jan-11 22-May-12 01-Oct-13 19-Feb-15 05-Jul-16

ASI

SUN

Source: CT CLSA


Director Name Designation Executive /

Non Executive Description / Related Directorships

S.A Munir Chairman Independent

Non-Executive

Appointed as Chairman in 2015. Carries 40 years of experience at

managerial and director levels in Abbot, a US based, worldwide

healthcare company

V. Govindasamy Managing Director Executive

Serving on the board since 2000. Mr. Govindasamy pioneered the

group’s diversification into key sectors such as renewable energy and

FMCG

G. Sathasivam Director Non-Executive

Serving on the board for more than 15 years. Carries over 48 years of

experience in the pharmaceutical sector and a leader in driving SHLL’s

growth

A. Hollingsworth Director Non-Executive

Serving on the board since 2006 and was the founder and Managing

Director of Mann Made Enterprises Ltd, a supplier of corporate, trust

and tax services

T. Senthilverl Director Non-Executive

Appointed to the board in 2014 and is the director of various listed

and non-listed companies. Dr. Senthiverl had a 22.9% stake in SUN as

at 31 Mar 2016

Asite D.B Talwatte

Director

Non-Executive

Appointed to the board in May 2016 and currently serves as the

Chairman of Management Systems (Private) Ltd

Roshani Kobbekaduwa

Director

Non-Executive

Appointed to the board in May 2016. Ms. Roshani has over 20 years

experience in advising on a number of aspects of

corporate/commercial law

B. A. Hulangamuwa Director Executive Serving on the board for more than 12 years. Director of WATA and

Secretaries and Financial Services (Pvt) Ltd

S. G. Sathasivam Director Executive Appointed to the board in 2006. Mr. Sathasivam is the Managing Director of SHLL and a director of Sunshine Packaging Ltd

N. B. Weerasekera Director Independent

Non-Executive

Serving on the board since 2008. Mr. Weerasekera is the Managing

Director responsible for Sri Lanka and Bangladesh of the Abraaj

Group, a leading investment group in growth markets

S. Piyaratna Director Independent

Non-Executive

Appointed to the board in 2006. Mr. Piyaratna was a director of

Nations Trust Bank (NTB) and was the former deputy CEO of HSBC Sri

Lanka

H. D. Abeywickrama Director Independent

Non-Executive

Appointed to the board in 2014 and has experience as an Air Chief

Marshal

SUN Director Board Composition

Source : Company Filling

SUN : Director Board Composition

Sunshine Holdings

Director Name Designation Executive /

Non Executive Description / Related Directorships

S.A Munir Chairman Independent

Non-Executive

Appointed as Chairman in 2015. Carries 40 years of experience at managerial

and director levels in Abbot, a US based, worldwide healthcare company

G. Sathasivam Director Non-Executive Serving on the board for more than 15 years. Carries over 48 years of

experience in the pharmaceutical sector and a leader in driving SHLL’s growth

V. Govindasamy Managing Director Executive Serving on the board since 2000. Mr. Govindasamy pioneered the group’s

diversification into key sectors such as renewable energy and FMCG

N. B. Weerasekera Director

Independent

Non-Executive

Serving on the board since 2008. Mr. Weerasekera is the Managing Director

responsible for Sri Lanka and Bangladesh of the Abraaj Group, a leading

investment group in growth markets

S. Piyaratna Director

Independent

Non-Executive

Appointed to the board in 2006. Mr. Piyaratna was a director of Nations Trust

Bank (NTB) and he was the former deputy CEO of HSBC Sri Lanka

H. D. Abeywickrama Director Independent

Non-Executive Appointed to the board in 2014 and has experience as an Air Chief Marshal


Healthcare Sector

The group’s healthcare business comprises Sunshine Healthcare Lanka Ltd (SHLL) and Healthguard Pharmacy Ltd. Established in 1967, 100% owned subsidiary SHLL specializes in providing pharmaceutical distribution, surgical, diagnostics, medical devices and wellness products

• SUN is currently the second largest player in the private pharmaceutical industry, with a ~14% market share. The group represents ~60 principles and distributes through a network of ~2,500 pharmacies (out of an estimated total universe of 2,800 pharmacies). Further, the company owns its wellness brands such as Mama Plus, Enlive Plus, Pedia Plus and Diabeta Plus. In addition, SUN is the market leader in the diagnostics sector

• Furthermore, Healthguard Pharmacy Ltd, which is a fully owned subsidiary of SHLL, is a pharmacy brand offering a range of pharmaceuticals, wellness and beauty products in 24 outlets located across the Western province

Pharmaceutical Segment

Industry Overview

Sri Lanka’s pharmaceutical industry is highly dependent on imported medicines, accounting for ~95% of the country’s requirements, while the rest is locally manufactured

In 2015, Sri Lanka’s total private healthcare market had an estimated value of Rs.110bn as per

industry sources, of which the private pharmaceutical segment is estimated to have consisted of ~31% • During 2012-2015 the private pharmaceutical industry witnessed a slower growth, at a 3

year CAGR of +2%, likely due to rising cost of healthcare amid currency depreciation and higher bargaining power of the pharmaceutical suppliers. However, the available research does not include total pharmaceutical expenditure as it excludes points of sale statistics such as pharmacy outlets in private hospitals, modern trade pharmacies and over the counter (OTC) sales at grocery outlets

Competition

Local pharmaceutical industry consists mainly of public and private sector, of which public sector is estimated to have ~65% of the total pharmaceutical industry as per industry sources. In addition, the private sector primarily concentrates on marketing branded drugs while the public sector’s effort is to promote generic drugs at affordable prices

Over the past few years, SUN witnessed a gradual increase in its market share from ~12% in 2012 to ~14% in 2015

Private pharmaceutical industry is highly fragmented market with ~200 players. SUN’s main direct private competitor is diversified conglomerate Hemas Holdings (HHL), with interest in FMCG, Healthcare, Transportation and Leisure sectors

• HHL is the largest distributor of branded pharmaceuticals, surgical and diagnostic products

in Sri Lanka and has the largest pharmaceutical network in the country with a ~21% market share. Further, HHL distributes its products via supermarket chains, private hospitals, government institutions and the “Hemas Sales Centre”

Sunshine Holdings

Value of Pharmaceutical Imports (US$ mn) and Variance YoY (%)

-10

15

40

65

150

250

350

450

2006 2008 2010 2012 2014

Pharmaceutical Imports (LHS)

Var YoY

Source: Ministry of Finance and Planning

Pharmaceutical Segment - Revenue (Rs mn) and Variance YoY (%) - SUN vs. HHL

Source: Respective Annual Reports *Figures of pharmaceutical, diagnostic and surgical

HHL* SUN

FY14 FY15 FY16 FY14 FY15 FY16

Revenue 10,255 11,276 12,914 4,965 5,449 6,374

YoY (%) 18 10 15 3 10 17

21%

14%

8% 7%

7%

43%

HHL

SUN

EmerChemieA. Baurs &CoCity Health

Others

Market Share Composition of Pharmaceutical Industry (%)

Source: SUN and CT CLSA

Key Pharmaceutical Principles Represented

SUN HHL

Zydus Cadila Ranbaxy

Abbott Sevier

Glenmark Seven Seas

Siemens Abbott

Source: SUN and CT CLSA HHL : Hemas Holdings


Competition

Further, SUN faces indirect competition from government owned, State Pharmaceutical Corporation (SPC), who supplies drugs to both the public and the private sectors, through an open competitive tender procedure. SPC distributes medicine via a total network of ~205 outlets which include “Rajya Osu Sala”, franchised “Osu Sala” outlets, SPC distributors and authorized retailers

• The value of free pharmaceuticals provided increased at a CAGR of ~+20% through 2011-2015, thereby offering more drugs at an affordable price. Going forward, the state sector is likely to be a growing threat to the overall pharmaceutical competitive landscape

Further, SUN faces competition from local drug manufactures such as J.L Morisons Sons & Jones (MORI) – 85% owned subsidiary of HHL which was acquired in 2013, Ceylon Pharmaceutical Ltd and state owned State Pharmaceutical Manufacturing Corporation, although local manufacturing is conducted at a relatively small scale

Meanwhile, SUN’s retail pharmacy segment faces direct competition from in-house pharmacies in retail super markets such as “Food City”, “Keells Super” and “Arpico Super Markets”

