Seizes opportunity to grow portfolio
Ceylon Guardian investment Trust PLC, which calls itself "an experienced innovative investment company with high quality diversified portfolio of equity stakes in some of Sri Lanka’s most successful companies," has posted a 10% revenue growth to Rs.1.8 billion in the year ended March 31, 2014 but seen its attributable profit down 9% to Rs.1.7 billion.
Guardian is the wealthiest investment trust quoted on the CSE with assets running at Rs.17.93 billion against liabilities of just Rs.222.9 million.
The company’s Chairman, Mr. Israel Paulraj, has told shareholders in its annual report that the year under review has been a quiet one with the Colombo Stock Market recording marginal positive growth during the period under review."
Ceylon Guardian investment Trust PLC, which calls itself "an experienced innovative investment company with high quality diversified portfolio of equity stakes in some of Sri Lanka’s most successful companies," has posted a 10% revenue growth to Rs.1.8 billion in the year ended March 31, 2014 but seen its attributable profit down 9% to Rs.1.7 billion.
Guardian is the wealthiest investment trust quoted on the CSE with assets running at Rs.17.93 billion against liabilities of just Rs.222.9 million.
The company’s Chairman, Mr. Israel Paulraj, has told shareholders in its annual report that the year under review has been a quiet one with the Colombo Stock Market recording marginal positive growth during the period under review."
"However on the domestic front we saw an ideal environment being mapped for a buoyant equity market with interest rates steadily coming down and the Central Bank setting the direction with policy rates," he said.
But he noted that investor had remained cautious with local participation in the CSE "low."
Domestic investors had preferred a wait-and-see approach opting for fixed income instruments such as debentures that offered attractive, lower risk returns.
"However foreign funds were net buyers during the period of review and were seen collecting fundamentally strong stocks at low valuations," he said.
They at Guardian, being long-term investors, had embraced the opportunity to grow the portfolio by shifting from fully valued to undervalued enterprises.
"Market volatility during the year under review increased thus presenting opportunities for both buying and selling of securities," he noted.
Paulraj indicated that Guardian, despite volatility of both local and overseas macro factors, remained confident of the long-term potential of Lankan equities and the sustainability of the economic development plans set in place.
"We believe that the long term development potential of Sri Lank will flow through to its equity market and indicators such as market capitalization to GDP (currently 29%) will improve over time," he said.
"For this to happen, we need greater depth of companies to invest in, growth in good quality corporate earnings and strong foreign inflows."
Paulraj also commented favourably on the rapid developments in capital market saying they were encouraged by the influx of listed debenture issues which will help open up an active debt market as well as the concept of investing in unit trusts gaining popularity and momentum.
"Furthermore, the entry of new institutional private equity investors to the unlisted market is an encouraging sign that this space too would improve in discipline and professionalism over time," he said.
The after-tax profit of Rs.2.12 billion posted by Guardian in the face of volatile conditions was up 4.6% from a year earlier – "a marginal upside" in the words of its chairman.
However the company’s portfolio value was down to Rs.24.2 billion from Rs.26.03 billion a year earlier.
The company had followed a strategy of booking profits on selected over-valued stocks, capturing market anomaly and booking substantial gains despite subdued market conditions.
Guardian’s Fund Managers, Guardian Fund Management Limited, reported that much of the market activity during the year under review had been on the foreign side with a net foreign outflow of approximately Rs.6.8 billion against a net inflow of Rs.22.7 billion recorded the previous year.
"Foreign interest or activity was evident on counters such as Commercial Bank, John Keells Holdings, Hatton National Bank, Aitken Spence, Ceylon Tobacco and Chevron Lubricants," the managers said.
"However mixed sentiment was evident on the counters with both selling and buying from foreign fund mangers."
They explained that the outflow during the current calendar year has been due to capital flight from emerging markets with funds selling out due to redemptions and transforming to developed markets and also due to foreign investors in such funds shifting from equities to fixed income assets putting pressure on over-valued or fairly valued markets.
However, frontier markets had been spared and a positive factor in Colombo was that domestic participation was increasing with both institutional and retail activity evident.
But he noted that investor had remained cautious with local participation in the CSE "low."
Domestic investors had preferred a wait-and-see approach opting for fixed income instruments such as debentures that offered attractive, lower risk returns.
