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Earnings Review - Q3 FY 16

05 April 2016

65, Braybrooke Place, Colombo 2, Sri Lanka


research@bartleetreligare.com, +94 11 5220200

BRS Research

Asiri Hospital Holdings PLC (ASIR: LKR 23.80)

Head of Research - Nikita Tissera


Research Analyst - Ishanudeen Zohar

Diagnostic and lab demand pushing core -growth :BUY


ASIR Q3 FY 16 net profit grew 105% YoY to LKR 658mn with an EPS of LKR 0.56 (This
included an increase in other operating income by 642% to LKR 291mn). During the
quarter Asiri hospital continued to be the highest contributor to group bottom line
with a contribution of 61%, where laboratory segment showed margin expansion.
Improved occupancy levels across all four hospitals and a rise in demand for private
healthcare drove the group to report a 19% YoY growth in top line. With ASIR having the largest laboratory network in the island, we believe the hospital will continue to benefit from increasing demand for diagnostic services in the country. On a
DCF valuation we have arrived at a target price of LKR 27 and a total return of LKR
28 (upside of 17% on CMP). We continue to recommend BUY.
All figures in LKR' mn
Revenue

2013

2014

2015

2016E

2017E

2018E

7,058

7,793

8,547

9,948

11,137

12,692

Trading Snapshot
Market cap (LKR mn)

27,073

Market cap (USD mn)

187

Outstanding equity shares (mn)

1,137.53

Public Holding (%) - Dec '15

20.26%

52 week High/Low

25.10/19.40

YTD ASPI return (%)

-11.83%

YTD Stock return (%)

-0.83%

Beta

0.64

Valuation Summary

Revenue growth (%)

15.2%

10.4%

9.7%

16.4%

12.0%

14.0%

EBIT recurring

1,863

1,966

2,295

2,772

3,203

3,600

CMP (LKR)

23.80

EBIT margin (%)

26.4%

25.2%

26.8%

27.9%

28.8%

28.4%

Intrinsic value (LKR)

27.33

Profit attributable to equity holders

756

1,055

917

1,869

1,948

2,227

DPS (LKR)

BRS EPS (LKR)

0.75

0.96

0.83

1.64

1.71

1.96

68.1%

28.5%

-13.1%

96.9%

4.2%

14.3%

BRS EPS growth (%)


NAV per share (LKR)

6.36

4.23

5.48

5.98

7.19

8.65

P/E (x)

15.3

23.1

24.2

14.5

13.9

12.2

P/BV (x)

1.8

5.2

3.7

4.0

3.3

2.8

ROE %

15.8%

19.0%

17.2%

29.2%

26.0%

24.7%

Source: Company data and BRS Equity Research

Occupancies to remain stable during our forecast period


Occupancy levels across all four hospitals improved during the quarter on the back of
improved demand for private healthcare services. We expect occupancy levels to
range bound between 65% - 68% during our forecast period. The Central continued to
be the largest contributor to group top line with a contribution of 36% followed by
AMSL and ASIR at 30% and 26% respectively. With The Central contributing 44% to
Asiri group room inventory, we believe that the hospital is well positioned to capitalize on the increasing number of NCDs (Non Communicable Diseases) in the country.

Target price based on total return

27.83

Valuation method

DCF method

Total Return %

16.94%

Rating

BUY

ASIR Price Vs ASPI Movement


ASPI

ASPI

8,000

LKR

ASIR

26

7,500

24

7,000
22
6,500
20
6,000
18

5,500
5,000
Jan-15

Laboratory segment to help maintain healthy margins


Gain made on sale of NDB shares (reflected under other income) and an increase in
finance income to LKR 116mn resulted in an unprecedented growth in bottom line of
105% YoY in Q3 FY 16. However we are of the view that ASIR will continue to enjoy
~35% recurring EBITDA margins in our forecast period, capitalizing from a growth in
laboratory segment. Asiri laboratory has acquired 35% of private diagnostic market in
the country.

