Bourse lights up

Vesak illumination was literally in full glow yesterday for the Colombo bourse as its value rose by a whopping Rs. 43 billion, aided by positive news which triggered a fresh round of buying.

The stock market began after two days of Vesak holidays on a high note with indices up but as speculated exclusively by the Daily FT, announcement of relaxation of credit rules by the Securities and Exchange (SEC) saw the market boom.

The All Share Price Index finished the day up 1.75% to close at 7,487 points, highest since 19 April. The 129 point gain is also highest since 12 April. Milanka gained by over 1% or 81 points. Market capitalisation rose by Rs. 43 billion to Rs. 2,537 billion, short by only Rs. 63 billion from its all-time high of Rs. 2,600 billion on 14 February.

With yesterday’s gain, the Colombo’s year-to-date return rose to 12.84%, further cementing its position as Asia’s best performer. However, the MPI continues with negative return of 2.3%, although much lower in comparison to 4% as of last week.

Turnover topped the Rs. 3 billion mark, a two-week high; much of it came after the SEC’s announcement.

Via a directive SEC said brokers have been granted additional time to clear debtor balances. Accordingly, 25% of the remaining debtors over T+3 is are to be cleared by 30 September 2011 and the balance 25% to be cleared by 31st December 2011. Earlier the rule was to clear the remainder 50% of the debtor balance by 30 June.

“The commission decision to grant the relief as mentioned above was based on the improved market conditions, especially having taken cognisance of the fact that the majority of the stock broking companies have been able to reduce the risk exposure of debtors over T+3 days by 50% as at 31 March 2011 and representations made by market participants,” a statement issued by SEC Director General Malik Cader said.

The Daily FT yesterday reported the impending announcement whilst on 9 May it reported the broker recommendations of a deferment and a phased-out period of settlement.

“Relaxation of the credit clearance policy led to renewed buying interest across the board, resulting in both indices enjoying hefty gains,” John Keells Stock Brokers said.

‘Relief granted to clear debtors driving prices up,’ NDB Stockbrokers headlined its report. “Market recorded the second-highest daily turnover for the month. Most shares gained as buying interest improved,” the broker said.

“While improvements in quarterly corporate earnings failed to improve prices since last week, the extended deadlines on debt collections for broking houses seem to have elated the investors,” NDB Stockbrokers said.

In its usual style, premier blue chip JKH was the top turnover contributor for the day with Rs. 242 million via trade of 0.8 million shares. Its share price gained by near 1% or Rs. 2.90, to close at Rs. 299.

The Bank, Finance & Insurance sector was the main contributor to the market turnover (driven by HNB and Nation Lanka Finance), while the sector index increased 1.4%. Two crossings of 1,000,000 shares were recorded for HNB at Rs. 230. The Manufacturing sector also contributed significantly to the market turnover, with the sector index climbing 2.99%.

Central Finance gained by Rs. 26.70 to Rs. 1,600.40 and accounted for fourth largest turnover of Rs. 184 million, whilst HDFC Bank gained by Rs. 7.70 to Rs. 1,607.70. Biggies in the sector Commercial, DFCC and Sampath also gained, whilst Aviva NDB rose by Rs. 19.90 to Rs. 310 on a volume of 200 shares.

Softlogic Holdings Group’s Asiri Hospitals saw 20.15 million of its shares or 2.2% traded for Rs. 171 million, accounting for fifth highest turnover and the share price up 50 cents to Rs. 8.60. Related party Asiri Central on a thin volume of 700 shares gained by Rs. 12.30 to Rs. 312.30.

Another encouraging factor was continuing net foreign inflow with yesterday’s figure amounting to Rs. 74 million on top of Rs. 3.1 billion (in May) as of Monday.

SEC approves Vallibel One IPO; Rs. 500 m issue to open in June

The Securities and Exchange Commission (SEC) has approved Vallibel One Ltd’s (VOL) Initial Public Offering worth Rs. 500 million which is scheduled to open next month.

VOL is the first holding company of business tycoon Dhammika Perera consolidating his personal and controlling/strategic stakes in Royal Ceramics, LB Finance, Sampath Bank as well as an upcoming luxury resort in Negombo. VOL also has interests in renewable energy projects.

The IPO involves 20 million ordinary voting shares priced at Rs. 25 each, which was the same price at which VOL had a private placement early this year to raise Rs. 4.9 billion via issuance of 196 million shares. The latter was not only the biggest ever private placement but was a sell out with Rs. 7.5 billion worth of applications received.

Post IPO, Dhammika will own around 80% stake in VOL, which is steered by a board of directors involving top professionals.

Acuity Partners who were managers to the private placement will function in the same capacity for the IPO as well, bringing its tally of IPOs to three including one as a co-manager.

VOL is a diversified holding company with strategic investments in financial services, tile and sanitary ware manufacturing, and leisure. Sector specific operations are carried out through its subsidiaries, namely LB Finance PLC, Royal Ceramics Lanka PLC and Greener Waters Ltd, the leisure venture arm of the company. Further, the VOL holds 15% of Sampath Bank PLC which is treated as a strategic long term investment.

The Rs. 4.9 billion private placement was floated to part finance investment of up to Rs. 2 billion in leisure sector projects in Sri Lanka. The company will engage in leisure sector projects through its fully owned subsidiary, Greener Water Limited, which is investing in a 382 room, luxurious five star resort to be located in Kochchikade, Negombo.

The hotel will target the high end of the tourist segment and will be positioned as a five star hotel. The starting gross average room rate will be USD 180 and will increase to up to USD 220 in the 5th year of operation, as per the private placement prospectus.

Additionally funds raised via private placement will also part finance investments of up to Rs. 1 billion in selected power sector projects in Sri Lanka and part finance investment of up to Rs. 1 billion in other related investments.

Whilst Dhammika Perera is the chairman and managing director of VOL, Nimal Perera is the executive vice chairman. Other board members are attorney-at-law Harsha Amarasekera (Independent Non-Executive Director), banker Kimarli Fernando (Independent Non-Executive Director), senior partner and country head of KPMG Ford Rhodes Thornton & Company Rajan Asirwatham (Independent Non-Executive Director) and LB Finance managing director Sumith Adhihetty (Non-Executive Director).