Ceylon Guardian Investment Trust PLC, among the wealthiest of investment funds quoted on the Colombo Stock Exchange, has profited from the ups and downs of the stock market in the first quarter of the current financial year ended June 30, 2013 by posting an after-tax profit of Rs.402 million against a loss of Rs.89.5 million a year earlier, according to figures published in an interim report now with shareholders.
Guardian’s Investment Managers, Guardian Fund Management Ltd, has reported that the quarter under review saw the CSE up 6.7% while Standard & Poor’s SL20 index grew 4.2%. It noted that the CSE for the calendar year to date is up 8.5% which is in positive territory compared to the negative 7.1% recorded last year.
"However we witnessed a high of ASPI 6,488.85 basis points during 2013 which amounted to an appreciation of 15% but since witnessed a correction in the market and settling at current level," the manager’s review said.
"We are seeing an overall positive trend at the CSE in the current year from negative performances recorded in the preceding two calendar years."
They noted that this highlights the volatility and cyclical trends in the stock market saying that volatility has posed an opportunity for institutional investors, enabling trading on market cycles. However, retail investors were unable to take on the new risk levels of the stock market.
During the quarter under review, the ASPI had nearly reached 6,500 index points, comfortably topping the 6,000 point index barrier.
The global markets had corrected with the hint of a quantitative easing program by the Fed due to positive US economic indicators. Analysts said that Friday’s surge on the CSE was an outcome of this.
The first half of 2013 from January to June this year has seen a foreign net inflow of approximately Rs.13.6 billion into the Colombo market against an inflow of Rs.33 billion a year earlier.
The managers said that domestic participation at mid-year at 77% was up from 50% at the beginning of the year.
The Guardian group comprising the parent, Ceylon Investments PLC, Guardian Capital Partners PLC and Rubber Investment Trust Ltd reported a consolidated profit after-tax of Rs.402 million for the quarter under review against a Rs.89.5 million loss posted a year earlier.
As at end June 2013, the company’s earnings per share stood at Rs.3.68 and the net asset value per share when the portfolio was valued at market prices was Rs.249.52.
"This highlights an anomaly with traded market price per share of Rs.188.00, a discount of 25% to NAV," the review said.
The Guardian portfolio had appreciated from Rs.26.03 billion to Rs.26.39 billion during the period under review. This portfolio is segmented into long-term trading, private equity and strategic investments.
"Our portfolio continues to be heavily weighted on the diversified sector, which has exposure to tourism, banking & finance, food & beverages and the palm oil sectors. Also the portfolio has exposure to the banking & finance sector and the health care sector, which we believe will yield good returns in the medium term," the managers said.
"We have held on to our existing portfolio and cash deposits, since valuations don’t warrant allocating money to stock yet, given that corporate earnings growth has slowed down due to a variety of cost related reasons."
The investment manager also said that Guardian had divested their stake in Durdans Medical and Surgical Hospital (Pvt) Ltd, an unquoted company, after the current quarter ended at a price of Rs.18 per share against an original cost of Rs.12.50. The deal yielded Rs.401 million sales proceeds.
"Although, many new private equity investment opportunities in varying industries have been evaluated, they failed to achieve our internal set benchmarks, and thus no new investments were made during this period," the managers said.
At company level Guardian’s after-tax profit for the first quarter was Rs.47.4 million, up from Rs.6.1 million a year earlier.
The company had a stated capital of Rs.953.2 million, capital reserves of Rs.1.5 billion and revenue reserves of Rs.12.7 billion. Total assets ran at Rs.18.43 billion and total liabilities at Rs.75.6 million.
Carson Cumberbatch with 67.15% is the controlling shareholder of Ceylon Guardian Investment Trust followed by Thurston Investments Ltd (6.43%). The ETF owns 1.54% of the company and the Sri Lanka Insurance Corporation General Fund (0.33%).
The share traded at a high of Rs.211.50 and a low of Rs.149.90 during the quarter under review.
The directors of the company are: Messrs. I. Paulraj (Chairman), D.C.R. Gunawardena, A. de Z. Gunasekera, V.M. Fernando, Mrs. M.A.R.C. Cooray, K. Selvanathan and C.W. Knight.