jkh-rights issue update_17 oct 2013

7/27/2019 JKH-Rights Issue Update_17 Oct 2013

1/16

Top5 shareholders as of 30th June 2013 Shareholding

Mr S ECaptain 9.9%

Broga Hill Investments Limited 9.9%

3.9%

Revenue (LKR'm)

FY2011

60,500

FY2012

77,690

FY2013

85,557

FY2014E

95,852

FY2015E

105,939

FY2016E

113,303

% YoYchange 26.1% 28.4% 10.1% 12.0% 10.5% 7.0%

EBITDA (LKR'm) 8,357 11,808 12,624 14,056 16,000 16,571

% YoYchange 60.1% 41.3% 6.9% 11.3% 13.8% 3.6%

Net profit to shareholders (LKR'm) - Reporte d 8,246 9,687 12,201 10,662 11,604 11,295

% YoYchange 58.5% 17.5% 26.0% -12.6% 8.8% -2.7%

P/E(x) 21.6 17.7 17.2 19.0 18.8 19.9

ROE 15.0% 14.7% 15.1% 10.1% 9.2% 8.1%

P/B(x) 3.0 2.4 2.4 1.8 1.7 1.5

Dividend yield 1.4% 1.3% 1.4% 1.4% 1.6% 1.5%

17 October 2013

Rights Issue Update

John Keells Holdings PLC (JKH)Rights Issue A Gamble Worth Taking

RecommendationRights : SUBSCRIBE

Ordinary Voting Share : SELL

Price (17.10.13) : LKR217.50

Target Price : LKR195.00

Sector : Diversified

After much speculation for several months, JKH announced the details of its landmark integrated resort project, which was followed by the announcement of a rights

issue attached with warrants (2 for every 3 rights subscribed) to partly fund theUSD820m project. The project is planned to include apartments, a hotel,

entertainment and gaming facilities, a shopping complex, a convention centre and

office space, largely resembling some of the regional integrated resorts. We are

optimistic of this project, largely owing to the success this model has witnessed inthe region and the countrys favourable location.

Balakrishnan Nirmalan

n ir m a l an @ a s i a ca p it a l .l k

Price vs. Volume

LKR

350.00

300.00

250.00

200.00

150.00

100.00

50.00

-

Price volume

Source Asia Wealth Research, Bloomberg

Volum

e

12,000,0

00

10,000,0

00

8,000,0

00

6,000,0

00

4,000,0

00

2,000,0

00

0

Waterfront Properties (WFP) project to be the key growth driver of the group

in the long term assuming proper execution: The WFP project which is plannedto commence full operation by end of 2017E, is relying on Sri Lankas location and

the integrated resort concept to attract high spending gaming tourists and Meeting,

Incentives, Conferencing, Exhibitions (MICE) tourists. Management has indicated

that WFP would merely rent the gaming area, whilst it stated that the rental to be

received from the gaming area would consist of a fixed component; and a variable

component linked to the performance of the gaming tenant. The total rental,according to the management could account for c. 60% of the gaming economics

and would provide WFP an indirect exposure to the gaming business. We estimatethat the rental received from the above to be largest contributor to WFP project, and

hence believe that the success of WFP would largely depend on the ability of the

company to attract a well reputed international gaming operator. Meanwhile, we

expect the increase in finance charge from the 60:40 debt to equity optimal capitalstructure of WFP to exert pressure on JKHs bottom-line in the short to medium

term, as the only cash flow stream to the company during that period would be fromthe pre-sales of apartments.

Short-medium term EBITDA margin is likely to be driven by the LeisureAs at 17.10.2013 JKH ASI Divers

ified

Index PriceMovement

1Month 5.6% 4.3%5.6%

3Month s -9.1% -0.5%-5.5%

12Months 10.3% 6.6%

-1.5% Total Iss ued Qty (Mn) 989.9

Average Daily Turnover (LKR 000's )

169,443.9 (USD 000's )

1293.6

Market Capitalis ation (LKR Mn)

186,426.4 (USD Mn)

1,423.2

Trailing P/E 15.8 12.115.4

Trailing PBV 2.2 1.8

1.7

Trailing ROE % 14.8 12.5

11.2

DY % 1.4 2.71.3

Free Float %73.8

52 week High

291.2

52 week Low196.3

Source Bloomberg

Janus Overseas Fund 8.9%

Paints & General Industries Limited

5.8% Deutsche Bank AG London

Source Company Filings

and Property segments: We expect the Leisure segment, which is the largest

contributor to EBITDA and the segment with the highest EBITDA margin, tocontinue to drive the groups EBITDA and the EBITDA margin. This is likely to besupported by the growth momentum in the high margin yielding Maldivian sub-segment (c. 27% of FY2013 segment revenue); and the strong portfolio ofrestaurants and MICE facilities at the city hotels. However, we expect the SriLankan resorts to continue with their lacklustre performance. The Property segmentis likely benefit from the commencement of revenue recognition from OnThree20

project and the possible revenue recognition of the 7th

Sense premium apartmentsfrom 2HFY2014E or FY2015E. Further, we expect a recovery in the EBITDAmargins of the Consumer Foods and Retail segment from 2HFY2014E subsequent

to the ending of the re-structuring program undertaken by the Retail unit.

We recommend a SELL on the ordinary voting share and recommend a

SUBSCRIBE on the rights: Based on our sum of the parts valuation, taking

into account a probability weighted value for WFP, we arrive at a one year pricetarget of LKR195. We believe that the ordinary share is currently trading at a10.3% premium to our intrinsic value and is yet to fully reflect the dilution effectfrom the rights to be listed and the warrants. However, we believe that the rights

issue is attractively priced at LKR175 given that the attached warrants wouldreduce the effective cost of investing in the rights for an investor who opts to

dispose the warrants during the warrants trading.
mailto:[email protected]:[email protected]


2/16

Asia Wealth Management Co. (Pvt) Ltd2

Rights Issue Update

Waterfront Properties Project to be the Key Growth Driver of the Group in the

Long Term

The project which would be undertaken through the project company Waterfront Properties (WFP) would consist of apartments, a

hotel, entertainment and gaming facilities, shopping complex, a convention centre and office space. The project, is estimated to cost c.