0.50

16
Apr-15

Jul-15

Oct-15

Jan-16

Apr-16

EPS
LKR
2.10
1.85
1.60
1.35
1.10
0.85
0.60

Valuation - Market leader in a recession proof industry


Being the market leader in an industry that is resilient to economic cycles along with
the ability to generate healthy margins gives ASIR an edge over other healthcare
peers. Based on a free cash flow valuation we have arrived at a target price of LKR 27
and a total return of LKR 28 and continue to recommend BUY. ASIR is trading at a
forward PER of 14.5x based on an EPS of LKR 1.64 in FY 2016E.
For analyst certification and other important disclosures, please refer to the Disclosure and
Disclaimer section at the end of this report.

0.35
0.10
2013

2014

2015

2016E

Page 1

2017E

2018E

Company Information Note


65, Braybrooke Place, Colombo 2, Sri Lanka
research@bartleetreligare.com, +94 11 5220200

05 April 2016

Asiri Hospital Holdings PLC (ASIR)


Company profile
Asiri Hospital Holdings is the second largest private
player in the Healthcare industry in Sri Lanka with
the group holding the highest bed capacity in the
country. ASIR consists of five hospitals presently of
which three are situated in Colombo and two in
Matara. A 140 bed hospital in Kandy is also in the
groups medium term plan.
Revenue LKR mn % Growth (2013-18E)
14%

12,692

2018E

2018E

12%

3,600

2018E

2018E

11%

4,306

2018E

2018E

12%
16%
10%

10%
7,058

2013

2014

2015

2016E

2017E

EBIT LKR mn % Growth (2013-18E)


16%
21%
1,863

6%

2013

2014

17%

2015

2016E

2017E

EBITDA LKR mn % Growth (2013-18E)

