CSE listed DIMO reports a loss as inventories increase by Rs5bn; stock is cheap but investors pass

Dimo 800 facility in Colombo 14

August 2, 2018 (LBO) – Colombo Stock Exchange listed DIMO lost Rs54mn in the quarter ended June 2018.

The loss comes amid a large build in inventories during the 3 month period.  During the quarter, inventories increased from Rs9.5bn, to Rs14.8bn.

Payables correspondingly increased from Rs3bn to Rs5bn, and short term debt increased from Rs8.5bn to Rs12.1bn in the quarter.

Analysts say that the company is moving towards a ‘risk on’ position with their balance sheet increasing by approximately 50% year over year from Rs22.8bn to 34.3bn.

Dimo is most noted as being the agent for Mercedes Benz, and Tata Motors in Sri Lanka.  The have invested significantly in property plant and equipment in the last several years.  Largest among these investments have been their flagship Dimo 800 facility in Colombo 14.

The automobile market has experienced a significant boom in Sri Lanka as the government has been progressively reducing import taxes on vehicles over the last several years.  However, agents have failed to reap maximum benefits as grey market importers have taken significant share as the market has expanded.

The stock trades at just Rs380/share which is just a fraction of its net asset value of Rs1318.  As the company has not historically been a significant dividend payer, analysts say that minority shareholders have not had adequate incentive to scoop up the cheap shares.