Spirited rebound by Softlogic

All round buying of 39 m shares propels newest listed conglomerate to top the list of percentage gainers yesterday up 37% after heading pack of losers on debut


Bourse in welcome rebound as market’s value increases by Rs. 19 b

Softlogic Holdings yesterday produced a spirited comeback after suffering humiliation of sorts on its debut on the Colombo stock market.

The strong rebound also boosted overall investor sentiment helping the market to end the day with a welcome gain.

A total of 39.17 million Softlogic shares changed hands yesterday via 5,953 trades generating a turnover of Rs. 886.7 million. The share peaked to a high of Rs. 25.90 before closing at Rs. 24.80, up by 37% or Rs. 6.70 from its previous closing.

On its debut on Tuesday, the high profile fast growing conglomerate was unfortunate to have landed on top of the list of losers percentagewise with share price down 37.6% or Rs. 10.90 to close at Rs. 18.10 as opposed to its IPO price of Rs. 25. The new entrant was fortunate to have seen only 21 million shares traded on opening day though there were sellers to the tune of 45 million shares.

Brokers said that with most of the selling done, pressure on Softlogic price eased off whilst the stock also got a lift with all round buying. Non-national holding of Softlogic increased by over 2 million yesterday confirming there was foreign buying yesterday. Of the quantity traded Softlogic saw six crossings (6.11 million shares at Rs. 20 each, 1 million shares at Rs. 21 each and 1.1 million shares at Rs. 24 each).

Carsons Group had sold almost the entirety of its shareholding obtained in the private placement of Softlogic in February 2010 worth Rs. 7.20 per share. The sale of around 9 million shares by Carson’s investment arm on Tuesday contributed to the slide of Softlogic as it sent wrong signal. The basis for this was usually those who are approached for private issues tend to be medium to long term shareholders. In the case of Softlogic, Carson had a change of heart and mind and its exit was still at a profit given its average cost being much lower. Analysts attributed Carson’s sale to it wanting to reallocate resources to other investments or ventures.

Those who bought yesterday did so with the belief that there is greater value and upside in Softlogic.

Apart from Softlogic, the other new entrant in the diversified holdings Vallibel One Ltd., also gained yesterday with 6.8 million shares traded for Rs. 216 million. Lanka Orix Finance rose by 14% to Rs. 11.70. These as well as gains in select blue chips boosted the market overall.

The value of the Colombo bourse rose by Rs. 19 billion after having dipped by Rs. 14 billion on Tuesday and Rs. 51 billion on Monday. The year to date increase of ASI moved back to a decent 1.2% after it had sunk below 1% threshold to remain 0.4% on Tuesday.

“Indices bounced back after experiencing huge dips during the week,” NDB Stockbrokers said yesterday. “The recent additions to the stock market, Softlogic Holdings along with Vallibel One attracted the investors to help ASPI gain and boosted the turnover,” it added.

MPI stayed in green with the price appreciations of counters such as Environmental Resources, Brown & Company, Distilleries, Colombo Fort Land & Building, Royal Ceramics and Ceylon Grain Elevators.

Diversified sector was the main contributor to the market turnover (due to Softlogic Holdings and Vallibel One), while the sector index increased by 1.46%.

Bank, Finance and Insurance sector also contributed significantly to the market turnover (due to Swarnamahal Financial Services). The sector index increased 1.46%. Swarnamahal Financial Services closed at Rs. 106.50, having gained Rs. 16.10 (18.17%).

Renewed interest was witnessed in Distilleries, Central Finance, Royal Ceramics and Environmental Resources, NDB Stockbrokers said.

Arrenga Capital said Union Bank grabbed investors’ attention after its announcement on Central Bank’s approval in acquiring The Finance & Guarantee Ltd. The counter recorded an intraday high of LKR24.50 whilst closing at LKR22.10.

Accumulation continued on Distilleries with the counter witnessing a crossing of 800k shares at LKR180.00 for the day. Investor interest continued in Swarnamahal Financial Services with the counter rising strongly by 18.17% whilst some selling pressure was evident in Orient Garments. Buying interest continued in Vallibel One making it the second most heavily traded counter for the day with a total of 6.81 mn shares.

Furthermore, with Ceylon Cold Stores Rights having commenced trading today, the counter registered a steady price appreciation of 113.3%. Panasian Power was found among the top price gainers today with 22.1 mn shares being traded.

Lanka Securities said foreign participation dropped to 5.0% of the total market activity and at the end of the day foreign investors were the net buyers with a new foreign inflow of Rs.37.5mn.

source - www.ft.lk