Feb 18, 2013 (LBT) - The ASPI opened the week on a weak note losing 1.0% to close the trading session at 5775. Turnover recorded LKR870 mn with trading in John Keells Holdings, Asiri Surgical Hospital and Hatton National Bank accounting for 63% of the day’s total. Losers outpaced winners with Udapussellawa Plantations, Equity One and Renuka Shaw Wallace declining by 12.6%, 12.4% and 10.0% and offsetting gains in SMB Leasing(X), Colombo Investment. Trust and Entrust Securities which rose by 12.5%, 10.3% and 7.8% respectively. Meanwhile, Asian markets ended mostly higher today, with a slide in the yen after the weekend Group of 20 meeting boosted Japanese equities, although Chinese stocks bucked the trend as trading resumed after a week-long holiday.
In corporate news, Distilleries Company of Sri Lanka PLC (DIST) reported a net revenue growth of 7.8% during 3Q2012/13 to LKR7.1 bn after contributing LKR8.9 bn as direct taxes to the government. Net profit meanwhile improved significantly by 485% to LKR1.5 bn on the back of improved operating efficiencies coupled with lower corporate tax expenses notwithstanding 156% increase in finance expenses during the period. The beverage segment was the biggest contributor to the group’s revenue and profits during the first nine months of FY2012/13 which contributed 86% to the cumulative revenue and profit.
Although we experienced a decline in the market today, we don’t believe that it is sustainable. Alternatively, the question facing many invested or seeking a portfolio investment in the Sri Lanka bourse is whether the country’s robust economics would be accompanied by an equally strong performance in the ASPI. Our belief is yes but only over the medium to longer term. We firmly believe that careful stock selection will determine the true extent of an investor’s gains by constructing a portfolio of the most compelling companies in the ASPI not purely based on macro- economic fundamentals, but strategically positioned to tap the 2013/2014 earnings cycle which we believe is tied to local consumption dynamics. In this respect, we are buyers of selected stocks in the Banking, Diversified, Tourism and F&B sectors which we expect would benefit fully out of the domestic expansion and pass our tests of top line growth prospects, margin sustainability, quality of management and valuation.