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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Sri Lanka Newspapers - 28/12/2011

Sri Lanka Newspapers - 28/12/2011

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1Sri Lanka Newspapers - 28/12/2011 Empty Sri Lanka Newspapers - 28/12/2011 Wed Dec 28, 2011 12:34 am


Global Moderator

Janashakthi Insurance outlook stable

RAM Ratings Lanka has reaffirmed Janashakthi Insurance PLC’s long- and short-term claims-paying-ability ratings at A- and P2, respectively; the outlook on the long-term rating remains stable. Janashakthi’s ratings are supported by its good competitive position, financial performance in the life segment and capitalisation levels. On the other hand, the ratings are tempered by its moderate underwriting performance in the highly competitive general segment.

"Janashakthi is Sri Lanka’s third-largest general insurer, accounting for 11.98% of the industry’s gross written premiums (GWPs) in FYE 31 December 2010 (FY Dec 2010). The Company, which started with life operations in 1994, was able to achieve strong growth through its focus on the general segment, which it ventured into in 1995. Its strong competitive position is underpinned by its extensive geographical reach, with a branch network that is only surpassed by the 2 largest industry players. In terms of life insurance, Janashakthi is the fifth largest, with 5.84% of that segment’s GWPs," the ratings agency said in a statement yesterday.

"The general segment recorded sluggish GWP growth in FY Dec 2010 amid keen competition and the shedding of loss-making contracts in a bid to focus on profitability. However, GWP increased 18.41% year-on-year (y-o-y) in the first 9 months of fiscal 2011 (9M FY Dec 2011), aided by more motor vehicle registrations and better macroeconomic conditions. Meanwhile, the introduction of new products together with consumers’ higher disposable incomes amid the more favourable economic landscape had led to a 17.73% y-o-y rise in its life GWPs to LKR 1.69 billion in FY Dec 2010; the trend continued in 9M FY Dec 2011.

"Janashakthi’s general underwriting performance is deemed moderate. Despite stringent cost control, an influx of claims subsequent to floods had worsened its underwriting losses in FY Dec 2010. Its claims ratio worsened to 69.53% that year (FY Dec 2009: 64.39%), albeit still better than most of its peers’. The Company managed to reduce its net underwriting losses in 9M FY Dec 2011, thanks to stringent cost control and measures to curb increasing claims as well as the weeding out of unprofitable businesses; its claims ratio improved to 64.25% for the period (9M FY Dec 2010: 69.35%). Going forward, the Company’s claims ratio is expected to worsen slightly as medical insurance claims tend to spike up towards the later part of the year. Nonetheless, the ratio is envisaged to remain relatively stable through the medium term.

"Meanwhile, Janashakthi’s life underwriting performance is deemed good. While claims have started trickling in with the maturing of its portfolio, its life-claims ratio is relatively in line with those of its peers. In 9M FY Dec 2011, the Company’s net underwriting margin broadened to 27.4% (9M FY Dec 2010:21.84%), supported by lower claims incidence. At the same time, the Company’s overall performance also improved, with a higher pre-tax profit of LKR 810.93 million (FY Dec 2009: LKR 749.75 million) that was fuelled by stronger investment income.

"Janashakthi’s capitalisation is deemed adequate. Its ratios on shareholders’ funds to insurance funds and shareholder funds to total assets advanced to 36.96% and 22.77%, respectively, as at end-FY Dec 2010; the latter is better compared to most of its peers’. Concurrently, the Company’s solvency margin in the general business eased to 1.56 times as at end-September 2011 (end-FY Dec 2010: 2.21 times) as it had reduced its investments in treasury bonds and repo agreements.

"The life segment’s solvency margin widened from 3.16 times to 3.70 times over the same span, in line with more robust investments in equities and corporate debt.

