The Nation Sunday Print Edition - page 18

Page 2 Sunday, October 20, 2013 gain
MARKET REPORT/NEWS
Lanka Securities Research
C
olombo stocks started the weekly operations with
marginal gains in both indices. ASI gained 5.20
points (+0.09%) and S&P SL20 Index gained 5.12
points (+0.16%). Daily market turnover reached the 13-
week low of LKR 233mn.Touchwood Investments record-
ed the highest turnover of LKR 28mn followed by Cey-
linco Insurance (LKR 23mn) and Lanka IOC (LKR 13mn).
Speculative Touchwood Investments, Swarnamahal Fi-
nancial Services and Colombo Land & Development were
the mostly traded stocks during the day.Foreign partici-
pation was low at 10% whilst recording a net inflow of
LKR 12mn.
On Tuesday Colombo bourse closed in green territo-
ry. ASI gained 9.36 points (+0.16%) and S&P SL20 Index
gained 1.84 points (+0.06%). JohnKeells Holdings – Rights
commenced its trading on Tuesday and attracted heavy
investor interest during the day. Market turnover reached
LKR 2.5bn which was far above the year-to-date average
daily turnover of LKR 877mn. This hefty turnover was re-
corded mainly due to the negotiated deals in John Keells
Holdings and John Keells Holdings – Rights. Accordingly
top two turnover levels were recorded from John Keells
Holdings (LKR 1.1bn) and John Keells Holdings – Rights
(LKR 995mn). Further Sampath Bank recorded the third
highest turnover of LKR 68mn. Touchwood Investments,
York Arcade and Textured Jersey were among the heav-
ily traded stocks. The proposed investor repayment plan
of Touchwood Investments failed to increase the retail
investor interest as the stock closed with no price change.
Meanwhile Taprobane Holdings announced a Rights-is-
sue of 01 for 03 shares. Foreign participation for the day
was 33% whilst foreign investors were net buyers with a
net inflow of LKR 696mn. Market was closed on Wednes-
day due to Eid festival.
The Colombo equity market wrapped the weekly opera-
tions on Thursday with positive returns as benchmark
All share price index advanced by 14.53 points (+0.24%)
to close at 5,976.51 and S&P SL20 index gained 18.42
points (+0.56%) to close at 3,309.00. Price advancements
in Ceylon Tobacco by LKR 20.50 (+1.18%, LKR 1,150.00),
CarsonsCumberbatch by LKR 13.60 (+3.47%, LKR 405.00)
and Ceylon Theaters by LKR 12.10 (+8.35%, LKR 157.00)
contributed positively to the market performance.
John Keells Holdings emerged as the top contributor
with LKR 227mn and JohnKeells Holdings-Rights was the
second best contributor with LKR 135mn underpinned by
negotiated deals recorded during the session followed by
Sampath Bank with LKR 23mn. Off-the-floor deals were
recorded in John Keells Holdings where approx. 0.75mn
shares changed hands at a price of LKR 217.00-218.00
and John Keells Holding-Rights approx.0.80mn shares
changed hands at a price of LKR 66.00.
Market turnover was LKR 546mn. John Keells Hold-
ing-Rights (closed at LKR 62.30,-3.9%), Touchwood
(closed at LKR 4.80,0%) and MTD Walkers (closed at LKR
31.40,+6.1%) managed to attract heavy investor interest.
Cash map closed at 48%. Foreign investors were net sell-
ers for the day with an outflow of LKR 28mn. Foreign
participation was 26%. Net foreign outflows were seen
in counters such as John Keells Holding-Rights (LKR
70mn), HNB non-voting (LKR 7mn) and Tokyo Cement
(LKR 3mn).
On Tuesday Central Bank of Sri Lanka reduced policy
rates corridor by 50 basis points lowering its repo rate
to 6.50% and reverse repo rate to 8.50% to boost credit.
Going forward this may reduce the market interest rates
gradually, whichmay draw back the investors to the stock
market. Currently CSE is trading at a PE of 12.0x, which
is 2.4%discount to the MSCI frontier market index PE and
20% discount to the MSCI frontier emerging market index
PE.
