Stock Market Forbes ABN AMRO business roundup
For the trading week ended Friday 18th of February 2000
— Local investors hold ground
— JKH; on track to surprise
— Cold Stores; slightly down but on track
— Plantations; Definitely a la modeLocal investors hold ground. Market closed on a positive note despite some selling pressure curing the last couple of days. The MPI-gained 0.2% to close at 926.5, whilst the ASPI followed suit with a 0.1% gain to close at 558.5. Overall activity remained at sober levels as average daily turnover continued to reign at Rs. 55m mark. Significant selling by foreign investors was witnessed during Thursday’s trading accounting to 39% of total week’s turnover. Bulk of the profit taking was targeted on JKH & DFCC.
JKH on track to surprise: JKH reported a 17% growth at the net level for the 9 months ended Dec. 99, clearly pushing the peddle from a 15% growth during the 1st half, and well on track to achieve our forecast 29% growth for the year. We see as causing the increased momentum 1) significant rebound in plantations contributions from a low base 2) Increased level of trade during latter ’99 augmenting an already good performance by the transport sector 3) A thumping winter contribution from Hakura in the Maldives and 4) SAGT contributions giving an added boost since Oct. 99. Local tourism contributions should have come in slightly lower than expected due to an unprecedented lag in arrivals during Dec. 99, which affected the entire industry.
Cold Stores: slightly down but on track. 3rd quarter earnings registered a 45% decline. Given this quarter’s contribution to the full year earnings is a minimal 15%, we believe our forecast for the year 2000 at Rs. 244m is well backed, which is at 14% you decline. This assumes a 9% growth in last quarter reflecting expectations of improved purchasing power and better weather conditions than the 3rd quarter. Going further we believe our growth expectations, which are slightly lower than the expectations of the management to be sound given the fact that last year profits were effected by a one off bad debt write off accounting to Rs. 19m. Recent budget proposals are expected to have negative as well as positive effects on the companies operations. However, we believe possible benefits from investment relieves on incentives for advanced technology investments on their proposed investments in the ice cream segment outweight possible negative effects arising from GST on imported poultry products.
Plantations; Definitely a la mode. Amongst the plantation interims published within the week, Maskeliya and Kegalle registered more than 100% growth in earnings QOQ. Maskeliya registered a Rs.85m net profit for 9 months ended 31st December 2000. Which was driven by a 24% increase in NSAs, coupled with definite benefits of its higher fixed cost leverage. This is further emphasised by 100% growth in profit/turnover ratio. Our forecasts expect a 41% growth in profits in the last quarter for 2000, whilst 2001 profits are expected to register a 68% growth. We believe these expectations to be well backed if not conservative, given the very positive outlook for the industry, coupled with the excellent past track record. At a 57% discount to the market on DCF valuations, this is one of our best Buys. Kegalle though still overshadowed by its associate trading only at a 46% discount on DCF valuations registered hither QOQ growth in profits. Kegalle registered a 387% growth in net profits, whilst company own contributions registered a 15 times growth. However this was mainly driven by efficiencies in the cost structure as indicated by a mere 6% growth in sales. The stock remains a definite Buy. These definite turnarounds in earnings registered by the plantations coupled with an improving industry outlook makes plantation sector very appealing.
Barleet’s Weekly Market Commentary
At the end of another week of trading at the Colombo bourse saw both indices witnessing a marginal gain on Monday and a more significant gain on Tuesday. For the rest of the week the ASPI witnessed marginal declines, so did the MPI with the exception of Wednesday where there was a gain. On a WOW basis the ASPI witnessed a marginal gain of 0.5 points to close the week at 558.3 points, while the MPI too witnessed a marginal gain of 2.1 points closing the week at 926.5 points. Thursday’s turnover of Rs. 130.22Mn. propped up the total Equity Turnover for the week which was Rs. 272.84Mn. This was down by 3.4% when compared to the previous week’s turnover of Rs. 282.43Mn. The average daily turnover for the week was Rs. 54.57Mn. which was down from the previous week’s figure of Rs. 56.66Mn. Foreign activity which was virtually non-existent for the week, with the exception of Thursday, saw a foreign outflow totalling Rs. 109.4Mn. for the week. Foreign purchases and sales accounted for Rs. 14.89Mn. (5.5%) and Rs. 124.31Mn. (45.6%) to total Equity Turnover. The Market Capitalization witnessed a marginal gain of 0.2Bn. during the week ultimately closing at Rs. 110.4Bn. With investors digesting the budget and its implication on the economy we anticipate that they would take a more positive approach towards the market in the coming weeks. We also anticipate investors to take the opportunity of the current discounted prices that are still prevailing in the market.
Among the stocks that were traded heavily during the week were JKH, Talawakelle, Blue Diamond (trading began on Wednesday 16th February after a two and a half months suspension), Union Assurance, Commercial Bank, Ceylinco Insurance, DFCC, Nations Trust Bank, Ceylon Tobacco Company, Agalawatte, Eagle Insurance (Debentures) and Hapugastenne.
Out of the 16 sectors, the Services, Banks Finance & Insurance, Chemicals & Pharmaceuticals and Trading Sectors witnessed major gains while the Motors sector was the leading sector that witnessed a decline with the Investment Trust and Hotels & Travels sectors being a distant second.