Stock Market ascent dependent on eastern political situation
The market could resume its steady ascent if their is progress in resolving the political situation in the east and talks with the LTTE SC securities said.
On the political front the situation has been deteriorating. The attacks on the Muslims in the East, threatens to re-ignite ethnic violence and undermine that peace process. These destabilizing forces have hampered the expected rise in the market. We believe that the political situation will have a large bearing on the market in the coming weeks. It is imperative that the situation in the East is salvaged for the peace process to continue.
Also, investors are anxiously awaiting the outcome of the ongoing discussions within the LTTE on the proposal for the interim administration. We feel that for the market to resume its steady ascent, there had to be some progress in resolving these issues.
Investor sentiment was mixed last week, with ethnic clashes in the East weighing down share prices. The All Share Price Index closed marginally higher at 1,088 (up 7 points for the week). However, foreigners were very active. Foreign purchases amounted to Rs. 662 million and foreign sales to Rs. 90 million for the week.
Turnover on Monday was a whooping Rs. 709 million largely due to Arisag, the foreign fund going on a buying spree. It purchased a 12% stake in Richard Pieris for around Rs. 370 million.
The fund also accumulated shares in JKH, pushing the counter’s price up Rs. 3 to Rs. 108. Large quantities of Asia Capital also traded including one block of 1.2 million shares at Rs. 8.5 and another block of 1.25 million at Rs. 8.25. The ASPI shot up 9 points to 1,090.
Profit taking caused the market to sag on Tuesday and the market index dipped 4 points to 1,086. Asia Capital continued to stir interest in the market and over a million shares were traded between Rs. 10.50 and Rs. 9.75.
The market closed relatively flat on Wednesday, with the ASPI at 1,085. The most notable event for the day was Dhammika Perera’s timely exit from Printcare. He sold his 21% stake to the Elgin Fund and the Al Nakib family on the basis of 10% to each at Rs. 30 per share.
The market moved into positive territory again on Thursday, the ASPI increased 6 points to 1,091. Following its announcement of its interim results, Grain Elevator’s shares were heavily traded. Almost 800,000 shares changed hand before it closed at Rs. 39.75.
The market slid 3 points to 1,088 on Friday Commercial Bank and DFCC were heavily traded. However, whereas Commercial Bank fell Rs. 2.25 to Rs. 193, DFCC’s share price rose Re. 1 to Rs. 271.25.
The DFI posted a net profit of Rs. 550 million for the first half of 2003, up 20%. However, interest income fell 12% to Rs. 2.2 billion due to falling interest rates and a smaller loan portfolio. Subdued demand for long term project lending and stiff competition from commercial banks are depressing NDB’s traditional business.
However interest expenses also declined 28% to Rs. 1.3 billion, as a result net interest income increased 28% to Rs. 923 million. The bank’s equity income went up 59% to Rs. 262 million. The bank has been reducing its equity portfolio, which currently stands at around Rs. 200 million. Total net income was Rs. 1.4 billion representing an increase of 20%. Operating expenses amounted to Rs. 403 million. In line with other banks, NDB increased its provision to Rs. 285 million for bad debts. Profit before tax was Rs. 731 million.
The group posted a net profit of Rs. 108 million for the quarter ended 30th June 2003. This was a decline of 12% compared to the corresponding period in 2002. Net turnover for the group rose 13% to Rs. 3.5 billion. This was largely due to Dipped Products (which is treated as a subsidiary for accounting purposes) purchase of its Italian distributor, Guanti Spa of Genoa.
However, the conglomerate’s coir and environment segments are languishing due to the poor production of coconuts. Operating profits were down 19% to Rs. 26 million for the coir division and 77% to Rs. 20 million for the environment division. There was also a 73% increase in distribution costs for the group, which led to a fall in consolidated operating profit of 9% to Rs. 308 million.
Chemical Industries (Ceylon) Limited (CIC)
For the 3 month period ended 30th June 2003 CIC recorded a revenue of Rs. 2,214 million representing an increase of 24% compared to the same period in the previous year. However, the gross profit of the company only increased by 6% to arrive at a value of Rs. 399 million. All the operating segments of CIC recorded an increase in revenue except for the agricultural sector.
However, the agriculture sector generated the highest turnover of Rs. 789 million for the company. The consumer and pharmaceutical sector generated Rs. 588 million in revenue representing an increase of 219%. Net profit recorded was Rs. 79 million for the period representing an increase of 8%. The annualized EPS was Rs. 33.93, while the NAPS stood at Rs. 172.54.
Ceylon Grain Elevators Limited (CGE)
During the 6 month period ended June 30th 2003 there was a turnaround in the company’s earnings. Total revenue of the company increase by 11% to reach a value of Rs. 2,421 million. During the 6 month period, net interest cost reduced to Rs. 59 million from Rs. 81 million. CGE recorded a net profit of Rs. 94 million representing an increase of 200%. The NAPS was at Rs. 25.37 at the end of the period under consideration.
Three Acre Farms Limited (TAFL)
The company recorded a turnover of Rs. 363 million representing an increase of 51% for the 6 month period ended June 30 2003. Operating profit for TAFL increased by 135% to reach Rs. 30 million and the net profit recorded was Rs. 34 million compared to a loss of Rs. 80 million in the first half of 2002. Annualized EPS was Rs. 2.96 and NAPS stood at Rs. 21.67.
Apart from a minor stumble on Wednesday, the Dow has been moving upwards this week. It rose 101 points during the four trading sessions to close at 9,423 on Thursday. Investors are upbeat about the economy’s prospects and experts calculate that the US economy is growing between 4% to 5%, aided by the tax cuts and the lax monetary policy.
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