Fortune Magazine
John Keells rated No. 3 Asian conglomerate for investmentAnalysts and stock watchers now see the silver lining emerge in the crisis ridden dark clouds that of late beset the Asian scene. In a incisive report on the re-emergence of Stock Market in the region, Fortune, the prestigious magazine held as the businessman's bible rate John Keells, the Sri Lankan conglomerate as the third among the best picks for those betting on Asia again.
Quoting Zahir Zitabkan, a fund manager with Lloyd George Investment Management in Hong Kong the review says: 'Everything comes down to consumption'. And it is believed consumerism is likely to start once again giving the 17-month-old Asian crisis to fade.
Fortune calls John Keells, the Sri Lankan blue chip, 'a superbly managed conglomerate'. The John Keells group has interests in tea, food, tourism, stock broking and shipping.
The review says:
Though small - total market cap is just $130 million - John Keells' return on employed capital is 20%, and its debt is a tenth of its equity. Most alluring of all, though, John Keells at $3.10 a share is now dirt cheap. It is down 40% from its 1997 high and trading at a P/E ratio of seven. Consider its poor performance an opportunity. 'Given the earnings momentum in their food and tourism businesses, I think the stock could go up as much as 50% over the next year,' says Gunendra
Sellahewa, an analyst with SG Securities in Colombo.
John Keells' tea business was hit hard when Russia imploded: A fifth of all Sri Lankan tea is swilled down in Russia, which is John Keells' biggest export market. But growth in tourism and food businesses cushioned the Russian blow. John Keells has also mapped plans to go into port management, which will dovetail nicely with its existing shipping business (its container lines account for roughly half of all Sri Lankan shipping traffic). If there is a slight lifting of scepticism toward tiny emerging markets like Sri Lanka's - and perhaps a return in Russia to the comforts of a good cup of tea - John Keells could have a splendid 1999.
Levy of THC, proposed THC increase and Freight increase
In view of the many protests made by the Export community to the President with regard to the above, the Secretary to the President, Mr. K. Balapatabendi invited the Exporters' Association of Sri Lanka and the Sri Lanka Shippers' Council to a meeting which was also attended by Dr. P. B. Jayasundera, Deputy Secretary to the Treasury, the Director of Merchant Shipping, the Fair Trading Commissioner, the Central Freight Bureau of Sri Lanka and CASA.
The export community voiced a strong protest against the following actions by shipping lines:
1. Levy of Terminal Handling Charges for export cargo despite on Order by the Fair Trading Commission to remove forthwith the imposition of such charges.
2. The proposed increase in Terminal Handling Charges from 1/1/1999.
3. The frequent freight increases during 1998.
4. The unreasonable and hefty freight increases proposed for January 1999 and a further increase contemplated for April 1999.
5. The forming of Cartels by Shipping Lines with a view to fixing freight rates.
The exporters requested State intervention as the actions of Shipping Lines were totally against the National interest and were likely to have disastrous consequences for the export industry.
The Secretary to the President stated that he would bring these matters to Her Excellency's attention but made the following proposals as an interim measure to provide immediate relief to the export trade:
1. CASA members were instructed to strongly advise their Principals to refrain from imposing any increases to the present Terminal Handling Charges.
2. The export sector was requested to forward details of the products/commodities which are most seriously affected, with a view to negotiating promotional/concessionary freight rates with the Shipping Lines on the basis of what these commodities could bear.
In view of the above exporters have been requested to forward relevant details of the products/commodities which are most vulnerable to the proposed freight increases so that negotiations could be initiated with the Secretary to the President acting as a Facilitator.
Tremendous response for Igatex Sri Lanka '99
Igatex Sri Lanka '99, an international exhibition on garment and textile machinery, accessories and fabrics premiering in Colombo from 27 to 29 January, 1999, has so far garnered the participation of 94 principal companies and agents from 14 countries.
An impressive showing of countries and territories will be represented at the exhibition, namely, China, France, Germany, Greece, Hong Kong SAR, India, Italy, Japan, Singapore, Sri Lanka, Sweden, Taiwan, Thailand and USA. Igatex Sri Lanka 99's international representation guarantees an extensive display of high-quality brands that will impress with its state-of-the-art technology and practical applications.
To be held at the Sri Lanka Exhibition & Convention Centre, Igatex Sri Lanka '99 is geared up for a highly anticipated premiere. Participating companies include industry leading names like Barudan, Gerber Garment Technology, Juki, Lectra Systems, Pegasus, Pfaff, Veit, Yamato and ZSK Stickmaschinen. There will also be a national pavilion from Taiwan comprising leading companies like Kaulin Manufacturing Co., Asia Kingdom, Machinery, Sarina Corporation and Huang Universal.
Market Comment
Low growns: Easier trendIt was a sale of significantly different markets in the two main auction catalogues this week. In the Ex-Estate catalogues most categories moved up in value, whilst the Low Grown sale once again followed an easier trend. In fact the market for Dusts and liquoring Off Grade fannings were also dearer.
The market for Low Growns has now reached a critical stage with prices in Dollar terms at their lowest in two years. The average price for Low Growns at the sale of 9th December was Rs. 120.49 compared with Rs. 141.71 at the comparable auction in 1997. The 1996 average for the same period was Rs. 107.12. A study of these averages in US Dollar terms reveals figures of $1.79 for 1998, $2.33 for 1997 and $1.89 in 1996. Interestingly in 1995 Low Grown teas averaged around $1.95 per kg at the close of that year.