Weekly Roundup
Listing a company with the Colombo
Stock Exchange (CSE) can provide the
boost fast-growing company needs,
several industry leaders said in a wide
ranging panel discussion at the Issuer
Relations Forum held at the Cinnamon
Grand last week.
Market capitalization of the CSE
amounts to less than 30% of Sri Lan-
ka’s annual GDP, the Chairman of CSE
Krishan Balendra revealed. In com-
parison, the total value of the stock ex-
changes in the region as compared to
GDP amounted to as much as 180% on
average, with exchanges in countries
like Malaysia and Singapore exceed-
ing 200% of their annual country’s
GDP. As such the forum aimed to en-
gage and encourage companies to list
on the CSE, while addressing the con-
cerns they voiced, Balendra added.
Representatives from top firms such
as the Akbar Brothers, Allianz Insur-
ance Lanka Limited, Asian Hotels and
Properties, Amana Bank, Ceylon Bis-
cuits Ltd, Brandix Lanka, Hameedia
Stores, Jetwing Hotels, Richard Pieris,
Softlogic Retail and the Tudawe Broth-
ers attended the event.
Panelist and CEO of People’s Leas-
ing and Finance PLC, D P Kumarage
explained that the company experi-
enced strong growth from the out-
set- as much as 120%. Eventually, the
company needed to enter a new growth
phase without unbalancing their debt-
equity ratio, and listing on the CSE
provided the perfect springboard pro-
pelling them towards further growth.
At the same time, Chairman of
Laugfs Holdings plc, W K H Wega-
pitiya said that far too many home-
grown companies entered a “Bermuda
triangle” when it came to the growth
momentum phase. Laugfs, on the oth-
er hand, wanted to ensure sustainable
growth by broad-basing their owner-
ship. Currently, Wegapitiya said that
Laugfs was planning to list five more
companies on the CSE, adding that it
was the perfect time to do so.
Wegapitiya
discussed
various
‘myths’ which exist in the market
when listing on the CSE, including
giving up control of the company, as
well as the need to disclose everything
about the way the company is run. On
the former myth CEO of ODEL Otara
Gunawardene alsoweighed in, explain-
ing that while it had been a difficult
decision, listing had ultimately been
for the benefit of the company. Not
only were there not too many changes
made, but it was also a faster, cleaner
process in terms of valuation, giving
ODEL the room to grow from strength
to strength.
Disclosures too were limited and
there was no need to give away trade
secrets, the panelists emphasized.
However, all the panelists agreed
that some preparation needed to be
done before listing a company on the
CSE, from streamlining systems and
processes to changing the culture of
the company.
These challenges were overcome
with the help of several organizations
who lent a helping hand. Moreover,
each of these companies subsequently
was able to grow at a much faster rate
than if they had decided not to list.
Assistant General Manager of Regu-
latory Affairs at CSE Renuke Wijay-
awardhane gave a presentation on
listing on the CSE. Wijayawardhane re-
vealed that this year has seen as much
as Rs. 30 billion raised by debt issuers,
adding that market capitalization has
doubled since 2009, showing that there
is huge potential for growth.
Companies which successfully listed
could raise long-term funds, especially
if they were looking to fund further
growth without raising their debts. In
addition, listed companies could tap
into a huge investor base, and would no
longer be limited by the owner’s capac-
ity to introduce capital, Wijayaward-
hane pointed out. Apart from this, the
company’s corporate profile would be
enhanced, with plenty of publicity
along with the publication of financial
statements. Listed companies are also
usually valued higher compared to un-
listed companies.
He also elaborated on important fac-
tors to consider by potential issuers
before deciding on listing on the CSE.
The Diri Savi Board opened up new
opportunities for smaller companies
looking to list with less onerous re-
quirements. Companies needed stated
capital of Rs. 100 million, a one year
record of operations and positive net
assets for the last financial year as well
as a public float of 10%, Wijayaward-
hane said.
Consulting with an investment
bank before approaching the CSE
would make the process much easier
and faster, Wijayawardhane said. It is
equally important to attract long-term
investors rather than retail investors
as this could introduce volatility, he
added.
Business leaders spell
benefits of listing
If you’re familiar with
Twitter
at all,
you’ve probably seen the “fail whale”
at least once or twice. This is the
graphic of a large whale being car-
ried aloft by a flock of small birds with
the message “
Twitter
is Over Capac-
ity” or something else explaining the
problem. With the Twitter initial public
offering (IPO) on the horizon, some
are wondering if the fledgling social
media company will be able to do bet-
ter than Facebook did back in 2012.
