CDIC rally amidst Aviva exit talks

By Jithendra Antonio

NDB Bank’s investment arm Capital Development and Investment Company PLC (CDIC) became the highest gainer at the Colombo Bourse, gaining almost 50 percent last Friday, amidst propaganda of a possible Aviva UK exist from Aviva-NDB Insurance Plc.

Market analysts and brokers were of the view that share price of CDIC rocketed up due to capital gains that CDIC could book in if AVIVA exits from the AVIVA NDB Insurance PLC.

However, some analysts dispelled the rumours that this could be just market hype driven by speculation.

The CDIC share price surged by Rs.134.70 to close at Rs.404.20 and a total of 26,500 shares changed hands during market hours.

At present, CDIC’s largest investment is in Aviva NDB Finance Lanka (Pvt) Ltd, through which the Company holds a 36.27% stake in Aviva NDB Insurance PLC (Aviva NDB).

It is anticipated that CDIC could obtain over Rs. 2 billion capital gain in the event of Aviva exiting from its investment in Aviva NDB Insurance through a strategic sale of stake.

CDIC’s initial investment in Aviva NDB Finance Lanka (Pvt) Ltd is said to be only Rs.741 million (41.56% stake) as per financials.

As to date, Aviva NDB Insurance PLC (CTCE) market capitalization is valued at Rs.8.7 billion and CDIC would have capital inflow of approximately Rs.3.2 billion (current market value) via Aviva NDB Finance Lanka (Pvt) Ltd if CTCE stake was sold to a new investor according to market sources.

Mirror Business in April 2011 quoting foreign media report carried an article which said UK insurer Aviva would only remain in countries where Aviva’s operations provide at least $100 million in profit and gives a minimum 12% return on capital, or are valued at a minimum of $1 billion.

Aviva is present in 30 countries and it entered Sri Lanka in 2006 partnering with National Development Bank to establish Aviva-NDB Insurance, which was earlier known as Eagle Insurance

The financial accounts of CDIC further notes that the dividend income received from Aviva NDB (via Aviva NDB Finance Lanka (Pvt) Ltd.) to CDIC amounted to Rs.92 Million for 2010.

CDIC also holds a 51% stake in the ordinary share capital of NDB Aviva Wealth Management Ltd. (NAWM) (formerly known as Eagle NDB Fund Management Company Ltd.), the largest fund Management Company in Sri Lanka, managing Assets in excess of Rs. 42 billion as at end 2010. NAWM is a unit trust and fund management company licensed by the Securities and Exchange Commission of Sri Lanka.

Subsequently, during 2010, CDIC has earned revenue of Rs..476.4 million through its investments and further revenue of Rs.188.3 million from NDB Aviva Wealth Management Ltd. CDIC’s assets are valued at Rs.5.3 billion.

In the lately published annual report of CDIC, Chairman Nihal Wadugodapitiya outlines that its parent company, National Development Bank PLC (NDB) which owns 99.6% of CDIC has repositioned CDIC as its strategic investment arm. However, CDIC currently holds only Aviva NDB and NAWM as strategic investments.

As per CDIC Chairman Wadugodapitiya, in anticipation of capitalizing on the stock market performance, during the year 2010, CDIC approved a total sum of Rs.850 million to be invested in the Colombo Stock Exchange (CSE) where Rs.750 million was managed by NDB Aviva Wealth Management Ltd.

Wadugodapitya in his annual review for 2010 further noted that through the above investments, CDIC was able to reap benefits from the soaring stock market performance during 2010 whilst the gains (both realized and unrealized) from these stock market investments added an aggregate sum of Rs.161 million during the year.

Meanwhile, CDIC financial results outlined that as at balance sheet date 31 December 2010 the portfolio value in the Quoted Equity Securities and investment in unit trusts amounted to Rs.456.9 million and over Rs.1 billion respectively.

For the quarter ended 31 March 2011, CDIC Earnings Per Share had risen from Rs.0.73 to Rs.9.74 whilst net Asset Value per Share had risen from Rs.105.29 to Rs.109.05.

Go to Link: http://print.dailymirror.lk/business/127-local/45373.html

Could some expert explain this. Aviva UK is planning to sell their unprofitable companies. Aviva UK hasn't got a single share in CDIC as far as I can see. CDIC is not Aviva UK. So why did CDIC share price go up?

do your own analysis and research and if you think the price is ok take the buy or sell decision, but make not of it, NDB is having 99.66% of the CDIC and if the NDB is not going to sell this then there is no use for any other investors, except the name may appear in the Top 20 shareholders list, if the NDB decided to dispose it at what price NDB will dispose it? The gain there are going to get or if the price stay at this level until 31st dec 2011, the unrealized profit NDB going to achieve?