USD820m (excluding land transfers) in total and is planned to be undertaken in two phases, with the estimated time of completion

between 4-5 years. Phase 1 alone would cost c. USD660m (excluding land transfer) and WFP has the option to undertake Phase 2. The

rights issue attached with warrants would be used to partly fund the project, whilst the balance would be funded via debt fin ancing.The company indicated that, at optimal funding, WFP would be operating at a D/E ratio of 60:40. The project which has been grantedthe Strategic Development Project status, would enjoy several tax concessions subsequent to the approval of the parliament.

Given the long gestation period for the implementation of the project and the lack of information regarding the international operator

who would be operating the gaming facility, it would prove to be a cumbersome task to evaluate the project at this juncture. Further,

the magnitude of the project and the long period for net cash inflow generation (the management expects the project to be in fulloperation during FY2019E) could increase the riskiness of the project in the short term. Further, we expect the bottom line of JKH to be

under pressure in the short to medium term, due to the interest cost arising from the WFP project in the absence of any signi ficantinflows from the project.

However, we remain optimistic about the project, given the success that this model has witnessed in several countries in our region anddue to the strategic location of Sri Lanka which is a key catalyst for the success of this project. We believe that the successful

implementation of the project would be value accretive to the shareholders in the long term. We discuss below the details regarding

some of the key components of the WFP project.

Gaming Facility

The project would include a 150,000 sq.ft gaming facility.

Management has indicated that it would neither own nor operate the gaming facility, but it would merely rent out the

facility.

However, the management has indicated that the rental income that WFP would earn from letting out the gaming area would

consist of a fixed component and a variable component (that would be linked to the performance of the gaming tenant), whichin total could account for c. 60% of gaming economics.

The variable component of the rental structure would enable WFP to indirectly benefit from the upside potential of the

gaming business.

As per the gazette notification issued under the Strategic Development Projects Act, if WFP engages in gaming operations,

profits from such operations would be taxed at the normal corporate tax rate (currently 40%). However, rentals (both fixed

and variable) received from letting out the gaming area would enjoy the tax breaks. By structuring its exposure to the gaming operations in the above method, WFP would benefit from the tax breaks, whilst

benefiting from the upside potential from the variable component of the rental.

In order to succeed from the exposure to the gaming operations, which would also influence the success of most of the other

units of WFP, a well reputed global gaming operator would need to be drawn into this location. Further, given the restrictionsin issuing new licenses for gaming businesses, the international partner would have to partner up with a local license owner.

Whilst, there have been media reports on the possible local partner, management has indicated that it is still in the process of

finalising an international gaming operator.

We believe that the successful execution of the gaming facility would trickle down to other units of WFP and result in

substantial value addition to the shareholders of JKH.

Convention Centre

The convention centre would have a seating capacity of 2,500 in a 247,000 sq.ft area.

The convention centre along with the 800 room luxury hotel would enable WFP to be an ideal location to host large scale

conferences and events in Sri Lanka given the current scarcity of such facilities within the country the strategic location of thecountry in the region.

Luxury Hotel

Despite the intense competition that is prevalent within the city hotel sphere, we believe that the integrated resort model

would enable the hotel to maintain substantially higher occupancy levels than the general industry average as witnessed inother regional integrated resorts.

Success in attracting a reputed global gaming operator and a successful destination marketing of WFP convention centrewould allow the hotel to attract MICE travellers during weekdays and leisure/gaming travellers during the weekends, and thus

enable to maintain relatively high occupancies.


3/16

Rights Issue Update


Luxury Condominiums

Backed by the success witnessed in JKHs apartment projects such as Monarch, Emperor, OnThree20 and 7th

Sense; the WFP

project is planned to include 240 luxury condominiums under Phase 1, which would be followed by another 200serviced/residential apartments if Phase 2 is implemented.

Management indicated that the apartments would be priced lower than the 7th

Sense up market apartments, but would bepriced higher than the Emperor and Monarch apartments.

We believe that the initial cash inflows from the project could accrue to WFP beginning from FY2015E in the form of

apartment pre-sales. However, we remain cautious regarding the luxury condominium component of the WFP project, given the exponential

growth that is being witnessed in the apartment stock within Colombo.

Shopping Mall

The shopping mall with a floor area of c. 400,000 sq.ft is planned to be positioned as an up-market shopping mall similar to

Crescat Boulevard.

Management has indicated that it is evaluating the possibility of a tie-up with an international mall operator to manage themall operations.

We expect the shopping mall operation to benefit from the gaming facility which generally attracts high spenders and theconvention centre.


4/16

TEUs'000


Rights Issue Update

Outlook for Other Key Segments of JKH

Transportation (accounted for c. 23% of the groups FY2013 external revenue)

Trans portation Segment FY2011 FY2012 FY2013 FY2014E FY2015E 1QFY2013 1QFY2014

External Revenue (LKR'm) 13,426 18,428 19,438 20,129 21,031 5,307 4,129% YoY Change 41.4% 37.3% 5.5% 3.6% 4.5% 2.1% n/a -22.2%

Adjus ted EBITDA (LKR'm) 852 1,215 1,074 1,106 1,142 364 250

% YoY Change 214.4% 42.6% -11.7% 3.0% 3.3% 0.9% n/a -31.3%

Transportation segment external revenue mainly consists of the bunkering revenue earned from Lanka Marine Services (LMS). We

expect the segment which witnessed a 22% YoY drop in revenue in 1QFY2014, primarily due to drop in volumes (owing to slowdown

in Sri Lankas external trade and world trade) to recover in line with the recovery witnessed in Sri Lankas external trade and the

projected recovery in world trade. Further, the opening of the Colombo International Container Terminal (CICT) deep draft terminal in

August 2013could increase the traffic in the Colombo port in the medium to long term and provide an opportunity for LMS to increaseits volumes sold. However, the growth in revenue is likely to be restricted, due to the anticipated downward trend in crude oil prices,

which would require LMS to adjust prices to remain competitive within the region.

