Over 100 stocks trading below asset value

Tuesday, 24 July 2012 01:53 -     - {{hitsCtrl.values.hits}}

Confirming buying opportunities are being missed, over 100 stocks were trading below asset value and market multiples have fallen below 10 times, according to Softlogic Stockbrokers.

“We are bullish on the market over the medium to long term advising investors to accelerate accumulation so as to benefit from the expected bull run,” the broking firm said.

DNH Financial urged investors to seek companies that are undervalued with growth drivers.

“While short term profits are difficult in trendless markets, we believe however that finding companies that are undervalued with growth drivers is likely to produce positive returns in the medium to longer term,” it said.

“Investors are advised to use the current lull in the market to review their portfolios in order to ensure that their allocations continue to reflect their risk appetite, investment goals and horizon while also using the price weakness in the market to cherry pick blue chip counters,” DNH Financial added.

Asia Wealth Management said stake holders including brokers, investors, regulators analysts and public at large, are waiting for a revival in the market.

“To date market is trading with a trailing PE of 11.28 x. Expectations were high at the beginning of each trading day anticipating that the market would bring up hope for investors. But why has it taken so long for these to materialise? In fact, these hopes were built around strong earnings in most of the counters, attractive dividend payments and high growth prospects in the economy,” Asia said.

Noting that interest rates and inflation in the economy are rising whilst the world economy is also undergoing turmoil, Asia said these have not drastically reduced the attractiveness of the Sri Lankan equity market.

“This raises the question as to whether investors have lost confidence in the Bourse. The chain of incidents also proves this dilemma. We came across incidents where the market responded positively over the news when the President extended discussions with the broker community. However, historically, the enthusiasm created over these has faded after a few days once the investor is not fully contended with remedies,” Asia said.

“Therefore, to top these all, the slow moving market is due to lack of investor participation, and the dominant reasoning behind the lack of involvement is less confidence towards market and excelled uncertainty. Will investors ever regain their confidence? The answer to this is broader and each stakeholder has its own role to play. Investors should be involved in fair dealings, whilst regulators should bring in discipline and order. These would multiply the attractiveness of the Lankan equity market in the wake of its economic resurgence,” Asia Wealth Management said in its weekly research report.

These positive comments are amidst Acuity Stockbrokers mid last week launching its equity market strategy saying Sri Lanka is leading the pack among frontier markets and there is great upside in the medium to long term.