Bourse eyed as Colombo Fort Group goes for Rs. 200 m Rights Issue

Colombo Fort Investments Plc (CFI) and Colombo Investment Trust Plc (CIT) are going for separate Rights Issues to raise a combined Rs. 200 million to tap good returns via the Colombo stock market.

CFI’s Board has resolved a Rights Issue of three new shares for every 10 held at Rs. 80 each. Its stated capital is Rs. 70 million and the Rights offering will see issuance of 1.5 million new shares.

Separately CIT’s Board has resolved for a two for 11 Rights Issue at Rs. 80 each. Its stated capital is Rs. 83.6 million and the move will see issuance of 1 million new shares.

Purpose of the issue is to obtain funds for further investment in shares listed on the CSE, the two companies said.

Both Rights Issues are subject to regulatory and shareholder approval.

The Boards are also of the view that consideration for which shares are to be issued is fair and reasonable to all existing shareholders.

CFI has 631 shareholders with public holding of 38.78%. CIT owns a 35.74% stake along with related parties Colombo Fort Land and Building (24.5%) and Financial Trust Ltd. (95).

Its share price ended the FY12 at Rs. 174.80 whilst on Friday it closed at Rs. 112.30, after peaking to Rs. 120.Its net asset per share is Rs. 34.41, up from Rs. 33.52.

The cost of the quoted investments of CFI at the end of the financial year was Rs. 127.22 million and the market value of these investments was Rs. 1.30 billion as at 31 March 2012.

CFI recorded revenue of Rs. 15.07 million in FY12 down by 26.5% in comparison to the previous year. Profit before tax was Rs. 14.47 million also down from Rs. 21.93 million in FY11.

CIT has 509 shareholders with a public float of 13%. Financial Trust Ltd. owns a 36% stake in CIT whilst Colombo Fort Land and Building owns 19.5% and Colombo Fort Investments Plc owns a 16.6% stake.

Last week its share price closed at Rs. 128 whilst it ended FY12 at Rs. 180.  The net asset value per share as at the end of the financial year was Rs. 23.51 as against the previous year’s value of Rs. 22.58. The cost of the quoted investments at the end of the financial year was Rs. 126.82 million and the market value of these investments was Rs. 1.65 billion as at 31 March 2012.

The company recorded revenue of Rs. 15.54 million down by 15% over FY11 and the profit before tax in FY12 was Rs. 13.34 million as against Rs. 15.95 m in the previous year.

Chairman of both companies A. Rajaratnam in his review in the 2011/12 Annual Reports noted that the capital market which has been oversold in the previous years’ collapsed during the financial year.

“A weakening currency combined with governance issues have made foreign investors stay in the side lines. Additionally, the domestic retail investors have not been active due to high interest rates and credit limits imposed by financial institutions. Unless the underlying issues are put right, it is unlikely we will see a sustained market rally during the current financial year,” he added.

Whilst so far in 2012 the Colombo stock market has given an 18% negative return, analysts have termed the two Rights Issues as a welcome move, whilst they reflect the Board’s medium to long-term confidence over prospects for listed equities.