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Sri Lanka Equity Forum » Stock Market Talk » Don''t sell LIOC. Buy soon. Will climb up

Don''t sell LIOC. Buy soon. Will climb up

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1 Don''t sell LIOC. Buy soon. Will climb up on Mon Aug 29, 2016 8:08 pm

Truestory


Equity Analytic
Equity Analytic

Please read the below article which was published in June 2016. If as agreed introduce before December 2016 LIOC will go beyond Rs. 100/- 


 http://www.economynext.com/Market_based_Sri_Lanka_fuel,_electricity_pricing_from_December-3-5260-1.html

Gainer

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Associate Director - Equity Analytics
Associate Director - Equity Analytics
ECONOMYNEXT – Sri Lanka’s government has agreed to introduce automatic pricing mechanisms that ensure retail prices above cost-recovery levels for fuel and electricity by December 2016 under a deal with the International Monetary Fund (IMF).

These are among proposed prior actions, structural benchmarks and state enterprise reforms agreed under the $1.5 billion three-year Extended Fund Facility (EFF) agreement with the IMF.

Under the deal, the Ministry of Finance is to introduce an automatic fuel pricing mechanism that ensures retail prices above cost-recovery levels and a financial position of Ceylon Petroleum Corporation capable of covering debt service by December 2016.

The cabinet of ministers is to introduce automatic electricity pricing mechanisms that ensure retail prices above cost-recovery levels and a financial position of Ceylon Electricity Board capable of covering debt service by December 2016.

The reform of energy and other utility subsidies would entail the implementation of a formula-based automatic pricing mechanism for petroleum products, the government has told the IMF.

This would reduce the possibility of future financial losses by the CPC and avoid large adjustments in retail prices.

“We will also enact legislative reforms to ensure that the Public Utilities Commission (PUC) will have sole authority to set electricity tariffs in a cost-reflective manner,” the government said.

“Automatic fuel and electricity pricing mechanisms that ensure retail prices above cost-recovery levels and a financial position of CPC and CEB capable of covering debt service will be introduced by December 2016 (structural benchmark)."

The same mechanism will be extended for water tariff settings when the PUC starts regulating the water sector.

Teller

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Moderator
As I said earlier, we can't keep much hope with LIOC due to this price formula.
CPC lost around 1100 crones due to hedging . so they want to recover these money . so definitely price formula or production tax must be imposed.
In that case LIOC profit is very limited and EPS will be lower due to high issued shares. LIOC has 1 billion shares in issued so it will stay 30-35 price range in a while.
Now it's very hard to push the share price as some investors will sell who baught above 38 levels with much hope.
Retail investors faced big losses 5 to 6 times in the history with LIOC.
Countries like Sri Lanka has no steady policy for energy so many more uncertainancies are there.
Time to time ministers are giving favourable media statements for their popularity.
GL

kumarweerarathne

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Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
& do not keep ur big hopes with Indian companies Very Happy haha

Truestory


Equity Analytic
Equity Analytic
May be production tax on diesel introduced last week was the step towards pricing formula.
Before that was introduced there was not much of profit from Petrol to the importer. But there was a profit from Diesel. Out of that profit 10/- was taken as prod tax.

May be it is now easy to have a formula with certain % of profit to CPC/LIOC

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