Sri Lanka Equity Forum
Dear Reader,

Registration with the Sri Lanka Equity Forum would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.

Thank You
Sri Lanka Equity Forum

Discussion Forum for Stock Market Investors in Sri Lanka

සිංහල පරිවර්තනය
Submit Post
Submit Post

Latest topics

» INSURANCE companies finally falling!
by nosf766 Today at 2:00 pm

» Cinnamon Grand now Topless without Rohan Karr
by ChooBoy Today at 1:47 pm

by Maharaja Today at 1:47 pm

» Dusit Thani Sri Lanka project halted?
by ChooBoy Today at 11:44 am

» Sad situation of expressway !!!!
by roshan1039 Today at 10:53 am

» UBC - What is going on
by Trader321 Today at 9:39 am

» UBC TO HIT 24 ??
by Trader321 Today at 9:38 am

by Yahapalanaya Today at 9:02 am

» Profitable Forex Copy (over 100% profit monthly)
by princess111 Today at 6:02 am

» SEC Chief welcomes PM’s remark on EPF’s return to stock market
by kalu351 Today at 2:16 am

» Daily Stock Market Update
by Insights Equity Yesterday at 6:14 pm

» පැලවත්ත කිරි සමාගම කොටස් වෙළද පොළට,DRINK pelawaththa milk & help sri lanka
by Miss-Sangeetha Yesterday at 5:39 pm

» CSE is promoting Life Insurance companies whilst Stock Market is crashing.
by ChooBoy Yesterday at 12:35 pm

» Singapore rejects Sri Lankan leader’s allegation on trading scam suspect
by Yahapalanaya Yesterday at 8:18 am

» BALA.N potential
by Yahapalanaya Yesterday at 6:39 am

» Sri lanka tourism income reached 4.4 billion USD 2019
by Yahapalanaya Wed Mar 20, 2019 10:03 pm

» presidential election very soon ?
by Yahapalanaya Wed Mar 20, 2019 10:01 pm

» UBC - Stake up by big invester
by Yahapalanaya Wed Mar 20, 2019 9:57 pm

» AEL.N0000 is the Next AAIC.N0000 -
by Trader321 Wed Mar 20, 2019 12:37 pm

» World Bank approves USD70Mn to Sri Lanka
by Sstar Wed Mar 20, 2019 11:13 am

» Sri Lanka shares end little changed; rupee rises
by Miss-Sangeetha Tue Mar 19, 2019 6:30 pm

» Diversification of Sri Lankan economy, must to garner more economic benefits
by ChooBoy Tue Mar 19, 2019 2:04 pm

» ALHP Right issue......!!!!1
by Miss-Sangeetha Tue Mar 19, 2019 11:47 am

» UBC.N0000- Donnt miss this
by Trader321 Tue Mar 19, 2019 10:13 am

» BFN - DEAL OVER - TO BE DE LISTED SOON AFTER THE PRIVATE PLACEMENT ඩීල් එක ඉවරයි @ 19-59 - කොටස් වෙළදපලෙනුත් ඉවත් කරගන්නා බවට ආරන්චි
by sanjulanka Mon Mar 18, 2019 7:03 am

» While waiting for the market to rebound, look for bargains if you can afford the risk. Try to be active at the right time to gain something
by Asoka Samarakone Sun Mar 17, 2019 3:18 pm

» ඉතා ඉක්මනින් සේවක අර්තසාදක අරමුදල නැවත කොටස් වෙළදපල ට
by mahasona2 Sun Mar 17, 2019 3:43 am

» Central Bank targeting early return of EPF to stock market
by mahasona2 Sun Mar 17, 2019 3:24 am