Some seem to have forgotten that if Aviva want to sell out of CTCE, they can do so without CDIC or NDB being directly affected.

CTCE is 87.27% owned by Aviva NDB Finance Lanka (ANFL).

ANFL in turn is 41.56% owned by CDIC and the balance 58.44% is held by Aviva.

Aviva hence indirectly hold a controlling 51% of CTCE, and this indirect controlling stake can be sold without need for any mandatory offer as Aviva's stake in ANFL can be sold.

Be aware.

Read more at:

http://forum.srilankaequity.com/t3574p20-aviva-ndb-insurance-ctce-for-sale

AS I mentioned here and even % in another place CDIC price went up by 50%!!
IF anyone had a look at it even when I posted could have easily earned over 30% gain just by buying today morning and selling about 30 minutes later ! tomorrow you will most probably would get a chance to increase the profit even larger if you were smart enough to by the share today morning!

cse.alpha wrote:Some seem to have forgotten that if Aviva want to sell out of CTCE, they can do so without CDIC or NDB being directly affected.

CTCE is 87.27% owned by Aviva NDB Finance Lanka (ANFL).

ANFL in turn is 41.56% owned by CDIC and the balance 58.44% is held by Aviva.

Aviva hence indirectly hold a controlling 51% of CTCE, and this indirect controlling stake can be sold without need for any mandatory offer as Aviva's stake in ANFL can be sold.

There is a joint venture agreement signed between NDB and AVIVA, the first choice of refusal need to be given to either party in the event of a divestment by one party. Therefore the possible scenarios are as follows;

a) AVIVA may sell its stake to NDB or CDIC. In such case CDIC would become the controlling shareholder of Aviva-NDB Insurance. Both NDB and CDIC, have sufficient funds to do that.

b) AVIVA & CDIC may jointly sell their stake to a potential investor. Good capital gain for both parties.

c) CDIC may buy AVIVA stake and offload it to a third party at a substantial capital gain. Like they did it in the past done in the past.

e) Regardless of any of the above events, CDIC may continue to hold or sell AVIVA NDB Wealth Management Company that manages over 40bn Funds. If NAMAL that managed 10bn was worth Rs 450mn to Union Bank. Then NDB-AVIVA Wealth Management should be worth lot more.

caught under 10%, band

Gaja wrote:caught under 10%, band

O o what would happen next? will it go up 10% everyday or other way?

770 is the max it seems tomo ;( ard 635 is the min.. wats gonna happen now?

yesterday no sellers for even 707/=, and now no buyers for even 636.60/=

Gaja wrote:yesterday no sellers for even 707/=, and now no buyers for even 636.60/=

I wonder what will happen tommorow

StocksWatch wrote:

Gaja wrote:yesterday no sellers for even 707/=, and now no buyers for even 636.60/=

I wonder what will happen tommorow

will touch either 700.20 or 572.90/=

Gaja wrote:

StocksWatch wrote:

Gaja wrote:yesterday no sellers for even 707/=, and now no buyers for even 636.60/=

I wonder what will happen tommorow

will touch either 700.20 or 572.90/=

It may touch both these values tommorow...who knows the investor sentiment?

StocksWatch wrote:

Gaja wrote:

StocksWatch wrote:

Gaja wrote:yesterday no sellers for even 707/=, and now no buyers for even 636.60/=

I wonder what will happen tommorow

will touch either 700.20 or 572.90/=

It may touch both these values tommorow...who knows the investor sentiment?

same think happen today as well

why no body interested in it today?, specially for the ones who bought at above 700 level must be happy now

There's a rumor among the brokers as Aviva does not own any shares of CDIC, Aviva has realized that they cannot sell CDIC.

Disclaimer: I don't have any CDIC shares. If I hadI would have sold it last week.

duke wrote:There's a rumor among the brokers as Aviva does not own any shares of CDIC, Aviva has realized that they cannot sell CDIC.

Disclaimer: I don't have any CDIC shares. If I hadI would have sold it last week.

I also don't have any shares of CDIC, yes AVIVA does not own any shares of CDIC, NDB owns 99.66% of CDIC

duke wrote:There's a rumor among the brokers as Aviva does not own any shares of CDIC, Aviva has realized that they cannot sell CDIC.

Disclaimer: I don't have any CDIC shares. If I hadI would have sold it last week.