Local Regulatory Environment

Cosmetics, Devices and Drugs Regulatory Authority (CDDA) appointed by the Ministry of Health (MOH) regulates all pharmaceuticals, surgical products, diagnostic products and health supplements. CDDA mainly oversees registration, manufacture, importation and transportation of pharmaceuticals

• However, CDDA, seems to demonstrate irregularities in terms of time it takes to approve new medicines, attributable to its highly bureaucratic nature, limited lab facilities, funds and human resources. Further in recent times, several incidents of importing substandard quality drugs were reported, owing to inefficiencies on the part of the CDDA

The Government of Sri Lanka’s (GoSL) National Medicinal Drug Regulatory Authority Bill was passed in early 2015 and is expected to address some of the above mentioned issues though its specifics are yet to be established. The bill is likely to create a more equal playing field for legally compliant members such as SUN and also focuses on encouraging more local drug production. However, proposals of the National Medicinal Drug Regulatory Authority Bill have not yet been clearly communicated

In a move to promote affordable healthcare, the bill mandates all doctors and consultants prescribe the generic name to their patients. Enforcement of the bill will likely remain a challenge

Industry Outlook

Ageing population on the rise - Sri Lanka is in the midst of a demographic shift to an ageing population, with the country estimated to have the fastest ageing population in South Asia as per the World Bank. This trend is likely to give rise to an increasing demand for different medical products such as vitamins, preventive, painkillers and therapeutic geriatric products

• The median age of the population now stands at 30 years vs. 21 years in 1981. Furthermore, the World Bank estimates that individuals over 60 years will account for ~17% of Sri Lanka’s population by 2021 from the current ~14%

Increasing disposable income levels - In the medium to long term, with the local economy expected to move into a sustainable growth trajectory, we expect disposable income levels to increase gradually, resulting in an increased demand for branded drugs

Sunshine Holdings

Healthcare Sector

020406080

10

20

30

40

2010 2011 2012 2013 2014

Pharmaceuticals (LHS)Var YoY

CDDA regulates pharmaceutical industry

in Sri Lanka

World Bank estimates 17% of population to be

over the age of 60 by 2021

Pharmaceuticals – Value of Public Sector pharmaceuticals (Rs bn) and Variance YoY (%)

Source: Ministry of Finance and Planning

Population Age (%)

0 50 100

1946

1981

2001

2012

2021

2031

60 Years & Over 15-59 0-14

Mean Household Income (Rs 000)

20

30

40

50

2006/07 2009/10 2012/13

Source: Annual Health Bulleting/World Bank Source: Department of Census and Statistics


CARG bear the difference

[VAT on 45% of revenue

- VAT on 45% input

cost]

CARG : VAT payment without restrictions

Cost – Rs.200 (50% liable for

VAT)

Receive VAT invoice on VAT liable inputs (45% of products)

Revenue Rs.200+

Claim the VAT already paid by the supplier

Pay VAT on revenue

on 45% VAT liable products

+Margin (10%)


[VAT on 75% revenue -

VAT on 45% of input cost]

CARG : VAT payment with “Deemed VAT”

Input


Revenue


Pay VAT on revenue


+Margin

Healthcare Sector

Industry Outlook

Changing lifestyles - Changing life styles have led to rise in Non-Communicable Diseases (NCDs) such as diabetes, cardiovascular diseases, high blood pressure and cholesterol, which is likely to give rise to higher demand for pharmaceuticals

Increased outreach by healthcare providers - There is likely to be an increased demand for diagnostic and surgical products, given the increase of testing centers across the country and the opening of new branches, collection centers island wide by leading private hospitals and laboratories

Financial Performance Sector NP declined at a 4 year CAGR of -2% FY12-FY16 with significant volatility over the period,

largely resulting from cost side factors

Healthcare sector EBIT margin deteriorated to 7.2% by FY16 (vs. 11.8% in FY12) owing to supply-side pressure, increasing brand building expenses, staff costs and currency depreciation

• Further, the regulated ~15% margin ceiling on pharmaceutical products limits SUN’s ability to pass on higher costs

Healthcare sector revenue grew at a 4 year CAGR of +11% over FY12-FY16 led by the

pharmaceutical sub segment owing to addition of new pharmaceuticals, increasing disposable income, ageing population, changing lifestyles and rise in NCDs etc. Further, SUN’s strong distribution network (covering ~2,500 pharmacies out of a total universe of ~2800) too contributed to the topline growth over the years Revenue in the pharmaceutical segment grew at a 2 year CAGR of ~+13% over FY14-FY16

while retail sector and diagnostic sector revenue grew at a CAGR of ~+20% and ~+17% respectively during the same period (as per the latest data available)

Healthcare sector net profit was Rs.327mn for FY16 (+11% YoY) mainly driven by the volume led revenue growth in the pharmaceutical sub segment • Pharmaceutical segment revenue increased by +17% YoY to Rs.6,374mn (vs. Industry

growth of ~ +6% YoY) in FY16

Sector Outlook

Healthcare sector net profit forecast at Rs.361mn for FY17E (+10% YoY) largely driven by the double digit revenue growth. Further, FY18E net profit forecast at Rs.415mn (+15% YoY) led by continuous revenue growth

We forecast EBIT margin to decline to 6.8% FY17E (vs. 7.2% in FY16) amid currency depreciation, promotional and supply side pressure due to competition

• Meanwhile, we expect EBIT margins to fall moderately to 6.7% in F18E, with modest currency depreciation and expected continuation of supply side pressure and promotional expenses

Revenue forecast at Rs.8,171mn for FY17E (+14% YoY) and Rs.9,431mn for FY18E (+15% YoY) largely driven by the pharmaceutical sub segment, anticipating a growth of +13% YoY for FY17E and +14% YoY for FY18E led by volumes

• Further, we expect increased contribution from retail segment with a growth of +18% YoY and +20% YoY respectively for FY17E and FY18E, led by branch expansion and rise in demand for wellness and beauty categories

• Moreover, a revenue growth of +18% YoY for FY17E and +21% YoY for FY18E is anticipated in the diagnostic segment amid increasing number of testing centers across the country, with the opening of branches and collection centers by leading private hospitals and laboratories

Sunshine Holdings

Revenue VAT liable (50%): Rs. 55+11% = Rs.61.05 Non Vat Liable (50%): Rs.55 Gross Revenue = Rs.116.05

Rise in NCDs likely to increase demand for

pharmaceuticals

Healthcare Sector: Revenue Composition (%)


FY16

Source: Annual Report and CT CLSA

Healthcare Sector: Revenue & NP Variance (%)

-20-1001020

48

121620

FY12 FY14 FY16 FY18E

Revenue Var YoY (LHS)NP Var YoY

*Pharmaceutical includes diagnostic and surgical

87%

10% 3%

86%

11% 3%

*Pharmeceutical

RetailHealthguard

Other

FY14


Healthcare Sector

Plantation Sector SUN’s exposure in the plantation sector is via a 25% effective holding in listed Watawala

Plantation (WATA) held through Estate Management Services (Pvt) Ltd (EMSPL). WATA’s main contributor to NP in FY16 was palm oil (Rs.682mn) and export segment (Rs.65mn) while tea and rubber made a loss of -Rs.315mn and -Rs.48mn respectively • WATA has been the single largest tea producer in the country in the last few years with the

highest exposure to Western High Grown tea (~50%), followed by Western Medium Grown tea (~47%) and Low Grown tea (~3%)

• Currently, WATA is also the single largest palm oil producer in Sri Lanka accounting for ~53% of total palm oil production in the country with cultivation mainly located in the southern province. Further, WATA owns one of the two palm oil mills in the country, currently processing over 19,000 tonnes fresh fruit bunches (FFB) annually

EMSPL, which holds 76% in WATA, is a joint venture between SUN, TATA Global Beverages Ltd (India) and Pyramid Wilmar Plantation (Pvt) Ltd (part of Wilmar International)

• During FY14, WATA entered into a new partnership with Pyramid Wilmar Plantation (Pvt) Ltd

subsequent to selling 5.6mn shares of EMSPL for a total consideration of Rs.910mn. Consequently SUN’s stake in EMSPL reduced from 51% to 33%

• Wilmar is one of Asia's largest palm oil producers with exposure to oil seed crushing, sugar milling & refining along with a distribution network of over 50 countries. The alliance is expected to provide WATA with Wilmar International’s expertise in palm oil cultivation and marketing

