There are two main reason for this dismal performance.
a) Rental Income remained static during the year except slight improvement despite appreciation property and rental yields. Seylan Bank the main tenant and the majority shareholder of CSD seems to have unfairly negotiated its tenancy agreement and not paid the market rentals to the CSD.
b) Despite reduction of interest rates during last two years, interest cost incurred by CSD remain almost unchanged indicating that loans have not adequately been re-negotiated by the of the management of the company. CSD had paid massive Rs 109 mn as finance cost for the 9 months ended 30 September 2010 for a total interest bearing borrowings of approximately Rs 450mn. (Refer latest quarterly accounts published on the CSE website)
Further find below some of the inter company transaction carried out between Seylan Bank and CSD in the past supporting the caption of this post..
Seylan Development PLC (CSD) continue to attract investor interest in the Colombo Stock Exchange due to the fact that share is trading at a considerable discount to its Book Value (BV)/Net Asset Value (NAV). Book Value of CSD as at 30 September 2010 is approximately Rs 27.80 per share whilst the market price of the share is around Rs 18/=.
Investors have considerable future upside in this share as a result of the expected escalation of real estate prices and rental yields in colombo provided that minority shareholders are in a position to steer the company out of the majority influence.