17%
2,497

2013

13%

5%

2014

12%

2015

ROCE

2016E

ROCE %

2017E

ROE

ROE %

29%

19%

24%

17%
15%

19%

13%

14%

11%

9%

9%

4%
2013

2014

2015

2016E

2017E

2018E

Year Ending 31 March


2013
2014
2015
2016E
2017E
2018E
Summary Information
BRS EPS (LKR)
0.75
0.96
0.83
1.64
1.71
1.96
BRS EPS growth (%)
68.1%
28.5%
-13.1%
96.9%
4.2%
14.3%
P/E (x)
15.3 x
23.1 x
24.2 x
14.5 x
13.9 x
12.2 x
Sector P/E (x)
35.5 x
16.0 x
18.7x
na
na
na
Reported EPS (LKR) as per annual report
0.75
0.96
1.30
na
na
na
P/E on reported EPS (x)
15.3 x
23.2 x
15.6 x
na
na
na
NAV per share (LKR)
6.36
4.23
5.48
5.98
7.19
8.65
P/BV (x)
1.8 x
5.2 x
3.7 x
4.0 x
3.3 x
2.8 x
Sector P/BV
2.2 x
2.7 x
2.5 x
na
na
na
DPS (LKR)
0.26
0.50
0.55
1.94 *
0.50
0.50
Dividend yield (%)
2.2%
2.3%
2.7%
8.2%
2.1%
2.1%
FCFF (LKR mn)
1,285
1,744
4,068
1,469
1,912
2,496
FCFE (LKR mn)
1,286
4,364
5,427
996
1,724
2,280
CFPS (LKR)
(0.30)
0.17
2.83
3.98
0.43
0.97
P/CFPS (x)
nm
133.7 x
7.1 x
6.0 x
55.1 x
24.5 x
Mkt price (LKR)
11.40
22.20
20.20
23.80
23.80
23.80
Weighted average shares (mn)
1,012
1,099
1,099
1,138
1,138
1,138
Average mkt cap (LKR mn)
11,533
24,400
22,202
27,073
27,073
27,073
Enterprise value (LKR mn)
18,893
33,518
30,518
32,511
31,964
30,919
EV/Sales
2.7 x
4.3 x
3.6 x
3.3 x
2.9 x
2.4 x
EV/EBITDA
7.6 x
12.8 x
10.3 x
9.4 x
8.2 x
7.2 x
Income Statement (LKR mn)
Revenue
7,058
7,793
8,547
9,948
11,137
12,692
EBITDA recurring
2,497
2,626
2,962
3,464
3,895
4,306
Depreciation and amortisation
(635)
(661)
(668)
(692)
(691)
(707)
EBIT recurring
1,863
1,966
2,295
2,772
3,203
3,600
Finance cost
(734)
(606)
(564)
(581)
(477)
(441)
Exceptionals/non-recurrings
(0.53)
(2.35)
(4.53)
(1.52)
Tax expense
(139)
(162)
(187)
(283)
(389)
(429)
Net income
967
1,225
1,072
2,103
2,498
2,890
Minorities & preference dividends
211
170
155
234
549
663
Profit attributable to equity holders
756
1,055
917
1,869
1,948
2,227
Statement of Financail Position (LKR mn)
Cash and cash equivalents
161
189
1,247
4,712
5,203
6,307
Inventories
315
341
381
264
475
677
Trade receivables
509
689
374
475
534
813
Fixed assets
12,537
12,547
14,554
12,145
12,353
12,626
Goodwill
565
549
549
549
549
549
Intangible assets
5
10
15
Investments
Associates
5
10
15
Total assets
15,005
15,240
18,215
19,196
20,192
22,083
Trade payables
585
552
373
1,268
950
1,084
Interest bearing debt -short term
2,053
2,233
1,347
1,973
1,823
1,673
Interest bearing debt -long term
4,321
6,077
7,033
5,918
5,468
5,018
Total liabilities
7,428
9,589
11,011
10,132
9,199
8,769
Shareholders equity
6,430
4,654
6,021
6,800
8,179
9,837
Minorities
1,148
997
1,183
2,264
2,814
3,477
Total equity
7,578
5,651
7,204
9,064
10,993
13,314
Net debt (cash)
6,213
8,121
7,133
3,179
2,088
384
Total capital employed
13,952
13,961
15,584
16,954
18,283
20,005
Cash flow (LKR mn)
Cash flow from operations
1,133
1,527
4,462
1,978
2,400
3,093
Net working capital
(234)
(184)
1,511
(347)
(614)
(380)
Capital expenditure
(489)
(317)
(874)
(1,021)
(900)
(980)
Free cash flow
643
1,210
3,588
957
1,500
2,113
Investing cash flows
(2,301)
(2,673)
(1,590)
3,779
(740)
(820)
Equity capital
5
10
15
Dividends paid
(548)
(601)
(541)
(225)
(569)
(569)
Net borrowings
(641)
2,085
878
(985)
(600)
(600)
Net cash flow
(300)
182
3,114
4,529
491
1,104
Key ratios
Revenue growth (%)
15.2%
10.4%
9.7%
16.4%
12.0%
14.0%
EBIT growth (%)
11.8%
5.5%
16.7%
20.8%
15.5%
12.4%
EBITDA margin (%)
35.4%
33.7%
34.7%
34.8%
35.0%
33.9%
EBIT margin (%)
26.4%
25.2%
26.8%
27.9%
28.8%
28.4%
ROCE %
14.2%
14.1%
15.5%
17.0%
18.2%
18.8%
ROE %
15.8%
19.0%
17.2%
29.2%
26.0%
24.7%
Debt/equity (%)
84.1%
147.1%
116.3%
87.1%
66.3%
50.3%
Net debt/equity (%)
82.0%
143.7%
99.0%
35.1%
19.0%
2.9%
Gearing (%)
45.7%
59.5%
53.8%
46.5%
39.9%
33.4%
Interest cover (x)
2.5 x
3.2 x
4.1 x
4.8 x
6.7 x
8.2 x
Payout ratio (%)
34.1%
52.1%
65.9%
118.1%
29.2%
25.5%
*ASIR distributed an interim dividend of Rs 1.94 per share for the year ending 31st March 2016 in the form of shares in Asiri Central Hospitals
Limited. Shareholders who hold a fraction of shares were entitled for cash equivalent

Page 2
Source: ASIR Annual Reports and BRS Equity Research

BRS Equity Research

Q3 FY 16 Performance

Q3 FY 16

Q3 FY 15

Q2 FY 16

2,598

2,189

2,396

YoY growth (%)

18.7%

8.3%

13.6%

QoQ growth (%)

8.4%

3.8%

3.5%

659

321

302

All figures in mn
Revenue

Recurring Net profit

0.56

0.25

0.24

YoY growth (%)

BRS EPS as adjusted (LKR)

123.1%

3.9%

13.1%

QoQ growth (%)

137.0%

20.1%

-11.7%

5.07

5.16

5.94

ROCE %

NAV per share (LKR)

16.9%

13.6%

14.7%

ROE %

23.5%

18.5%

16.4%

101.9%

113.9%

106.4%

50.5%

53.3%

51.6%

Net debt/equity (%)


Gearing (%)
EV/Sales (x)
EV/EBITDA (x)

3.5

3.9

3.8

10.2

7.1

11.7

Valuation estimates
Based on a free cash flow valuation we have arrived at a target price of LKR 27.33. Our
valuations are based on the following estimates.

