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Sri Lanka: Stock investors end up in a fiasco through Carsons owned company Guardian Capital rights deal
By J.A. Fernando in Colombo
Colombo, 04 March, (Asiantribune.com):
Some investors of Colombo Stock Exchange - one of world’s best performing stock markets, had become millionaire’s within a few minutes and after the lapse of some weeks, a few others had lost millions or yet to face millions of losses due to a recent price hike in a dud company share transaction deal, that resulted in a All Share Price index fall out since the 1 March 2011 .
According to sources from Colombo Stock Exchange recently name-changed Guardian Capital Partners (formerly Watapota Investments or WAPO) owners, Carson Cumberbatch PLC (CARS) had sold 99.4% of the Rights to its other subsidiary Ceylon Guardian Investment Trust (GUAR) for Rs. 223.4 million.
“This share already made some millionaires during this year. According to investors, in case if some bought at least 100 shares of this company in December 2010 at Rs.800, you would have been able to sell the same 100 shares at Rs.10,000 per share during the first two months of 2011 earning almost over 1100% return” said one investor, Samantha Kulathilake.
According Manusha Kumarasinghe, another investor from Colombo said that the sudden drastic fall of these rights and ordinary voting shares of the Guardian Capital Partners (WAPO) has had a major impact on Colombo’s share index fallout during last few days, while panic selling and forced selling by brokers to settle credit had further triggered the indices to fall in world’s best performing stock market in Colombo
The company had a mere 671,008 listed ordinary shares at the Colombo Stock Exchange, while back in September 2010, there were a series of offers to purchase the shareholding of former Watapota Investments PLC ranged in price from Rs.40.60 per share to Rs.95 per share. That time company majority shareholder, Carson Cumberbatch in an announcement noticed that it has decided not to sell its shareholding of Watapota Investments. Later company was retiled as Guardian Capital Partners PLC as the investment climate in Sri Lanka has been positive, while investment Managers of the entity Guardian Fund Management Limited forecasted that given a sufficient capital base that the company could engage in lucrative investment related businesses in the medium and long term.
However, at the time to date, the net asset value of the company as at 31st March 2010 amounted to Rs.152.80 per share, out of which Rs.132 was declared as dividend following shareholder approval at the last Annual General Meeting held in 2010. This was later resulted in a net asset value of Rs.20.80 approximately remaining behind in the books of the company.
Although the investment managers of the company said the that there still appeared to be a discrepancy between the price at which the share trades in the Colombo stock market and the net asset value of the Company, the company share value exorbitantly shot up above Rs.10,000 with an announcement which said that company has decided to invest Rs.249.6 million in Expolanka Holdings Limited, while there was no sufficient funds in the company to invest such an amount in another thing.
Meanwhile, company then announced that a rights issue of 75 shares for every 02 shares held at a price of Rs. 20 per share, in view of raising Rs. 503.2 million from public shareholders for expanding the capital base of the company to undertake new investment projects mainly in the area of private equity such as investing in Expolanka Holdings Limited. Both the rights issue and the investment in Expolanka Holdings Limited (the latter being a major transaction in terms of the Companies Act), were approved by the shareholders of the Company on 18th February, 2011 according to sources.
On the other hand, Guardian Capital Partners PLC has reported only Rs.306,000 profit (46 cents per share) for the 9 months ending 31st December 2010 representing mainly the interest income earned on surplus funds available within the Company amounting to Rs. 20.3 million.
Although the original entitlement was 21,823,125 shares based on Carson’s shareholding of 581,950 shares of Guardian Capital Partners (WAPO) (86.73% of company), Carson’s had sold 21.692 million shares at a price of Rs. 10.30 per right to its subsidiary Ceylon Guardian Investment Trust (GUAR); however according Colombo Stock Exchange sources seeing the transaction on market the retailers had then believed to trade the dud company’s shares at an exorbitant level of Rs.200o and later the rights had then fallen in to Rs.500 levels on Tuesday the 1 March 2011 whilst the Guardian Capital Rights had closed at Rs.163 levels on Thursday the 3 march 2011 bringing massive losses to retailers at Colombo.
In another development Sri Lanka’s most highly valued stock owning Company at Colombo Bourse, Carsons Cumberbatch PLC (CARS) and its associate Bukit Darah PLC (BUKI) had expressed its plans to buy minority stakes in its Malaysian oil palm units as part of a restructuring to prepare for bigger investments and expansion outside the region, according to a statement in Colombo Stock Exchange.
This comes in the wake of Carsons’s announcing its result for the nine months ended in 31 December 2010, where the oil palm plantations of Carson’s group had been the major contributor to company’s revenue since 2009 amounting to all most 50% of group’s revenue and over 60% of company’s profits for the first nine months of 2009 and 2010.
In 2009 alone oil palms had brought revenue amounting to Rs.8.6 billion out of 19.6 billion of Carsons, while oil palm net profit has been reported at Rs.3.2 billion out of Rs.4.7 billion profits of the group. In 2010 oil palms had brought in revenue of Rs.15.3 billion out of Rs.29.9 billion of Carsons while oil palm net profit had added Rs.4.3 billion to Rs.6.4 billion net profit of the group during the first nine months.
The Carsons group has expressed desire to buy minority stakes in its all time four highly valued Malaysian plantation stocks at Colombo Stock Exchange including, Shalimar (Malay) (SHAL), Good Hope (GOOD), Indo-Malay (INDO) and Selinsing (SELI), and delist them from the Colombo Stock Exchange, a statement outlined.