25,000

20,000

5,000

0,000

5,000

0

Transportation Segment Revenue Fluctuation withCrude Oil Price

FY2009 FY2010 FY2011 FY2012 FY2013

Revenue (LKR'm) Revenue growthBrent crude oil price change

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%

-10.0%

-20.0%

-30.0%

2,500

2,000

1,500

1,000

500

0

SAGT's Share of Containers Handled Trending

Downwards

CY2007 CY2008 CY2009 CY2010 CY2011 CY2012

Containers handled by SAGT

SAGT containers handled as a % of total container

51.0%

50.0%

49.0%

48.0%

47.0%

46.0%

45.0%

44.0%

43.0%

42.0%

41.0%

Source: Company filings, EIA, Asia Wealth Research traffic

Source: SAGT website, Central Bank Annual Report

South Asia Gateway Terminals (SAGT), an associate of JKH which operates a container terminal at the Colombo port, is the cash cow

of the JKH group and the key driver of the bottom-line of the Transportation segment. SAGT witnessed a slowdown in its volumes

handled during FY2013 in line with the slowdown in global trade and the tight monetary policy adopted in Sri Lanka during 2012. Thistrend persisted in 1QFY14, which resulted in the groups share of SAGTs profits dipping 17% YoY. We expect an improvement in

SAGTs performance subsequent to the recovery that is being witnessed in Sri Lankas external trade after the expansionary monetarypolicies adopted by the Central Bank and the improvement witnessed in several developed economies. However, the commencement of

operations of CICT (with a 1.4m TEU capacity), which is a joint venture between China Merchants Holdings (International) Co., Ltd.

(85% shareholding) Sri Lanka Ports Authority (SLPA) (15% shareholding) could increase the competition for SAGT. As such, weexpect the share of containers handled by SAGT to continue its downward trend.

According to the management, the segments latest associate Saffron Aviation which is in the business of domestic airline operations,

commenced its operations during 2QFY14. However, the management indicated that the company which operates two aircrafts (eight

seats each), has been witnessing low load factor. Given, the comparatively small size of the investment (LKR238m), we expect the

impact on same to be limited.


5/16

TotalRevenue(LK

R'm)

Occupanc

ies

Leisure (accounted for c. 24% of the groups FY2013 external revenue)

Leis ure Segment FY2011 FY2012 FY2013 FY2014E FY2015E 1QFY2013 1QFY2014

External Revenue (LKR'm) 13,810 17,415 20,593 22,951 24,522 3,913 4,117

% YoY Change 20.1% 26.1% 18.2% 11.4% 6.8% 6.3% n/a 5.2%

Adjus ted EBITDA (LKR'm) 3,294 5,595 6,864 7,495 7,950 1,107 956

% YoY Change 46.1% 69.9% 22.7% 9.2% 6.1% 5.0% n/a -13.6%

The Leisure segment had been witnessing an uptrend in revenue and EBITDA post war in line with the overall growth witnessed in Sri

Lankan tourism. However, occupancies have been trending downwards in the properties in Sri Lanka in line with overall dip witnessed

in star class hotels in Sri Lanka as the country continues to attract a high number of low end customers. This has been partly reflected in

the 1QFY14 performance, where the revenue growth slowed down to 5.2% YoY, whilst the EBITDA dipped 13.6% YoY. In addition,the hike in electricity prices and the industry wide wage hike in Sri Lanka could also have contributed to the dip in EBITDA.

Leisure Segment Revenue - City Hotels have beenDriving the Revenue During the Past Few Years

25,000

20,000

15,000

10,000

5,000

0

FY2009 FY2010 FY2011 FY2012 FY2013

City Hotels Sri Lankan Resorts

Maldivian Resorts Destination Management

90%

80%

70%

60%

50%

40%

30%

Segment Occupancies Across Hotel Categories -

Maldivian Resorts Top the List

FY2009 FY2010 FY2011 FY2012 FY2013

Cinnamon Grand Cinnamon Lakeside

Sri Lankan Resorts Maldivian Resorts

Source: JKH, AHPL and KHL company filings, Asia Wealth Research

Source: AHPL and KHL company filings, Asia Wealth Research

The city hotel sub-segment which has been driving the overall segment revenue during the past few years and catering to MICEtravellers is likely to witness intense competition in the medium to long term with the entrance of several new hotels in the city hotel

sphere. However, the successful implementation of WFP project and the increase in number of entertainment facilities within the city

limits could assist the city hotels to maintain sustainable occupancy levels. In addition, the strong portfolio of restaurants of the cityhotels is likely to support the revenue growth momentum. The city hotels are likely to witness a slight improvement in occupancies

during 2HFY2014E due to the Commonwealth Heads of Government Meeting (CHOGM) that is being held in Colombo.

Sri Lankan resort hotels are likely to continue to witness slowdown in occupancies, amidst a rise in room stock, unless the country as

whole is able to draw in high a proportion of high-end tourists. Further, relatively higher Average Room Rates (ARR) cf. regionalcompetitors could restrict the Sri Lankan resort hotels to increase the ARR, despite the rise in operating expense. This is also likely to

exert pressure on the margins.

The Maldivian resorts are likely to be a key growth driver amidst a rise in occupancies. Further, the region which attracts a high

number of high end tourists and charges premium ARRs, yields higher margins cf. other locations. This is likely to support the Leisuresegment to sustain its margins.

JKH expects the 240 room Sancity Hotels project (which is a joint venture between JKH and Sanken Lanka) to commence operations

during 2QFY2015E. The hotel is branded as a three star business hotel, where JKH currently holds a c. 28% stake in it. Management

indicated that the shareholding would dilute to c. 20% as at the completion of the project and the hotel would be treated as an associate

in the books of JKH. We expect the demand for this hotel to be driven by the budget MICE travellers.

Consumer Foods & Retail (accounted for c. 28% of the groups FY2013 external revenue)

Cons umer Foods & Retail FY2011 FY2012 FY2013 FY2014E FY2015E 1QFY2013 1QFY2014


% YoY Change 15.9% 19.7% 10.5% 10.2% 9.6% 9.0% n/a 2.8%Adjus ted EBITDA (LKR'm) 1,113 2,257 1,826 2,012 2,336 555 421

% YoY Change 41.5% 102.8% -19.1% 10.2% 16.1% 9.0% n/a -24.1%


6/16

LKR'm

LKR'm

The Consumer Foods & Retail (CF&R) segment, despite witnessing a double digit growth in revenue during the past few years has

been witnessing high volatility in EBITDA margins due to fluctuation in raw material prices, hike in import duty, etc. In addition the

FY2013 performance was hampered by the one-off VAT impact after the introduction of VAT on retail trade, where the Retail unit was

unable claim input VAT on the inventory as of 31 December 2012 due to a non-availability of a transitional provision in the VAT Act.

Further, the restructuring expense incurred by the retail unit termed as the way forward strategy also impacted the performance of thesegment.

