Stock Market Forbes ABN AMRO business roundup
For the trading week ended Friday 04th February 2000
- Downward trend continues
- Market pleasantly surprised
- Pays to be the first, when it comes to plantations
- JKH, plenty of incentives for near-term price movementFaith in bluechips drives the market up. It was another week of local investor domination driving the market up despite continued foreign selling. Total foreign selling contributed towards 54% of total turnover & a net outflow of Rs.218m. Blue chips were the main driving force behind the 1.3- % hike in the ASPI to close at 561.8. The MPI closed 2% higher at 925.3. Overall activity levels improved significantly registering an average daily turnover of Rs.112m, despite a mere 30% contribution from the foreign segment.
Market pleasantly surprised. NDB announced a 1 for 2 bonus issue and a 45% dividend on the enhanced share capital on Wednesday. This resulted in the stock closing 30% up at the end of day’s trading. Despite the welcoming market reaction, we believe the bonus to be mainly to pave way for an issue of new shares to the IFC. Counter has more upside given that it still trade below its adjusted book value. NDB/SSB consortium is one of the shortlisted, in the search for a lead manager for the much awaited SLT placement. Should this consortium be appointed, the announcement of which is expected at the end of this month, the stock should see further demand.
Pays to be the first, when it comes to plantations. Tea NSA forecast for Y2000 16% up from last year, the comparative for Rubber is expected to be 15% higher. We believe these forecasts to be conservative given the depressed conditions in the last couple of years & a definite turnaround in these factors expected this year. Current developments as discussed in our research leads us to believe this turnaround to be more pronounced in the stocks with exposure to High Growns, Medium Growns and the Rubber segment. Thus we believe Kelani Valley & Maskeliya to be the best BUYs with DCF’s at 176% & 158% premiums to current market prices. We believe Kegalle & Balangoda to continue to be well worthy stocks & definite BUYs, given their exposure to rubber & low grown segments. Our valuations for these stocks are at 92% & 54% premiums to current prices. We’ve upgraded Kotagala & Watawala to HOLDs.
JKH; plenty of incentives for near-term price movement. While a clear recovery was evident in 2Q00 offsetting first quarter losses, we expect 3Q00 results to surprise the market positively. The share price generally moves following the release of corporate results and we expect a stronger reaction this time. While tourism should perform as well as expected, the conglomerate which is a proxy to the local economy, should get a healthy boost to earnings through the increase in trade (transportation sector), improvement in plantations prices (plantations sector) and the recovery in consumer demand (F&B). A further plus would be contributions from the SAGT terminal from October 1999. JKH is generally the first off the starting blocks and outperforms the market in times of high liquidity. On a one-year horizon, we have high hopes for the stock given the inevitable surge of liquidity following the listing of Sri Lanka telecom towards the third quarter of 2000.
Barleet’s Weekly Market Commentary
This week’s trading which was limited to four days due to the upcoming holiday on Friday, saw both indices witness marginal changes on Monday and Tuesday, significant gains on Wednesday, and finally shedding off some of those gains on Thursday. The ASPI and MPI gained 6.9 points (1.24%) and 17.9 points (1.97%) to close the week at 561.8 points and 925.3 points respectively. Total Equity Turnover for the week was Rs. 408.18Mn. which was mainly due to Wednesday’s turnover of Rs. 204.1 Mn. and Friday’s turnover of Rs.115.53Mn. This week’s average daily turnover of Rs.102Mn. was significantly higher than the previous week’s Rs. 46.57Mn. Foreigners were net sellers for yet another week totaling Rs. 231.4Mn. with Foreign purchases and sales accounting for 5.3% and 62% to total equity turnover. Market Capitalisation showed a gain of Rs.1.63Bn. ending the week at Rs.111.03Bn; In the coming week we anticipate investors to take advantage of the current discounted prices that are prevailing in the market.
Among the stocks that were heavily traded this week were AMW, Talawakelle Plantations, John Keells Holdings, Renuka City Hotels, Mahaweli Reach Hotels, CIC (Non-Voting), Ceylan Oxygen, Commercial Bank, NDB, Eagle Insurance (Debentures), Hotel Services, DFCC, and Ceylon Tobacco Company.
Among the 16 sectors on the bourse, the banks finance and insurance sector index witnessed the largest gain owing to investor interest in NDB shares which announced a 1 for 2 bonus and a 45% final dividend. The Construction & Engineering (3%), Services (2.4%), Footwear & Textile (1.9%) and Hotel & Travel (l. 1%) sector indices were some of the other sectors that witnessed gains. The Investment Trust (3%), Motors (1.9%), Diversified (0.8%) and Beverage Food & Tobacco (0.6%) sector indices were some of the sectors that witnessed declines.