"However foreign funds were net buyers during the period of review and were seen collecting fundamentally strong stocks at low valuations," he said.
They at Guardian, being long-term investors, had embraced the opportunity to grow the portfolio by shifting from fully valued to undervalued enterprises.
"Market volatility during the year under review increased thus presenting opportunities for both buying and selling of securities," he noted.
Paulraj indicated that Guardian, despite volatility of both local and overseas macro factors, remained confident of the long-term potential of Lankan equities and the sustainability of the economic development plans set in place.
"We believe that the long term development potential of Sri Lank will flow through to its equity market and indicators such as market capitalization to GDP (currently 29%) will improve over time," he said.
"For this to happen, we need greater depth of companies to invest in, growth in good quality corporate earnings and strong foreign inflows."
Paulraj also commented favourably on the rapid developments in capital market saying they were encouraged by the influx of listed debenture issues which will help open up an active debt market as well as the concept of investing in unit trusts gaining popularity and momentum.
"Furthermore, the entry of new institutional private equity investors to the unlisted market is an encouraging sign that this space too would improve in discipline and professionalism over time," he said.
The after-tax profit of Rs.2.12 billion posted by Guardian in the face of volatile conditions was up 4.6% from a year earlier – "a marginal upside" in the words of its chairman.
However the company’s portfolio value was down to Rs.24.2 billion from Rs.26.03 billion a year earlier.
The company had followed a strategy of booking profits on selected over-valued stocks, capturing market anomaly and booking substantial gains despite subdued market conditions.
Guardian’s Fund Managers, Guardian Fund Management Limited, reported that much of the market activity during the year under review had been on the foreign side with a net foreign outflow of approximately Rs.6.8 billion against a net inflow of Rs.22.7 billion recorded the previous year.
"Foreign interest or activity was evident on counters such as Commercial Bank, John Keells Holdings, Hatton National Bank, Aitken Spence, Ceylon Tobacco and Chevron Lubricants," the managers said.
"However mixed sentiment was evident on the counters with both selling and buying from foreign fund mangers."
They explained that the outflow during the current calendar year has been due to capital flight from emerging markets with funds selling out due to redemptions and transforming to developed markets and also due to foreign investors in such funds shifting from equities to fixed income assets putting pressure on over-valued or fairly valued markets.
However, frontier markets had been spared and a positive factor in Colombo was that domestic participation was increasing with both institutional and retail activity evident.
The managers said that the total shareholder return for 2013/14 of Ceylon Guardian was 13.6% taking into account both share appreciation and cash dividends received for the year.
"Taking a more longer term horizon, the shareholders of Ceylon Guardian got a return of 55%," the managers noted.
Ceylon Guardian Investments has a stated capital of Rs.953.4 million, capital reserves of Rs.769.7 million and revenue reserves of Rs.12.9 billion in its books. Net assets per share at market value were down to Rs.228.70 from Rs.247.48 the previous year while at book value it was down to Rs.166.93 from Rs.167.25.
Carson Cumberbatch PLC with 67.15% is the controlling shareholder followed by Thurston Investments (6.43%) and the EPF (2.65%). The EPF is a new entrant to the top shareholder list of the company.
The directors of the company are: Messrs. I. Paulraj (Chairman), D.C.R. Gunawardena, A. de. Z. Gunasekera, V.M. Fernando, Mrs. M.A.R.C. Cooray, K. Selvanathan and C.W. Knight.
"Taking a more longer term horizon, the shareholders of Ceylon Guardian got a return of 55%," the managers noted.
Ceylon Guardian Investments has a stated capital of Rs.953.4 million, capital reserves of Rs.769.7 million and revenue reserves of Rs.12.9 billion in its books. Net assets per share at market value were down to Rs.228.70 from Rs.247.48 the previous year while at book value it was down to Rs.166.93 from Rs.167.25.
Carson Cumberbatch PLC with 67.15% is the controlling shareholder followed by Thurston Investments (6.43%) and the EPF (2.65%). The EPF is a new entrant to the top shareholder list of the company.
The directors of the company are: Messrs. I. Paulraj (Chairman), D.C.R. Gunawardena, A. de. Z. Gunasekera, V.M. Fernando, Mrs. M.A.R.C. Cooray, K. Selvanathan and C.W. Knight.
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