Access Engineering Ltd. may be in the market to raise Rs. 500 million via a key IPO, but yesterday it paid Rs. 846 million to buy near 60% control of Sathosa Motors Plc from Japanese owners, in addition to incurring a Rs. 555 million exposure via a mandatory offer.
The stake amounting to 59.7% or 3.6 million shares was done at Rs. 235 each, Rs. 15 above Tuesday’s closing. SMOT’s 52-week highest price was Rs. 469 whilst its net asset per share is Rs. 91.
The seller was Japan’s trading giant ITOCHU Corporation, which acquired SMOT during its privatisation in 1992. Its exit is believed to be with a tidy capital gain. Following the deal, SMOT share price gained to close at Rs. 227.30, up by Rs. 7.30 whilst it hit an intra-day high of Rs. 275.40.
Incidentally, market talk was that there was a bid for the very price at which SMOT closed yesterday by a party already in the motor trade However the Japanese had perhaps stuck to an informal agreement with Access Chairman Sumal Perera, who also has been Chairman of SMOT for several years after being appointed to the Board in 1998.
Among major shareholders of SMOT are R.M. Nanayakkara of Ishara Motor-fame owning (19.36%) and Lakshmans/Pinsiri Fernando controlling around 13%. Despite ITOCHU’s exit, SMOT will continue to enjoy the agency of Isuzu, which it has been marketing since 1962 via the then CWE.
SMOT also holds the franchise for Opel passenger cars and spare parts.
According to the provisional results of SMOT released to the Colombo Stock Exchange for the nine months ended 31 December 2011, the company has recorded a net turnover of Rs. 1,393 million, a 37.5% increase over the corresponding period. The total gross profit for the same period has been Rs. 242 million, a 50% increase over the previous corresponding period. The company has recorded a profit after tax of Rs. 128 million, which is a staggering 125% increase over the corresponding period. This eventually turns out to earnings per share of Rs. 21.22 for the nine months period ended 31 December 2011. The company does not have any significant noncurrent liabilities except for a retirement benefit obligation of approximately Rs. 21 million and thus has the ability to leverage on its equity base of approximately Rs. 550 million for expansion purposes.The net asset per share as at 31 December 2011 was Rs. 90.73, a 38% increase over the corresponding figure as at 31 December 2010. The company also has a ‘Cash & Cash Equivalent’ balance of Rs. 448 million as at 31 December 2011.
On expected annualised earnings, the acquisition is at a price earnings ratio of 8.3 times, which makes it one of the most attractive acquisitions and investments made on the Colombo Bourse in the recent past.
source - www.ft.lk
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