The 1QFY2014 performance of the CF&R segment was affected by the weakening consumer demand due to rise in cost of living,

increase in raw material and energy costs and the continuation of the restructuring program at the Retail unit. However, with the

completion of the restructuring at the Retail unit during 1QFY2014, the EBITDA margin of the segment is likely to improve in theabsence of the one-off restructuring expense. Further, the projected growth in per capita income and improvement in life style is likely

to improve the demand for the CF&R segment, albeit the rise in cost of living could be a damper.

Financial Services (accounted for c. 10% of the groups FY2013 external revenue)

Financial Services FY2011 FY2012 FY2013 FY2014E FY2015E 1QFY2013 1QFY2014


% YoY Change 23.2% 22.3% 8.4% 15.5% 13.3% 13.2% n/a 11.6%

Adjus ted EBITDA (LKR'm) 953 1,514 1,204 1,392 1,607 257 116

% YoY Change 87.6% 58.9% -20.4% 15.6% 15.4% 12.5% n/a -54.7%

Segments revenue is derived from Union Assurance (c. 98% contribution to revenue) and John Keells Stock Brokers (c. 2%

contribution to revenue). Despite the gradual growth that has been witnessed in the insurance industry, the life insurance industry in Sri

Lanka continues to be under penetrated, which provides ample growth opportunity for the industry. The projected growth in disposable

income coupled with the enhanced awareness on insurance products is likely to drive the demand Union Assurances (UAL) life

insurance products. However, the rise in cost of living and high interest rates provided by banks creates a resistance for the growth ofthe life insurance business. The general insurance business is likely to benefit from the growth in post war business activity in the

country and due to the slight recovery witnessed in the automobile market.

However, the industry is likely to witness certain structural changes due to the newly introduced regulations which requires composite

insurance companies (companies involved in both life and general insurance business) to segregate both the business segments into

different entities by February 2015. This would be followed by the listing of the unlisted unit within three years from the issue of new

license. This could possibly result in cost increases arising from duplication of overheads and capital expenditure; and also from one-off expenses resulting from restructuring.

UAL's Life Insurance Unit Continues to Maintain the

Fourth Position Whilst Increasing its Market Share6,000

5,000

4,000

3,000

2,000

1,000

0

CY2008 CY2009 CY2010 CY2011 CY2012

Life Insurance - Gross premium written

Life Insruance - UAL's market share

15.0%

10.0%

5.0%

0.0%

UAL General Insurance Unit Continues to Maintain

the Fourth Position Whilst Gradually Loosing Market

5,000Share

4,000

3,000

2,000

1,000

0

CY2008 CY2009 CY2010 CY2011 CY2012

General Insurance - Gross premium writtenGeneral Insruance - UAL's market share

10.0%

9.5%

9.0%

8.5%

Source: Insurance Board of Sri Lanka Annual Report 2012 Source: Insurance Board of Sri Lanka Annual Report 2012

The Monetary Board of the Central Bank has directed JKH to reduce its current shareholding of c. 30% held in Nations Trust Bank(NTB) to 15%, whist JKH has requested for an extension for same. We believe that JKH could look into the possibility of trimming its

shareholding in NTB depending on the funding requirements for the WFP project. This would result in a one-off gain in the incomestatement of JKH, whilst the share of profits from NTB would be stopped being recognized in the income statement.


7/16

Property (accounted for c. 4% of the groups FY2013 external revenue)

Property FY2011 FY2012 FY2013 FY2014E FY2015E 1QFY2013 1QFY2014

External Revenue (LKR'm) 2,494 3,790 3,170 5,410 6,974 612 673

% YoY Change 53.9% 52.0% -16.4% 70.7% 28.9% -27.9% n/a 10.0%

Adjus ted EBITDA (LKR'm) 617 763 720 1,249 1,610 33 133

% YoY Change 63.8% 23.7% -5.7% 73.5% 28.9% -27.9% n/a 299.5%

According to management, the 475 unit OnThree20 apartment project has witnessed c. 80% completion to date and is poised to be

fully completed by the scheduled date of December 2014. The project which has witnessed c. 81% pre-sales to date has commenced

revenue recognition and we expect the revenue recognition from the project to continue to add strength to the Property segmen t during

FY2014E-FY2016E.

During 1QFY2014, the segment commenced construction of the 7th

Sense premium residential apartment project with a targeted date

of completion of April 2015. According to management, the 65 unit apartment project, which is priced at a premium rate of c. USD380-

390 per sq. ft, has already witnessed c. 50% pre-sales. Given the projected 2 year period for completion of the project, we expect the

revenue recognition from this project to commence towards the latter part of FY2014E.

Valuation

Sum of the parts (SOTP) Valuation

Segment/Line Item Sub-s egment/Comments Method of valuation and Inputs

LKR'm

Trans portation South As ia Gateway Terminals DDM (Ke=14.9%, TGR=3%) 18,519

Others (LMS) FCFF (WACC=14%, TGR=3%) 6,871

Leis ure FCFF (WACC=14.1%, TGR=6%) 62,346

Property P/B (peer average P/B of 1.0x) 11,969

Cons umer Foods & Retail FCFF (WACC=14.8%, TGR=5%) 11,186

Financial Services Nations Trus t Bank Jus tified P/B of 1.1x 4,294

Others (UAL & JKSB) P/B - 2.1x. (Five year average P/B ofUAL adjus ted for peer average P/B

of JKSB)

8,405

Information Technology FCFF (WACC=14%, TGR=5%) 3,163

Others FCFF (WACC=13.7%, TGR=5%) 1,213

Waterfront Properties Probability weighted average value

of bas e cas e, optimis tic cas e and

pessimis tic case

FCFF (WACC: 1-4 years =13.6%, 5-10

years =13.7%, 10-25 years =13.3%,

after

25 years =12.9%, TGR=3%, Exchange

rate=LKR130/USD)

82,769

OtherAdjus tments Adjus tment for net debt, land

and minority interes t

(8,843)

Dilution effect from warrants Effect from iss uing warrants at a

dis count to the current market price

ofthe share

Black-Scholes model (2 year bondyield

=10.8%, 3 year bond yield

=11.1%, current s hare

price=LKR217.50, adjus ted s hare

price LKR199.74)

(5,539)

Total Equity Value 196,352

Number ofs hares (m) Shares pos t rights iss ue + outstanding

ESOPs

1,007

Price per s hare (LKR) 195

DDM Dividend Discount Model, FCFF Free Cash Flow to Firm, Ke Cost of Equity, WACC Weighted Average Cost of Capital, TGR Terminal Growth Rate


8/16

We believe that SOTP valuation is the most suitable valuation methodology for JKH, given its diverse unrelated business segments.