» Lofc delisting??
by Bdcdman Sat Mar 16, 2019 11:16 pm

» Weekly Stock Market Roundup
by Insights Equity Sat Mar 16, 2019 5:37 am

» Today is UBC.N0000 day.
by Trader321 Fri Mar 15, 2019 11:32 am

by Bdcdman Fri Mar 15, 2019 11:11 am

by Miss-Sangeetha Fri Mar 15, 2019 10:52 am

by mahasona2 Thu Mar 14, 2019 11:05 pm

by Yahapalanaya Thu Mar 14, 2019 6:09 pm

» ලාංකීය හෙදියකට ලක්ශ 9 ක් ගෙවන ඇමෙරිකාව
by Uaecoindubai Thu Mar 14, 2019 3:48 pm

by karuna2 Thu Mar 14, 2019 11:43 am

» රජයේ පඩි දෙගුණයක් වුන හැටි
by Uaecoindubai Thu Mar 14, 2019 9:31 am

» UBC.N0000 Vs AEL.N0000 - What will be the best
by Trader321 Thu Mar 14, 2019 9:15 am

» EFP TO start again invest in Stocks
by mahasona2 Thu Mar 14, 2019 1:10 am

» Second reading of budget passed by 119 Votes - Shows this Government is Confident
by Maharaja Wed Mar 13, 2019 11:27 pm

» Fall of stocks - Big Players are behindThis is the time to buy and collect stocks
by mahasona2 Wed Mar 13, 2019 9:49 pm

» Government salary hike almost double..
by Uaecoindubai Wed Mar 13, 2019 9:32 pm

by soileconomy Wed Mar 13, 2019 7:19 pm

» UBC.N0000 ? Expert ideas please ?
by Trader321 Wed Mar 13, 2019 2:31 pm

» UBC.N000- keep eye, something is happening
by Trader321 Wed Mar 13, 2019 2:22 pm

» How about EAST @ 10/= end of march
by karuna2 Wed Mar 13, 2019 2:21 pm

» CHOU.N0000
by Shiranleet Wed Mar 13, 2019 11:16 am

You are not connected. Please login or register

Sri Lanka Equity Forum » Stock Market Talk » Stock price decline leaves John Keells (JKH) vulnerable to a takeover by Sri Lanka’s oligarchs

Stock price decline leaves John Keells (JKH) vulnerable to a takeover by Sri Lanka’s oligarchs

Go down  Message [Page 1 of 1]


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Stock price decline leaves John Keells (JKH) vulnerable to a takeover by Sri Lanka’s oligarchs-15 Oct 2018

2018 has been a tough year for emerging market equities, and Sri Lankan stocks are no exception. The major stock indices of the Colombo Stock Exchange (CSE), the All Share Price Index (ASPI) and the S&P SL 20 are down near 10% and 20% respectively so far for the year. The market in aggregate looks inexpensive, trading at a PE of less than 10 and nearing book value.

The most important stock by far at the CSE is John Keells Holdings (JKH). JKH is a diversified conglomerate whose reach touches almost every aspect of the Sri Lankan economy. It is normally the company with the highest market capitalisation on the CSE, although the recent downturn has put it at second to Ceylon Tobacco (CTC), a local monopoly cigarette player owned by giant British American Tobacco.

Although second in terms of market cap, JKH dwarfs Ceylon Tobacco or any other company in terms of importance to Colombo’s floundering stock market. Aside from the banks (which are protected by legislation prohibiting a controlling shareholder), JKH is the only major listed company in Sri Lanka that does not have a controlling or even dominant shareholder.

JKH is the last of the old British founded corporates that remains uninfluenced by any of Sri Lanka’s emerging oligarchs. One family (headed by Solhi Captain) has a stake which is approaching 20%. However, at this juncture, the Captains exert no control over the company. Although Rusi Captain was once on the Board, at this time his family do not even have a board seat. The Captains have owned a large stake for some time, and previous attempts by them to increase their stake have been met with pushback in the form of rights issues. These cash calls required existing shareholders to come up with large amounts of funds to avoid dilution of their holdings.

JKH has always been controlled by its Board of Directors, currently made up of 9 of the top personalities in corporate Sri Lanka. Today the board members are as follows: Susantha Ratnayake (Chairman), Krishan Balendra (Deputy Chairman), Gihan Cooray (Finance Director), Ashroff Omar, Hans Wijayasuriya, Amal Cabraal, Nihal Fonseka, Premila Perera, and Radhika Coomaraswamy.