"Elsewhere, Janashakthi’s investment portfolio comprised investments such as repos and fixed deposits. The proportion of treasury bonds increased to 46.83% as at end-FY Dec 2010, from 44.05% a year earlier. In tandem with the local stock exchange’s boom, the Company’s exposure to equities had climbed up to 14.07% by end-September 2011. That said, about 60% of the portfolio remained in fixed deposits and government securities, reflecting its conservative investment strategy," RAM Ratings said.


Global Moderator

The Colombo bourse yesterday sustained its pre-Christmas momentum with both indices moving up and turnover dipping slightly below the billion rupee mark although the lion’s share of business volumes was on Commercial Bank.

The All Share Price Index moved up 32.51 points (0.54%) clearing the 6,000 point barrier below which it had fallen, while the Milanka was up 36.25 points (0.70%) on a turnover of Rs.995.9 million with 83 gainers comfortably outpacing 61 losers.

"Nearly Rs.800 million of the day’s turnover came off Commercial Bank where there were four crossings all at Rs.100 accounting for most of the trades," Prashan Fernando of Acuity Stockbrokers said. "The rest of the market was on holiday although Regnis and Environment Resource Investments (Walker & Greig)) generated a little turnover."

ComBank closed 40 cents up at Rs.100.50 on nearly 8 million shares done between Rs.100 and Rs.101.30 with the crossings accounting for over 7.5 million of the shares traded.

Brokers said there appeared to be foreign selling of the counter which was traded in quantity from before the Christmas vacation.

Regnis, a Singer subsidiary, which was on a run during the market boom some months ago was up sharply by Rs.11.60 to Rs.382.50 on 62,200 shares done between Rs.365 and Rs.384 generating the day’s second highest turnover of Rs.23.8 million.

ERI closed flat at Rs.39.40 on 0.5 million shares done between Rs.39.10 and Rs.41 contributing Rs.20.1 million to turnover.

Trading in blue chips like JKH was thin with just 3,800 shares done between Rs.170 andRs.173.40 with the counter closing Rs.1.30 up at Rs.171.

NDB announced an interim dividend of Rs.3.50 per share for 2011, XD from Jan. 4 and payment on Jan. 11.

3Sri Lanka Newspapers - 28/12/2011 Empty Interest rates ease, pressures unabated Wed Dec 28, 2011 12:37 am


Global Moderator

Rupee interest rates eased on Tuesday (27) with the Central Bank pumping in Rs. 12 billion into the banking system as intervention in the foreign exchange market continues to put pressure on liquidity, dealers said.

The Sri Lanka Inter Bank Offered Rate (SLIBOR) eased to 9.06 percent on Tuesday from 9.10 percent last Friday. The weighted average call money market rates, for interbank borrowing without collateral, eased to 8.96 percent from 9.10 percent. Money market repo rates for interbank borrowings with government securities pledged as security eased to 8.18 percent from 8.20 percent last week.

The Central Bank is continuing to defend the rupee at Rs. 113.89/90 against the dollar as severe import demand puts pressure on the rupee to depreciate. This intervention of selling dollars from the reserves is straining the rupee liquidity in the banking system already facing seasonal demand and what dealers call ‘severe import demand’.

The Central Bank conducted a reverse repurchase auction to pump in Rs. 12 billion into the system at 8.03 percent.

Reuters newswire services reported yesterday that the Central Bank had sold more than US$ 50 million to keep the exchange rate steady, thus selling around US$ 610 million since the rupee was devalued by 3 percent in November 22.

As reported in these pages yesterday, Gross official reserves have fallen 14.8 percent in October to US$ 6,896 million, from a high of US$ 8,099 in July 2011, latest Central Bank data showed.

During the three month period July to August, the bank had sold US$ 1.1 billion to defend the exchange rate.

Export earnings fell for the first time this year in the month of October while the cumulative trade deficit for the first ten months of this year doubled.

Export earnings fell 4.9 percent year-on-year to US$ 882.2 million in October. The import bill grew by 41.4 percent to US$ 1,751 million. The trade deficit had expanded 179.9 percent to US$ 868.9 million.