The valuation of the WFP project poses several challenges due to the long gestation period of the project, inclusion of multiple

components in the project, inclusion of an option to undertake Phase 2 and also due to the international gaming operator not being

selected yet. Despite WFP playing a passive role in the gaming unit, we believe that the rental income (fixed + variable) generated from

renting out floor space to the gaming operator would be the key driver and the largest contributor to the WFP project.

In valuing the WFP project, we have considered similar integrated resorts in the region and projected the cash flows over the three

different tax regimes (i.e 1-10 years 0% tax, 11-25 years - 6% tax and after 25 years the current tourism tax rate of 12%) under a base

case, optimistic case and a pessimistic case. We have assumed that under the base case and the optimistic case, WFP would undertake

Phase 2. In arriving at the probability weighted value for WFP, we have assigned the highest weightage for the base case whilstassigned a lower weightage for the optimist case (due to the peer integrated resorts considered being in close proximity cf. Sri Lanka to

countries with a large gambling population), and the pessimistic case (on the assumption that JKH would be able to attract aninternational casino operator who would be successful in attracting gaming tourist). As per our estimation, we believe that WFP would

be the largest contributor to the share price of JKH and hence it is critical that JKH successfully implements the project.

Value (LKR'm) Weight

WFP -bas e case 60,348 60.0%

WFP - optimis tic case 216,850 20.0%

WFP -pessimis tic case 15,951 20.0%

Weighted average value 82,769

Based on the above valuation, we believe that the ordinary share of JKH is currently trading at a c. 10.3% premium to its intrinsicvalue of LKR195 and has not fully factored in the dilution effect from rights and the warrants yet. However, we believe that the rights

are attractively priced at LKR175. Given that every 3 rights subscribed entitles the investor for 2 warrants, we believe that the effectivecost of investing in the rights would be much lower than LKR175 assuming that the investor opts to dispose the warrants during

warrants trading. Hence we believe that the rights issue attached with warrants provides an opportunity to gain for both a trader with a

short term investment horizon (through arbitrage) and a long term investor who is likely benefit from the long term growth prospects of

the WFP project.

Valuation of Rights and Warrants

We illustrate below the implied value of warrants and the right considering the current price of LKR217.50 and our intrinsic value of

LKR195 as two scenarios. We have valued the warrants using the Black-Scholes model with the following inputs: 2 year government

bond yield =10.8%, 3 year government bond yield =11.1%, 2 year share price volatility =21.4%, 3 year share price volatility =28.0%.Further, we have assumed at the time of disposal the current price will prevail in the current price scenario and our intrinsic price will

price will prevail in the intrinsic price scenario.

Current Price

LKR217.50

Intrins ic Value

LKR195

Subs cription of 3 rights @ LKR175 (LKR) (525) (525)

Es timated value of 2015 Warrant (LKR) 71 51

Es timated value of 2016 Warrant (LKR) 86 67

Dis pos al of the 3 s hares s ubs cribed via rights (LKR) 645 585

Total value of 3 rights (LKR) 277 178

Implied value per right (LKR) 92 59

Relative Valuation

Source: Bloomberg, Asia Wealth Research

JKH is currently trading at a premium to its closest peers in terms of P/E, EV/EBITDA, P/BV and P/S. We expect the multiples to re-

rate downwards in the short term, due to the dilution effect from the rights issue and due to the slowdown in the short term performance

of the group.

Based on our above analysis we recommend a SELL on the ordinary voting share due to the potential downside within a 1 yearperiod and recommend a SUBSCRIBE for the rights due its attractiveness.


9/16

Key Risks to Our Recommendation, Target Price and Estimates

The Gazette notification issued for WFP under the Strategic Development Projects Act is yet to obtain the Parliamentsapproval to be valid. A failure to obtain such approval from the Parliament could significantly impact our estimates.

Fluctuation in exchange rates, cost overruns and delay in completing the construction could affect the estimates of the WFP

project.

In ability to attract one of the leading gaming operators who has a network of large amount of high spending clientele couldresult in lower than expected return from the WFP project.

Management has indicated that the rental received from the gaming area would account for c. 60% of the gaming economics.

A steep reduction in this percentage (arising from the higher bargaining power of the casino operator) could significantly

impact the valuation of the share.

The WFP includes a condominium component in its each Phase. If an oversupply of apartments results in a drop in real estate

prices, it could adversely affect the margins of the condominium component of the WFP project.

Pressure groups against the operation of casinos in Sri Lanka could negatively impact the successful implementation of thegaming business.

A sharp drop in occupancies in Sri Lankan resorts could impact the margins of the group, whilst political instability in

Maldives good impact the performance of the high margin yielding Maldivian segment.

Slow down in global and local trade could adversely impact the performance of the Logistics segment.

A sharp rise in cost of living could hamper the performance of the CF&R and the Financial Services segment.

Volatility in LKR, volatility in exchange rates and rise in raw material costs could significantly affect the margins of thegroup.


10/16

Annexure 1

Summary Financial Statements

Income Statement (LKR'm) - Condensed FY2011 FY2012 FY2013 FY2014E FY2015E FY2016E