• TATA Global Beverages Ltd is one of the largest branded tea companies in the world with a brand presence in over 40 countries and interests in tea, coffee and water. TATA holds 32% of EMSPL



[VAT on 45% of revenue

- VAT on 45% input

cost]

CARG : VAT payment without restrictions

Cost – Rs.200 (50% liable for

VAT)


Revenue Rs.200+


Pay VAT on revenue


+Margin (10%)


[VAT on 75% revenue -

VAT on 45% of input cost]

CARG : VAT payment with “Deemed VAT”

Input


Revenue


Pay VAT on revenue


+Margin

Sunshine Holdings

Revenue VAT liable (50%): Rs. 55+11% = Rs.61.05 Non Vat Liable (50%): Rs.55 Gross Revenue = Rs.116.05

Healthcare Sector: EBIT(Rs mn) & EBIT Margin (%)


Healthcare Sector: NP (Rs mn) & Contribution to Group (%)

6

8

10

12

400

500

600

700


EBIT (LHS) EBIT Margin

52

56

60

64

250

350

450

FY13 FY14 FY15 FY16 FY17E FY18E

Net Profit (LHS) % of Group NP


WATA Land Cultivation (%)

Tea 36%

Palm Oil 24% Rubber

6%

Other 34%


EMSPL is a JV between 3 parties

FY12 FY13 FY14 FY15 FY16 FY17E FY18E 5 YR

CAGR %

Revenue (Rs mn) 4,705 5,296 5,511 6,076 7,161 8,171 9,431 14.4 YoY% 9 12.6 4.1 10.2 17.9 14.1 15.4 N/A EBIT (Rs mn) 557 557 510 444 514 554 630 5.4 Net Profit (Rs mn) 431 360 358 294 327 361 415 3.8 YoY% 26.0 -16.6 -0.6 -17.8 11.4 10.1 15.1 N/A EBIT Margin (%) 11.8 10.5 9.3 7.3 7.2 6.8 6.7 N/A

Healthcare Sector: Key Financial Indicators


0

50

100

150

200

250

2010 2011 2012 2013 2014 2015

Bulk Tea Value Added Tea

Plantation Sector

Tea Segment Industry and Exports

Sri Lanka is the second largest tea supplier to the world market exporting 317,885 Metric tonnes in 2014, followed by China, India and Vietnam. Sri Lanka exports more than 90% of the locally produced tea to international markets

Sri Lanka’s tea exports earnings consisted ~1.6% of GDP 2015 (vs. 2.4% in 2010) and 13% of total exports in 2015 • Sri Lanka has been witnessing a decline in tea export earnings (-18% YoY to US$1,341mn in

2015), largely due to the drop in oil prices which impacted most of the premier importing destinations of Sri Lankan tea (i.e. Russia, Turkey and the Middle East)

Tea Plantation Divisions

By 2014, Sri Lanka had ~204,000 hectares (Ha) under tea cultivation of which 73,445Ha (36%) were owned by 22 Regional Plantation Companies (RPCs)

Sunshine Holdings

Dairy farm with an initial investment of Us$3mn

Source: FY16 Annual Report

SUN

Joint Venture Partners of EMSPL

Tata Global Beverages

(32%)

Pyramid Wilmar Plantations

(35%)

ESMPL (76%)

WATA

Sri Lankan tea exports have been facing a

challenging environment

In March 2016, WATA entered into a joint venture agreement with M/s PADC Holdings to set up a diary farm in the Lonach Estate in Watawala through a subsidiary namely Watawala Dairy Ltd. The group invested US$3mn during FY16 on the project • M/s PADC Holdings is a 100% owned subsidiary of

Duxton Asset Management Singapore with ~US$690mn assets under management, of which US$460mn comprises agricultural investments

• Dairy Farm is expected to be operational by early 2017 and the project is anticipated to produce 30,000 Liters a day with 1,700 cows of which 1,000 will be dairy cows

33% 32%

35%

76%

Major Sri Lanka Tea Export Destinations 2015 (%)

Source: Sri Lanka Export Development Board

Tea Export Value (Rs bn)

Source: Forbes & Walker

59%

36%

5% TeaSmallholders

RPCs

GovernmentInstitutions

National Tea Production Composition 2014 (%)

Source: Ministry of Plantation Industries

WATA

EMSPL (76%)

Sunshine Holdings

(33%)

Tata Global

Beverages

(32%)

Pyramid Wilmar Plantations

(35%)

Russia 12%

Turkey 10%

Iran 10%

Iraq 8%

U.A.E 7%

Other 53%


Sunshine Holdings

Plantation Sector Tea Production Total tea production in the country rose at a 7 year CAGR of +3% over 2008-2015 to 329mnKg,

reaching an all-time high of 340mnKg in 2013. Industry yield per hectare (YPH) grew at a CAGR of +2% over 2012-2015 (likely due to increased worker productivity and better soil management practices). Tea production in the country, however, has been volatile largely due to erratic weather conditions

WATA had the largest tea market share of ~3% among the RPCs in FY15 while its total tea

production grew at a CAGR of +2% to 9.4mnKg over FY09-FY16 • Although WATA’s tea production growth and YPH have been lower vs. the total production

growth in the country over the past years, WATA stands moderately ahead of other RPCs. Generally RPCs process larger quantities of mature tea plants which yield lower outputs, and these companies have been making lesser investments in the tea segment

Cost of Production

In recent times, most RPCs have been generating losses, largely due to the rise in cost of production and weaker prices fetched at local auctions • Production costs of tea have escalated during the past decade mainly due to the

rise in labor costs with the bi-annual wage hikes

• Total cost of production of tea grew at a CAGR of +44% over 2010-2015 to Rs.450/kg, while the average net sales average (NSA) grew +9% during the same period to Rs.403/kg

• Labour costs consists of ~70% of total costs. Estate workers are currently paid on a remuneration based model rather than a productivity based model and the tea industry is highly unionized

Industry Outlook Sri Lankan tea industry continues to be hampered by rise in cost of production, resulting in

declining cost competitiveness in the global market - main reason being increase in wages without a link to productivity improvement

• RPCs are currently in negotiation with trade unions on a possibility of a “productivity base” or

a “revenue sharing” wage model

Declining yields of tea bushes, which are nearly 50 years old in most RPCs, likely to reduce YPH going forward. Further, shortage of workers in the plantation sector could also pose a threat to the sector

Meanwhile, tea auction prices are anticipated to improve with expected improvement in the Russian economy and removal of trade sanctions in Iran. Further, the GoSL plans to invest in the Sri Lanka tea brand and promote in new and existing markets which could improve demand for Ceylon tea

Total tea production grew at a CAGR of +3%

over 2008-2015

WATA was the largest tea producer among RPCs in the last few

years

National Tea Production (mnKg) and Variance YoY (%)

Source: Forbes & Walker

-10

0

10

20

280

300

320

340

360

2009 2011 2013 2015

Tea Production (LHS) Var YoY

Yield Per Hectare of Key listed Players Kg (‘000)

Source: Respective Company Annual Reports

0.8

1.2

1.6

2.0

2.4


WATA MASK KOTABALA ELPL KGAL

MASK : Maskeliya Plantations, KOTA : Kotagala Plantations, BALA : Balangoda Plantations, ELPL : Elpitiya Plantations,

KGAL : Kegalle Plantations

National Sales Average and Cost of Production (Rs/kg)

Source: Ministry of Plantation Industries

300

400

500

2010 2012 2014

NSA Cost of Production

Rise in cost of production continues to

be a threat


Plantation Sector

Palm Oil Segment Industry

Currently, palm oil is cultivated in the Southern Province by five listed RPCs and Sri Lanka State

Plantation Corporation (7,953Ha cultivated in 2013) In Sri Lanka, palm oil is used primarily as an edible oil. Other alternative edible oil used locally

includes coconut oil, sunflower oil and soya bean oil etc. Currently, ~70% of the edible oil consumption in Sri Lanka is imported

Palm Oil Production In FY15, five RPCs are estimated to have produced a total of ~16,626 Metric Tonnes (MT)