Total export earnings for the first ten months of this year slowed down to 23.4 percent to US$ 8,702.1 million while the import bill grew at a much faster pace, up 50.7 percent to US$ 16,436 million. The trade deficit had expanded by 100.6 percent year-on-year to US$ 7,733.9 million.

In a recent report Fitch Ratings said Sri Lanka had a structural weakness in its current account, as indicated by the recent 3 percent devaluation of the rupee. It said Sri Lanka was one of the highest-risk financial systems in the Asia-Pacific region but Central Bank Governor Ajith Nivard Cabraal disagrees with this analysis claiming the economy made impressive gains in a world of economic uncertainty. Economic growth is estimated to reach 8 percent this year.

However, analysts point out a protraction of the slump in the global economy would affect export earnings and growth going into 2012.


Global Moderator

External market conditions of grave concern says Planters Association
By Ravi Ladduwahetty

Tea production for the month of November 2011 has increased to 31,225,907 kilos from the 27,951,260 for the corresponding period a year ago, but the Regional Plantation Companies and the Tea small Holders are battling the issues of prices amidst the uncertain global conditions prevailing as of now.

The high growns have shown an increase to 8.1 million kilos for November 2011 vis a vis 7.3 million kilos for the corresponding period a year ago, while the Medium growns have increased to 5.5 million kilos from 4.8 million between the two years while the Low growns have increased to 17.4 million kilos from the Rs. 15.7 million kilos between the corresponding periods of the two years under review.

"It is true that the ideal weather conditions have propped up the tea production for the month of November, but the Regional Plantation Companies and the small holders are battling the costs of production and the selling prices," Roshan Rajadurai, Deputy Chairman of the Planters’ Association, the umbrella organization of the 23 Regional Plantation Companies told The Island Financial Review yesterday.

Rajadurai, also Kahawatte Plantations PLC CEO, said that the time was bad for the industry with the prices keeping low due to the prevailing uncertainties in the poor leaf prices in the wake of the uncertainties in the market conditions in the Euro Zone and other key markets such as Libya, Egypt and Syria.

He lamented that the Gross Sale Averages were low and the leaf prices were also low in that context and that the small holders get 68% of the Nett Sale Averages while there was a different mechanism for the RPCs.

He also said that the prices were of major concern to the RPCs who were battling with the trade unions to provide the promised benefits to the employees and that there were additional benefits to the industry at this time of the year such as festival advances and other statutory benefits such as EPF, in addition to the production related wage incentives.

He also said that the issues which were negotiated with the plantation trade unions were sensitive and that the ideal situation was to negotiate with them for a mutually beneficial settlement in relation to the benefits vis a vis the price issue.

Meanwhile, Anil Perera, Past Chairman of the Sri Lanka tea Factory Owners Association and incumbent Tea Small Holder Factories PLC, a John Keells Holdings PLC member, said that the small holders produced 56-57% of the national production in the low grown areas and around 70% of the tea in all elevations. He also said that though there was a marginal increase in the low growns, there is a predicted dip for the month of December due to the inclement weather attributed to overcast conditions and cold weather as in the case annually.

5Sri Lanka Newspapers - 28/12/2011 Empty HDCC fetes H'tota entrepreneurs today Wed Dec 28, 2011 1:05 am


Global Moderator

The Hambantota District Chamber of Commerce (HDCC) in collaboration with the Hambantota District Secretariat and the Ruhuna University with the support of the Southern Regional Access to Finance and Advisory Programme, implemented by the International Finance Cooperation with financial assistance from the Royal Norwegian Embassy is organizing the Hambantota District Best Entrepreneur of the Year Awards Ceremony to be held today at the Hambantota Singapore Conference Hall from 6 pm onwards for the 10th year.

