Who is the fool in JKH Transaction ?Buyer or seller

In today's JKH transaction who fools who ?come up with reasons....
and what may be their intentions.......

Both party are not fools, we small investors are going to be fool in future.
Go through last one year big crossings (or corporate buy outs)we can find something fishy.

"The market is weird. Every time one guy sells, another one buys, and they both think they're smart."
We have been inviting foreign investors to buy Sri Lankan equity; to that extent, the JKH deal is a success for SL.
If the Malaysian fund is able to make a decent margin on this investment over the next few years, they would be winners too...

Given reason, the seller.
His plan was to depend the rupee.

LBO
Central Bank governor Nivard Cabraal said the deal was part of the several into equity and bond markets that will help stabilize a currency peg. The rupee opened stronger Friday below 124 to the US dollar, from a close of 125.00/25 a day earlier.

But what will be happened in Geneva

Both not fools,But if we talk too much about this we'll be fools.

Malaysian fund would have done a special study before investing in this conglomerate considering the economic & geopolitical factors. It is a common target of any investor to look into the highest return of equity which covers the risk factor & opportunity cost as well.
Economic & political views on this deal are already published in the media making the readers imbalanced & disturbed of pros & cons.
I guess that there could be a hidden agenda behind this deal backed by another huge economic transaction which covers unexpected loss on this equity investment.
This is my own view in considering the current status of equity market.

rishanpossitive wrote:Both not fools,But if we talk too much about this we'll be fools.

well said resan.

rishanpossitive wrote:Both not fools,But if we talk too much about this we'll be fools.

Excellent you are absolutely correct.
MOST OF PEOPLE LOOK AT THIS WITH POLITICAL EYE.THIS IS A SIN!!!!!!!!!!!!

dsam wrote:

rishanpossitive wrote:Both not fools,But if we talk too much about this we'll be fools.

Excellent you are absolutely correct.
MOST OF PEOPLE LOOK AT THIS WITH POLITICAL EYE.THIS IS A SIN!!!!!!!!!!!!

It is a political deal indeed to push up the declining reserves. That,s all. Dont dream of Bull runs.

Malaysiya is a emerging economy .They are investing in developing countries .Since they have good big investments here , definitely they are looking at the bigger picture.
From our side this is a bit relax for our depreciating rupee and it may give a positive indication on EPF investments.

EPF can be a winner as they must have bought at a very low price. Same time, the buyer may have its own reasons for investing in JKH at market prices. But, FDI in capital markets is risky as its easy for the foreign buyer to liquidate and vanish with a hefty profit. Unlike direct invetment in settingup a factory, whereby country will be more beneficial, as that sort of investment cannot be easily withdrawn and also those invetments in settingup companies will create additional job opportunities.
Invetments in capital markets is just a cashflow whereas other direct investments have additional benefits and guarantees for the country.

Although this is good for the country, it could have been better, had it come by way of direct investment in settingup a company

If you see the below table EPF gained minimum 1 billion on this transaction.

sriranga wrote:If you see the below table EPF gained minimum 1 billion on this transaction.

Thanks Sriranga for sharing this informaiton

sriranga wrote:If you see the below table EPF gained minimum 1 billion on this transaction.

Good way of analysing.
So EPF at last made some profit.

dumi wrote:EPF can be a winner as they must have bought at a very low price. Same time, the buyer may have its own reasons for investing in JKH at market prices. But, FDI in capital markets is risky as its easy for the foreign buyer to liquidate and vanish with a hefty profit. Unlike direct invetment in settingup a factory, whereby country will be more beneficial, as that sort of investment cannot be easily withdrawn and also those invetments in settingup companies will create additional job opportunities.
Invetments in capital markets is just a cashflow whereas other direct investments have additional benefits and guarantees for the country.

Although this is good for the country, it could have been better, had it come by way of direct investment in settingup a company

We have to look at our requirement as a rapidly developing country. We have achieved our FDI target last year. In this year also, we are ahead in target. So we don't have problems in FDIs now. FDIs are always good, no argument in that. But to a country like ours, foreign inflows to the capital markets are utmost important.

Problem in FDIs is, they are indirectly pressurizing our foreign currency reserves. As we are a developing country most of the capital items required in a project have to be imported. So we have to spend about more than 80% of the FDI amount for the importation of capital items for that particular project. This is one of the reasons for the current FCR problems we are facing. Of course main culprit is miss-management, no argument in that. But when investments are started to happen (Local of FDI) it gives lot of pressure on FC reserves of the country, as we have to import major part of materials and equipment from other countries.

This is where we need most important FC inflows, in the form of capital market investments, either on equity or bonds. Most of the equity investments are long term. What we had last Friday is a very long term investment. Their expected maturity period of investment is seven years or more which is really beneficial to the country. They will participate in future fund raisings in the company that they invested, bringing more FCs to the country.

