Steady set of results. For FY15 TSL delivered a steady set of results with revenue increasing marginally to $48.6 million while profit for the period was down 15.89% to $4.2 million. The logistics businesses contributed positively to overall group performance, while agricultural operations had a subdued year on the back of a smaller national crop and softer world tobacco prices. Real estate operations reported flat revenues compared to prior year.
Benefiting from diversity of businesses. The FY15 results proved that TSL is more than just a tobacco related business. While there was reduced business activity for agricultural (tobacco related) operations, TSL’s diversified business model gives us reasonable comfort that they can sustain operations at current levels despite the challenging economic environment.
Revenue analysis. Revenue for the period was largely flat with approximately 0.89% additional revenue being generated during FY15. There was, however, a change in mix with the bulk of revenue $21.4 million now coming from logistics as opposed to FY14 when the bulk came from agricultural operations.
Earnings analysis. Group PBT was 10.77% lower, down to $6.1 million (FY 14: $6.8 million). PAT for the period registered a 15.97% decline to $4.2 million implying a PAT margin of 8.6% (FY 14: 10.33). EPS closed at 1.2 cents from 1.4 cents, and the company declared a DPS of 0.33 cents, a payout ratio of 27.5% from earnings .
Valuation. On current PER of 9.85x, TSL appears relatively cheap compared to its historical average PE of 12.74x. The company still exhibits extensive growth potential for both its logistics and real estate business. The agricultural operations can always benefit from any change in weather patterns and international tobacco prices. Using comparative valuation, we derive a price target of 16.74 cents, giving an upside potential of 24%, implying the stock is undervalued. Accordingly we recommend the stock as a BUY.