Sri Lanka JKH stock bought by Captains as Janus sells down

Apr 05, 2014 (LBO) - Members of Sri Lanka's Captain family, key shareholders of John Keells Holdings have raised their stake in John Keells as New York based Janus Overseas fund sold down its stake, market sources said.

Some analysts believe it has been selling over the past three months to meet redemptions.

On Friday Sohli Captain, who was listed as having 116.1 million shares of the firm by December 2013 had bought a 15.5 million share stake, while Rusi Captain bought 2.5 million shares as New York based Janus Overseas Fund sold down its stake.

Janus had sold over 18.6 million shares at 234 rupees per share. The deals were made by Capital Trust Securities.

On Thursday Janus sold 7 million shares in JKH and it was bought by a foreign fund, with CT Smith on the buying side.

The deals went through at prices higher than 225 rupees paid for 12.5 million shares a week earlier by the Captains when Janus was also the seller.

There had been speculation that a UN resolution in March, calling for an external probe of alleged war crimes in Sri Lanka and an improvement to rule of law, religious freedoms and attacks on human rights defenders in Sri Lanka a reason for the exit of the fund.

A market analyst said Janus was believed to have been selling to meet redemptions at their own price, but were not in a distressed selling mode where they were willing to come down and sell at any price.

"The belief that they were willing exit at any price turned out not to be correct," the analyst said.

Though the price fell once it was known that Janus wanted to sell down another block, they were not willing to sell at prices near 200 rupees, the analyst said.

Local investors on the other hand would be on a firmer footing to make investment decisions once the uncertainties of the resolution and recent elections were over and exact outcomes were known, he said.

In January 2014 also the Janus sold 10 million shares at 229 rupees, around the current levels.

According to stock exchange filing in December 2013, Sohli Captain held 116 million shares or 11.7 percent of the stock Broga Hill Investments (Khazanah) 105 million shares, which increased its stake to 10.5 percent from 9.9 percent in September.

Janus Overseas Fund's 77.0 million share stake at 7.8 percent was down from 8.7 percent or 74.8 million in September before a rights issue. JKH was the 9th largest stock in the fund by value at the time accounting for about 2.95 percent.

Janus Aspen series Overseas Fund Portfolio had another 19.3 million shares in JKH.

Following recent deals, the Captain family and related parties are estimated to have around 27.6 percent of JKH.

Despite recent sale the foreign fund still had close to 30 million share of JKH.

John Keells Holding is Sri Lanka's top capitalized company and market making style trading by the Captain family was partly responsible for its liquidity, analysts said which made it attractive for foreign investors.

Dockyard earnings slump, company ready for revival

Shipbuilding order book full, ship repairs decline

 

A. Nakauchi (Chairman)

The downturn in the global shipping industry has hurt earnings at Colombo Dockyard PLC controlled by Japan’s Onomichi Dockyard Company Limited with the after-tax group profit for the year ended December 31, 2013 slumping to Rs.929.1 million, the lowest since 2006, from nearly Rs.2 billion the previous year.

At company level, the profit after-tax was down to Rs.823.8 million from nearly Rs.1.9 billion in 2012.

Dockyard said in its recently released annual report that the reduction in earnings was mainly attributable to the drop in volume of their ship repair business and severe competition in attracting new ship building orders.

"The company has achieved 5.2% net profit margin during the year compared to 12% recorded for 2012," the report noted.

The company’s Chairman, Mr. Akihiko Nakauchi noted that the company founded in 1974 had seen total revenue hitting a record high of Rs.15.8 billion which was significant given the challenges they had faced.

These challenges, common to the ship building and ship repair industry world-wide, has pushed down profitability that had declined by almost 56% from the previous year due to the low volume of ship repairs, competitiveness in ship building contracts and depreciation of the rupee.

Overheads had increased considerably as a result. They were currently working on strategies to minimize the impact of the negatives confronting them and hoped to keep profitability and turnover on an even keel this year without sacrificing the development of their business, Nakauchi said.

According to figures published in the company’s report, the 2013 profit of Rs.824 million was the lowest since 2006 when a profit of Rs.607 million had been posted.

Nakauchi said that from a capacity perspective, their ship building business had operated on almost full capacity while in ship repairs, they had seen a decline in operations at a relatively lower capacity.

"At peak, our ship repair industry has brought in US$ 58 million annually, but in 2013, just gained only US$ 28 million. The trends foreseen, we have set our sights on approaching at least US$ 38 million by end 2014," Nakauchi said.

He also indicated that with four new vessels - one passenger boat and three off-shore vessels - on order, their order book looks strong until 2016.

He was hopeful that advantages of pricing will spur ship owners to order new ships in readiness for an upturn in the global shipping industry.

The company’s Managing Director, Mr. Mangala Yapa, who is retiring later this year said that with ship prices bottoming out during the latter part of 2013, owners, supported by hedge funds and lending institutions are now keen to order new vessels at the reduced prices on offer.

He noted that Dockyard is one of the country’s largest export earners having contributed an impressive 1.2% of Sri Lanka’s total export earnings last year, pointing out that 100% of their ship building revenues come off export orders.

Other than Onomichi Dockyard (51%) other major shareholders of the company are the EPF (14.8%), SLIC through its General and Life funds (10%), Sri Lanka Ports Authority (over 3%) and the ETF Board (2.4%).

