Dhammika returns to market; buys 24% Nawaloka Hospitals stake for Rs. 1.35 b

Friday, 11 March 2016 00:10 -     - {{hitsCtrl.values.hits}}

The return of business leader and market mover Dhammika Perera yesterday for a new acquisition was good enough to boost an otherwise-negative Colombo Bourse, which also got a fillip from positive vibes over the imminent strengthening of China-Sri Lanka ties.2

With the market having lost over Rs. 450 billion in value since start of 2016 and 14% negative return until yesterday, Dhammika Perera stepped in and bought a 22% stake in Nawaloka Hospitals Plc for Rs. 1.2 billion. He paid Rs. 4 per share, around 30% above Nawaloka’s Net Asset per share of Rs. 2.84 given the size of the stake. Its highest price in the quarter ended 31 December 2015 was Rs. 3.70 and the lowest was Rs. 3 before closing at Rs. 3.30. Prior to yesterday’s purchase, Dhammika had held a 1.76% stake in Nawaloka.

Sellers of Nawaloka Hospitals yesterday were longstanding shareholder and low profile high net worth investor Dr.  T. Senthilverl, who as at 31 December 2015 held 309.5 million shares or a 21.96% stake. Additionally NSB which had 17.8 million shares or 1.26% sold out too. Last week Dhammika had entered Nawaloka by buying EPF’s stake of 1.76%.

Nawaloka Hospitals’ controlling stake is held by Jayantha Dharmadasa with 32.83% and Nawaloka Construction Company owns 31.34%.

Overall Nawaloka saw 306.1 million of its shares changing hands via 50 trades for Rs. 1.224 billion. It closed the day up 13% or 40 cents to Rs. 3.50.

Dhammika told the Daily FT the investment under his personal name was on value and not aimed at a takeover. “Healthcare along with food and education are some of the high growth sectors and Nawaloka has been a good healthcare provider including for my family,” he added.

For the nine months of FY16, Nawaloka Group revenue has increased to Rs. 4.38 billion from Rs. 3.38 billion a year earlier. Gross profit was Rs. 2.2 billion from Rs. 1.6 billion.

Operating profit improved from Rs. 304 million to Rs. 553 million. Pretax doubled to Rs. 300 million from Rs. 128 million a year earlier and after tax profit was Rs. 218 million up from Rs. 120 million.

It was the first major acquisition of Dhammika after more than a year.  The previous Dhammika-linked acquisition was in October 2014 via his mainstay Hayleys when it acquired control of Alufab Plc consolidating the position in the aluminium market along with Alumex Ltd.

The deal on Nawaloka helped to boost turnover at CSE to Rs. 2.5 billion as well as pushed the benchmark All Share Index by 1.46% or 86 points, reversing the declines suffered for the past seven market days.

Positive vibes on stronger Sino-Lanka ties also boosted investor sentiment. 

The Daily FT yesterday reported Strategic Development and International Trade Minister Malik Samarawickrama stating that the Government has ironed out its issues with Beijing, would resume the $ 1.5 billion Colombo Port City project and had agreed to allow all Chinese projects to continue including the Hambantota Port and Airport under a joint venture with the Government.

SC Securities said the rebound in the market was mainly due to price gains in counters such as SLTL.N (Rs. 35.00, +5.42%), JKH.N (Rs. 152.90, +1.39%), HNB.N (Rs. 194.50, +3.24%), AHUN.N (Rs. 54.90, +9.80%) and HHL.N (Rs. 76.00, +3.40%). The Blue Chip Index S&PSL20 also advanced by 40.64 points or +1.31% to close at 3,133.56.

Foreigners took the position of net buyers for the day, recording a net foreign inflow of Rs. 76 million for the day. Shares of 216 companies were traded today. Of these, 23 companies declined while 147 closed higher, SC Securities added.

Whilst yesterday’s rebound was welcomed by brokers and analysts, larger concerns over the outlook remains on account of re-imposition of capital gains, upward revisions in corporate and personal tax as well as Value Added Tax by the Government to shore up revenue to pay for higher debt and previously unaccounted payments of Rs. 1 trillion by the former President Mahinda Rajapaksa regime.

Though fiscal management is likely to improve and weigh positively to fundamentals of the market, the upward pressure on interest rates was another concern in addition to dimmer prospects for corporate earnings in the new financial year.


Shares rise most in 11 months on bargain hunting 


Reuters: Shares rose 1.5% on Thursday, posting their biggest one-day percentage gain since April 2015 as investors bought beaten-down stocks.

Sri Lanka’s benchmark share index ended up 1.46% at 5,948.23, rebounding from an intra-day trough of 5,802.02 hit on Wednesday, which was the lowest since December 2013.

The index had lost 3.2% in the last two sessions through Wednesday as a Government move to hike value added tax (VAT) and reintroduce capital gains tax to break out of a debt trap and qualify for a $1.5-billion IMF loan weighed on sentiment.

With the Central Bank’s unexpected hike in interest rates in mid-February and yields on Treasury bills at two-year highs, investors prefer fixed interest rate bearing assets over risk assets, stockbrokers said.

Financial companies, which tend to benefit from higher interest rates, led the market’s rebound on Thursday.

“Market has turned around and we feel the stabilisation point has reached,” said Dimantha Mathew, Head of Research, First Capital Equities Ltd.

“We believe the market will be in the range of 5,800 to 6,000 level, with volatility here and there,” Mathew said.

Foreign investors were net buyers for the ninth straight session, purchasing Rs. 75.58 million ($521,601) worth of shares on Thursday. But the Bourse has suffered a net foreign outflow of Rs. 246.1 million so far this year.

Shares in Sri Lanka Telecom Plc jumped 5.42% while conglomerate John Keells Holdings Plc advanced 1.39% and Hemas Holdings Plc HHL.CM gained 3.40%.