Last year we had FDIs. But our capital market had heavy outflows. 2012 will be a different year. Though we are experiencing a difficult period now, we do have hope, and it’s confirmed. By now we have got almost all the out flow of 2011 within first 3 and half months. By next few weeks our equity market will touch Rs.25 billion worth of foreign net inflows. We will end the year with foreign inflows worth total outflows that took place in last three years.
So FDIs are good. But long term equity investments are the requirement now.

hariesha wrote:

dumi wrote:EPF can be a winner as they must have bought at a very low price. Same time, the buyer may have its own reasons for investing in JKH at market prices. But, FDI in capital markets is risky as its easy for the foreign buyer to liquidate and vanish with a hefty profit. Unlike direct invetment in settingup a factory, whereby country will be more beneficial, as that sort of investment cannot be easily withdrawn and also those invetments in settingup companies will create additional job opportunities.
Invetments in capital markets is just a cashflow whereas other direct investments have additional benefits and guarantees for the country.

Although this is good for the country, it could have been better, had it come by way of direct investment in settingup a company

We have to look at our requirement as a rapidly developing country. We have achieved our FDI target last year. In this year also, we are ahead in target. So we don't have problems in FDIs now. FDIs are always good, no argument in that. But to a country like ours, foreign inflows to the capital markets are utmost important.

Problem in FDIs is, they are indirectly pressurizing our foreign currency reserves. As we are a developing country most of the capital items required in a project have to be imported. So we have to spend about more than 80% of the FDI amount for the importation of capital items for that particular project. This is one of the reasons for the current FCR problems we are facing. Of course main culprit is miss-management, no argument in that. But when investments are started to happen (Local of FDI) it gives lot of pressure on FC reserves of the country, as we have to import major part of materials and equipment from other countries.

This is where we need most important FC inflows, in the form of capital market investments, either on equity or bonds. Most of the equity investments are long term. What we had last Friday is a very long term investment. Their expected maturity period of investment is seven years or more which is really beneficial to the country. They will participate in future fund raisings in the company that they invested, bringing more FCs to the country.

Last year we had FDIs. But our capital market had heavy outflows. 2012 will be a different year. Though we are experiencing a difficult period now, we do have hope, and it’s confirmed. By now we have got almost all the out flow of 2011 within first 3 and half months. By next few weeks our equity market will touch Rs.25 billion worth of foreign net inflows. We will end the year with foreign inflows worth total outflows that took place in last three years.
So FDIs are good. But long term equity investments are the requirement now.

Thanks Hariesha.

The Employees Provident Fund has booked a capital gain of around Rs.800 million by selling off its 8.85% stake in John Keells Holdings to Malaysia’s Khazanah Nasional Bhd, for Rs.14.5 billion paying Rs.194 per share in the second biggest deal ever done on the Colombo Stock Exchange.

"I haven’t got the final figures yet but it’s around Rs. 800 million." Central Bank Governor Ajit Nivard Cabraal said yesterday. "The EPF held the shares for about four years with the bigger quantities held for around two years. In addition to the capital gain, the fund enjoyed dividends and made trading profits on the share."

The Governor said that the buyer which is the Malaysian Government’s investment arm has financial muscle similar to that of Singapore’s Temasek Holdings and was almost a replica of Temasek. Khazanah is chaired by Malaysia’s Prime Minister.

"The entry into JKH offers Khazanah and its group of companies opportunities to participate across a wide range of businesses where the JKH group is involved in. At the same time, it allows Khazanah to participate in Sri Lanka’s positive growth story, and is in line with our strategy of investing in the region," Khazanah managing director, Tan Sri Azman Mokhtar said in a statement on Friday.

Malaysia’s CIMB group with which John Keells Stockbrokers recently tied up is 32% owned by Khazanah. CIMB and Bank of America Merrill Lynch were joint advisors to Khazanah on Friday’s deal which was second in size only to the acquisition of a major slice of Sri Lanka Telecom by Malaysia’s Maxis group.

The Business Times in Kuala Lumpur yesterday reported the deal saying that Sri Lanka is currently experiencing a strong economic revival as evidenced by recent economic growth of about 8% a year.

Cabraal said that Khazanah buying into JKH was a vote of confidence on Sri Lanka internationally and would send a very good signal to other global investors. Business leaders concurred with this view.

Foreign interest in Sri Lanka’s stock market was lacking last year, analysts noted. However, the picture has changed this year with several interested investors looking at possibilities.

Khazanah’s Azman said that Sri Lanka has been a ``positive experience" to companies in which the Malaysian Fund has invested. He noted that Dialog Axiata group in which Khazanah held a stake was the largest mobile telephony player here. The CIMB group has an investment banking joint venture in Sri Lanka.

Earlier this month, CIMB entered into a strategic collaboration with JKH’s stock broking unit, John Keells Stockbrokers (Pvt) Ltd.. to promote and facilitate trading on the Colombo Stock Exchange (CSE) and provide co-branded research for JKSB clients.

The Business Times (of Malaysia) said that Khazanah’s entry into JKH was through its special purpose vehicle Global Hill Investments Limited.

The deal has been under discussion for about six months and has been concluded at a price considerably higher than the Rs.160 level at which JKH was traded earlier this year. Many investors sensing that the EPF may book a capital gain on its JKH stake bought into the company expecting an upward movement in the JKH share price.

