Stock Market Forbes ABN AMRO Business Roundup
For the trading week ended Friday 3rd of September 1999
— Activity intensifies pushing indices further
— Expectations of a relative return
— Quarterlies
— Decrease in interest ratesOverall picture distorted by Wednesdays trading; Foreign participation was predominant in this weeks trading contributing towards 57% of total turnover. Overall activity improved marginally registering Rs. 44m compared to last week’s Rs.37m. However selling pressure continued to persist as the ASPI & MPI both declined 1% to close at 559.4 & 914 respectively. This picture is somewhat distorted by Wednesdays trading which contributed towards 61% of the week’s turnover. Bulk of the transactions constituted of foreign to foreign transactions however resulting in a net outflow of Rs 25.3m, compared to the total Rs 35.1m outflow for the week. Both indices declined by 1% as a result of the day’s transactions mainly due to the pressure exerted on the blue chips like JKH, Hayleys & DFCC. However, prices recovered somewhat during the later part of the week, as both indices regained back some of the lost ground in last two days trading.
Expectations of a relative return; Despite evident reaction to the poor quarterlies within the last couple of days we remain positive in the near term in contradiction with general sentiments. We believe recent boom in tourist arrivals coupled with signs of tea prices moving up, should effect bottom lines of most blue chips with considerable exposure to these segments. Thus we believe recent sell down to have opened ideal opportunities for investors to pick up some of these market movers at bargain prices ahead of the crowd. The recent 1% SRR cut coupled with impending privatisations which we believe will induce much needed liquidity to the system further backends our argument of improved sentiments in the future.
Quarterlies; Amongst the quarterlies released during the week, CTC registered YoY increases in profit after taxation. This adds further weight to our BUY recommendation on the stock. In a more negative note both Aitken Spence Hotel Holdings (AHUN) and Dockyard registered YoY declines. AHUN recorded a 11% increase in losses mainly due to higher losses from Triton which was closed for refurbishment during May and June. We expect a 29% growth at net level mainly due to an improvement in summer tourist arrivals, which in turn expected increase contributions from the local side. However current prices reflect these conditions, thus we advice investors to HOLD for the time being. Dockyard registered a 20% decline in net profits YoY, but the stock still remain attractive as these results do not reflect the full year performance.
Decrease in interest rates; 3,6 and 12 month interest rates declined from 12.31,11.80 and 12.31 to 11.34,11.79 and 12.29.
Bartleet’s Weekly Market Commentary
The Market remained relatively stagnant throughout the five days of trading to close on a slightly lower note than the previous week. Both the ASI and MPI fluctuated within a narrow band to record declines of 5.2 points and 10.3 points WoW to close at 559.4 and 914 respectively. Total turnover however remained encouraging on Rs.216 owing to Wednesday’s activity generating Rs.135.6Mn and accounting for 63% of the week’s turnover. This was achieved on the back of significant foreign participation, which accounted for 67% of purchases and 85% of sales for the day. This helped boost average daily turnover to Rs.43. l Mn, up 15.7% from the previous week.
Foreigners were net sellers with a net foreign outflow of Rs.35Mn as against an inflow of Rs. lMn last week. They however remained active on both sides with foreign purchases and sales accounting for 50% and 66% of total turnover. Despite many companies recording poorer results for the June ended quarter, we feel this situation should improve on account of the anticipated recovery in the plantation sector towards the latter part of the year.
HNB announced of an I.P.O. of non voting shares amounting to 30% of the issued capital of the company at a price of Rs.70.00 per share with priority being given to the existing shareholders in the form of a rights issue in the proportion of 3 for 10. However they will not be given the right of renunciation. Any shares unsubscribed by the existing shareholders will be offered to the public by way of an I.P.O. In the meantime MLL has decided not to go ahead with the rights issue which they had announced previously.
SEYB has decided to go ahead with a second debenture issue within the space of a year, after witnessing a successful debenture issue last October. The current issue of 2Mn Unsecured, Redeemable Non-convertible debentures will be at the same price of Rs.100.00 each amounting to Rs.200Mn extendable to a maximum of 400Mn, (subject to approval from the CSE & SEC) and is expected to be quoted in the CSE.
Other announcements for the week include TKYO’s capacity increase in which respect a BOI agreement has been signed which provides for an investment of Rs.500Mn within 3 years of signing. The company would then be entitled to a 10 year tax holiday in respect of entire profits from the day the additional investment is completed. It also announced of an investment in not less than 50% of the issued capital of Samudra Cement Co; which will be a subsidiary of TKYO involved in importing, trading etc. of cement and related items.