Revenue 60,500 77,690 85,557 95,852 105,939 113,303

EBITDA 8,357 11,808 12,624 14,056 16,000 16,571

Total segment res ults 6,062 9,185 9,447 10,613 12,628 13,248

As sociate Profits 2,641 2,765 3,369 3,458 3,765 4,132

Profit Before Tax 10,629 12,820 15,775 14,323 15,588 15,123

Net profit to shareholders (reported) 8,246 9,687 12,201 10,662 11,604 11,295

Net profit to shareholders (recurring) 6,025 8,440 10,172 10,662 11,604 11,295

Diluted EPS (LKR) - reported 9.77 11.44 14.22 11.42 11.55 10.95

Diluted EPS (LKR) - recurring 7.14 9.96 11.85 11.42 11.55 10.95

Balance S heet (LKR'm) - Condensed FY2011 FY2012 FY2013 FY2014E FY2015E FY2016E

Non-current As s ets

Property, plant and equipment 28,628 34,290 49,273 56,338 84,631 104,770

Intangible as s ets 2,632 2,633 2,690 2,504 2,325 2,150

Investment in as s ociates 14,692 15,654 15,724 16,123 16,648 17,354

Other non-current as s ets 30,644 34,134 41,413 41,054 41,278 41,808

Current As s ets

Cas h in hand and at bank 2,113 4,267 3,555 4,024 3,169 4,070

Other current as s ets 20,971 28,603 31,855 53,210 49,464 60,648

Total As s ets 99,680 119,582 144,510 173,254 197,515 230,800

Total Equity

Non-current Liabilities

67,748 80,201 101,185 133,167 142,763 160,265

Borrowings 8,275 12,221 11,858 9,525 23,887 37,719

Other non-current

liabilities Current

Liabilites Borrowings

15,276

6,334

17,567

7,833

20,576

8,259

21,971

6,218

22,870

5,477

24,008

6,183

Other current liabilities 2,046 1,760 2,632 2,374 2,518 2,624

Total equity and liabilities 99,680 119,582 144,510 173,254 197,515 230,800

Net as s et value pers hare (LKR) 71.59 84.51 104.78 122.05 130.55 140.70

Growth rates and Ratios FY2011 FY2012 FY2013 FY2014E FY2015E FY2016E

Growth rates

Revenue 26.1% 28.4% 10.1% 12.0% 10.5% 7.0%EBITDA 60.1% 41.3% 6.9% 11.3% 13.8% 3.6%

Total s egment res ults 83.3% 51.5% 2.8% 12.3% 19.0% 4.9%

Net p rofit to s hareholders (reported) 58.5% 17.5% 26.0% -12.6% 8.8% -2.7%

Net p rofit to s hareholders (recurring) 42.9% 40.1% 20.5% 4.8% 8.8% -2.7%

Diluted EPS (LKR) - reported 54.7% 17.1% 24.3% -19.7% 1.1% -5.2%

Diluted EPS (LKR) - recurring

Margins and Ratios

Gros s profit margin

39.5%

22.6%

39.6%

23.4%

18.9%

23.9%

-3.7%

23.4%

1.1%

23.4%

-5.2%

23.4%

EBITDA margin 13.8% 15.2% 14.8% 14.7% 15.1% 14.6%

Total s egment res ults margin 10.0% 11.8% 11.0% 11.1% 11.9% 11.7%

Net margin (reported ) 15.0% 14.1% 15.9% 12.5% 12.3% 11.2%

Net margin (recurring) 11.2% 12.3% 13.3% 12.5% 12.3% 11.2%

ROE (bas ed on reported net income) 15.0% 14.7% 15.1% 10.1% 9.2% 8.1%

ROE (bas ed on recurring net income) 11.0% 12.8% 12.6% 10.1% 9.2% 8.1%

Dividend Yield 1.4% 1.3% 1.4% 1.4% 1.6% 1.5%

S eg ment Exte rnal Revenue (LKR'm) FY2 011 FY201 2 FY2013 FY20 14E FY201 5E FY2016E

Transpo rtation 13,426 18,428 19,438 20,129 21,031 21,480

Leisure 13,810 17,415 20,593 22,951 24,522 26,057

Property 2,494 3,790 3,170 5,410 6,974 5,030

Consumer food and retail 18,358 21,969 24,267 26,742 29,316 31,967

Financial s erv ices 6,484 7,932 8,599 9,931 11,256 12,737

Information Technology 3,107 5,926 6,514 7,445 8,494 9,647

Others 2,823 2,229 2,978 3,244 3,569 3,906

W aterfront Prop erties - - - - 777 2,478

S egment EBITDA (LKR'm) FY2011 FY2012 FY2013 FY2014E FY2015E FY2016E

Transpo rtation 852 1,215 1,074 1,106 1,142 1,152

Leisure 3,294 5,595 6,864 7,495 7,950 8,348

Property 617 763 720 1,249 1,610 1,161

Consumer food and retail 1,113 2,257 1,826 2,012 2,336 2,547

Financial s erv ices 953 1,514 1,204 1,392 1,607 1,808

Information Technology 200 341 547 627 715 812

Others 1,328 122 390 175 474 211


11/16

W aterfront Properties - - - - 166 530


12/16


Annexure 2

Waterfront Properties at a Glance

Rights Issue Update

Salient Features of the Project

Project scope Integrated resort consisting of multiple businesses including a luxury hotel, convention centre,

entertainment and gaming facilities, international standard shopping mall, luxury condominiums,

serviced apartments and office space. The project would be undertaken in two phases and the

implementation of Phase 2 would depend on the market conditions.

Time line 4 to 5 years. Management has indicated that the decision to undertake Phase 2 would be taken while the

construction of Phase 1 is in progress and the decision would not impact the estimate time line.

Estimated cost of

the project

(excluding land)

Phase 1 + Phase 2 = USD820m or;

Phase 1 only = USD660m

Tax benefits The project company, Waterfront Properties would enjoy several tax concessions under the Strategic

Development Projects Act. Profits and income derived from non-gaming activities would be exempted

for 10 years from income tax and would be taxed at a concessional rate for another 15 years. Dividends

distributed by Waterfront Properties would be exempted from income tax for 11 years. Further,

importation of projected related goods and services would be exempt from Value Added Tax for 5-8years depending on the implementation of Phase 2.

Proposed mode of

funding

Land transfer amounting to USD60m

Equity infusion by JKH USD240m

Pre-sales of residential apartments

Balance to be funded by debt (The company has indicated that the optimal Debt/Equity ratio would

be 60/40)

Source: Company circular to the shareholders, Asia Wealth Research

Artists Impression of the Waterfront Properties Project

Source: Company


13/16


Annexure 3

Rights Issue Update

Proposed Shareholding Structure of Waterfront Properties (Approximate

Shareholding)

81.36%

John Keells Holdings

(effective shareholding of c.