Dialog Telecom is the gold sponsor and David Pereis Motor Company is the bronze sponsor for the event and many other private companies also cooperated with the HDCC to make this event a success. HDCC was founded in 1993, and was the first Sri Lankan district chamber to be established outside Colombo.

HDCC's vision is to act as the 'gateway' for development, and to ensure social cohesion and the economic success of the Hambantota District.

The event is designed to encourage the local business community to improve their standards of business practices and to achieve a high level of entrepreneurship.

The competition has now become a benchmark and a driving factor for the local business community to look for more ethical approaches towards their businesses.

The representatives from the government, NGO's and Private institutes will be participating in the event. Thirty six winners were selected by a panel of judges led by Ruhuna University Deputy Vice Chancellor Prof. Gamini Senanayake and the winners will be announced today. The competition was held under the categories of Best Entrepreneur (open), Best Youth Entrepreneur, Best Corporate Social Responsibility Entrepreneur and Best Woman Entrepreneur.

Parallel to the Entrepreneur award ceremony, HDCC is organizing a 'Business Night'.

HDCC Director General Azmi Thassim said," Honouring and encouraging entrepreneurs is the main objective of our competition and over the last decades we have achieved a lot and we will continue this work for the betterment of our community and the region."


Global Moderator

Dec 28, 2011 (LBO) - India's Tata and Maruti brands is leading Sri Lanka's vehicles market taking a lion's share of both automobile and trucks, data compiled by a Colombo based stock brokerage shows.
In November 1,348 Maruti cars were registered in a market where about 4,500 to 5,000 cars are registered each month, data from Sri Lanka's motor vehicle registry published by JB Stockbrokers showed.

The best selling model was Maruti Alto with 778 units.

In the truck market where about 3,000 units are sold, Tata sold 1,484 units in November.

The best selling unit was TATA Ace, a small truck popularly known as Dimo Batta, after its local agents, Diesel and Motor Engineering Company. In November 930 Tata Ace units were registered, slightly down from 1,073 in October.

The truck is popular with small entrepreneurs who hire it out or use it in their own business.

According to the JB Stockbrokers data out of 9,229 trucks sold during the 11-months of 2011 9,229 or 32.6 percent were Tata Ace and the brand had a 49.7 percent share or 14,071 units when other models were added.
Separately Tata also sold 349 automobiles in December.

Motor vehicles are a key import from India to Sri Lanka, helping improve travel freedoms of the island's citizens.

Cars are not covered by preferential tariffs, though anti free trade activists and protectionist businesses frequently use total India Sri Lanka trade data when they attack attempts to give more trade liberties to the people.


Global Moderator

DNH Financial showcases impressive GDP data to make a credible case to consider stock market as an attractive medium to long term investment option

The high 8.4% economic growth enjoyed by Sri Lanka in the third quarter is considered the fourth best in the world according to an analysis by stock broking firm DNH Financial.

Sri Lanka Newspapers - 28/12/2011 400x5210

It said that Sri Lanka judging by impressive third quarter GDP data has bucked the downward trend in the global economy. As per its analysis Sri Lanka is only lagging behind the world economic powerhouse China whilst Sri Lanka has also remained consistent as against other emerging economies in the top four rank.
DNH Financial said the 8.4% third quarter growth (compared to 8.2% in second quarter and 7.9% in 1Q 2011) is likely to enable the country to comfortably achieve its full year growth target of 8.0%.

“Growth, although broad based will continue to be driven by the industrial and construction sectors. We view this performance as highly encouraging and indicative of Sri Lanka’s resilience and strength in an environment of globally heightened risk,” DNH said.

“We believe that a solid fundamental base is developing for a prolonged rise in the market with Sri Lanka now growing amongst the fastest in the world,” it added.

DNH also showcased the impressive GDP data to make a credible business case for investors who mysteriously remain shy of the stock market.

Emphasising that bourse’s performance will be underpinned by strong macro-economics, DNH said: “In our opinion, we see no credible reason for medium to longer term investors to shy away from the domestic bourse given the prospect of strong upside potential in 2012 underpinned by solid macro-economic and corporate EPS growth.”