WACC 12.8%
Terminal Growth rate 3%
Risk-free rate 12.56% (Five year bond rate)
Beta 0.64 (Based on ASIR vs. ASPI movement)
Equity risk premium 5%

Sensitivity of Target Price to Risk Free Rate

Risk free rate - 5 year treasury bond rate

Terminal growth

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27.33

10.06%

10.56%

11.06%

12.56%

13.06%

13.56%

14.06%

2%

29.78

28.84

27.94

25.52

24.78

24.08

23.41

3%

32.30

31.19

30.14

27.33

26.49

25.69

24.92

4%

35.48

34.14

32.89

29.56

28.57

27.63

26.75

Page 3

BRS Equity Research

Financial Analysis
Income Statement - Asiri Hospital Holdings PLC
2013

Year Ending 31st March (LKR mn)

2014

2015

2016E

2017E

2018E

Total Revenue

7,058

7,793

8,547

9,948

11,137

12,692

YoY growth %

15.2%

10.4%

9.7%

16.4%

12.0%

14.0%
3,060

ASIR

2,121

2,329

2,441

2,684

2,816

YoY growth %

12.2%

9.8%

4.8%

10.0%

4.9%

8.7%

AMSL

2,244

2,395

2,654

2,960

3,255

3,551

YoY growth %
Other - The Central+Matara Medi House+Asiri
Matara+Diagnostic Services

13.7%

6.7%

10.8%

11.6%

10.0%

9.1%

2,693

3,069

3,452

4,303

5,066

6,081

YoY growth %

19.1%

14.0%

12.5%

24.6%

17.7%

20.0%

(635)

(661)

(668)

(692)

(691)

(707)

Total depreciation
EBIT including non-recurring items

1,862

1,963

2,290

2,771

3,203

3,600

EBIT margin %

26.4%

25.2%

26.8%

27.9%

28.8%

28.4%

YoY growth %

11.8%

5.4%

16.6%

21.0%

15.6%

12.4%

ASIR

1,143

1,442

1,099

1,525

1,689

1,839

EBIT margin %

53.9%

61.9%

45.0%

56.8%

60.0%

60.1%

YoY growth %

59.1%

26.2%

-23.8%

38.7%

10.7%

8.9%

AMSL

1,797

433

401

501

558

606

EBIT margin %

80.1%

18.1%

15.1%

16.9%

17.1%

17.1%

215.6%

-75.9%

-7.3%

24.8%

11.4%

8.6%

(1,078)

88

790

745

956

1,154

YoY growth %
Other - The Central+Matara Medi House+Asiri
Matara+Diagnostic Services
Non-recurring items

(0.53)

(2.35)

(4.53)

(1.52)

EBIT excluding non-recurring items

1,863

1,966

2,295

2,772

3,203

3,600

YoY growth %

11.8%

5.5%

16.7%

20.8%

15.5%

12.4%

EBIT margin %

26.4%

25.2%

26.8%

27.9%

28.8%

28.4%

EBITDA excluding non-recurring items

2,497

2,626

2,962

3,464

3,895

4,306

9.7%

5.2%

12.8%

16.9%

12.4%

10.6%

35.4%

33.7%

34.7%

34.8%

35.0%

33.9%

28

42

195

160

160

(606)

(564)

(581)

(477)

(441)

YoY growth %
EBITDA margin %
Finance Income
Finance Cost

(734)

Exchange loss

(59)

(48)

(75)

Change in fair value of investment property

513

Recurring profit before tax

1,106

1,388

1,260

2,386

2,887

3,319

YoY growth %

50.3%

25.4%

-9.2%

89.4%

21.0%

15.0%

(139)

