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Tuesday, 7 June 2011 00:39 - - {{hitsCtrl.values.hits}}
First it was Reefcomber and more recently Colombo Land and Development whilst yesterday it was Panasian Power. In all it could be sensationalized as dialing ‘Dilith’ for a deal.
Post-war bullish new high networth and networked investor Dilith Jayaweera sparked a massive bull run on Panasian Power Plc (PAP) when he purchased 20% stake in it for around Rs. 520 million. Of the stake purchased by Emagewise Ltd, in which Dilith is the Joint Managing Director a block of 77 million shares was done at Rs. 6 each whilst the balance shares amounting to a further 23 million were collected from the market.
The big block had come from Palace Path Holdings, which as at March 31, 2011 held 97 million shares or 19.4% stake. It is a consortium of resident shareholders whilst PAP’s control is held by Malaysia’s Power Hub International with a stake of 42%.
The strategic buy by Emagewise triggered a massive retail and high networth hunt for PAP shares thereafter. End result was 367.6 million shares of PAP amounting to 74% stake of the company changes hands for Rs. 2.51 billion. PAP finished the day at Rs. 8.30, up by Rs. 3.70 or 70.4%. Intra-day high was Rs. 8.50.
Deals on PAP accounted for 60% of the volume and over 50% of the day's turnover.
Investors chase after PAP was a sheer case of herd instinct. They cannot be faulted because stocks which previously acquired by Dilith had shot up sharply. The recent case was Colombo Land and Development (CLD). After Emagewise acquired a 20% stake at Rs. 21 per share, the stock price has more than doubled within weeks. Investors zooming in on PAP yesterday could be in anticipation of a repetition of CLD. Market talk was that PAP would rise further when market opens Tuesday. Some of the smarter investors heavily engaged in day-trades profiting on the rise.
Some analysts were surprised by the price (Rs. 6 per share) Emagewise paid for a stock like PAP. Though they admitted PAP has great potential the price paid was a premium. Others said it was a strategic block whilst the Malaysian party was also keen to buy the big stake at large hence the premium paid.
Emagewise strategy of select acquisition has fuelled various speculation as well as concern. Its acquisition of Colombo Land sparked off much talk but given the post-war boom in real estate and property development the investment by Emagewise makes sense. It was pointed out that minihydro power was an emerging sector, hence the decision to acquire the stake.
Emagewise’s originaly entry in to Colombo Bourse was via the acquisition of Hotel Reefcomber (now Citrus Leisure) and deals on Colombo Land involved focus on the subsidiary of the latter – Kalpitiya Beach Resort, which made the Liberty Plaza owning company among other assets an associate last week. The other subsidiary of Citrus Leisure is Wakaduwa Resort.
PAP is a 100% fully owned subsidiary of Power Hub International (PHI), Malaysia, which is a subsidiary of Malaysia's Majulia Group, responsible for the first plant under the Malaysian Government’s Small Renewable Energy Programme.
The latter under the Malaysian Government's small Renewable Energy Programme, was the first to undertake the development of a mini-hydro plant in Malaysia. This same expertise is at the forefront of efforts by PAP to develop the use of renewable energy in Sri Lanka.
PAP owns and operates a 2.0 MW Mini Hydropower plant in Rathnapura District and supplies electricity directly to the CEB. In September it acquired 100% shareholding of Manelwala Hydropower (Pvt) Ltd (MHPL) producing 2.4 MW at Walapane in the District of Nuwara Eliya for Rs. 565 million from PHI.
In financial year ended March 31, 2011, net profit of PAP amounted to Rs. 120.4 million whilst Group revenue was. Rs. 223 million. The Company’s net profit dipped to Rs. 58 million from Rs. 78 million whilst turnover rose to Rs. 137 million from Rs. 118 million. Its net asset per share is Rs. 1.56, up from Rs. 0.73 a year earlier.
Active play on PAP boosted the overall power and energy sector with its price index rising by near 5% whereas both indices of the Bourse dipped.
The market’s chase after penny stocks yesterday renewed concerns among some analysts.
"This sort of local penny stock price movement can keep foreign activities away," Reuters reported quoting an unnamed trader.
NDB Stockbrokers headlined its report as “interest in penny stocks” as well. It said indices continued with the negative momentum to close in red. Turnover was lifted by the Power & Energy sector
(Panasian Power PLC). Retail investors also showed interest in penny stocks such as Blue Diamond Jewellery Worldwide PLC and SMB Leasing PLC while most blue chip counters failed to gain amidst low investor participation.
Banking, Finance and Insurance sector also contributed significantly to the market turnover with the sector index decreasing 1.06%.
“Investors continued profit taking in Colombo Land after the rapid gains during last week,” NDB Stockbrokers added.
Reuters reported the stock market fell on Monday mainly on profit-taking amid heavy speculative buying in Pan Asia Power that boosted the day's trading volume to a more-than three-year high, while the rupee edged up on heavy exporter dollar sales.
Sri Lanka's main share index closed 0.68 percent or 50.59 points weaker at 7,355.43, its lowest since May 13.
Traded volume was 611.5 million, highest since April 1, 2008, against a five-day average of 231.2 million. The 30-day and 90-day average trading volumes were 112.2 million and 93.7 million respectively. Last year's daily average was 67.9 million.
Foreign investors were net buyers of 76.9 million rupees' worth of shares on Monday, but they have sold a net 6.28 billion rupees worth shares in 2011 after a record 26.4 billion in 2010.
Analysts say offshore investors have complained of inside information and speculative buying and not been willing to invest in the bourse despite it being Asia's best performer for a third running year since the end of a 25-year war in May 2009.
The day's turnover was 4.94 billion Sri Lanka rupees ($45 million), highest since June 2 and well above last year's average of 2.4 billion and this year's daily average of 2.89 billion.
The bourse is still Asia's best performer in 2011 with an 10.84 percent gain, after bringing in the region's top return of 96 percent last year.
The rupee edged up to 109.65/70 a dollar from Friday's 109.68/70 as exporter dollar sales and central bank lowering dollar trading band by 10 cents helped boost the currency amid heavy importer demand, dealers said.