(+2% YoY and +11% CAGR during FY11-FY15) crude palm oil due to its higher profitability (vs. other crops) and also as part of the crop diversification strategy • Palm oil has been a more profitable crop to grow locally due to its higher yields and

lower labour intensive nature. Labour requirement for oil palm cultivation is much less, with just one worker to cultivate ten hectares of the crop (vs. tea which needs two or three workers per hectare). Further, palm oil has a potential oil yield of 3,000 to 4,000 litres/Ha per annum. (vs. coconut ~700 litres/Ha, sunflower oil yields ~600 litres/Ha and soya-bean oil ~460 litres/Ha)

WATA is the largest palm oil producer in the country, estimated to have produced ~53% of the country’s total palm oil production in FY15. During FY11-FY15 WATA, grew its crude palm oil production at a 4 year CAGR of +15%

• Further, WATA has been reporting the highest yield per hectare (YPH) among the RPCs, at

3,294Kg/Ha (vs. ELPL 2,889 Kg/Ha, NAMU 2,809Kg/Ha)

Palm Oil prices World palm oil prices likely to have resembled fossil fuel prices over the years, which is a close

substitute for one of the key uses of palm oil as a bio fuel. Further, palm oil prices witnessed a volatile trend in the past few years

Palm oil prices in Sri Lanka have been closely in line with international prices. However, palm oil growers in Sri Lanka are subsidized through a duty element of Rs.150/Kg on imports crude palm oil

Sunshine Holdings

Source: Annual Reports

Key Players in Palm Oil Production in Sri Lanka (%)

WATA 53%

AGAL 10%

NAMU 21%

ELPL 16%

AGAL : Agalawatte Plantations, NAMU : Namunukula Plantations, ELPL : Elpitiya

Plantations

Global Palm Crude Palm Oil Prices (Ringgit/MT) and Crude Oil Prices (USD$/BBL)

Sri Lanka: Palm Oil Production (MT’000) & Variance YoY (%)

0

10

20

30

14

15

16

17

FY12 FY13 FY14 FY15

Palm Oil Production (LHS) Var YoY

Source: Annual Reports Source: mpoc.org and gotech.nmt.edu

WATA is the largest palm oil producer in the

country

0

50

100

150

0

1,000

2,000

3,000

4,000

Jul-11 Jul-13 Jul-15

Palm Oil Price (LHS) Crude Oil price


Plantation Sector

Industry Outlook GOSL’s goal is to increase palm oil cultivation from its current ~8,000Ha to 20,000Ha by 2020

In 2016, GOSL further increased the taxes of imported edible oil by Rs.20/Kg to Rs.150/Kg to

protect the local industry, which is further expected to stabilise the local edible oil prices

Dairy Segment

In March 2016, WATA entered into a joint venture agreement with M/s PADC Holdings to set up a dairy farm in the Lonach Estate in Watawala through a 60% owned subsidiary, Watawala Dairy Ltd. The group invested US$3mn during FY16 on the project • M/s PADC Holdings is a 100% owned subsidiary of Duxton Asset Management Singapore

with ~US$690mn assets under management, of which US$460mn comprises agricultural investments

• The dairy farm is expected to be operational by early 2017 and the project is anticipated to produce 30,000 Liters a day with 1,700 cows

Financial Performance Sector net profit (NP) declined at 3 year CAGR of -9% over FY13-FY16 largely due to

pressure on GP margins amidst rise in cost of production

Sector gross profit (GP) declined at a 3 year CAGR of -7% over FY13-FY16 while GP margin declined to 13.5% in FY16 (vs.19.3% in FY13) mainly attributable to the higher costs in the tea segment amid wage hikes

• The latest wage negotiation in 2013 resulted in a +20% wage hike to plantation workers

• Meanwhile, palm oil segment has been able to record GP growth of +6% over FY13-FY16 while segment's GP margin too improved to 54.9% in FY16 (vs. 52.2% in FY13)

SUN’s Plantation sector reported a net profit of Rs.518mn for FY16 (+33% YoY) mainly due to the reduction in net losses in the tea segment

• Palm Oil segment net profit declined -33% YoY to Rs.682mn in FY16 largely due to drop

in global palm oil prices (-6% YoY decline in FY16 to Rs.167/kg). Profitability was also impacted by adverse weather conditions

Sunshine Holdings

Yield Per Hectare (Kg/Ha) of palm oil in the region

2

3

4

5

Source: Bloomberg

GP declined at a CAGR of -7% over FY13-FY16

FY16 net profit growth of +33% YoY in FY16

Plantation Sector: Revenue Composition (%)


65%

24%

1% 10%

Tea

Palm Oil

Rubber

Exports

Plantation Sector: NP Contribution (Rs mn)

-500

0

500

1,000

Tea Palm Oil Rubber Exports

FY14 FY15 FY16



Plantation Sector

Sector Outlook

Plantation sector net profit forecast at Rs.372mn for FY17E (-28% YoY) largely factoring

another wage increase during FY17E. Although we believe the wage hike to be productivity related, there is still likely to be a notable impact to sector’s bottom-line. Accordingly, GP margin is expected to reduce to 10.9% in FY17E (vs. 13.5% in FY16) • We expect tea segment to record a gross loss of -Rs.288mn in FY17E (vs. a gross loss

of -Rs.23mn in FY16). As indicated by management, the wage increase is likely to post a bottom line hit of ~Rs.250mn to the tea segment

• Meanwhile, palm oil gross profit forecast at Rs.898mn (+9% YoY) for FY17E led by the expected topline growth. However, we expect a slight contraction of the palm oil GP margin to 54.8% in FY17E (vs. 54.9% FY16) mainly considering the wage increase with palm oil having one third of labor requirement vs. tea

FY18E rebound in net profit is forecast at Rs.490mn (+32% YoY) considering sector’s strategy to increase production of high quality tea, yielding better prices while reducing overheads, and also further expected increase in the productivity of the palm oil segment. Consequently, GP margin is expected to improve to 12.9% in FY18E

• We expect tea segment to record a gross loss of -Rs.271mn in FY18E (vs. gross loss of

-Rs.288mn in FY17E). Further, palm oil segment GP to increase +12% YoY to Rs.1,005mn in FY18E while increasing GP margin to 55.1% in FY18E (vs. 54.8% in FY17E) led by expected increase in yield owing to better technology and increasing number of mature plants

Management indicated that the segment is expected to convert its current ~450 hectares of rubber to palm oil over the next few years, with ~150 hectares expected to be converted each year. As per management, it costs ~Rs.3mn per hectare to convert a rubber plantation to palm oil, which will be funded via internally generated cash

• Sector capex forecast at Rs.699mn for FY17E (vs. Rs.289mn in FY16 and Rs.590mn in FY15) and Rs.729mn in FY18E (+4% YoY). Accordingly, sector depreciation forecast to increase +9% YoY to Rs.562mn in FY17E and +10% YoY to Rs.617mn in FY18E

Sunshine Holdings

Plantation Sector: Palm Oil and Tea GP Margin (%)

-12

-6

0

6

12

52

56

60

64


Palm oil (LHS) Tea

300

350

400

450

500


Revenue Per Kg Cost Per Kg

Plantation Sector: Tea - Revenue and Cost Per Kg (Rs)


6

10

14

18

4.0

4.8

5.6

6.4

7.2


Revenue (LHS) EBIT Margin


Plantation Sector: Revenue (Rs bn) & EBIT Margin (%)

1418222630

80

120

160

200

Net Profit (LHS)

% of Group NP

Plantation Sector: NP (Rs mn) & Contribution to Group (%)


200

400

600

800


Plantation Sector: Capex (Rs mn)


FY12 FY13 FY14 FY15 FY16 FY17E FY18E 5 Yr

CAGR (%)

Revenue (Rs mn) 4,279 5,435 6,246 6,848 6,299 6,240 6,345 3.1

YoY (%) -8.2 27.0 14.9 9.6 -8.0 -0.9 1.7 N/A

EBIT (Rs mn) 766 807 678 550 669 489 627 -4.9

Net Profit (Rs mn) 565 680 497 391 518 372 490 -6.3

YoY (%) 6.2 20.3 -26.9 -21.4 32.5 -28.1 31.7 N/A

GP Margin (%) 9.5 19.3 15.1 11.7 13.5 10.9 12.9 N/A

EBIT Margin (%) 17.9 14.8 10.9 8.0 10.6 7.8 9.9 N/A

Plantation Sector: Key Financial Indicators




FMCG Sector

SUN’s Fast Moving Consumer Goods (FMCG) sector is represented via ~33% held Watawala Tea Ceylon Ltd (WTCL), which commenced operations in 2001. FMCG portfolio consists of tea (~99% of total sales mix), gift tea boutiques and bottled water