“However, for those seeking speculative gains, the bourse is clearly likely to disappoint as the opportunity to realise short term gains is likely to prove more and more difficult,” DNH said.

It opined that investment into equities appears to have been generally feared due to global headwinds, liquidity constraints of brokers and the lack of short term opportunities. The majority of investors appear to be waiting for either a short term rally to participate in or a strong correction before entering the market.
“With the domestic macro-economic backdrop looking increasingly strong, we believe that it is not ‘if’ but ‘when’ a market re-rating would eventuate and we believe that it is likely to be sooner than later. While we do admit that the bourse has certainly taken its time to absorb the positive developments in the economy, we believe however that heading into the year end, the market is likely to positively surprise once investors realise that the performance of the bourse is backed by solid fundamentals both on the macro-economic and corporate front. Consequently, we advise investors to carefully stock-pick and re-enter on price weakness,” DNH said.

On a sector basis, the broking firm believes that conventionally defensive sectors such as Telecoms may experience a slowdown in top line growth exacerbated by downward pressure on margins due to intense price competition.

“Conversely, we believe that several of the traditionally more cyclical sectors such as Manufacturing, Construction and Tourism could generate highly attractive defensive attributes, such as strong volume growth, pricing power which should beef up margins while generating sustained cash flow notwithstanding a rise in interest rates and potentially higher gearing levels for select companies,” it added.
In terms of market positioning for the New Year, DNH is advising investors to carefully assess the quality of their existing portfolios and restructure and rebalance their books where necessary in order to take advantage of the market’s secular growth prospects in 2012.

For foreign investors, with emerging markets favourites China and India both experiencing a slowdown in growth, DNH is recommending an entry into the Sri Lanka bourse at current levels as it now completes its consolidation process and enters a period of secular growth.

“We advise investors to align the strong fundamentals to the relevant sectors, sub-sectors and stocks in the bourse that will benefit fully from the macro-economic upswing over the next few years,” DNH said.


Global Moderator

Dec 28, 2011 (LBO) - Sri Lanka should be prepared for a slow external environment with stimulus by deficit spending having failed in advanced economies and China and India also losing momentum, an international economist said.

"Many of the policy interventions in the wake of the crisis (2007 banking panic) have made matters worse rather than better," Razeen Sally, a longtime professor at London School of Economics, said in Colombo.
"Fiscal stimulus packages have by and large failed, huge amounts - hundreds of billions of dollars or Euros - have been spent by central banks indulging in rather questionable policy mainly buying government bonds in what is called quantitative easing."

"Of course in addition to this there had been huge financial sector bailouts."

Sally, who is to take up an appointment at Singapore's Lew Kuan Yew School of Public Policy, after spending 18 years in Europe as a professor at LSE, was addressing senior executives at the LBR-LBO CEO forum in Colombo.

Many countries deficit spent to boost economies on policies originally advanced by John Maynard Keynes, after a credit bubble collapsed in 2007 triggering a banking panic.

Several developed countries that deficit spent and acquired more debt based on Keynesian dogma, after bailing out banks with more debt, are now having sovereign credit problems.

Deficit Spending

Keynesian spending gives politicians something to do, making them attractive to rulers, but they have been opposed by more prudent economists in the classical tradition even when they were first advanced as far back as the 1930s.

Among the fiercest critics was Friedrich August Hayek from LSE an Austrian immigrant, who took on Keynes from Cambridge publicly.

Both Hayek and fellow Austrian economist Ludwig von Mises had seen at firsthand what money printing, deficit spending and aggressive nationalism based linguistic majoritarianism had done to Eastern Europe in general and Germany in particular.

Standard Austrian theory says low interest rates by central banks will lead to excess credit, leading to mal-investment which will eventually result in an economic collapse amid a credit contraction.
Continued printing with no breaks will result in currency depreciation and an inflationary blow off which can even lead to the abandonment of the central bank fiat paper currency in question also known as hyperinflation.