96.7%)

86.9

%

100%

Ceylon Cold Stores John Keells PLC John Keells Properties

79.24%

5.03%

14.15%1.57%

Waterfront Properties

(Project Company)

Phase 1 Phase 2

Luxury hotel (800 rooms)Convention centre to

Serviced apartments (200 units)

Office complex (400,000 sq. ft)accommodate 2,500 guests

Shopping mall Entertainment and gaming

facilities Luxury condominiums (240

units)

Car park facilities (2,500 slots)

Source: Company circular to the shareholders, Asia Wealth Research


14/16


Annexure 4

Proposed Rights Issue Attached with Warrants at a Glance

Rights Issue

Rights Issue Update

Proportion 2 new shares for every 13 shares held

Number of rights to be issued (m) 132.0

Issue price LKR175

2015 Warrant

Proportion 1 warrant for 3 subscribed rights

Number of warrants to be issued (m) 44.0

Conversion to ordinary shares 1 warrant to 1 share

Issue price LKR185

Point of exercise 24 months from the issue of rights (12 November 2015)

2016 Warrant

Proportion 1 warrant for 3 subscribed rights

Number of warrants to be issued (m) 44.0

Conversion to ordinary shares 1 warrant to 1 share

Issue price LKR195

Point of exercise 36 months from the issue of rights (11 November 2016)

Share Dilution from Rights Issue and Warrants

The following illustration excludes the dilution effect from ESOPs.

Period Description Number of shares

issued (m)

Total shares

outstanding (m)

4 October 2013 Outstanding N/A 857.9

4Q2013 Listing of rights 132.0 989.912 November 2015 Conversion of 2015 warrant 44.0 1,033.9

11 November 2016 Conversion of 2016 warrant 44.0 1,077.9


15/16


Rights Issue Update

Important Disclosures

Equity Rating Definition

Buy The stock is expected to deliver an absolute return greater than or equal to 15% within a 12-month time horizon

Long-term buy The stock is expected to deliver an absolute return less than 15% but greater than or equal to 5% within a 12-month time horizon. However, we maintain a positive outlook for the stock based on the underlying fundamentals and the future

growth prospects of the firm.

Hold The stock is expected to deliver an absolute return less than 15% but greater than -5% within a 12-month time horizon.

Sell The stock is expected to deliver an absolute return less than or equal to -5% within a 12-month time horizon.

Disclaimer

The report has been prepared by Asia Wealth Management Co (Private) Limited. The information and opinions contained herein

has been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith. Such

information has not been independently verified and no guaranty, representation or warranty, express or implied is made as to its

accuracy, completeness or correctness, reliability or suitability. All such information and opinions are subject to change w ithoutnotice. This document is for information purposes only, descriptions of any company or companies or their securities mentio ned

herein are not intended to be complete and this document is not, and should not be construed as, an offer, or solicitation of an

offer, to buy or sell any securities or other financial instruments. In no event will Asia Wealth Management Co (Private) Limited

be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss ordamag e

whatsoever arising out of, or in connection with the use of this report and any reliance you place on such information is therefore

strictly at your own risk.

Asia Wealth Management Co (Private) Limited may, to the extent permissible by applicable law or regulation, use the above

material, conclusions, research or analysis in which they are based before the material is disseminated to their customers. Not all

customers will receive the material at the same time. Asia Wealth Management Co (Private) Limited, their respective directors ,

officers, representatives, employees, related persons and/or Asia Wealth Management Co (Private) Limited, may have a long or

short position in any of the securities or other financial instruments mentioned or issuers described herein at any time and maymake a purchase and/or sale, or offer to make a purchase and/or sale of any such securities or other financial instruments from

time to time in the open market or otherwise, in each case either as principal or agent. Asia Wealth Management Co (Private)

Limited may make markets in securities or other financial instruments described in this publication , in securities of issuers

described herein or in securities underlying or related to such securities. Asia Wealth Management Co (Private) Limited may

have recently underwritten the securities of an issuer mentioned herein. The information contained in this report is for general

information purposes only. This report and its content is copyright of Asia Wealth Management Co (Private) Limited and all

rights reserved. This report- in whole or in part- may not, except with the express written permission of Asia Wealth Management

Co (Private) Limited be reproduced or distributed or commercially exploited in any material form by any means whether graphic

, electronic, mechanical or any means. Nor may you transmit it or store it in any other website or other form o f electronic

retrieval system. Any unauthorized use of this report will result in immediate proceedings.


16/16

Rights Issue UpdateResearchnager - Research Assistant Manager - Research

akrishnan Nirmalan (94-11)5320362 Amali Perera (94-11)5320256

rporates

nir m a la n @ a s iaca p ita l. lk

Economy

a m a li@ a s iaca p ita l. lk

gini Yogarasa (94-11)5320361 Dhanusha Pathirana (94-11)5320254

Statistician

Nuwan Pradeep (94-11)5320257

Salesti t ut i o n al S ales R e tail S ales

riMarikar (94-11) 5320224 077 3-576868 s ab ri@ a s iacap ita l. lk ShiyamSubaulla (94-11)5320218 0773-502016 s hiy a m @ a s iacap ita l. lk

oshanWijayakoon (94-11) 5320208 0777-713645 niro s h a n @ a s iacap ita l. lk PriyanthaHingurage (94-11)5320217 0773-502015 p r iy a n t h a @ a s iaca p ita l. lknjulaKumarasinghe (94-11) 5320211 0777 -874310 m a nj u la @ a s iaca p ita l. lk SubeethPerera (94-11)5320227 0714-042683 s u bee t h @ a s iaca p ita l. lk

elakaHapugoda (94-11)5320240 0777 -256740 c h e lak a @ a s iacap ita l. lk NelukaRodrigo (94-11)5320214 0777-366280 n e luka @ a s iaca p ita l. lkamindaMahanama (94-11) 5320223 0777 -556582 m a h a n a m a @ a s iaca p ita l. lk GaganiJayawardhana (94-11)5320236 0714-084953 g a g a ni@ a s iaca p ita l. lkanBibile (94-11) 5320238 0777 -352032 hira n @ a s iacap ita l. lk ShamalPerera (94-11)5320219 077-3717558 s h a m a l@ a s a iaca p ita l. lkoshanRathnam (94-11) 5320242 0773 -717515 ra t n a m @ a s iacap ita l. lk NuwanEranga (94-11)5320246 0777368012 e ran g a @ a s iaca p ita l. lkvanHett igoda (94-11) 5320220 0773 -691251 je e v a n @ a s iaca p ita l. lk RomeshPriyadarshana (94-11)5320228 0772548795 p r iy ada rs h a n a @ a s iaca p ita l. lk

ajFouz (94-11) 5320210 0773 -810159 fa raj @ a s iacap ita l. lk RukshanLiyanage (94-11)5320235 077-3413297 r u k s h a n @ a s iacap ita l. lk

flalFarook (94-11) 5320247 0772-253730 m if la l@ a s iaca p ita l. lk NathashaMunasinghe (94-11)5320231 0777-569266 n a t h a s h a @ a s iaca p ita l. lk

