KING OF RETAIL: CEYLON COLD STORES PLC

THE COMPANY IS DOUBLING THE NUMBER OF KEELLS SUPERMARKET OUTLETS MOSTLY IN THE AFFLUENT WESTERN PROVINCE

First Capital Research in a recent equities report has crowned Ceylon Cold Stores Plc (CCS) the King of Retail, as it potentially grows revenue by over 40% annually over the next three years to Rs100 billion by 2022.

CCS operates the Keells supermarket chain and manufactures carbonated soft drinks and frozen confectionery under the Elephant House brand. According to First Capital Research, CCS is positioning itself for a consumption boom driven by the rising affluence of an emerging middle-class. CCS is doubling the number of Keells supermarket outlets to reach 205 by 2024.

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From 96 outlets in 2019, Keells will add 20-25 new large-format outlets annually over the next five years, mostly in the Western province including Colombo suburbs. Home to 29% of the population, the region’s contribution to the country’s GDP is over 40%.

“The modern retail concept has been embraced by a growing affluent middle- and upper-income consumer base owing to its product diversity and hygiene advantages,” FC Research says.

Ample parking facilities, faster checkouts and outlet layouts that enhance the modern trade experience will be key to Keells attracting customers. Each outlet will take a year to breakeven according to historical data, the report said. Retail revenue will explode to Rs123 billion by 2024, up from Rs45 billion in the year ending March 2019 with profit margins (before interest and taxes) improving from 2% to 4.2%. CCS’ soft drink and frozen confectionery segments are also positioned to exploit the impending consumption boom.

Combined revenue will grow 55% over the next five years to Rs21 billion by 2024, FC Research estimates. “Growth is likely to be led by reaping the benefits of higher consumption of ice cream and soft drinks as per capita consumption is tied to improving disposable incomes and resultant changes in consumption patterns leading to more impulse buying,” FC Research says. CCS can look forward to a promising reign. Consumer confidence can only improve going forward as the economy rebounds from a disappointing 2% in 2019 to 5% in 2022.