ERI energises trading at CSE

• Exercising of 2011 warrants raises Rs. 873 million; Target of Rs. 2.4 b falls short as Lionhart abstains

Environmental Resources Investment (ERI) yesterday energised trading at the Colombo Stock Exchange (CSE) accounting for over 30% of turnover and volume though price closing lower.

Arrenga Capital said Colombo Bourse’s volume saw a sharp rise to 20.5 million (almost double from Monday’s 11.5 million) with the speculative counter, Environmental Resources Investment actively trading as it topped the turnover list with 6.5 million shares trading contributing 33% to the turnover.

The counter dipped 8% to close at Rs. 27.2, touching a 52-week low of Rs. 25.5 with announcement of the conversion of 33 million of its 2011 warrants to ordinary shares.

Environmental Resources Investments’ Warrants [W: 0002, W: 0003, W: 0006] also followed the main share with losses of -0.7%, -5.6% & -0.7% respectively.

Interest was also in Ceylon Leather Products, a subsidiary of ERI generating turnover of Rs. 20 million as it gained 1.7% to close at Rs. 102.1.

On Monday following the decision to extend the cut-off date for 2012 warrants in ERI, selling pressure emerged in the counter along with its Warrants [W: 0002, W: 0006, W : 0003]. The counters continued to be actively traded as they closed with losses of 6.6%, 6.7%, 5.3% and 5.3% respectively snapping the early gains, where the voting share touched a 52 – week low of Rs. 29.

In that context as well as in a declining market coupled with negative sentiments on equities including ERI renewed investor interest yesterday on ERI shares was notable which incidentally boosted activity levels as well.

Following ERI’s 2011 warrants conversions process being completed last month (at Rs. 24 each), 33.88 million shares were listed yesterday. These were from stage two whilst in the first phase 2.5 million shares were listed. Combined exercising had brought in Rs. 873 million in fresh funds. Whilst some analysts rated raising Rs. 873 million in the current market conditions as an achievement, the exercise failed to garner the full amount of Rs. 2.4 billion since ERI’s major shareholder (owning over 80% stake in equity and 90% in Warrants) Lionhart hadn’t exercised the conversion.

Lionhart’s abstinence appears to be owing to a lack of confidence in pumping in new funds given the sharp decline in Colombo Bourse as well as its own toll owing to problems in Western markets. Another factor could be lack of new investment opportunities locally hence lesser funding requirement for ERI.

Ceylon Leather has managed to perform well along with South Asia Textiles whilst Dankotuwa Porcelain remains a damper for ERI so far out of its major investments.

Meanwhile the stock market yesterday slipped further into red for the sixth consecutive session but slowing down as the benchmark index approaches the 5,800 mark. Furthermore, the more liquid Milanka slid below the 5,000 mark for the first time since 4 June 2010. The ASPI and MPI dropped circa 13 and 25 points respectively, as the year to date loss for the ASPI grew to -3.5%.