Mr. Sohli Captain remains the top shareholder of JKH with 13.7% with Paints and General Industry controlled by him holding 3.9% and other connected parties hold up to another 3.2% according to JKH’s interim report covering the nine months ended December 31.

Khazanah will now become the third biggest shareholder of the blue chip conglomerate behind Captain and Janus Overseas Fund which owns 10.3%. Janus Aspen Overseas Portfolio Fund connected to Janus Overseas Fund owns 2.3%.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=47688

gainers are Private sector workers

This is not a gain to EPF. It is a loss

The deal value is 14.5 bn
Last 5 months rupee was depreciated to 125 from 110 (12%)
If the rupee was there at 110 they will sell @12.76Bn

If they deposited the money Rs 13.5Bn in last November to a USA bank only due to depreciation (12%) they will earn 16.2Bn rupee.
This is a number game.
You can see EPF has a lost due to purchase @ higher price levels

sapumal wrote:This is not a gain to EPF. It is a loss

The deal value is 14.5 bn
Last 5 months rupee was depreciated to 125 from 110 (12%)
If the rupee was there at 110 they will sell @12.76Bn

If they deposited the money Rs 13.5Bn in last November to a USA bank only due to depreciation (12%) they will earn 16.2Bn rupee.
This is a number game.
You can see EPF has a lost due to purchase @ higher price levels

If we consider like this way all of our trades are number game.
We need to consider one currency to calculate our gain or loss.
If your argument make sense for you then another one will come here and compare the loss or gain with Zimbabewe curreny.(May be 1000times profit for EPF)
If we do not want to accept anything good or bad, we try to make comparison to show we are pundits.
This is is typical Srilankan culture?

sriranga wrote:If you see the below table EPF gained minimum 1 billion on this transaction.

Simple way to look at it in this way....

Average Investment cost ==========> LKR10bn
Average investment Period =========> 2 years
Gain as per Mr.Cabraal ============> LKR800mn

Return on investment =============> 800mn/10bn

That means 8% return for two years & that brings 4% return per annum.

Wouldn't be better if EPF had invested in Teasury bonds/bills?

greedy wrote:

sriranga wrote:If you see the below table EPF gained minimum 1 billion on this transaction.

Simple way to look at it in this way....

Average Investment cost ==========> LKR10bn
Average investment Period =========> 2 years
Gain as per Mr.Cabraal ============> LKR800mn

Return on investment =============> 800mn/10bn

That means 8% return for two years & that brings 4% return per annum.

Wouldn't be better if EPF had invested in Teasury bonds/bills?

But greedy in that period they got dividends also no?
Again during 2010/2011 averagely most of us failed capital gain in CSE.

what was the commission for Cabral? some one has told it was 1 rupee for share?

Redbulls wrote:

sapumal wrote:This is not a gain to EPF. It is a loss

The deal value is 14.5 bn
Last 5 months rupee was depreciated to 125 from 110 (12%)
If the rupee was there at 110 they will sell @12.76Bn

If they deposited the money Rs 13.5Bn in last November to a USA bank only due to depreciation (12%) they will earn 16.2Bn rupee.
This is a number game.
You can see EPF has a lost due to purchase @ higher price levels

If we consider like this way all of our trades are number game.
We need to consider one currency to calculate our gain or loss.
If your argument make sense for you then another one will come here and compare the loss or gain with Zimbabewe curreny.(May be 1000times profit for EPF)
If we do not want to accept anything good or bad, we try to make comparison to show we are pundits.
This is is typical Srilankan culture?

Your have take a good example but showed it to give a wrong picture

If you buy a land in Zimbabwe for 1Mn Dollars few years ago now it should worth few Billions(say 10). But it's gold based value might have not changed. Even if you got 10bn from that you can't buy things 1000 times than previous

I am not arguing with you. But you should have a common sense about what is the simple meaning of the word devalue. Also the word is not devalue it is 'currency devalue'

sapumal wrote:

Redbulls wrote:

sapumal wrote:This is not a gain to EPF. It is a loss

The deal value is 14.5 bn
Last 5 months rupee was depreciated to 125 from 110 (12%)
If the rupee was there at 110 they will sell @12.76Bn

If they deposited the money Rs 13.5Bn in last November to a USA bank only due to depreciation (12%) they will earn 16.2Bn rupee.
This is a number game.
You can see EPF has a lost due to purchase @ higher price levels

If we consider like this way all of our trades are number game.
We need to consider one currency to calculate our gain or loss.
If your argument make sense for you then another one will come here and compare the loss or gain with Zimbabewe curreny.(May be 1000times profit for EPF)
If we do not want to accept anything good or bad, we try to make comparison to show we are pundits.
This is is typical Srilankan culture?

Your have take a good example but showed it to give a wrong picture

If you buy a land in Zimbabwe for 1Mn Dollars few years ago now it should worth few Billions(say 10). But it's gold based value might have not changed. Even if you got 10bn from that you can't buy things 1000 times than previous

I am not arguing with you. But you should have a common sense about what is the simple meaning of the word devalue. Also the word is not devalue it is 'currency devalue'

Read your post
http://forum.srilankaequity.com/t15906-towards-70-loss#104163

Compare to you EPF is far better on this deal no?