IreshaFernando (94-11)5320232 0777359012 ire s h a @ a s iaca p ita l. lkSharikaRathnayake (94-11)5320209 0777567994 s h a r ika @ a s iaca p ita l. lk

BranchesE Floor CSE,01-04, World Trade Centre, Colombo 1. ThusharaAdhikari (011)-5735122 0773-688202 adhika r i@ a s iaca p ita l. lk

M G Suranjana (011)-5763539 0773-954994

runegala Union Assurance Building, No.6,1stFloor,Rajapilla Rd, Kurunagala. AsankaSamarakoon (037)-5628844 0773-690749 a s a n ka @ a s iaca p ita l. lkGayanNishsanka (037)-5642717 0777-105356 n is h s h a n k a @ a s iacap ita l. lk

tara E.H.Cooray Building, Mezzanine Floor, No:24, AnagarikaDarmapala Mw, SumedaJayawardena (041)-5677525 0773-687307 s u m ed a @ a s iaca p ita l. lkMatara LalindaLiyanapathirana (041)-5677526 0778-628798 r is h a n @ a s iaca p ita l. lk

MaheshaMadurangi (041)-5620727 m a h e s h a @ a s iaca p ita l. lk

lle Peoples Leasing Building,2nd Floor,No.118,Matara Road,Galle RuchiraHasantha (091)-5629998 0773-687027 r u c h ira @ a s iaca p ita l. lk

gombo Asia Asset Finance, 171/1, Station Road, Negombo. UthpalaKarunatilake (031)-5676881 0773-691685 u t hp a la @ a s iaca p ita l. lk

ratuwa Asia Asset Finance, No.18, New De Zoysa Rd, Moratuwa.

CharithPerera (011)-5238663 c h a r it hn @ a s iacap ita l. lk

nadura Asian Alliance Building, 293, Galle Road, Panadura RanganathWijetunga (038)-5670400 0715-120723 rang a n a t h @ a s iacap ita l. lkAsankaChaminda (038)-5670407 0713-559552 c h a m inda @ a s iaca p ita l. lk

ndy 132 2/7, Hill City Complex,D. S .Senanayake Street, Kandy.

NilupulHettiarachchi

RadhikaHettiarachchi

(081)-5628500

(081)-5625577

0777410164

0773692242

nilu p ul@ a s iacap ita l. lk

ra d h ik a @ a s iacap ita l. lkTharinduPr iyankara (081)-5625577 0777282586 p r iy a n k a ra @ a s iacap ita l. lk

mpara Bandula Cinema Shopping complex, No-103,D S Senanayaka Street,Ampara.

Ravi De Mel

NalakaDhanushka

(063)-5679071

(063)-5679070

0772-681995

0771-520376

ravide @ a s iaca p ita l. lk

n a lak a @ a s iacap ita l. lk

ervi ce Centersibathgoda Level 2-6,Udeshi City Shopping complex, No 94,Makola Rd,Kiribathgoda DanushkaBoteju

KasunNavoda(011)-5634803 0716-270527 botej u @ a s iaca p ita l. lk

mbantota Hambanthota Chamber of Commerce, ThangalleRoad,Hambantota. SherminRanasinghe (047)-5679240 0777681866 s h e r m in @ a s iaca p ita l. lkSamithEdirisinghe 0775-486869 s a mit h @ a s iaca p ita l. lk

fna 62/20, First Floor, Stanley Road, Jaffna GratianNirmalan (021)-5671800 0777-567933 nir m a l@ a s iaca p ita l. lkS.Puviraj (021)-5671801 0775-096969 puviraj @ a s iacap ita l. lk

ASIA WEALTH MANAGEMENT CO.(PVT) LTD

21-01 West Tower,World Trade Centre, Echelon Square,

Colombo 01, Sri LankaTel: +94 11 5320000

Website: ww w .as i ac a p it a l.lk
mailto:[email protected]:[email protected]://var/www/apps/conversion/Travis/Documents/Templates/[email protected]://smb//192.168.3.10/Research-1/Research/WEEKLY/2012-weekly/Weekly%2003/[email protected]%20%20http://smb//192.168.3.10/Research-1/Research/WEEKLY/2012-weekly/Weekly%2003/[email protected]%20%20http://smb//192.168.3.10/Research-1/Research/WEEKLY/2012-weekly/Weekly%2003/[email protected]://smb//192.168.3.10/Research-1/Research/WEEKLY/2012-weekly/Weekly%2003/[email protected]://smb//192.168.3.10/Research-1/Research/WEEKLY/2012-weekly/Weekly%2003/[email protected]:[email protected]:[email protected]:[email protected]://smb//192.168.3.10/Research-1/Research/WEEKLY/2012-weekly/Weekly%2003/[email protected]://smb//192.168.3.10/Research-1/Research/WEEKLY/2012-weekly/Weekly%2003/[email protected]:[email protected]:[email protected]://smb//192.168.3.10/Research-1/Research/WEEKLY/2012-weekly/Weekly%2003/[email protected]:[email protected]:[email 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protected]://smb//192.168.3.10/Research-1/Research/WEEKLY/2012-weekly/Weekly%2003/[email protected]://smb//192.168.3.10/Research-1/Research/WEEKLY/2012-weekly/Weekly%2003/[email protected]:[email protected]:[email protected]://smb//192.168.3.10/Research-1/Research/WEEKLY/2012-weekly/Weekly%2003/[email protected]://smb//192.168.3.10/Research-1/Research/WEEKLY/2012-weekly/Weekly%2003/[email protected]://smb//192.168.3.10/Research-1/Research/WEEKLY/2012-weekly/Weekly%2003/[email protected]://smb//192.168.3.10/Research-1/Research/WEEKLY/2012-weekly/Weekly%2003/[email protected]://smb//192.168.3.10/Research-1/Research/WEEKLY/2012-weekly/Weekly%2003/[email protected]://smb//192.168.3.10/Research-1/Research/WEEKLY/2012-weekly/Weekly%2003/[email protected]://www.asiacapital.lk/mailto:[email protected]://var/www/apps/conversion/Travis/Documents/Templates/[email protected]://smb//192.168.3.10/Research-1/Research/WEEKLY/2012-weekly/Weekly%2003/[email 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