SUN is currently the largest player in the branded tea segment with a ~36% volume market share and value market share of ~34% in FY16. SUN caters through a retail universe of ~80,000 outlets (vs. a total universe of ~120,000 outlets). Meanwhile, sales through modern trade accounts for less than ~20% of SUN’s tea brands • The tea segment includes “Watawala Tea” (~66% of total sales), “Zesta” (Premium

brand;~20% of sales) and “Ran Kahata” (Economy brand:~14% of sales)

Branded Tea Industry Overview

Sri Lanka is estimated to have a total domestic tea market of ~33mnKg, of which branded

tea accounts for ~31%

Branded tea market is estimated to have grown at 4 year CAGR of ~+9% to 10mnKg over FY12-FY16, largely driven by rise in disposable income and increasing trend towards quality tea

Competition The retail tea market in Sri Lanka is highly competitive with about three leading players,

out of a total universe of ~234 companies selling over ~250 brands. The largest player in the domestic branded tea market is SUN (~36% market share) followed by Unilever Sri Lanka (~34%) and Dilmah (~1%) • Unilever Sri Lanka is a multinational FMCG player which was incorporated in Sri Lanka

in 1938, and currently has its own local manufacturing facilities • Lipton is Unilever’s flagship brand and is one of the highest selling tea brands in

the world, in over 110 countries. Lipton is considered to be its premium brand, while Laojee is a black tea which targets the mass market

• Dilmah is a Sri Lankan family owned business which was founded in 1974 by Mr. Merrill J Fernando. Currently “Dilmah” is sold under three companies, namely M.J.F. Teas Ltd, M.J.F. Exports Ltd and listed Ceylon Tea Services (CTEA). Dilmah is mainly an export oriented branded tea company with an outreach of over 90 destinations, marketing the tea under the flagship brand “Dilmah”

Outlook In the medium to long term, we expect branded tea industry to move into a sustainable

growth trajectory, in line with rise in disposable income. Further, given the branded tea segment is undertapped (~31% of the total tea consumption), presents opportunities for industry players amid increase focus on better quality

Financial Performance

Sector NP grew at 4 year CAGR of +16% over FY12-FY16 attributable to double digit

revenue growth and low raw material costs resulting from depressed tea prices

FMCG sector’s EBIT grew at a CAGR of +14% over FY12-FY16 • Consequently, EBIT margin improved to 13.6% in FY16, peaking at 15.9% in FY12 (vs.

12.2% in FY13), largely due to lower tea prices and higher volumes resulting in lower fixed costs

The sector revenue increased at 4 year CAGR of +18% over FY12-FY16 with increased branded tea sales, owing to rising disposable income, strong distribution network and brand equity • SUN’s branded tea volume grew at a 3 year CAGR of +13% (as per available data) over

FY13-FY16 while average prices too estimated to have grown ~+6% over the period

Sunshine Holdings


Sri Lanka Branded Tea Industry and SUN’s Production (MnKg)

SUN has the largest market share in the

branded tea segment

Price of Key Tea Brands (200g)

SUN Rs.

Watawala Tea 215

Zesta BOPF 220

Ran Kahata 130

Unilever

Lipton Tea 220

Laojee Tea 205

Dilmah

Dilmah Tea 230

Source: CT CLSA Prices as at 20 July 2016

Branded tea segment is dominated by SUN with an

estimated market share of ~37% followed by Uniliver Sri Lanka Limited with an estimated market share of ~34%. SUN saw its market share of the branded tea increasing over the years, rising from ~33% in FY12

FMCG Sector: NP (Rs mn) & Contribution to Group NP (%)


10

20

30

40

100

160

220

Net Profit (LHS)% of Group NP

2

3

4

789

1011


Branded Tea Industry (LHS)

SUN's Production


FMCG Sector

Financial Performance

FMCG sector has been a highly cash generating business, with no leverage. Sector recorded a net cash balance of Rs.401mn as at 31 March 2016

SUN’s FMCG sector reported a net profit of Rs.423mn for FY16 (+8% YoY; 22% of total NP)

largely driven by higher volumes. The sector revenue grew +18% YoY to Rs.3,440mn in FY16, amid an estimated ~+16% YoY growth in branded tea volumes • Sector EBIT margin declined to 13.6% in FY16 (vs. 15.3% in FY15) attributable to

expenses incurred to expand the export business

Sector Outlook

FMCG sector net profit forecast at Rs.477mn (+13% YoY) in FY17E and Rs.560mn (+17% YoY) in FY18E, largely driven by topline growth

Revenue forecast at Rs.3,899mn for FY17E (+13% YoY) and Rs.4,511mn for FY18E (+16% YoY) driven by the volume growth primarily from “Watawala Tea”. Some moderation in revenue growth is expected in FY17E owing to an anticipated slowdown in the consumption drive, amid tight macro policies, though expected to pick in the medium term • We expect segment branded tea volumes to increase +12% YoY in FY17E to 4.1mnKg

and +14% YoY in FY18E to 4.7mnKg

We broadly maintain EBIT margin at 13.6% in FY17E amid anticipated modest recovery in global tea prices, which is the main raw material in the segment. Meanwhile, we expect a pickup in EBIT margins to 14.0% in FY18E considering higher fixed costs being absorbed by higher volumes

Sunshine Holdings

FMCG sector is a net cash business

Net profit to grow +13% YoY and +17% YoY in

FY17E and FY18E

Revenue to grow via rise in disposable income

FMCG Sector: Revenue (Rs bn) and Variance YoY (%)


13

17

21

25

1.5

2.5

3.5

4.5

5.5


Revenue (LHS) Var YoY

FMCG Sector: EBIT (Rs mn) and EBIT Margin (%)


12

13

14

15

16

200

400

600

800



FMCG Sector : Key Financial Indicators

FY12 FY13 FY14 FY15 FY16 FY17E FY18E 5 Yr

CAGR (%)

Revenue (Rs mn) 1,757 2,005 2,482 2,915 3,440 3,899 4,511 17.6

YoY (%) 14.5 14.1 23.8 17.4 18.0 13.3 15.7 N/A

EBIT (Rs mn) 279 245 349 445 469 531 630 20.7

Net Profit (Rs mn) 237 198 310 397 423 477 560 23.1

YoY (%) 1.9 -16.3 56.2 28.1 6.6 12.7 17.4 N/A

EBIT Margin (%) 15.9 12.2 14.1 15.3 13.6 13.6 14.0 N/A



Energy sector

Sunshine Energy Ltd, 61% owned subsidiary of SUN, commissioned its first mini hydropower plant in Lindula (Central Province of Sri Lanka) in February 2012, with a capacity of 1.62MW of power to provide to the national grid. Sector contribution to overall group profitability is negligible, with less than 1% of total revenue in FY16

• The company has commenced construction of two new mini hydro power projects for which

Power Purchase Agreements (PPAs) have been signed with the Ceylon Electricity Board (CEB) during FY16. Construction of the second plant (2.8MW) is expected to be completed by early FY17E and the third (2.6MW) by end of FY17E. Upon completion, total capacity of SUN’s energy sector would increase to 7MW

• Energy sector reported a revenue of Rs.129mn (+7% YoY) for FY16 amid heavy inter monsoonal rainfall and improved plant and grid stability resulting in a net profit of Rs.32mn (+62% YoY)

• We forecast the sector to record a net profit of Rs.45mn in FY17E (+40% YoY) and Rs.65mn for FY18E (+46% YoY) amid anticipated addition of the two mini hydro power plants. sector earnings are however vulnerable to erratic weather patterns

Packaging Sector

Sunshine Packaging Ltd (SPL), a 60% owned subsidiary of SUN, engages in the manufacture and printing of metal packaging and is the market leader in categories such as tea caddies and confectionary boxes. Sector contribution to group revenue was ~2% in FY16

• In May 2016, Hong Kong based Primeco Holdings Ltd infused US$2mn to SPL.

