Stock Market The Forbes ABN AMRO Business Roundup
For the trading week ended Friday 10th March 2000
A dull week of trading: Trading was dull when compared to the past week with most investors remaining on the sidelines. This was highlighted by the fact that the total turnover for the week was only Rs. 204 m, as against last week’s Rs. 350m. Foreign selling pressure continued throughout the week, resulting in a net foreign outflow of Rs. 133m, which was Rs. 32m higher than last week. Total foreign participation amounted to 75% of total turnover. The ASPI and MPI declined by 2.7% and 3% respectively to close at 521.5 and 846.8. We believe that the currently sold down levels present ample opportunities for selective stock picking given that fundamentals are improving.
HNB-Unexciting medium term growth: HNB reported a relatively decent 8% growth at the net level for the year ending Dec. ’99, helped by a substantial interest write back and a fall in provisions. We have revised HNB earnings slightly upwards to take into account better economic prospects & operational efficiencies. Despite the relatively decent performance in a difficult year, we maintain our SELL call on HNB given that past concerns still exist, exacerbated by uninspiring EPS growth over the medium term, relatively lower efficiencies and substantial spending on the Rs. 3.5bn - HNB Tower still exists.
DFCC — Exciting prospects beyond 2000: DFCC reported a disappointing nine-month results, with a substantial fall in net profit by 32%. However this is not necessarily a reflection of operational performance, as the numbers are distorted by a substantial rise in provisions, transfer to suspense and profit on sale of securities. Excluding these items, earnings are up by 9%. Our biggest concern at the moment is the significant rise in non productive loan levels from 13 3% in FY99 to 17.5%, which is mainly due to default on textile loans by the government. However, with the better understanding of the new CEO’s plans over the medium & long-term, with moves to diversify its product range, end realise sizeable synergies with commercial bank, which can have a significant impact, we maintain our BUY recommendation on DFCC.
Colombo Dockyard Ltd.- Plenty left to move: Earnings at Rs. 311.9m was an 8% decline from last year. This was 16% below estimates. The decline was not due to operational weaknesses but due to a Rs. 40m insurance claim, which will come back into profits in the next year. Minus the impact of the insurance claim, earnings for FY99 in fact grew by 3%. Given a high DCF value, supported by steady returns and a positive outlook, we reiterate our BUY recommendations.
Barleet’s Weekly Market Commentary
The gradual downward movement witnessed in the previous few weeks continued for yet another week owing to poor investor sentiment specially on the part of foreigners. Both indices witnessed declines throughout the week with the exception of Wednesday where the MPI witnessed a marginal gain. For the week the ASPI lost a further 14.4 points (2.6%) to close at 521.5 points while the MPI lost another 28.6 points (3.3%) to end the week at 846.4 points. Equity Turnover for the week was extremely dull with the exception of Tuesday and Friday where there was heavy foreign selling. For the week the total turnover was Rs. 202.1Mn. which was down by 36% when compared to the previous weeks figure of Rs315.46Mn., while the Average Daily Turnover of Rs.40.4Mn. was down from the previous week’s Rs.63. lMn. Foreigners were net sellers once again totaling Rs.133.3Mn. with foreign purchases accounting for Rs.9.87Mn. (5%), while foreign sales accounted for Rs.143.11Mn. (71%) of total turnover. Market Capitalisation for the week dipped by Rs.2.9Bn. to close at Rs.103.1Bn. With many stocks still trading at discounted prices, we anticipate investors to take advantage of these prices in the coming weeks.
During the week large quantities of Eden Hotel, John Keells Holdings, Vanik (Non-Voting), Hayleys, Vanik (Voting), Blue Diamonds, Metropolitant Resource Holdings, Lanka Ventures, Udapussellawa, Talawakelle, Merchant Bank, Sampath Bank, National Development Bank, and Lanka Tile shares were traded.
There were declines in 14 sector indices during the week, with the Beverage Food & Tobacco, Banks Finance & Insurance, Chemicals & Pharmaceuticals, Plantations, Investment Trust, Stores & Supplies, Trading and Motors sectors leading the way. There were no sector indices that gained during the week, while the Footwear & Textile and Oil Palm sector indices remained unchanged.
Vanik shares continued to be traded heavily this week amidst rumours about resignation by certain senior employees which the company says is baseless. In response to an inquiry by the CSE it said that only one senior employee has resigned for personal reasons and no other resignations have been received from senior employees. Further to this in an announcement made today, Vanik says that it is considering a cost reduction plan, which will include a reduction in the number of employees in order to enhance the performance of the company.