Controlling shareholder CFLB buys 12% more of Colonial Motors for Rs. 319 m

Already owning 52%, The Colombo Fort Land and Building Co Plc on Friday bought a 12% stake in Colonial Motors Plc for a staggering Rs. 319 million.

It bought the stake from high net worth investor Dr. T. Senthilverl. The deal done at Rs. 290 per share was Rs. 15 above Thursday’s closing hence excited the market for Colonial to peak to a high of Rs. 309.90 before closing at Rs. 299.70, up by Rs. 14.70. 

The highest price for the quarter ended on 31 March, 2011, was Rs. 349 whilst lowest was Rs. 218 before closing at Rs. 300. Its 52-week highest price is Rs. 530. Net asset per share of Colonial is Rs. 110.50 at company level and Rs. 151 at group level.

Senthilverl booked a hefty capital gain from the sale of the part stake which he began collecting from early last year at prices three or four times lower. As at 31 March 2011, Senthilverl held 1.77 million shares or 19.45% stake. On Friday what he sold was only 1.1 million shares suggesting he has a further 700,000 shares unless he had shed subsequently. Some believe he had sold most and could be having around 300-400,000 shares left. Colonial Motors data and results for FY12 first quarter ended 30 June, 2011 are yet to be out.

The deal sparked much interest in the market. Some analysts viewed it as Senthilverl wanting to book profit, as he is one of the biggest investors in the Colombo Bourse. His near exit comes despite holding around 29% stake in C.W. Mackie and 16% in E.B. Creasy, two companies where CFLB Group has big stakes. The decision by CFLB to increase stake in Colonial could be because it wanted to further protect its interest lest it goes to an outside party, some argued.

The increased investment by CFLB in Colonial also come midst industry rumours that the flagship Kia agency held by the latter is up for review and there was a clamour by motor trade to win the agency. Some linked the rumour to depress the share price ahead of the trade of this block whilst others viewed market talk as credible. Kia sources have maintained that agency isn’t up for review and was satisfied with the current arrangement.

CFLB last year lost the prestigious Land Rover agency which is now serviced by Frontier Automotives Ltd.

KIA Motors (Lanka) Limited, a wholly owned subsidiary of Colonial Motors PLC and was largely responsible for a boom in fortunes for the parent in 2010/11 financial year.

Colonial group’s sale of vehicles in 2010/11 financial year raced to Rs. 1.28 billion, from a mere Rs. 95 million in the previous year. At company sale of vehicles was only Rs. 125 million, up from Rs. 56 million.

Sale of spares and repairs the dominant revenue contributor in 2009/10 financial year with Rs. 195.4 million at group level and Rs. 133 million at company level had improved to only Rs. 255 million and Rs. 153 million respectively.

Colonial finished 2010/11 financial year with group sales of Rs. 1.5 billion, up by 432% over the previous year and a pre-tax profit of Rs. 327 million, up by 715% from a year earlier. After-tax profit grew by 466% to Rs. 228 million. The company’s net profit figure was Rs. 24 million, up by 23% over 2009/10.

For the group of the Rs. 1.5 billion turnover for 2010/11 full year, 67% or Rs. 1.04 billion had come in fourth quarter and 50% of the bottom line or Rs. 113 million also in the fourth quarter reflecting the robustness of and dependence on Kia business.

The other subsidiaries of Colonial are Carplan Ltd., and Union Investments.

Thanks to the Government lowing duties and taxes on vehicles as well as aggressive marketing Kia’s product range has been a greater success than some of the other brands in the market.

CFLB’s net profit attributable to equity holders in FY2011 was Rs. 1.1 billion, up by 175% over the previous year. After tax profit was up 225% to Rs. 2.1 billion. Group turnover was up 92% to Rs. 28 billion. At company level net profit was down 11% to Rs. 66.7 million. Group assets amounted to Rs. 22.78 billion and at company level it was Rs. 1 billion as at 31 March, 2011.

Total liabilities at company level is Rs. 549 million and Rs. 14 billion for the group.