Consequently, SUN’s holding in SPL reduced to 60% (vs. previous 100%)

Packaging sector reported a revenue growth of +34% YoY to Rs.362mn in FY16, with strong contribution from printed sheets. Further, company’s efforts to venture into export of direct value added tin packs too saw an increased contribution to topline. Consequently, sector reported a net profit of Rs.16mn for FY16 (vs. a net loss of -Rs.24mn in FY15)

We forecast a net profit of Rs.20mn (+25% YoY) for FY17E and Rs.28mn (+41% YoY) for FY18E

Sunshine Holdings

Energy sector contributes < 1% to

group topline

In 2016, Hong Kong based Primeco Holdings

Ltd infused US$2mn equity capital to SPL

Group 5YR CAGR of +10%, driven by the healthcare sector amid rising demand for pharmaceuticals and the FCMCG sector (5yr CAGR of +18%) attributable to improved branded tea sales. Meanwhile, plantation sector revenue -10% 5YR CAGR, resulting in sectoral contribution to group topline falling from 44% in FY11 to 36% in FY16.


-5

5

15

25

35

-200

200

600

1,000

FY12 FY14 FY16

Net Debt (LHS)

Net Debt to Equity

Group Financial Review

Group revenue grew at a 5 year CAGR of +10%, driven by key healthcare sector (5

year CAGR of +11%) amid rising demand for pharmaceuticals and the FMCG sector (5 year CAGR of +18%) attributable to improved branded tea sales. Meanwhile, plantation sector revenue grew at a 5 year CAGR +6%

SUN’s FY16 revenue rose to Rs.17,422mn (+7% YoY), largely led by healthcare (41% of group revenue) and FMCG (20% of group revenue) compensating for the weak performance in the plantation sector

Group EBIT increased at a 5 year CAGR of +5% during FY11-FY16, on the back of operating expenditure rising at a 5 year CAGR of +17% amid increased brand building related expenses in the healthcare sector Margin pressure from the plantation sector was somewhat negated, subsequent to

adopting a strategy to greater focus on high quality tea over quantity

SUN’s FY16 net profit increased to Rs.587mn (+21% YoY, 5 year CAGR of +3% FY11-FY16) largely due to strong performance in the healthcare sector (50% of total NP) followed by the FMCG sector (22% of total NP)

Net Finance cost

SUN’s net debt position amounted to Rs.270mn as at 31 March 2016 while net debt to equity of 5% in FY16 vs. 31% in FY12

SUN’s total debt position has been broadly constant over the years and stood at Rs.1,736mn as at 31 March 2016, primarily attributable to the energy and plantation sectors. Meanwhile, FMCG sector denoted a net cash positive position • Group leverage declined from a peak of Rs.1,844mn in FY12 with reduction in debt in

EMSPL, which is the holding company for both plantation and FMCG sectors

SUN reported a net finance cost of Rs.68mn in FY16 (-36% YoY)

Capital Expenditure

FY16 capex amounted to Rs.902mn, with majority attributable to the energy

sector (Rs.373mn, 41% of total capex) with the two mini hydro power plants under construction for a total investment of Rs.1.1bn. Rise in capex was curtailed during FY16 due to lower capex in the plantation sector (Rs.289mn in FY16 vs. Rs.590mn in FY15), attributable to significant upgrading in the tea factories and palm oil mill in the comparative period

Capex peaked in FY12 at Rs.1,270mn amidst the construction of its first

1.7MW hydro plant in Lindula (Waltrim) at a total investment of ~Rs.500mn

Sunshine Holdings


SUN: EBIT (Rs bn) and EBIT Margin (%)

8

10

12

14

1.0

1.4

1.8

FY12 FY14 FY16


Capital expenditure has been broadly stable

SUN: Net Debt (Rs mn) and Net Debt to Equity (%)


4

8

12

0.4

0.8

1.2

1.6

FY12 FY14 FY16

Capex (LHS)

As a % of Revenue


SUN: Net Finance Cost (Rs mn) and Interest Cover (X)

0

10

20

30

50

130

210

FY12 FY14 FY16

Net Finance Cost (LHS)Interest Cover


SUN: Capex (Rs bn) and Capex as a % Revenue

SUN: Group Revenue (Rs bn) and Variance YoY (%)


0

8

16

24

10

15

20


Revenue (LHS) Var YoY

SUN: Group Sectoral Revenue Composition (%)


40%

43%

14% 2% 41%

36%

20%

1% 2% Healthcare

Plantation

FMCG

Energy

Packaging

FY11

FY16

Revenue increased at a CAGR of +10% over

FY11-FY16

SUN: Net Debt (Rs mn) and Net Debt to Equity (%)



Group Financial Review

Sunshine Holdings

FY11 FY12 FY13 FY14 FY15 FY16

5 Yr CAGR (%)

Revenue (Rs mn) 10,732 10,859 13,068 14,697 16,327 17,422 10.2

Gross Profit (Rs mn) 2,426 2,433 3,319 3,511 3,611 4,093 11.0

EBIT (Rs mn) 1,337 1,084 1,713 1,595 1,475 1,682 4.7

Net Finance Costs (Rs mn) -110 -116 -210 -145 -105 -68 -9.2

Profit Before Tax (Rs mn) 1,226 967 1,503 1,450 1,371 1,591 5.3

Reported Net Profit (Rs mn) 500 448 612 599 484 587 3.2

Recurring Net Profit (Rs mn) 500 448 612 599 546 587 3.2

Earnings per share (Rs) 3.7 3.4 4.6 4.5 4.1 4.3 3.0

GP Margin (%) 22.6 22.4 25.4 23.9 22.1 23.5 N/A

EBIT Margin (%) 12.5 10.0 13.1 10.9 9.0 9.5 N/A

Total Opex (Rs mn) -1,249 -1,548 -1,772 -2,037 -2,311 -2,569 15.5

Total Opex as a % of Revenue 11.6 14.3 13.6 13.9 14.2 14.7 N/A

Effective Tax Rate (%) 18.1 31.1 20.0 22.4 24.5 23.5 N/A

Total Debt (Rs mn) 1,046 1,844 1,404 1,799 1,443 1,736 10.7

Debt : Equity (%) 31.0 36.8 27.2 27.1 21.4 23.1 N/A

Net Debt (Rs mn) 578 973 634 361 -120 270 -14.1

Interest Cover (x) 12.1 7.3 6.2 5.3 6.8 9.5 N/A

Capex (Rs mn) 891 1,270 638 826 895 902 0.3

SUN: Key Financials

Source: FY15 recurring net profit exclude a goodwill write-off of Rs.62mn in the healthcare sector Source: Annual Report

SUN: Revenue (Rs bn) and NP (Rs mn)

Capex anticipated to increase led by the

plantation sector

Key Sectoral Revenue Breakdown

Key Sectoral Net Profit Breakdown



Revenue

Rs (mn) Var YoY (%) Composition %

Sector FY14 FY15 FY16 FY17E FY18E FY14 FY15 FY16 FY17E FY18E FY14 FY15 FY16 FY17E FY18E

Healthcare 5,511 6,076 7,161 8,171 9,431 4 10 18 14 15 37.5 37.2 41.1 43.3 45.0

Plantation 6,246 6,848 6,299 6,240 6,345 15 10 -8 -1 2 42.5 41.9 36.2 33.1 30.3

FMCG 2,482 2,915 3,440 3,899 4,511 24 17 18 13 16 16.9 17.9 19.7 20.7 21.5

Net Profit

Rs (mn) Var YoY (%) Composition %

Sector FY14 FY15 FY16 FY17E FY18E FY14 FY15 FY16 FY17E FY18E FY14 FY15 FY16 FY17E FY18E

Healthcare 358 294 327 361 415 -1 -18 11 10 15 59.7 53.8 55.8 57.4 55.1

Plantation 124 98 129 93 123 -27 -21 33 -28 32 20.8 17.9 22.1 14.8 16.3

FMCG 102 131 140 157 185 56 28 7 13 17 17.1 24.0 23.8 25.0 24.5


Outlook & Valuations

SUN’s NP forecast at Rs.628mn for FY17E (+7% YoY) and Rs.753mn for FY18E (+20% YoY), driven by the healthcare and FMCG sectors. Further, the plantation sector is anticipated to recover, with the new strategies adopted in the tea segment and increased bottom-line contribution from the palm oil segment

We forecast capex to rise +30% YoY to Rs.1,166mn through FY17E-FY18E, mainly attributable

to the conversion of rubber lands (450Ha) into palm oil and remaining investments in the mini hydro power plants • Consequently, depreciation forecast at Rs.562mn in FY17E (+9% YoY) and Rs.617mn in

FY18E (+10% YoY)

Group net debt position forecast at Rs.316mn for FY17E (+17% YoY) and Rs.303mn for FY18E (-4% YoY) • Group finance costs forecast at Rs.193mn for FY17E (+9% YoY) amid expected rise in debt

levels, with anticipated capex incurred in the plantation sector, though most of which is projected to be funded internally. Meanwhile FY18E finance costs anticipated at Rs.183mn (-5% YoY) with expected deleveraging

We forecast SUN to marginally increase its dividend payout to 25% in FY17E and FY18E (vs.