Susantha Ratnayaka (59), longtime Chairman and CEO of JKH, is due to retire at the end of the year. After his retirement the company will be stewarded by Krishan Balendra (45). Balendra is the scion of JKH’s most famous Chairman Ken Balendra. It had long been speculated that the young Balendra would eventually reach the helm of Sri Lanka’s most important company, and that long telegraphed transition is less than 3 months away.

The next Chairman of JKH is taking over at a precarious time. JKH’s market capitalisation, once well above US$2bn, is now very close to dipping under a billion dollars. Almost 60% of the shares of the company are owned by foreign institutions, and there have been rumours circulating that many would like to sell.

With the global correction in emerging market stocks, there are many stocks in Asia whose valuations have come down significantly. Portfolio managers are almost certainly evaluating their JKH positions in comparison to other opportunities that have presented themselves after the global emerging market stock selloff.

It has long been speculated that the Malaysian soverign fund Khazanah, which owns 10% of JKH bought at much higher prices, is keen to sell. Schroder International Selection Fund which owns over 6% of JKH is down sharply in 2018. The poor performance of emerging market funds in 2018 may lead to redemption pressures, forcing portfolio managers to liquidate some positions to meet cash calls.

Shares of JKH, like the rest of the stocks at the CSE, have become relatively illiquid during this stock market downturn. With emerging market funds looking for liquidity, a large bid for a block of JKH from a local investor would be hard to pass up. The most likely local investors to make such a move are Sri Lanka’s quasi oligarchs.

A recent ‘fireside chat’ event put many of these quasi oligarchs on stage together in an event that ended up sparking media outrage. Sri Lanka’s wealthiest businessmen, many who have benefited directly from significant state patronage, took to the stage to complain about the current government. One even outrageously suggested that Sri Lanka needed a dictator in order to get things done. The business magnates on that stage control many of the listed conglomerates in Sri Lanka. It would not be a stretch to imagine that they would covet the crown jewel of Sri Lanka’s corporates, JKH.

The most liquid, and possibly most feared, of these Sri Lankan business magnates in Harry Jayawardena. Through his holding company Melstacorp, Jayawardena already owns a 3.5% stake in JKH. If he is able to take the block from Kazanah, he will have close to 14%. With that shareholding (14%), he together with the Captains would control in excess of 30%, and together could block any rights issue or other major dilutive capital raise.

The deal for the Khazanah block is likely just a price negotiation, and could happen in a matter of days if there was interest and both parties came to terms. This deal (if Khazanah sold the whole block to a Sri Lankan) would likely be the start of a group of Sri Lanka’s richest people, colluding to control Sri Lanka’s most important company. Krishan Balendra would then find himself at the head of a company much different than the one he thought he would steward.

One veteran market watcher said this: “If one of Sri Lanka’s billionaires wrestle control JKH, you may as well close down the Colombo Stock Exchange. There would be no meaningful company with a sizeable market cap and free float to invest in.”

JKH stands as the only non-financial company with a sizeable free float. It has been shareholder friendly and exhibited a high standard of corporate governance, characteristics that are hard to come by in Sri Lanka. One needs only to ask any of the country’s many oppressed minority shareholders about the standards of corporate governance or shareholder value ethos that exits in the country to realise how rare JKH is.

JKH is the only company in Sri Lanka that can raise a billion dollars in financing for a large project. It is the only company which is controlled by a diverse aggregate of shareholders as opposed to a dominant shareholder. It symbolises the best of corporate Sri Lanka.

And here she lies… open and vulnerable to Sri Lanka’s most aggressive corporate predators.

John Keells Holdings has done stock buybacks in the past when its stock was floundering. With the shares now trading below book value, it would be wise for management to get the company to start buying its own stock soon. If they don’t, they may find it in the hands of someone less palatable.

Back to top  Message [Page 1 of 1]

Permissions in this forum:
You cannot reply to topics in this forum