Saturday 28 November 2015

JKH collects Rs. 8 billion cash from warrants conversion

Rs. 5 billion will be paid to shareholders as an interim dividend


The Colombo Stock Exchange last week announced that approximately 49.25 million new shares of John Keells Holdings, the largest market capitalized company quoted on the CSE, had been listed on Nov. 26 following the conversion of JKH warrants into ordinary shares.

The conversion, at slightly under Rs. 162 per share, infused eight billion rupees of zero cost capital into the company but some five billion rupees of this cash will be paid to shareholders in December by way of an interim dividend of Rs. 4.50 per share – the highest paid by the company in recent years.

Company sources said that over 98 percent of the warrants in issue had been converted to shares. There was no 100 percent conversion as the issue was unlike a rights issue with shareholders wanting to take more given the opportunity to apply for additionals.

"The warrants were tradable on the CSE and were in fact traded in fairly large volumes. At one time they fetched very high prices of over Rs. 50 each although the price came down sharply by the time the September deadline for trading arrived," an analyst said.

"If somebody did not want to convert his warrants into shares, he had ample opportunity to sell them for a good price. The small percentage that was unconverted obviously belonged to shareholders who have died, those whose holdings were tied up in testamentary cases and perhaps others who didn’t read the company circulars and get the necessary advice from a stockbroker."

Well informed sources said that considerable pressure was exerted by major shareholders to pay the unusually high dividend announced.

"Normally at this time of the year JKH pays an interim dividend of one rupee per share. This time it is Rs. 3.50 more than that," an analyst noted.

He said there was plenty of cash in the company despite ongoing work on its Waterfront project, the single biggest investment undertaken by the company in its long history, and the payment of the dividend would cause no hardship.

Also a second tranche of warrants are convertible next year when JKH will get further billions zero cost capital useful for the Waterfront investment. These warrants are now trading on the CSE.

Like those converted into shares earlier this month, these warrants were issued free in proportions to the shares purchased in the last JKH rights issue which was highly priced. The free warrants were a sweetener for shareholders to take up their rights.

There is a substantial foreign shareholding in JKH. The biggest shareholder of the conglomerate is industrialist S.E. Captain holding slightly over 10 percent with his Paints and General Industries Ltd. also a major shareholder.

The executive directors of JKH, Chairman Susantha Ratnayake, Deputy Chairman Ajith Gunawardene and Finance Director Ronnie Peiris, all of whom enjoy share options, also have significant shareholdings although they are not on the Top Twenty list. Former Chairman Ken Balendra is on this list.
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