Guardian Capital Partners PLC, a member of the Carsons group of companies, has reported what its Chairman, Mr. Israel Paulraj, called "an improvement in the private equity deal flow" during the year ended March 31, 2014 although none that had met the company’s investment criteria had materialized.
"Hence we did not make any investments during the year," Paulraj said with the company’s portfolio confined to Expolanka Holdings PLC (58% of the portfolio), Access Engineering PLC (34%) and Hsenid Business Solutions (Pvt) Ltd (8%) with a total value of Rs.523 million.
The chairman reported that one company in the portfolio had been divested with the other listed positions continuing to be held as the trading price of these companies on the Colombo Stock Exchange "continued to remain below our estimate of their intrinsic value."
The disposal during the year under review was of Textured Jersey Lanka PLC sold for Rs.20 million netting a gain of Rs.8.3 million, the report reveals.
Paulraj said that the year under review had seen the company generating an accounting profit of Rs.15.5 million and a comprehensive net income of Rs.99.6 million representing a significant turnaround relative to the previous year.
"The improvement was driven by favourable conditions at the CSE resulting in fair value gains as well as revenue growth and control in costs," he said.
"Growth in profits resulted in the NAV per share recording a 20.6% growth, increasing from Rs.18.70 to reach Rs.22.56 as at 31st March 2014."
He said that although the company had been challenged once again to make new investments, they continue to strongly believe in the important role that private equity can play helping promising businesses achieve rapid growth.
"Private equity is still a relatively new concept to Sri Lanka, as all stakeholders in the industry gain more experience and comfort in this form of investing, we could expect the level and quality of activity to improve over time," Paulraj said.
"Guardian Capital Partners hopes to play a key role in the development of this asset class."
He said the company will continue to focus on improving various facets of the business such as deal generation, deal evaluation and structuring and they continued to pursue opportunities to tie up with foreign private equity firms and foreign funding partners to expand assets under management and build their expertise.
He reported that the discrepancy between the actual net worth of the company and the price at which its share trades in the market had significantly narrowed relative to the previous year.
The net worth of the company as at March 31, 2014 stood at Rs.22.56 relative to a market price of Rs.25.30 per share.
The directors have once again recommended no dividend for the year under review stressing again to its shareholders that private equity investments are riskier, relatively illiquid in nature, carry a longer gestation period and therefore carry a higher risk rate than listed equity.
An operational review in the annual report said that the portfolio value of the company as at March 31,2014 stood at Rs.523 million recording a growth of 16% driven by fair value gains recorded by both Expolanka and Access whose share prices had increased.
The Expolanka share price had appreciated to Rs.8.70 from Rs.6.80 while Access closed at Rs.22.50, up from Rs.19.70 a year earlier.
Guardian Capital Partners funds are managed by Guardian Fund Management Limited, a fully owned subsidiary of the Ceylon Guardian Investment Trust PLC.
At present Guardian Fund Management manages the largest equity fund in the country and has built up its competencies with a field of portfolio management and research and support services.
Ceylon Guardian Investment Trust PLC is the dominant shareholder with 83.97% of the company followed by Lakeview Investments (2.39%) and Carson Cumberbatch (2.25%).
The company has a stated capital of Rs.513.7 million and revenue reserves of Rs.69.1 million in its books. Total assets ran at Rs.589 million and total liabilities Rs.6.2 million.
The directors of the company are: Messrs. I. Paulraj (Chairman), D.C.R. Gunawardena and S. Mahendrarajah.
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