But Aviva is the major shareholder of CTCE(AVIVA NDB Ins.) They can sell their stake if they wish. Isn't it?

duke wrote:There's a rumor among the brokers as Aviva does not own any shares of CDIC, Aviva has realized that they cannot sell CDIC.

ha ha ha ......... CDIC is another BOMB blasted by/on retailers...

Still can not understand the relationship between AVIVA's exit from CTCE and CDIC's performance or bottom line!!

Though AVIVA exits from CTCE there won't be mendatary offer that CDIC also can sell its stake to the new investor at the same selling price. Because AVIVA invested in CTCE through Aviva NDB Finance Lanka (Private) Limited, which is not a listed company.

But, I guess one/few members here need to link AVIVA's exit talk with CDIC's performance and push-CDIC-up

we discussed it at http://forum.srilankaequity.com/t3574-aviva-ndb-insurance-ctce-for-sale

factFINDER wrote:
87.27% of CTCE owned by Aviva NDB Finance Lanka (Private) Limited, which is Associate of CDIC with 41.56%. the balance is owned by AVIVA. Therefore the controlling stake (51%) is hold by AVIVA through Aviva NDB Finance Lanka (Private) Limited.

If AVIVA want to exit wholly or partially from CTCE, it is not CDIC, but stakes of Aviva NDB Finance Lanka (Private) Limited which AVIVA currently hold will be diversted. As I remember, it was the same thing happend when "Zurich" exit from CTCE few years ago. But, NDB-CDIC was keeping its stake (less than 50%) continuously. It is also possible to make an intermediary arrangement by NDB (jointly with BOC, EPF), if AVIVA seek immidiate exit.

Therefore, if "Uncle Harry" interested in a stake in CTCE, he will put his money in Aviva NDB Finance Lanka (Private) Limited ... but not in CDIC.

*On 11 June 2009, the Company(CDIC) acquired a direct holding of 16.15% and an indirect holding of 34.85% through its investment in Aviva NDB Finance Lanka Limited, of the issued share capital of NDB Aviva Wealth Management Limited.(Formerly Eagle NDB Fund Management Company Limited ) . NDB Aviva Wealth Management Limited was a fully owned subsidiary of Aviva NDB Insurance PLC in which the Company holds 41.56% of the issued capital through Aviva NDB Finance Lanka Ltd. Accordingly the Company acquired a controlling interest of 51% in NDB Aviva Wealth Management Limited

*CDIC directly holding 16.15% of NDB WEALTH
*CDIC indirectly holding 34.85% of NDB WEALTH

INDIRECT holding structure
*CDIC invest in AVIVA FINANCE(it is not a subsidiary of CDIC)
*AVIVA FINANCE invested in AVIVA INSURANCE(41.56% of issued capital)
*AVIVA INSURANCE invested in (owns) NDB WEALTH fully(100%)

so this indirect path worth 34.85% together of issued capital of NDB WEALTH....
CDIC--->AVIVA FINANCE--->AVIVA INSURANCE--->NDB WEALTH

so finally CDIC owns 51% of NDB WEALTH,and it become a subsidiary of CDIC,due to over 50% ownership.........


http://forum.srilankaequity.com/t1190-cdic-results-subsidiary-of-ndb?highlight=CDIC#7514

http://www.ft.lk/2011/06/02/aviva-ndb-insurance-records-33-growth-in-1q-revenue/

as i know this is the EXPENSIVE share which caught into price band,now gonibilla already destroyed huge value of it,and it is coming down like a rocket, everyday decreasing by 10%..
if this price band was not there,this would have gonna hit 1000.

as we all saw shares which caught in band, at least appreciated once,but CDIC going down.

a good lesson to retailers who got the bomb,but will there be a chance to increase?

mark wrote:as i know this is the EXPENSIVE share which caught into price band,now gonibilla already destroyed huge value of it,and it is coming down like a rocket, everyday decreasing by 10%..
if this price band was not there,this would have gonna hit 1000.

as we all saw shares which caught in band, at least appreciated once,but CDIC going down.

a good lesson to retailers who got the bomb,but will there be a chance to increase?

If the retailer bought this one at 700 level on credit, what will be the end results, is it going to be the forced sell?

mark wrote:as i know this is the EXPENSIVE share which caught into price band,now gonibilla already destroyed huge value of it,and it is coming down like a rocket, everyday decreasing by 10%..
if this price band was not there,this would have gonna hit 1000.

as we all saw shares which caught in band, at least appreciated once,but CDIC going down.

a good lesson to retailers who got the bomb,but will there be a chance to increase?

Mark,on the first day of price band, this actually appreciated and on the same day this hit both upper and bottom limits. After that this is coming down straig.ht...but don't know how far this can go down. Anyway good lesson for chasing stocks.