(162)

(187)

(283)

(389)

(429)

Income tax expense

967

1,225

1,072

2,103

2,498

2,890

YoY growth %

Profit after taxation

51.9%

26.7%

-12.5%

96.1%

18.8%

15.7%

NP Margin

13.7%

15.7%

12.5%

21.1%

22.4%

22.8%

Profit attributable to Equity Holders

756

1,055

917

1,869

1,948

2,227

Minority Interest

211

170

155

234

549

663

Earnings per share - BRS adjusted (1)

0.75

0.96

0.83

1.64

1.71

1.96

Earnings per share - unadjusted (2)

0.75

0.96

1.30

Source: Company Financial Reports and BRS Equity Research


Note 1: EPS adjusted non recurring information
Note 2: Based on earnings as reported (unadjusted for non-recurring).

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Page 4

BRS Equity Research

Financial Analysis
Statement of Financial Position - Asiri Hospital Holdings PLC
Year Ending 31st March (LKR mn)

2013

2014

2015

2016E

2017E

2018E

Non Current Assets


Property, plant and equipment

10,313

10,090

10,839

11,138

11,351

11,629

Leasehold properties

184

272

1,018

1,007

1,002

997

Intangible Assets

565

549

549

549

549

549

Deferred Tax Assets

102

213

228

228

228

Investment Property

2,040

2,185

2,698

Investment in Equity Securities

Financial Assets for Sale

432

598

Interest Free Loans/Advances

13,203

13,740

15,701

12,928

13,137

13,410

Inventories

315

341

381

264

475

677

Trade and other receivables

509

689

374

475

534

813

Investments in shortterm Marketable Securities

429

Short term investmnets

138

138

138

AHL - Employees Share Trust Fund

Taxes paid in advance

17

Interest Free Loans

Cash and cash equivalents

161

189

1,247

4,712

5,203

6,307

Current Assets

1,802

1,500

2,513

6,268

7,055

8,673

15,005

15,240

18,215

19,196

20,192

22,083

Share Capital

3,902

3,902

3,902

4,748

4,748

4,748

Capital Reserves

1,620

(74)

(753)

(1,225)

(1,225)

(1,225)

Available for Sale Reserve

130

296

296

296

296

Retained earnings

907

696

2,575

2,980

4,360

6,018
9,837

Total assets
Equity and liabilities

6,430

4,654

6,021

6,800

8,179

Minority Interest

1,148

997

1,183

2,264

2,814

3,477

Total Equity

7,578

5,651

7,204

9,064

10,993

13,314

5,018

Non-Current Liabilities
Interest bearing borrowings

4,321

6,077

7,033

5,918

5,468

Non Interest bearing borrowings

42

38

34

34

34

34

Deferred Tax Liabilities

93

380

224

475

475

475

Retirement benefit obligations

223

247

345

381

409

435

Other Payables

4,680

6,743

7,636

6,809

6,386

5,962

1,084

Current Liabilities
Trade and other payables

585

552

373

1,268

950

Income tax liabilities

78

23

54

261

218

228

Dividend payable

28

34

43

(182)

(182)

(182)

Amounts due to related parties


Interest bearing loans and borrowings
Non interest bearing loans and borrowings

Total liabilities
Total equity and liabilities

1,553

2,053

2,233

1,347

1,973

1,823

1,673

2,748

2,846

3,375

3,324

2,813

2,806

7,428

9,589

11,011

10,132

9,199

8,769

15,005

15,240

18,215

19,196

20,192

22,083

Source: Company Financial Reports and BRS Equity Research

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Page 5

BRS Equity Research

Financial Analysis
Cashflow Statement - Asiri Hospital Holdings PLC
Year Ending 31st March (LKR mn)

2013

2014

2015

2016E

2017E

2018E

1,862

1,963

2,290

2,771

3,203

3,600

629

657

664

688

687

702

Cash flow from operating activity


EBIT including non-recurring items
Depreciation
Amortization of leasehold assets

Profit on sale of Property,plant and Equipment

(1)

(2)

(5)

(0.2)