24% in FY16)

Given SUN’s relatively strong Balance Sheet, the group has the capacity to leverage on future prospects

Group effective tax rate (ETR) forecast at 24.0% for both FY17E and FY18E (vs. 23.5% in

FY16)

SUN’s share declined -4% YoY (vs. ASI -13% YoY). The share also outperformed the broader market in the past five years rising at a CAGR of +5% (vs. ASI -2%), reaching an all-time high of Rs.63.4 in November 2014. In addition, SUN’s one year average daily turnover is low at just US$8,651 while the average quantity traded was 22,810. SUN announced a 1 into 10 subdivision of shares to improve liquidity in 2010

SUN share is trading at PER multiples of 10.9x FY17E and 9.1x FY18E (vs. diversified sector trailing 12 month TTM per of 14.9x), whilst offering an ROE of ~10%-11% in the medium term. We believe, a partial discount is warranted given SUN’s relatively high exposure to the volatile plantation sector, limited effective holding in growing FMCG sector and relative illiquidity. SUN is currently trading at a 16% discount to its SOTP value though we believe share seems to lack a near term catalyst to narrow this gap

Share may find favour among medium to long term investors given SUN is well positioned to leverage on the expected growth in the local pharmaceutical industry amid anticipated rise in the disposable income, ageing population and rise in Non Commutable Diseases. Further, we anticipate an increased contribution from the FMCG sector to bottom line given the rising demand for branded tea in the domestic market

SUN HHL DIST SPEN JKH

MPS (Rs) 50.5 89.4 240.1 73.3 140.5

Market Cap (US$ mn) 47 353 493 202 1,317

EPS Growth (%) 7.0 33.7 24.9 63.7 -0.8

PE Ratio (X) 10.9 14.4 9.1 9.0 13.9

Dividend Yield (%) 2.0 2.1 1.6 2.0 2.5

Return On Equity (%) 10.0 15.3 11.8 8.9 9.7

PBV (X) 1.1 2.1 1.0 0.8 1.3

3M Avg Daily Turnover (US$) 3,956 95,560 214,212 14,159 635,508

Sunshine Holdings

PER of 10.9x in FY17E and 9.1x in FY18E

SUN: Revenue (Rs bn) and NP (Rs mn)


400

600

800

10

15

20

25


Revenue (LHS)Net Profit

SUN: Trailing Twelve Month PER (X) : 2012 – 2016TYD

Source: CT CLSA

Peer Conglomerate Analysis – FY17E Relative Valuations

Source: CT CLSA

4

9

14

19

02-Jan-13 13-Mar-14 25-May-15 29-Jul-16


Sector Fair Value (Rs mn) Main Valuation Basis

Healthcare 4,191 EV with WACC 14%

FMCG 1,303 EV with WACC 19%

Plantation Sector 1,198 Ev of 25% stake in WATA

Packaging Business 728 Estimated EV adjusted for recent equity infusion

Other Investments 617 Balance-Sheet value as at 31 Mar 2016

Power Plant 318 Discounted EV/EBIT of listed players

Group Net Debt -270

Total Value 7,752

Number of shares 135

Value Per Share 60

Sum of the parts (SOTP)

An approximate SOTP valuation for SUN suggests that the share is currently trading at ~16% discount to its breakup NAV of Rs.60

Among SUN’s sectors, the highest valuation is attributed to the healthcare sector at Rs.4.2bn (52% of total NAV). We have derived the NAV for the sector using the DCF valuation method, assuming a WACC of 14% and a terminal growth rate of 2%. Further, beta was assumed at 1.12x in line with regional pharmaceutical companies. EBIT margin expected at 7.7% in terminal year (vs. current 7.2%) and revenue growth is estimated to fall to 5% YoY in the terminal year (vs. current 18% YoY) • The sector lacks local proxies to consider other valuation methods. HHL is the only

comparable proxy, however, group financials do not disclose adequate information on the pharmaceutical segment

FMCG sector is valued at Rs.1.3bn with a 16% value composition, again using the DCF

valuation method, assuming a WACC of 19% and a terminal growth rate of 2%. Unlevered beta was assumed at 1.06x, in line with regional FMCG players. EBIT margin forecast at 14.5% in terminal year (vs. current 13.6%) while the revenue growth is projected at 8% YoY in the terminal year (vs. current 18% YoY) • We believe, the sector could in fact command higher valuations given its strong

Balance Sheet, market leadership and significant potential in the under penetrated branded tea market segment

• However, SUN’s current lower holding in the growing FMCG segment (~33% effective holding) could act as a deterrent to higher valuations. Therefore, we believe the sector value could further increase if SUN is able to acquire a higher stake in the FMCG business

We derived a valuation of Rs.1.2bn for the plantation sector based on the Enterprise Value

(EV) of listed WATA (SUN has 25% effective holding in WATA)

Packaging sector was also valued based on an estimated EV of the recent equity infusion (40% equity infusion by Primeco Holdings Ltd, amounting to US$2mn)

The energy sector was valued using a EV/EBIT of 7.2x (discounted to listed mini hydro players, 9.2x EV/EBIT; Panasian Power, Vallibel Power Erathna) for the existing plant. Further, the expected new plants are valued using a conservative PBV multiple of 1.4x, applying a discount to listed players (vs. PBV of 1.9x)

Other investments (80% unquoted) are valued at the balance sheet value as at 31 Mar 2016

Sunshine Holdings

SUN: Sum-of-the-parts (SOTP) Valuation

Source: CT CLSA

Trading at a discount to SOTP


SWOT Analysis

Strengths • Second largest private player in the pharmaceutical market with the biggest healthcare team

in the country (~350 medical marketing and sales personnel) • Dominance in the branded tea segment with increasing market share (currently at~36%) • Strong distribution network under the FMCG sector with access to ~80,000 retail outlets (vs. a

~120,000 total universe) across Sri Lanka, with pure focus on branded tea • Focused and wider distribution network in FMCG sector with only emphasis on branded tea

(~80,000 retail outlets) • Competitive advantage in the plantation sector in expertise and technology amid joint venture

partnership with Wilmar International, one of Asia’s largest palm oil producers • Strong balance-sheet with relatively modest gearing levels at ~5% net debt to equity,

providing room to leverage for future expansion plans

Weaknesses

• High exposure to the labour intensive tea segment, burdened by rising costs, weak prices and susceptible to erratic weather patterns

• Limited effective holding of just 33% limits group from reaping full benefits of fast growing FMCG sector

Opportunities • Significant growth potential in the underpenetrated branded tea market (~40%) in Sri Lanka • Strong prospects in both healthcare and FMCG sector amid rising disposable income and Sri

Lanka moving towards an upper middle class economy • Growing presence in preventive care and wellness products with changes in modern lifestyles • Actively increasing exposure in higher margin palm oil segment due to its better yields and

lower labour intensive nature

Threats • Low branding equity coupled with stiff competition in the highly fragmented retail

pharmaceutical network (~2,800 pharmacies) • Current weak regulatory environment resulted in an uneven playing field in the

pharmaceutical industry, where the state is the largest player (though predominantly in generics)

• Vulnerable to currency fluctuations and higher import related costs in the pharmaceuticals amid regulated price ceilings

Sunshine Holdings


Sunshine Holdings

Forecast Summarised Financials

SUN – Income Statement Extracts (Rs mn)