The stated capital of the company is Rs.714.4 million and it carries nearly Rs.10.3 billion retained earnings in its books. Total assets ran at over Rs.17 billion, non-current liabilities at Rs.833.9 million and current liabilities at nearly Rs.5.2 billion.

The directors of the company are: Messrs. A. Nakauchi (Chairman), Sarath de Costa (Vic Chairman), Mangala Yapa (MD/CEO), Lalith Ganlath, H.A.R.K. Wickramathilake, Y. Kijima, T. Nakabe, Janaki Kuruppu, P. Kudabalage and Y. Imai/K. Usu (Alternate directors to T. Nakabe).

www.island.lk

Ceylon Tobacco grows profits despite dip in cigarette sales

Mega returns for investors in CTC shares

Ceylon Tobacco Company PLC (CTC), the monopoly manufacturer of legal cigarettes in Sri Lanka and the largest contributor to government revenue, has seen its attributable profit grow to Rs.9.14 billion in the year ended December 31, 2013 from Rs.8.43 billion the previous year despite a 6% volume drop in sales.

The company’s Chairman, Mr. Susantha Ratnayake, attributed this to "weaker consumer sentiment due to pricing and the twin shocks of drought and flood in various parts of the island continuing from late 2012.’’

"The company has delivered a profit after tax of Rs.9.1 billion which allowed us to propose a total dividend distribution of Rs.48.75 per share for the year to our valued shareholders," he said.

"I am extremely pleased with the performance of your company in what was a difficult year where we have continued to grow our bottom line. Well run companies continue to focus on cost and sound management practices and that is exactly what CTC has demonstrated."

Ratnayake pointed out that CTC had during the year contributed Rs.76.5 billion to government revenue, up Rs.5.3 billion from the previous year, and pledged that the company "will continue to support the growth of the Sri Lankan economy over decades to come as we have done in over a century."

He noted that CTC’s shares had performed exceptionally well on the Colombo Stock Exchange in what was a moderate year for the bourse by outperforming the All Share Price Index by as much as 43%.

"If a shareholder had invested Rs.1,000 in CTC shares on 1 January 2009 and sold these shares on 31 December 2013, total return would have been Rs.23,596, including share price appreciation and dividends, providing a total gain of 2,260%," he pointed out.

Ratnayake reported what he called "the emergence of unfair enforcement by interest groups" who had arbitrarily attempted to force their dealers to stop selling cigarettes in certain areas.

While the company had engaged with the concerned authorities to manage this situation, he urged the government and local authorities, specially the police, to take strict action against such illegal acts which disrupt business impacting on returns to the government, the company and their dealers alike.

"The tobacco industry is a legal business that has been in existence for over a hundred years. As a responsible business, we pursue our commercial objectives in ways consistent with changing expectations of a modern tobacco business and despite being in a controversial industry; CTC and BAT have always kept the best interests of our consumers and stakeholders at heart," he said.

Ratnayake also expressed the need to maintain the pressure on smuggled cigarettes. The disadvantage of high prices for cigarettes is that the country had become a lucrative destination for smugglers and the last year the Customs had confiscated over Rs.1.3 billion worth of illicit cigarettes.

Over the years, CTC had built a great partnership with law enforcement authorities through sharing resources, information and education on curbing the menace of illicit cigarettes, he said.

CTC’s MD/CEO, Mr. Felicio Ferraz, discussing the proposed 80% graphic health warnings on cigarette packaging said that the company was not in principle against such warnings.

"We are in favour of informing consumers of the health risks involved with smoking and this is done via a health warning to which we are already compliant under existing regulations," he explained.

"What we are not in favour of is excessive regulation such as the proposed 80% warning on the front and back of the pack face. We strongly feel that it infringes upon our intellectual property and brand communication rights – and that it is excessive, which are some of our contentions before court."

Ferraz attributed the volume decline in cigarette sales seen during the year under review to a mix of factors including pressure on the disposable income of consumers, pricing and smokers turning to beedi going up in 2013 despite a decline seen over the past ten years.

He also said that there had been unfair enforcement by sections of the law enforcement authorities restricting and imposing penalties on their dealers selling their legitimate product.

"In some areas of the country, our trade partners were forced to stop selling this legal product. There is a huge lack of understanding and awareness on this matter. In addition, consumers are uncomfortable to exercise their right to smoke as permitted under the law because they may be unaware of and victimized for smoking in areas where they are permitted to do so," he said.

"These factors collectively contributed immensely to our sales performance this year, and we have engaged with law enforcement authorities and our trade partners to educate them on the situation."

CTC has a stated capital of Rs.1.87 billion and retained earnings of Rs.2.44 billion in its books. The company’s total assets ran at Rs.15.17 billion and its total liabilities at Rs.10.85 billion.

Earnings per share were up to Rs.48.80 during the year under review from Rs.43.64 a year earlier and net assets per share were up to Rs.23.04 from the previous year’s Rs.20.26. The market price per share for 2013 closed at Rs.1,184.

British American Tobacco Holdings (Sri Lanka) BV holds 84.13% of the CTC followed by FTR Holdings SA with 8.32%. All other shareholders individually hold less than one percent of the company.

The directors of the company are: Messrs. Susantha Ratnayake (Chairman), Felicio Ferraz (MD/CEO), M. Raza, A. Hewage, Ms. Premila Perera, Henry Koo and Ariful Islam.

www.island.lk