Dramatic turn round for Asia Capital

Asia Capital which is a truly diversified company with 11 subsidiaries and associates have earned a net profit of Rs 235 m for the financial year 2009/10 according to the financial report released recently.

This is a commendable growth compared to a loss of Rs 379m comparison the previous year.

The company has recorded substantial profits of Rs 65m, Rs 249m, Rs 206m for the years 2004, 2005, 2006 respectively.

However for the past three years upto 2009 losses have incurred one reason being the substantial losses continuously incurred by the garment factory which has since been since disposed of. The company also faced with financial constraints which prevented the group achieving true potential.

The entry of V.S. Vijayaratnam with the purchase of 26.83 percent of the shareholding on May 15, 2009 made a fundamental change to the rehabilitation and by February 8, 10, increased the stake to 87 percent.

According to an independent report Vijayaratnam is the founder of multimillion dollar global conglomerate the QI group and had invested in telecommunication, television, broadcast media, leisure, banking sector and retail and commercial properties in 30 countries.

Substantial financial resources available to him had beneficial impact specially on Asia Securities Ltd., and it has now become the major contributor to the profitability of the group within a short one year period.

The subsidiaries and Associates of the Asia Capital PLC as follows indicate to what extent activities of the group have been diversified.

Group Companies Nature of Business

01. Asian Alliance & Insurance Insurance (Quoted Company)

02. Asia Securities (Pvt) Ltd. Security Trading (Stock Brokering)

03. Asia Asset Finance Ltd. Finance House

04. Asia Siyaka Commodities Ltd. Commodity Brokering (Commodity Brokering)

05. Asia Growth Fund (Pvt) Ltd. Venture Capital

06. Asia Fort Sri Lanka Direct Venture Capital Investment Fund

07. Investor Access Asia (Pvt) Ltd. Software Development

08. Capital Reach Holding Ltd. Leasing, Finance

09. Capital Reach Leasing Leasing (quoted Company)

10. Capital Reach Credit Ltd. Leasing (Approved Finance Co.)

11. Capital Reach Business Business Development Development Ltd.

The above list shows that the Group has two quoted companies, a finance company approved by the Central Bank, a commodity brokering house and one of the leading stock brokering companies in the Colombo Stock Market.

Since the acquisitions, not only groups financial position has improved substantially but also embarked on expansion by purchase of Capital Reach Holding Ltd., with three subsidiaries in July 2009.

It is possible the group may acquire further companies under the present management which would add further strength to the group.

The appointment of a new Chairman, a highly qualified investment banker with exposure to local and foreign financial sector and highly specialized expertise will also make a contribution towards restructuring of some subsidiaries ensuring synergies which would lead to better performance in the future too.

The net profits for 2009/10 represent over EPS of Rs 2 and it is reasonable to expect a growth of around 60 percent to 75 percent in net profits for the current financial year which may even exceed EPS of Rs 3.50. On this basis a price level of Rs 60 to 75 is justified during the current financial year.

Investors and stock brokers should pay attention to the development in the group considering the rapid progress made within a short period of 12 months that would lead to greater profitability which may exceed even the above estimates.

- K.A.S. Perera