R I L Property Limited (RIL) – Initial Public Offer

First Capital Research Reports on RIL Property’s recent IPO

Company Profile:

Incorporated in 2009, RIL is an owner, developer and manager of Grade ‘A’ commercial office space in Colombo. RIL focuses on offering multi-faceted real estate solutions including facilities management, leasing, land acquisition, construction management services, consulting and strategic investment. The company’s flagship asset, Parkland, currently has an occupancy of 90.4% and about 60% of the tenants are foreign. RIL also owns FoodBuzz (Private) Limited (FBPL), a food and beverage company which is a franchisee of the BreadTalk Group based in Singapore.

Growth Prospects:

Parkland’s tenant base has a Weighted Average Lease Expiry (WALE) of 3 years and introductory rates offered to initial clients are expected to be re-priced upon renewal of the respective lease agreements. Furthermore a specific clause in the lease agreements ensures a 10% increase in rentals every 2 years.

The expansion project for FBPL involves increasing the number of BreadTalk outlets from 7 in FY17 to 16 in FY21. This would provide the potential for growth in cash flow generation.

The refurbished Readywear building will be ready for occupancy by June 2018 and would add 194,345 sq. ft. of Net Rentable Area (NRA). Furthermore RIL has a vacant property on Park Street with a land extent of 155 perches, and based on market conditions, the company plans to utilize it for large scale commercial office space development.

RIL also plans to dispose of the Morgan Road property in FY18/19 for LKR 1.3Bn (net of capital gains taxes) and utilize the proceeds for future office space developments. In addition to this, given the company’s strong balance sheet and cash flows, the company has the potential to raise further debt if required.

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The comments on this report are provided by the Capital Markets Research Unit of First Capital Holdings PLC an investment bank in Sri Lanka.

The company operates in the capital markets of Sri Lanka in government securities – treasury bills and bonds, stock brokering and share market investments, asset management, private wealth management,  retirement planning, personal financial planning, unit trust, margin trading, capital market research, trustee services, corporate finance advisory services including corporate debt structuring (debentures, trust certificates, commercial papers), valuations, restructuring, mergers and acquisitions, initial public offerings (IPOs) and project advisory.

The First Capital Group consists of First Capital Treasuries PLC, First Capital Limited, First Capital Markets Limited, First Capital Asset Management Limited and First Capital Equities (Private) Limited covering Colombo, Negombo, Matara, Kandy and Kurunegala.