Sunday, November 21, 2010

Mark Mobius' Templeton invests in Laugfs

By Duruthu Edirimuni Chandrasekera

Global investor and emerging markets fund manager, Mark Mobius has invested in the recently concluded Laugfs Gas Ltd Rs 2.5 billion Initial Public offering (IPO) stockbrokers said, signaling possibly his Templeton fund’s second major foray into Sri Lanka. Earlier Mr. Mobius, in an interview with Business Times in November 2009, had said he would adopt a ‘wait and see’ policy in view of presidential/parliamentary elections and.

However brokers said Templeton applied for the Laugfs IPO, which saw 22% of the gas firm offered to the public, to ‘test’ the Sri Lankan IPO process. "The Templeton Fund applied for the Laugfs IPO, which is a huge positive to the market," a broker said, adding that the fund applied for about a million shares.
Mr Mobius, asked whether he had invested in Laugfs, told the Business Times in an email response on Thursday that “… I can't give you that information since we are not allowed to comment on what we have bought or sold in any (global) market.”

He said comments he made then are still valid today. Noting that Sri Lanka is ‘ripe’ for investment, he added: “We want to find the very best opportunities in Sri Lanka and in other parts of the world.” In the November 15 interview he commented that the Colombo stock market is ill-liquid and too small for a fund like Templeton. The global fund invested in Sri Lanka in the ’90s in institutions like NDB Bank. Meanwhile, Chairman Laugfs W.K.H. Wegapitiya, at a media briefing to announce the allotment of the IPO shares, said the company saw interest by many oil major giants to take up a stake in the company (before its IPO). “But we wanted the partnerships to be more Sri Lankan,” he added.

Laugfs sources on the sidelines of the media briefing told the Business Times that Laugfs has plans to go regional. “Essentially we’re optimistic about Bangladesh and Vietnam,” a source said. He said that Laugfs had discussions with some prospective partners in the energy sector in India, Pakistan and Bangladesh. “We’re trying to acquire some regional LPG (Liquid Petroleum Gas) operators,” he said. Mr. Wegapitiya said Laugfs has grown into some 18 firms in diversified sectors within the last 15 years since it started. He added that the number of applications at over 64,000 was a record for any IPO. The company has finally accepted only 59,011. “With the current economic boom, the political stability and the tapering of the global recession this IPO had real value, which was the main reason that it was oversubscribed by 21.8 times,” he added.

He noted that there were applicants from across the country with 40,000 coming in from remote areas including the North and East. He said with the IPO money, Laugfs, which already has two hotel properties in Induruwa being bullish on the tourism sector and will start construction on a 100-room resort hotel in Chilaw. “We will set up a hotel in the Southern coastal belt and is also looking to acquire some hotels in the South as well,” he said, adding that Laugfs is also studying the East for similar projects.

Laugfs is also bullish about the property sector. Mr. Wegapitiya said Laugfs’ 45 apartment complex in Maya Avenue at Kirulapana will be converted to a 72- room city hotel through Laugfs Property Developers Ltd by December, while plans are on to set up two hydro power projects in Balangoda. The balance funds will be utilised to retire high cost short and long term borrowings. This is expected to improve the bottom lines of the company and will also contribute to ease the strain on cash flow which will eventually lead to a healthy working capital situation.

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