SLT boosts market

Speculation of NTT selling stake :

Channa Kasturisinghe

Strong investor interest: The stock market moved up sharply yesterday mainly due to strong investor interest in Sri Lanka Telecom Ltd. (SLTL) of which over 7 million shares traded pushing the share price up by 9 percent.

Some analysts said that the stock moved up remarkably due to speculation that the NTT Communications Corporation which owns 35 percent of the company is planning to sell its stake to another foreign company.

SLT share price moved up by Rs.3.25 to close at Rs.41.75 due to heavy local interest and analysts said the share might move further up later in the week as it is still an undervalued stock taking into consideration the growth potential of the telecommunication sector.

Heavy interest in the telecom sector helped the Milanka Price Index to gain 49.65 points to close at 4,214.76 points. The All Share Price Index moved up by 25.58 points to close at 3,012.32 points.

The market turnover exceeded Rs. 720 million mainly contributed by the two telecom sector companies and Nations Trust Bank (NTB) of which 3.8 million shares traded with the share price moving up by Rs.1. Over 1.1million Dialog shares traded and the share gained 25 cents.

There was no confirmation of this news by the management of Sri Lanka Telecom. However, an official of a leading trade union of Sri Lanka Telecom told the Daily News that there were reliable information that the NTT was in discussion with a Malaysian company named Maxis which recently expanded its telecommunication business in the region and has expressed its intention to buy the entire 35 percent stake held by the NTT.

S. Umasudhan of SC Securities told the Daily News that he forecast a profits after tax of Rs 7.8 Bn for the SLTL group for the financial year 2007.

"Therefore the PE ratio based on the forecasted profits will reduce from 12.62 times to 8.65 times in the year 2007, which is an indication of an under-valued stock. SLTL is still trading a lower PE multiples despite the aggressive growth in the country's telephone penetration," he said.

Indika Rajakaruna of Asha Phillip Securities said that there is potential for SLT to grow as telecommunications is a sector with high growth potential both internationally and locally. "So, the SLT shares still got so much of value creating interest among investors," he said.

Revenue of the SLTL group increased to Rs 40,691 Mn for the year 2006, compared to Rs 32,515 Mn recorded during the year 2005, which is equivalent to an increase of 25%. The revenue of the company alone recorded a growth of 23% over the previous financial year.