FY15 FY16 % YoY FY17E % YoY FY18E % YoY

Revenue 16,327 17,422 6.7 18,862 8.3 20,949 11.1

Cost of Sales -12,716 -13,329 4.8 -14,580 9.4 -15,922 9.2

Gross Profit 3,611 4,093 13.4 4,282 4.6 5,028 17.4

Operating Income 175 159 -9.5 166 5.0 175 5.0

Operating Expenses -2,311 -2,569 11.2 -2,817 9.7 -3,248 15.3

EBIT 1,475 1,661 12.6 1,656 -0.3 1,953 19.6

Net Finance Cost -105 -68 -35.5 -75 10.5 -60 -19.4

Profit Before Tax 1,371 1,591 16.0 1,581 -0.6 1,921 21.5

Income Tax -336 -374 11.3 -377 0.8 -454 20.6

Profit After Tax 1,036 1,218 17.6 1,202 -2.1 1,460 20.6

Minority Interest 489 631 28.9 574 -9.6 707 22.5

Net Profit 484 587 21.2 628 7.0 753 19.9

Recurring Net Profit 546 587 7.5 628 7.0 753 19.9

Source : Annual Report and CT CLSA

SUN – Key Ratios (%)

FY12 FY13 FY14 FY15 FY16 FY17E FY18E

Revenue Growth (%) 1.2 20.3 12.5 11.1 6.7 8.3 11.1

GP Margin (%) 22.4 25.4 23.9 22.1 23.5 22.7 24.0

EBIT Margin (%) 10.0 13.1 10.9 9.0 9.5 8.8 9.5

PAT Margin (%) 6.1 9.2 7.7 6.3 7.0 6.4 7.0

NP Margin (%) 4.1 4.7 4.1 3.3 3.4 3.3 3.6

Opex as a % of sales 14.3 13.6 13.9 14.2 14.7 14.9 15.5

Effective Tax Rate (%) 31.1 20.0 22.4 24.5 23.5 24.0 24.0


SUN – Balance Sheet Extracts (Rs mn)


FY12 FY13 FY14 FY15 FY16 FY17E FY18E Non Current Assets 6,920 7,071 7,772 8,282 9,293 10,084 10,885

Property, Plant & Equipment 3,361 3,309 3,460 3,618 3,899 4,015 4,153

Biological Assets 2,767 2,880 3,140 3,350 3,431 3,948 4,439 Current Assets 4,177 4,697 5,727 6,330 6,829 7,227 7,579 Inventories 1,847 2,122 2,443 2,635 2,892 3,192 3,478

Trade and Other Receivables 1,446 1,775 1,764 2,038 2,371 2,429 2,698

Cash & Bank Balance 870 770 1,438 1,563 1,465 1,498 1,290 Total Assets 11,097 11,768 13,500 14,613 16,122 17,311 18,465 Stated Capital 680 680 691 731 731 731 731 Retained Earnings 2,480 3,071 4,156 4,571 5,049 5,524 6,088 Total Equity 5,619 6,725 8,271 8,947 9,950 10,766 11,738 Non-Current Liabilities 2,752 2,396 2,717 2,608 2,884 3,030 3,005 Interest bearing borrowings 1,528 1,149 1,285 1,038 1,280 1,344 1,205 Current Liabilities 2,726 2,646 2,511 3,058 3,288 3,514 3,721 Trade & Other payables 1,644 1,596 1,574 1,993 2,285 2,459 2,701 Bank Overdraft 667 674 291 564 423 445 467 Interest Bearing Borrowings 315 254 514 405 456 490 426 Total Equity & Liabilities 11,097 11,768 13,500 14,613 16,122 17,311 18,465


Major Shareholder Movements

Name No. of

Shares %

Change (Shares)*

Comment

Dr. T. Senthilverl 30,946,100 22.9 -738,290

Lamurep Investments Ltd 27,392,830 20.3 - “Sathasivam” Related Party

Deepcar Limited 25,600,000 18.9 -

Moneymore Securities Ltd 22,810,730 16.9 -

Tansinghe (Private) Ltd 16,015,390 11.9 - “Sathasivam” Related Party

Ceylon Property Development Ltd 3,000,000 2.2 -

National Equity Fund 1,261,540 0.9 - New Entrant to

Top 20

Est. of Late M. Radhakrishnan (Deceased) 750,000 0.6 -

Hatton National Bank PLC A/C No 05 669,661 0.5 -

Aerbach Grauson & Co 602,286 0.5

+280,000

Nuwara Eliya Property Developers (Pvt) Ltd 575,261 0.4 -

Mr. V. Govindasamy 443,330 0.3 -

JB Vantage Value 386,793 0.3 -

Deutsche Bank AG as National Equity Fund 321,249 0.2

+59,709

Mr. W.D.P.L. Vithanage 114,703 0.1 -

Mr. I. M. Dabah 100,000 0.1 -

Gold Investment Ltd 100,000 0.1 - New Entrant to

Top 20

Mr. M. A. Valabji 100,000 0.1 - New Entrant to

Top 20

Mr. N. S. Perera 87,104 0.1 - New Entrant to

Top 20

Freudenberg Shipping Agencies Ltd 79,585 0.1 - New Entrant to

Top 20

Sub Total 131,356,562 97.2

Major Shareholder Movements as at 31 March 2016

Sunshine Holdings

*Changes since 31 March 2015 Exited from top 20 since 31 March 2015: GF Capital Global Limited : 261,540, Amana Takaful Plc : 136,100 Numerica Emerging Frontiers : 117,010, Mr.M.H.M Nazeer : 105,320, Dr. W.S.E Fernando : 100,000

Trading & Sales

Lasantha Iddamalgoda [email protected] +94 11 255 2295 +94 77 778 2103 Dyan Morris [email protected] +94 11 255 2320 +94 77 722 4951 Manura Hemachandra [email protected] +94 77 261 4797 Rosco Todd [email protected] +94 77 262 7233 Dhammika de Silva [email protected] +94 77 356 2699

Arusha Michael [email protected] +94 77 395 6765

Nuwan Madusanka [email protected] +94 76 858 9722 Shirali Rodrigo [email protected] +94 11 255 2290

CT CLSA SECURITIES (PVT) LTD A Member of the Colombo Stock Exchange

4-14 Majestic City, 10 Station Road, Colombo 4, Sri Lanka

General: +94 11 255 2290 to 2294 Facsimile: +94 11 255 2289 Email: [email protected] Web: www.ctclsa.lk

A CT HOLDINGS GROUP AND CLSA GROUP COMPANY

Disclaimer : This document has been prepared and issued by CT CLSA Securities (Pvt) Ltd. on the basis of publicly available information, internally developed data and other sources, believed to be reliable. Whilst all reasonable care has been taken to ensure that the facts stated are accurate and the opinions given are fair and reasonable, neither CT CLSA Securities (Pvt) Ltd. nor any director, officer or employee, shall in any way be responsible for the contents. CT CLSA Securities (Pvt) Ltd. may act as a Broker in the investments which are the subject of this document or in related investments and may have acted upon or used the information contained in this document, or the research or analysis on which it is based, before its publication. CT CLSA Securities (Pvt) Ltd., its directors, officers or employees may also have a position or be otherwise interested in the investments referred to in this document. This is not an offer to buy or sell the investments referred to in this document. It is not intended to provide professional, investment or any other type of advice or recommendation and does not take into account the particular investment objectives, financial situation or needs of individual recipients. Before acting on any information in this publication/communication, you should consider whether it is suitable for your particular circumstances and, if appropriate, seek your own professional advice, including tax advice. The markets in which CT CLSA Securities (Pvt) Ltd. operates may not have regulation governing conflict of interest over preparation and publication of research reports (including but not limited to disclosure of perceived or actual conflict of interest) as may be found in more developed markets. Please contact your investment advisor / analyst should you require further information over the relevant regulation and particular disclosure over perceived or actual conflict of interest.

Research

Sanjeewa Fernando [email protected] +94 77 742 7439 Chayanika Ranasinghe [email protected] +94 77 237 9731 Yasas Wijethunga [email protected] +94 77 053 2059 Maduranga Hettiarachchi [email protected] +94 11 255 2290 Ryan Jansz [email protected] +94 11 255 2290 Kavindu Ranasinghe [email protected] +94 11 255 2290

Consultant / Sales

Rohan Fernando [email protected] +94 11 255 2297 +94 76 778 2101

CT CLSA - Sunshine Holdings (SUN) Initiation Report - 29 July 2016

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Transcript of CT CLSA - Sunshine Holdings (SUN) Initiation Report - 29 July 2016