NYSE for IPO: Twitter is not
Facebook
When talking about the upcoming
Twitter IPO, the first thing you need to
realize is that this social media com-
pany is not the same as Facebook.
In fact, they’re quite different. Upstart
Business Journal has reported that
Twitter is using the NYSE instead of
NASDAQ for their IPO.
Learning from Facebook’s
mistakes
One of the things
Twitter
has go-
ing for them is that they were able
to study Facebook’s IPO closely.
This has most likely given the com-
pany a better chance of not repeat-
ing mistakes the other social media
company made when going public.
For example, Facebook may have
waited too long to come to market
with their own IPO. This made it more
difficult to show that they would have
explosive growth once they had gone
public.
Another mistake that
Facebook
and its underwriters made was in set-
ting the stock’s initial price so high.
While they have finally moved past
that initial number in recent weeks,
the stock dropped precipitously after
its IPO and was stuck in a rut for a
considerable period of time, generat-
ing plenty of bad feeling among re-
tail purchasers of the stock who felt
they’d be taken advantage of.
If
Twitter
takes a cue from the
Face-
book
offering, in which greed got in
the way of common sense, learning
from the debacle, and choosing to set
their asking price more realistically,
they may be able to do better right
out the gate when their own IPO
goes public.
Bumpy road ahead
While Twitter may have been able
to study
Facebook
’s IPO closely and
can try to avoid some of the mistakes
that weremade, they haveother prob-
lems to worry about as well. One is
that they recently reported their worst
quarterly loss in three years. This is
not good news when you’re about to
go public. Even worse, there’s no real
indication that
Twitter
has a solid plan
to reverse the recent trends.
Twitter
’s Q3 2013 numbers were
negative $65 million, which is about
three times the amount they were in
the red in the same quarter in 2012,
according to a report by
ABC News
.
No mention of when the IPO - one of
the most anticipated since Facebook
- will happen or what the IPO price-
range of the shares will be, but some
think this information may be known
before Thanksgiving 2013.
At the same time,
Twitter
has never
said they were worried about mon-
etizing their social media network
too heavily. They’ve taken steps to
sell their own ads and marketing to
companies, but their native adver-
tising hasn’t been as successful as
they had hoped. Still, looking at other
numbers - like traffic - it’s hard to see
how they can continue to lose money
much longer, given current trends.
The social media company hasn’t
had a profitable month since they
launched roughly eight years ago.
In fact, to date they’ve lost close to
$500 million. Monetizing their large
network of users needs to be one of
their priorities if they follow through
on their plan to go public. Whether or
not this happens, however, is another
story entirely.
Life after IPO
Whatever happens in the market,
life will undoubtedly continue after the
Twitter IPO
. Some people may make
money by getting in early and flip-
ping the stock if it pops, while others
may lose money by trying to be too
greedy. Either way, many signs point
to the social media company having a
successful IPO. And you can be sure
many people will be writing about it all
over the Internet.
Mashable has reported that
Twit-
ter
is trying to act more like
Google
before and after their IPO rather than
emulate
Facebook
. The tweet the
company sent out immediately after
their IPO announcement told their
employees to get back to work. In
many ways, they see their upcoming
IPO as just another round of funding
rather than a radical change in the
way the company operates.
Having said that the fact that
Face-
book
’s stock price has recently been
heading north is good news for
Twit-
ter
, which may be able to pull off an
IPO that will go down in the history
books—in a positive way. And if not,
perhaps they can rent a billboard and
run an ad campaign featuring their
fail whale apologizing for not being
able to handle the company’s IPO.
(Washington Times)
Twitter IPO
CSE Weekly Disclosures
SMB Securities Research
CIFL
The Writ Application submitted by the depositors for a
stay order was called for Notice Returnable on the Octo-
ber 11, 2013 and the Court has directed the Respondents
to file limited Objections by October 15, 2013. Accord-
ingly, the matter was taken up on October 18, 2013 and
the State Counsel appearing for the Respondents has
informed that they will file limited objections on behalf of
four respondents during the course of the day. The Coun-
sel appearing for the Petitioners too have moved for a
date to file counter affidavits in relation to such objections.
