CT CLSA revises JKH earnings upwards; maintains ‘Buy’

Stock broking firm CT CLSA Securities has revised top blue chip John Keells Holdings PLC’s (JKH) earnings upwards, prompting to maintain its rating as ‘Buy’.

CT CLSA Research, in its latest research on JKH titled “From Dreams to Reality”, has revised JKH’s group net profit forecast upwards by 10% to Rs. 18 billion for FY25E (+43% YoY). FY26E net profit forecasts have also been revised upwards +2% to Rs. 37.1 billion (+83% YoY).

CT CLSA said the upward revision to the FY25E NP forecast is primarily due to a rising revision to margin expectations in the existing leisure businesses, as tourist arrivals into Sri Lanka seem to be bouncing back strongly after the e-visa issue was resolved in the latter part of September by the new Government.

“The FY26E net profit forecast has been revised up marginally due to some minor adjustments made to our assumption on the timing of the commencement of the casino operations. We expect the casino to commence operations in August 2025,” it added. 

The JKH share trades at forward PE multiples of 17.0X and 9.3X for FY25E and FY26E, respectively. Valuations for FY27E and beyond are expected to be more with the earnings ramp-up from City of Dreams Sri Lanka and WCT-1 expected over the next 1-2 years.

“Our 12M target price for JKH based on a breakup Sum of The Parts (SOTP) valuation has been revised up by +18% to Rs. 252.4 (total upside of +30%) and we maintain our rating as ‘Buy’,” said CT CLSA. “Our indicative 24-month Target Price based on a breakup SOTP valuation has also been revised up by +8% to Rs. 283.8 (total upside of +46%),” it added.

JKH, which successfully raised Rs. 24 billion via a Rights cum Warrants issue recently, closed at Rs. 197 on Friday unchanged from the previous week, but higher in comparison to Rs. 171.75 soon after the rights announcement on 31 July.

CT CLSA said JKH opened the doors of its flagship integrated development “City of Dreams Sri Lanka” on 15 October 2024. The soft opening, branded under Cinnamon Life, included the opening of a 687-room hotel, a range of ballrooms, banquet facilities with an exhibition centre, and world-class restaurants. The mall, along with the casino and ultra-luxury ‘Nuwa’ hotel (113 keys) managed by Melco Resorts and Entertainment Ltd. (Melco), is set to follow in the next phase in mid-2025E.

Cinnamon Life offers 11 versatile venues, spreading 160,000 sq. ft., featuring five ballrooms and six outdoor spaces, with a total capacity to host up to 5,000 guests. The resort is equipped with 83 elevators and 10 escalators to ensure seamless movement throughout the venue along with parking facilities for 2,500 vehicles.