Link : http://lankabusinesstoday.com/news/market/1484-cheap-stocks
Mar 20, 2012 (LBT) -One of the recently entered foreign investment funds to Colombo Bourse, UK based CF Ruffer Pacific Fund has pointed out that it is a small consolation and that Sri Lankan stock market now looks extremely cheap, with the major banks now on single digit multiples.
In the latest monthly review report of the CF Ruffer Pacific Fund outlines however, the fund have a large weighting in Sri Lanka, and although one Sri Lankan company after another has reported excellent results, share prices have continued to drop.
“On top of that, there has been a close to 10% devaluation of the Sri Lankan rupee against sterling” the analysts note.
Meanwhile CF Ruffer’s equity exposure to Sri Lanka has come down from 13% in December 2011 to 11% in February 2012.
One of the oldest entertainment industry based listed companies, Ceylon Theatres Holdings (CTHR) in early 2011 expressed its plans to raise Rs.2.67 billion through a private placement with CF Ruffer’s foreign funds and a rights issue for existing shareholders of CTHR to invest in leisure and real estate and repay debt of the company.
Accordingly company raised nearly Rs.2 billion by issuing 9,651,080 shares at a price of Rs.210 per share via a private placement to Ruffer LLP managed funds.. Accordingly it said that out of the issued equity two million shares was placed for CF Ruffer Pacific Fund, 4.3 million shares was allotted to CF Ruffer Total Return Fund and 3,351,080 shares was placed at CF Ruffer Absolute Return Fund based in United Kingdom.
Ever since then CF Ruffer funds had done considerable investments in Sri Lanka’s listed companies including banking and finance sector, diversified sector and telecom sector.
According to CF Ruffer analysts Company have a cluster of shares in the power sector in other countries which are either loss-making, or barely profitable, because energy prices have not kept pace with the rise in commodity prices.
“But they are all extremely leveraged to either a rise in tariffs or a fall in the coal price. All three are partially owned by the state, which is both a positive and a negative; positive in that they do not run the risk of bankruptcy; negative in that they are not really run on commercial lines – the state is able to make a choice between angry shareholders or angry voters, and for now it has favoured the voters."
The investment objective of CF Ruffer Pacific Fund is to deliver consistent positive returns by investing in a diversified portfolio of predominantly Asia Pacific equities. The sub-fund also invest in fixed income securities, collective investment schemes, cash, money market instruments, other transferable securities and derivatives and forward transactions and other investments to the extent that each is permitted in the stated investment and borrowing powers of the Company, with the proportion of the sub-fund invested in each asset class varying over time in line with changes in the Investment Manager’s view about their relative attraction and subject to the limitations on investments contained in the prospectus.