Aug 04, 2010 (LBO) - Shares of Sri Lankan retailer Odel group opened at double the price of its initial public offer and closed even higher as it began trading Wednesday, ensuring hefty gains for investors, brokers said.
The Initial Public Offer of Odel at 15 rupees a share, which opened and closed on July 5, was oversubscribed a record 64 times.
On Wednesday, the share opened at 30 rupees and hit a high of 38.50 and a low of 29.80 rupees. It closed at 32.70.
About 18.5 million shares were traded during the day contributing 613.7 million rupees to the day's turnover.
Odel had offered 16.7 million shares, an 11.5 percent stake in the company’s equity, at 15 rupees per share.
Odel group's June profits rose 187 percent to 37 million rupees from a year ago owing to better margins despite higher tax and operating costs, its interim results show.
CT Smith Stockbrokers said in a report that Odel's issue price was at a price-to-earnings multiple of 10.3 times and 7.8 times estimated earnings for the 2011 and 2012 financial years.
It said retailers like Odel were expected to benefit from an anticipated rise in consumer spending as economic growth accelerates.
Odel's gross profit margins are also expected to rise owing to greater economies of scale, better inventory control, and an improved product mix.
Margins are also likely to improve as a stronger rupee makes the retailer's imports cheaper.
source - www.lbo.lk
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