Expolanka Rs. 2.4 b IPO success a wakeup call says Asia Wealth

Broking firm Asia Wealth Management Ltd. says the success of Rs. 2.4 billion Expolanka Holdings IPO was a wakeup call to the market and stakeholders.

“Despite the weakened sentiments and limitations in obtaining bank guarantees, Expolanka Limited Holdings – IPO was oversubscribed more than 5X to an approximate value of over LKRs.12 bn. This indicates the capacity of the investors and that investor confidence can be easily woken from the current dormant mode,” Asia Wealth said in its weekly research report.

It said that activity levels last week gave some positive signal to the investors, as they were picking on selected counters, reactivating few quiescent counters.

“Yet, the bourse seems to have moved out of its positively correlated trend with the earnings, and remained unresponsive. Though, corporate earnings remained positive and well in line with expectations, investor reaction remained poor,” Asia said.

It was pointed out that the hibernation mode of investors led the market to slither down. “Investors seem to be reigned by the wrong psych with the debt settlement period coming up in June. Despite the deadline for settlement being over a month away, investors have already started to take a precautionary move,” the broker opined.

Asia is advising its clients to move out of this wrong thinking and instead focus on the counters which are currently attractive with low multiples.

“The market now has drawn up a strong welcome note for the fresh starters as well as the existing, to move onto the buying side and hit on fundamentally strong and attractively valued counters. Foreigners attempt to lower the net outflow as weights on the buying side strengthen; we believe that this would re-elevate local players’ confidence,” Asia Wealth Management emphasised.

Acuity Stockbrokers in its report said although the bourse witnessed dips in indices midweek, retail investors lifted the market to wrap up at a nominal gain. Investor interest was reflected in fresh buying on selected counters and also foreign inflow was indicated.

“In the ensuing shortened week we expect a lull in activity levels. However the investors will look towards strengthening their investment portfolio by tapping fundamentally sound scrips with high growth potential,” Acuity added.

Recapping last week, Asia Wealth said the Colombo bourse witnessed a volatile week where the overall activity levels remained below par, reaffirming the continuous struggle led by lack of buying interest and retail participation, amidst favourable quarterly results.

The All Share Price Index remained stagnant WoW to close at 7,319.9 points whilst the Milanka Price Index gained 32.5 points WoW to close at 6,769.4 points (+0.5%). Indices remained stagnant due to few large gains diluting large losses incurred over the week.

The indices showed a downward momentum mainly on the back of, the losses made by Alufab (-30.8% WoW), Beruwela Walk Inn (-25.3% WoW), Three Acre (-16.7% WoW), Radiant Gems (-16.2% WoW), Lanka Aluminium (-15.8% WoW) and Miramar Beach Hotel (-15.1% WoW). Apart from that, the massive price gains were recorded in Nation Lanka Finance (+54.3% WoW), Eastern Merchant (+51.3% WoW), Nuwara Eliya Hotels (+24.4% WoW).

The week’s turnover levels were driven by banking and finance sector counters where high investor involvement was seen in Nation Lanka Finance which reported a price appreciation over 54%, due to continued bullish sentiments while Brown and Company being promoted by retail and high net worth investors second topped the weekly turnover levels. In addition heavy interest in blue chip counter Central Finance diluted the downward pressure on the sector index; however the banking sector index dipped a minute 0.5% WoW owing to price losses reported by few banking counters. Moreover, the heavy weight John keells also contributed to weekly turnover levels which resulted from renewed institutional and high net worth interest. Further, Hatton National Bank was seen amongst top traded counters due to the hype centred on the HNB rights issue, hence the price dip approximated to HNB (X) -7.7%, HNB (N)-2.2%.