Following a balance of payments crisis in 2009 Sri Lanka actively reduced deficits allowing the economy to rebound strongly. But the deficit and monetary policy is still too loose to effectively maintain the island's peg with the US dollar.

Hayekian Diagnosis

"The Hayekian diagnosis for the crisis is pretty much on the ball," Sally said responding questions from the audience whether it was banking sector de-regulation that triggered the bubble.

"There are many factors that led to the crisis, not just one. But if there was one lead factor it was probably cheap money.

"In other words governments around the world, starting with the US Fed under Alan Greenspan and European government's with the camouflage of the Euro and its currency markets at the time held interest rates artificially low and deliberately pumped up bubbles.

"There was supporting legislation in the housing markets to build up housing bubbles as well."

US Economists Russ Robert and Larry White have detailed how regulations by the US Federal Housing Administration and Department of Housing and Urban Development and strengthening of the Community Re-investment Act forced bad lending over several years.

This was in addition to the Fed's near zero policy rates, which disregarded all risk across the board.

Following a recession in 2001, then Fed chairman Alan Greenspan slashed the federal funds rate from 6.25 to 1.75 percent.

When the economy was recovering it was reduced further in 2002 and 2003. While house and commodity prices were bubbling up the Fed rate reached a record low of 1 percent in mid-2003—where it stayed for a year.

Cause and Effect

"That led to far too much money sloshing around the economy, including financial markets," Sally said.

"And bankers responded as not irrational agents but rational agents. They took advantage of all this artificial money sloshing around; they made what Hayek called mal-investments.

"In other words they threw risk assessments out of the window and made decisions which were certainly not prudent. And that led to second and third rounds of credit creation and the invention of all those exotic financial products and vehicles."

Most of the losses from the exotic financial products ultimately came from defaults in a very simple product - the mortgage loan.

"The anti free market a diagnosis turns things the wrong way around," Sally observed. "So the cause becomes one of greedy bankers and financial markets out of control. I think in essence that is more the effect than the cause."

"Yes financial markets are in one sense special and there is a case for addressing what economist call market failures, but the root cause of the crisis had everything to do with bubbles and much less to private agents who responded to incentives that has been set."

"Unfortunately banks had to be bailed out."

Analysts say Sri Lanka also saw massive excess liquidity in banks in the past two years, which led to margin loans and a stock market bubble.

But to the Central Bank's credit it kept rates higher than they would have normally been - except from early 2011 - and also encouraged banks to lend only to credit worthy borrowers.

Backfiring Interventionism

Sally says continued intervention by rulers, especially in the United States has made the business environment uncertain, which is has delayed an early recovery.

The US under President Barak Obama's administration has seen an 800 billion dollar fiscal stimulus over two years which failed; the Fed has intervened in several unorthodox ways.

"And that has not worked either," Sally said. "And we by American standards a big increase in micro regulations.

"America is not like Europe traditionally and historically. It is not used to - I won't use the word socialism because that is inaccurate - but it is not very used to an interventionist kind of social democracy.

"It has happened rarely in America. It had during the (President Franklin Roosevelt's) New Deal, it happened during Lyndon Johnsons' Great Society. But the American people are not used to a very interventionist administration or congress."

Roosevelt's New Dealers came up with some of the most dangerous Keynesian style economic policies (Keynes in fact wrote a letter to FDR) and after winning the Second World War those policies were spread around the world.

To depreciate the dollar which was liked to gold at the time, Roosevelt banned gold holdings by American citizens through a Nazi-style presidential proclamation.

Analysts say New Dealers led by Harry Dexter White from the US Treasury invented soft-pegged dollar regimes under the Bretton Woods system which led to high inflation, deficit spending, currency depreciation and poverty in Sri Lanka and elsewhere.

