Fairfax buys 10.7% JKH stake from Khazanah for Rs. 22.7 b

Friday, 10 January 2020 00:30 -     - {{hitsCtrl.values.hits}}


  • Deal propels CSE turnover to highest since 2008; Bourse rebounds 

Canada’s Fairfax Financial yesterday bought a strategic 10.7% stake in the premier blue chip John Keells Holdings PLC (JKH) for Rs. 22.7 billion from Malaysia’s sovereign fund Khazanah Nasional Berhad with the deal boosting investor sentiment and propelling the Colombo bourse turnover to highest since 2008.

In its official disclosure to the CSE, JKH said the buyer was Citigroup Global Markets Ltd., Agency Trading Prop Securities A/C. However market analysts linked the account to the Toronto, Ontario-based giant Fairfax. The seller was Northern Trust Co S/A Broga Hill Investments Ltd., linked to Khazanah. 

Fairfax Financial is a financial holding company engaged in property, casualty, insurance and reinsurance, investment management, and insurance claims management. Fairfax first entered Sri Lanka in 2013 via HWIC Asia Fund, accumulating a 15% in JKH subsidiary Nations Trust Bank. In 2015, Fairfax bought 78% of JKH-linked Union Assurance's general insurance business for Rs. 3. 7 billion. A year later, it acquired 100% of Asian Alliance General from Softlogic Holdings for Rs. 1. 2 billion 

The 10.76% stake in JKH amounting to 141.8 million shares was traded at Rs. 160 each. The deal boosted the Colombo Bourse’s turnover to Rs. 23.6 billion, highest since 2008, according to NDB Equities.

Analysts saw Fairfax investment as a major vote of confidence on the prospects of JKH as well as Sri Lanka. 

The JKH deal energised investor sentiments and boosted the market to positive territory. After suffering a 2% dip on Wednesday (sharpest in over two months), the ASPI yesterday shot up by 85 points or 1.44% and the S&P SL 20 Index moved up 64 points or 2.3%. On Wednesday, it fell by 2.6%.

NDB Securities said the ASPI closed in green as a result of price gains in counters such as LOLC Holdings, Distilleries and John Keells Holdings. A similar behaviour was witnessed in the S&P SL20. 

Mixed interest was observed in Sampath Bank whilst retail interest was noted in Browns Investments. Furthermore, foreigners remained active closing as net sellers. Total foreign participation accounted for 97.5% of the turnover.

During the week, the ASPI and the S&P SL20 lost 2.02% and 3.34% respectively whilst recording an average daily turnover of Rs. 5.3 billion.

Diversified sector was the top contributor to the market turnover (due to John Keells Holdings and Browns Investments) whilst the sector index gained 1.34%. The share price of John Keells Holdings increased by Rs. 1.70 (1.06%) to close at Rs. 162.80. The share price of Browns Investments gained Rs. 0.40 (7.84%) to close at Rs. 5.50. 

The Banks, Finance and Insurance sector was the second highest contributor to the market turnover (due to Sampath Bank and Hatton National Bank) whilst the sector index increased by 2.11%. The share price of Sampath Bank moved up by Rs 1.50 (0.98%) to close at Rs. 155.

The share price of Hatton National Bank recorded a loss of Rs. 0.30 (0.19%) to close at Rs 160. Chevron Lubricants was also included amongst the top turnover contributors. The share price of Chevron Lubricants appreciated by Rs. 4.30 (6.37%) to close at Rs. 71.80.