There was greater depth of demand for Low Grown teas this week even though, prices generally followed an easier trend. This is perhaps an indication of the relative value of Low Grown teas at current levels.
The smaller volume and brighter mix of offerings at the Ex-Estate sale attracted more demand this week. Buyers for the UK and Pakistan were more active particularly for the improved Westerns on offer.
Next week sale was scheduled to be a one day auction on 22nd of December. The large number of lots on offer however compelled readjustment. The Low Grown teas will now commence sale on the previous day, Monday, 21st at 2.00 p.m. The carry over Low Grown catalogues will be sold the following day, along with Ex-Estate, High & Medium, Dust, Off Grades and Supplementary catalogues.
- Asia Siyaka
BOPF, grades sell at a premium
This week quality in Ex. Estate catalogues was irregular. It was heartening to witness the widespread improved demand which resulted in a firm to dealer market being witnessed for most teas on offer. The BOPF grades continued to sell at a premium over the corresponding BOP's.
There was strong buying on behalf of Pakistan and the U.A.E. with shippers to U.K., and the Continent also operating.
In Low Grown catalogues there was widespread levels.
This week too Off Grades and Dusts met with good demand with prices appreciating fairly substantially particularly for the Off Grades.
- Eastern Brokers Limited
Former head of Citibank joins NDB
The National Development Bank announced that former Head of Citibank Colombo, Nihal Welikala, will join their ranks as Deputy General Manager. This is a level 2 post in NDB, with CEO, Ranjit Fernando at level one.
Mr. Welikala is no stranger to the corporate world and to the NDB, having served on its board as an alternate director for the Asian Development Bank, since its privatisation. He was also a Director of Citi National Investment Bank, the investment banking joint venture owned by the NDB and Citicorp. He will take up the key position of DGM of the NDB from the 1st of January next year.
A graduate in Law of the University of Sri Lanka, Mr. Welikala is a fellow of the Institute of Chartered Accountants in England and Wales, and is an Associate Member of the Institute of Chartered Accountants of Sri Lanka. He worked for many years in the London Offices of Ernst and Young, and recently completed an 11-year stint as CEO of Citibank N. A. Colombo. He has also served as Director of the Sri Lanka Banks Association and was a founding Director of the American Chamber of Commerce in Sri Lanka.
Shell appoints JWT as global Advertising Agency
J. Walter Thompson has been appointed Shell International's global advertising agency for oil products outside of North America and stands to pick up an extra $45 million in business.
The move is designed to provide greater cost-efficiency for Shell and a consistent global strategy and communications plan for the oil products business which includes more than 40,000 branded petrol stations and serves 20 million retail customers a day.
J. Walter Thompson is one of the largest advertising agency groups in the world, operating in 147 cities in 88 countries. Its worldwide billings are $8 billion. In Europe, Middle East and Africa, JWT now operates in 44 countries with billings of $2.8 billion.
+ Exchange Rates The Central Bank's Spot Rates for transactions with Commercial Banks announced on the morning of December 18, 1998 were as follows:
Buying Selling 100 US Dollars Rs. 6684.93 Rs. 6819.97 The approximate middle exchange rates of following currencies calculated on the basis of cross rates quoted by Gulf International Bank, Bahrain as it appeared in Reuters Financial Information System on December 18, 1998 were as follows:
Saudi Arabia Riyal Rs. 17.99 Bahrain Dinar Rs. 179.12 Kuwait Dinar Rs. 224.00 Qatar Riyal Rs. 18.56 UAE Dirham Rs. 18.39 Oman Riyal Rs. 175.40 Average rates at which the following currencies were quoted by Commercial Banks in Colombo for Telegraphic Transfers at mid-day on December 18, 1998 were as follows:
Buying Selling 100 US Dollars Rs. 6791.40 Rs. 6829.40 100 Sterling Pounds Rs. 11358.38 Rs. 11481.98 100 Deutsche Marks Rs. 4060.08 Rs. 4121.56 100 French Francs Rs. 1209.38 Rs. 1230.49 100 Japanese Yen Rs. 58.17 Rs. 59.11 Average Weighted Prime Lending Rate (AWRP) and Lowest Prime Rate (LPR) of Commercial Banks
The Average Weighted Prime Lending Rate (AWPR) during the week ended December 11th, 1998 was 15.5 per cent for all banks. The Lowest Prime Rate among banks during this week was 12.0 per cent.Average Weighted Deposit Rate (AWDR) of Commercial Banks
The Average Weighted Deposit Rate (AWDR) of Commercial Banks for the month ended November 30th, 1998 was 9.2 percent.
* Unit Trust Prices
Comtrust Equity Fund
Manager's Selling Price Rs. 5.16 Managers Buying Price Rs. 4.83
Eagle Gilt Edged Fund
Manager's Selling Price Rs. 11.05 Managers Buying Price More than one year Rs. 11.04 Less than one year Rs. 10.93*
Eagle Income Fund
Manager's Selling Price Rs. 11.04 Managers Buying Price More than one year Rs. 11.00 Less than one year Rs. 10.92*
Eagle Growth Fund
Manager's Selling Price Rs. 8.39 Managers Buying Price More than one year Rs. 8.06 Less than one year Rs. 7.98* * After deducting the relevant exit fees applicable
Ceybank Unit Trust
Manager's Selling Price Rs. 5.83 (per unit) Managers Buying Price Rs. 5.45 (per unit)
Ceybank Century Growth Fund
Manager's Selling Price Rs. 8.19 (per unit) Managers Buying Price Rs. 8.02 (per unit)
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