Provision for bad debts

14

Mark to market value for short term investments

Gratuity
Impairement loss
Investment income
Other
Operating Profit/(loss) before Working Capital Changes
Changes in working capital
Cash generated from operations
Finance cost paid

2
-

44
-

13
-

52

3
-

68

5
-

63
-

5
-

52
-

52
-

(53)

(74)

(33)

(107)

(195)

(84)

19

20

2,206

2,518

2,507

3,215

3,947

4,358

(234)

(184)

1,511

(347)

(614)

(380)

1,972

2,334

4,018

2,868

3,333

3,978

(734)

(606)

564

(581)

(477)

(441)

Gratuity paid

(12)

(27)

(16)

(26)

(24)

(26)

Income taxes paid

(75)

(156)

(103)

(284)

(432)

(419)

Non current payables


Cash generated from operations

(18)

(18)

1,133

1,527

4,462

1,978

2,400

3,093

(489)

(317)

(874)

(1,021)

(900)

(980)

Cash flow from investing activity


Acquisition of Property, plant and equipment
Net investmnet in short term investmnets

Proceeds from sale of property, plant and equipment

907

38

10

Recovery of non current loans/interest bearing related party loan

Proceeds from disposal of investment property

2,700

(1,866)

(2,453)

(23)

(846)

31

(735)

1,045

Investment in subsidiaries
Investment in quoted securities

Capital work in progress

Interest received/Dividend received


Net cash out flow from investing activities

53

64

33

110

160

160

(2,301)

(2,673)

(1,590)

3,779

(740)

(820)

(569)

(569)

Cash flow from financing activity


Dividend paid

(548)

(601)

(541)

(225)

Dividend paid to minority by subsidiaries

(143)

(221)

(93)

(14)

(4)

(4)

(641)

2,085

Changes in non interest bearing loans


Net proceeds from long term borrowings
Net proceeds from short term borrowings

Lease repayments
Proceeds from Issue of shares to minority/Rights issue/Private placement

(4)

878
-

(4)

2,209

74

Interest free loan/non interest bearing related party loan

Net cash flow from financing activities

869

1,329

Net Increase/(Decrease) in Cash & Cash Equivalents

(300)

182

(985)
-

(4)

(4)

(600)
-

241

(1,228)

(1,169)

(1,169)

3,114

4,529

491

1,104

Source: Company Financial Reports and BRS Equity Research

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(600)

Page 6

BRS Equity Research

Top 20 Shareholders as of 31.12.2015

Name of the Shareholder

No.of Shares

% holding

Softlogic Holdings PLC

418,007,865

36.75

Merrill Lynch Pierce Fenner & Smith-TPG Growth III SF Pte Ltd

328,258,325

28.86

Commercial Bank of Ceylon PLC/Softlogic Holdings PLC

47,033,338

4.13

BNY-CF Ruffer Investment Fund : CF Ruffer Pacific Fund

36,148,930

3.18

HSBC INTL NOM LTD - SSBT- Wasatch International opportunities Fund

35,536,611

3.12

Softlogic Holdings PLC A/C No 3

26,184,018

2.30

Softlogic Holdings PLC A/C No 2

26,184,018

2.30

Softlogic International (Pvt) Ltd

23,689,854

2.08

Softlogic Information Technologies (Private ) Limited

23,151,323

2.04

10

Mr.Chaminda Dilantha Weerasinghe (Deceased)

9,375,000

0.82

11

Mr. P P Subasinghe

8,109,090

0.71

12

Asian Alliance Insurance PLC A/C 02 (Life Fund)

5,500,000

0.48

13

Mas Capital (Pvt) Ltd

5,379,574

0.47

14

Union Bank of Colombo Ltd/Softlogic International (Pvt) Ltd

4,905,390

0.43

15

CBHK S/A Platinum Broking Company Ltd

3,523,601

0.31

16

Dr. L.D.A.C. Luvis

3,441,720

0.30

17

Dr. W.M.S.Welagedara

3,375,000

0.30

18

Mr. A.U. Maniku

3,036,050

0.27

19

Pictet and CIE (Europe) S.A.S/A Ruffer Sicav-Ruffer Global

3,000,000

0.26

20

Estate of Mr. Tissa Weerasinghe

3,000,000

0.26

Source: Company interim financial statements

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BRS Equity Research

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