Bourse dances to Singer

Wednesday, 1 June 2011 01:17 -     - {{hitsCtrl.values.hits}}

Speculative yet profiteering play on Singer Sri Lanka and Singer Industries continued for the second consecutive day at the Colombo Bourse, with the latter landing under the SEC’s price band yesterday.

Parent Singer Sri Lanka dominated investor play with 3.45 million shares changing hands via 2,795 trades, generating Rs. 527.5 million turnover. The number of transactions confirms the degree of recycling of day-trades. On Monday 2.57 million shares of Singer were transacted via 1,069 trades for Rs. 331.5 million.

Singer topped the list of percentagewise gainers yesterday with 15.32% or Rs. 20.10 up to Rs. 151.30, whilst it hit an intra-day high of Rs. 169.50.

The renewed interest in Singer follows its subsidiary Singer Industries on Monday fully divesting its 1.4% stake or 1.8 million shares held in the parent. As at 31 December 2010, the stake amounted to 1.7%, which came down to 1.4% by 31 March 2011. The most noticeable block to trade yesterday was 530,000 shares done via a crossing at Rs. 122 but it hit a peak of Rs. 149 before closing at Rs. 131.20, up by 14% or Rs. 16.30.

The consumer goods retailing giant has been traditionally illiquid with only 12% or 15 million shares held by the public. The quantity in the CDS is also only 12.6 million. However, during the past two days, over six million Singer shares had traded. This figure – despite six more months more for the year to end – is a new annual record, with the last highest annual volume traded being 4.14 million shares in 2007. Last year’s figure was a mere 1.8 million.

Singer’s Dutch parent owns 86% of the Lankan entity. It has 2,673 shareholders, of which 2,634 are resident, owning a combined 8.6 million shares. Within the local category, there are 1,793 holding less than 1,000 shares with a collective haul of only 386,526 shares. Ceybank Unit Trust is the second largest shareholder, but taking a long-term view, it hasn’t been on the selling side this week.

 In the first quarter of 2011, its highest price was Rs. 235 whilst the lowest was Rs. 165, with closing price being Rs. 224.20. In that context the current level is far below. However, it is a new high in the second quarter whilst Singer closed last week down by 10 cents to 114.90 with only 59,200 shares traded. Post sub division the number of shares in issue rose to 125.2 million, from 62.6 million.

Singer Sri Lanka CEO Asoka Pieris told the Daily FT that the sale of the stake held by Singer Industries had boosted liquidity whilst the market had re-rated though belatedly the outlook for the parent, following the impressive release of 1Q results.

Pieris noted that internally the thinking was that the market price hitherto hadn’t reflected the true value and emphasised that following the new pricing, there was more scope.

Market analysts however claim that brokers were merely propping up Singer share. They pointed to the recycling of trades or substantial day-trades, which signifies profiteering.

On Monday, with several high net worth investors joining the fray, there was strong speculation that there could be strategic play. However, this was quickly dismissed since Singer’s parent is firmly in control. One of the investors who bought in on Monday said it was purely as part of trading portfolio.

Singer Industries ranked number two yesterday with a 13% gain amounting to Rs. 24.40 to close at Rs. 210.40. It hit an intra-day high of Rs. 247. It saw only 336,300 shares transacted for Rs. 76.5 million via 651 trades. On Monday it gained by Rs. 13.40 to Rs. 186 with 282,500 shares traded. In terms of the SEC directive, the 10% price band has been imposed on Singer Industries with effect from 1 June 2011 to 7 June 2011 (both days inclusive).

Pieris opined that Singer Industries’ share price gain could be due to investor re-rating on account of profit from the sale of stake in parent.

Singer Sri Lanka in 1Q saw Group revenue surpassing the Rs. 5 billion mark, up 38% from the same period last year. The growth in revenue cascaded down to the bottom line with Group pre-tax profit up 60% to Rs. 485 million, while profit after tax grew by 53% to Rs. 257 million.

In the financial year ended 31 December 2010, Singer’s group revenue rose by 34% to Rs. 16 billion, whilst profit after tax shot up by 403% to Rs. 669 million.