Sri Lanka Stock Picks

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Wednesday, July 28, 2010

DIST on Demand : Colombo Stocks Up by 2.8% for the day

DAILY MARKET REVIEW

28 /07/2010 (S.L.S.Picks) – Colombo Stock Exchange closed with record gains today up for the third consecutive day for this week. The All share price index was closed at 5138.93 level, up by massive 139.88 points. This is the first time in the history of Colombo Stock Exchange that the All share price index has passed the all important 5000 barrier level as at end of a trading day. The more liquid Millanka price index was up by substantial 159.54 for the day to close at 5828.63

We have clearly predicted the possible upturn in the market purely on the grounds of future growth potential of the shares listed in the Colombo Stock Exchange. We have published a special article “All Share Price Index - History performances & way forward “on 13th July, predicting the upward movement of the market. This has become a reality now & our expectation was the market to reach 5000 barrier level well before end of the year 2010. However ASI has achived its target well before the stipulated time frame.

Renewed buying interest was visible for selected stocks / Blue chip stocks as investors are expecting better results for the June quarter 2010 from these companies.

There were 114 positive contributors as against 47 negative contributors for the day.

Turnover for the day was a healthy Rs3.1b.n.

Foreign participation was at lower levels in today’s trading session. They were net sellers for the day by marginal Rs 18m.n. foreign purchases were at Rs 345m.n. & foreign sales were at Rs 363m.n

Renewed buying interest was visible in Hotels sector shares due to the increased tourist arrivals to the country & the Banking sector companies as well. Banking sector, Hotels sector & Construction sector has been identified as leading growth sectors in post war Sri lanka.

Palm Oil sector was heading the sector’s list due to share price appreciation of Bukit Darah Company, followed by Construction & Engineering sector. Stores & Supplies sector was heading the negative performers list for the day.

ANNOUNCEMENTS

Trans Asia – Each Ordinary share to be subdivided in to two.

Lanka Tiles - Capitalization of reserves of 01 ordinary share for every 04 shares held @ Rs 45 /share.

Lanka Ventures – Final Dividend of Rs 1.50 / share.

CLOSER LOOK

The quarterly results of the listed companies in the Colombo Stock Exchange for the MARCH – JUNE Quarter 2010 will be released to the market within couple of weeks time. The results released for JAN – MARCH 2010 quarter showed improved performances & earnings for this period has risen more than 150%. We expect better results from the listed companies for the JUNE 2010 quarter as well.

Foreign participation was at high levels during the last three weeks & the Net foreign buying for the same period tops Rs 3.0b.n.This is a positive sign for the Colombo Market as investors are waiting to see continuous foreign buying in CSE.

Buying for JKH the at improved price levels always gives the signal of an upward market potential. JKH was closed at Rs 249.50 today & the share was up by Rs 9.50 for the day. JKH share has continuous buying interest during the last two weeks onward at higher price levels.

The credit guarantee scheme approved by the Central Bank of Sri lanka to strengthen the liquidity position of the registered finance companies may give the confident to investors to invest in the companies like The Finance Company, Nation Lanka Finance (Formerly Ceylinco Securities & Financials) etc. Investors are expecting a reduction of Vat from Banks in future as well, & there for we expect Banks to perform well in the medium to long term.

Demand for hotel stocks were at high levels during today's trading sessions on back of improved Tourist arrivals to the country after the end of 30 year old civil war. Hotel stocks such as KHL, MARA,HSIG, HUNA, SIGV,TANG etc... were collected by the investors expecting further upward movement of these companies.

We can expect DIALOG Telecom to perform well during medium to long term future on back of exceptional performance reported by the company. This is one of few companies in the market where foreigners can purchase in large quantities due to the high liquidity of its shares.

STOCKS TO WATCH

Sampath Bank

Has reported exceptional performance for the 1Q 2010 ended 31/03/2010 by registering a profit of Rs 598m.n as against 397m.n reported for the same period in year 2009.This reflects a profit growth of 50.6% YOY. Earnings per share (EPS) for the period was Rs 7.09 as at 311/03/2010 & it was Rs 5.24 for the same period in year 2009.

NAV of Sampath share as at 31/03/2010 was Rs 174.33. Sampath trailing PE ratio is below 12 & is one of lowest among listed banks.

Sampath Bank has a pending subdivision of 2 shares for every single shares held.

Hotel Marawila(MARA)

The comparison of Hotel Marawila together with Hotel index,ASI, & MPI of the Colombo Stock Exchange clearly reflects the performance of the MARA for the past 18 months period. The graph shows us that the MARA has clearly under perform to the all three indexes for the last couple of months & crosses the ASI & MPI very recently.

MARA is the only hotel listed in the Colombo Stock Exchange that trades below Rs 20 levels as at end of today's trading session.( A 10 Rupee company) The REEF is originally reported as a One rupee company.

MARA has reported improved profits as at 31/03/2010 & the reported profit was Rs 22.0m.n, against Rs 13m.n reported for the same period in year 2009. NAV per share stands at Rs 3.98 as at 31/03/2010.

MARA is a Lankem Ceylon PLC owned company.

We expect MARA to deliver over 80% return for the investors who invest in the company shares at current price level ( Rs 12.75) over medium to long term period purely on back of increased tourist arrivals to the country.

Distilleries Company (DIST)

We have done a comparison chart for DIST against ASI ,MPI, the sector DIST is representing the BFT. This clearly shows us how DIST has under perform to the market & to the sector performance over the past 18 months period.

The cancellation of the ICSL deal may be the major reason for this performance & the profitability of the company also reduced by almost 50% to Rs 318m.n as at 31/03/2010 (Three months) which reflects an EPS of Rs 0.91for the period.

However we believe that the Govt bonds held with DIST (pending maturity) may give them the much needed boost for their bottom line.

DIST has interests to the Plantations through Balangoda & Madulsima Plantations, Telecom sector through Lanka bell , Beverage sector through its core business activities,Power sector through Newly established Hydro power plant at Madulsima ,Insurance sector through Continental Insurance. etc. They have interests in the area of tourism as well through its Associate company Aitken Spence PLC.

DIST has significant share holdings in the leading blue chip companies listed in CSE such as HNB ,COMB, JKH, DFCC Bank, ASIRI hospitals together with BBH,& LMF etc.

We expect DIST to perform well in the post war Sri Lanka in medium to long term.