This matter will be coming up for counter affidavit of the
petitioner and Limited Objections on the October 31, 2013
and stay order was extended until November 1, 2013. A
disclosure filed with the CSE on October 18, 2013.
Orient Finance
K R Bandaranaike will be resigning from being the
Chief Executive Officer of Orient Finance PLC with effect
from November 13, 2013 in order to take up duties as the
Chief Executive Officer of the Colombo Stock Exchange.
A disclosure filed with the CSE on October 15, 2013.
Taprobane Holdings
The Board of Directors of Taprobane Holdings PLC
have decided to raise additional funds by means of a
Rights Issue of 255,950,493 shares in the proportion of
one new Ordinary Share for every three Ordinary Shares
held by them at an offer price of Rs.3.00 per share. The
Current Stated Capital of theCompany is Rs.349,023,400
represented by 767,851,480 Ordinary Shares. The funds
raised will be utilized for part settlement of the borrowings.
The Rights Issue is subject to the Exchange approving in
principle the issue and listing of shares and obtaining of
shareholder approval at an Extraordinary General Meet-
ing. A disclosure filed with the CSE on October 15, 2013.
Touchwood
On October 14, 2013 a disclosure filed with the CSE
mentioned that when the case (HC Civil 31/2013/CO)
was taken up in Court Touchwood Investments PLC (the
Company) filed its Statement of Objections to the applica-
tion made by the Petitioner for the appointment of a Provi-
sional Liquidator. As undertaken by the Company on the
last date of hearing, Harsha Amarasekera, President’s
Counsel appearing for the Company presented to Court
the repayment plan of the Company for all of the contracts
issued by the Company which have now matured and in
which payment is due. The repayment plan submitted
to Court was embodied in the Statement of Objections
filed along with the supporting Affidavit deposed to by
the Chairman of the Company. The proposed repayment
plan is that the Company will pay 23% of the monies
payable on all of the matured contracts (irrespective of
whether their claims have been recorded in this case
or not) within three months from today, a further 25%
within five months of today and the balance within eight
months of today. Avindra Rodrigo, Senior Counsel for
the Petitioner and several Counsels appearing for the
Claimants before Court expressed their optimism on the
repayment. Plan and requested Court for time to obtain
instructions from their clients. Court fixed the matter to
be called in Court on October 3, 2013. President’s Coun-
sel Dr. Harsha Cabraal appearing for the Securities & Ex-
change Commission (SEC) informed Court the SEC was
taking the same stand that it had on the last date of hear-
ing by opposing any application to wind up the Company
at this point of time.
Ex SLIM Chief wins
Golden Globe
A former President of Sri Lanka Institute of Market-
ing, Rohan Somawansa was recognised as one of the
50 Most Talented CMOs at the World Marketing Sum-
mit 2013. He was presented with the prestigious Golden
Globe Tigers Award 2013 at a glittering ceremony at Pu-
trajaya International Convention Center in Kuala Lum-
pur on September 30.
Somawansa served as the President of SLIM, the na-
tional body for marketing in 2010/11. He is also a former
Vice President of the Asian Marketing Federation, the
governing body for Marketing in Asia, and is currently
the General Manager, Sales and Marketing at D. Samson
& Sons (DSI) Ltd.
The World Marketing Summit (WMS) is an initiative
of the world’s most influential marketer Professor Philip
Kotler and is held annually with the objective of “Creat-
ing a Better World throughMarketing”. The goal of WMS
is to create global movements through marketing strate-
gies that will serve to inspire change in human behavior
leading to a positive impact on society and living. The
Golden Globe Tigers Awards recognize the professional
marketers throughout the world who are engaged in an
attempt to fulfil Prof. Phillip Kotler’s vision.
Will infamous whale
picture show up?
Rohan Somawansa
From left: Assistant General Manager of Regulatory Affairs at CSE, Renuke
Wijayawardhane, Peoples Leasing and Finance PLC, D P Kumarage, Founder and
CEOOdel Plc, Otara Gunewardene, Deputy Director General of the SEC, Dhammika
Perera and Chairman of Laugfs Holdings Plc, W K HWegapitiya
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