Sally says in the US, there is a serious policy debate developing around the so called 'salt water economists' in the coast who are pushing for more spending, and others including Republican lawmakers who want solutions to excessive state debt and less intervention.

Both the US and Europe has slapped new regulation and banks and are at the same time expecting them to lend more by keeping rates low.

Economists in the classical tradition have pointed out that higher capital rules can be solved in only two ways; curbing credit to improve net bank capital or raising new equity, which also indirectly contracts deposits and broad money.

Both effects contradict the aims of the interventionists and can delay or slow the eventual recovery.

Sally says there is a chance of the Euro breaking up with a German led 'hard' currency core and a others including Greece getting out, though efforts are being made to keep the union with tighter fiscal policy.

If it happens, it can trigger a recession and weaken banks.

"This can have implications for Sri Lanka given that so many of Sri Lanka's exports go to Europe," he said.

Asian Outlook

Sally says there are emerging weaknesses in China and India which will also need time to work out.

China was now big enough to influence global policy, which was more than India. Most Asian nations had better fiscal policy and debt levels in the run up to the crisis.

"We see a China which is not retreating into a command economy shell, but it is not opening up further," Sally.

"It is been more aggressive in supporting big state owned enterprises, the big industrial conglomerates and banks."

China has tightened monetary policy in recent months after a large stimulus package in 2008 and 2009 mainly through banks.

Sally said the 'liberal wing' of China's administration understood the problem and the need to reform financial markets, but the reforms were difficult politically.

India which sailed through the crisis, was now facing problems.

"The hyper optimists forecast that even without doing much in the way of new reforms India would graduate 8-10 percent growth per annum and join the big league with China," Sally said.

"What we've seen during the past year are deflated expectations and forecasts."

India's currency has also fallen amid intervention by its reserve bank.

Update II


Global Moderator

Senior business leader Harry Jayawardena-controlled Distilleries Company (DCSL) has triggered the Takeovers and Mergers Code on Aitken Spence Plc, the Daily FT learns.

The triggering had taken place late last week when Melstacorp, a subsidiary of DCSL, had bought 62,100 Spence shares at Rs. 110 each.

Spence’s number of shares in issue is 406 million and 30% amounts to 121.8 million shares. As at 30 September 2011, Distilleries held a stake of 28.01% or 113.7 million shares.

Two related parties, Milford Exports held 1.06% and Stassen Exports had 0.8%.

Their collective stake was 29.87%, whilst it is learnt Melstacorp would have picked up more quantities since September quarter.

Analysts viewed Harry J’s move as timely given the relatively low price at which Spence has been trading as in the case of several other blue chips in a highly-depressed market.

Spence’s 52-week highest price is Rs. 200.10, and current price is almost half and the purchase price last week is only Rs. 10 from its 52-week lowest. Net asset per share of Spence is Rs. 22.76.

Last week Spence saw 599,300 of its shares traded between a high of Rs. 113.50 and a low of Rs. 110 before closing at Rs. 111.60, up by 50 cents. When the market opened yesterday after Christmas holidays, Spence share shot up by Rs. 3.40 to close at Rs. 115 whilst it hit an intra-day high of Rs. 115.90 with 8,200 shares traded.

Despite triggering the code, which is yet to be officially announced, analysts don’t think many other shareholders would accept the offer. Foreign holding in Spence inclusive of Rubicond, which owns 16.25%, is around 37.4%. Among major local institutional shareholders are EPF (7.35%) and SLIC (10%). Individual shareholders were holding a 10.6% stake in Spence as at 31 March 2011.

In the first half of the 2011/12 financial year, Spence posted a pre-tax profit of Rs. 1.7 billion, an increase of 7.5% from the corresponding period last year.

Group revenue rose by 8% to Rs. 13 billion whilst profit attributable to shareholders increased by 8.4% to Rs. 1.1 billion, while earnings per share rose by 8.4% to Rs. 2.79 over the corresponding period in the previous year.

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