| Wednesday, February 27, 2008 |
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| Contact us:- Editor The Bottom Line |
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Who were stock market ‘Hotspots’ of 2007? In
this special report Lanka Orix Securities present the annual listing
of top performing counters – Hotspots Top 50 for the year 2007.
The prioritisation process involves many stages of elimination with
respect to capital gain and liquidity with the final prioritisation
being capital gain. The
market performance in 2007 was much dampened with the ASPI declining
by 6.66% to close for the year at 2,560.10 points and the MPI declining
by 11.31% to close at 3,268.98. The ASPI attained its all time high
in history on the 13th of February 2007 with the index reaching
3,016.42 points. The MPI reached an all time high of 4,194.34 points
on the 26th of February 2007. The indices had been on a continuously
declining trend since then. In the year 2006, the ASPI had increased
by 41.63% and the MPI had increased by 51.44 points. The
assumptions and the process of prioritisation were maintained with
counters in the Default Board being automatically disqualified in
the ranking. The liquidity prioritisation was based on the number
of trades per day for the 241 market days. The capital gain was
calculated by comparing the closing price for each counter with
the opening price adjusted for bonuses, rights, splits and capitalisations
of reserves. In
Hotspots Top 50 for 2006, the capital gain for each counter was
compared with the average base rate in 2006 (Prime Lending rate
which was the cut off point). However, this comparison could not
be carried out in the 2007 ranking since the interest rates for
the year remained at very high levels. The average Commercial Bank
Prime Lending Rate was 17.07% during 2007 compared to 12.87% during
2006. As a result many counters had an overall performance below
the base rates. Therefore we have simply ranked the 50 counters
with more than 5 trades per day and with highest capital gains as
the Hotspots Top 50 – 2007. The
number one in the list is MTD Walkers (Kapila Heavy Equipment).
The Company was acquired by MTD Capital BHD during April 2007 that
explains the abnormal capital gain on the counter. It
is our observation over the two years that approximately half of
the top performers in one single year tend to top up for the following
year as well. Despite the contrasting index performance in years
2006 and 2007, 21 of the top performing counters for 2006 got ranked
in the 2007 list while 26 of the top performers of 2005 appeared
in the 2006 list. A
few counters including Ceylon Leather, Asha Central, Kotagala,HNB
Non Voting, Distilleries, The Finance, Ceylinco Insurance and Commercial
Bank Voting appeared in the top ranks for three consecutive years.
As such, amid the high risk involved in stock price movements, investors
can expect continuous growth from strong counters in the long run. When
considering the sector performance plantation sector seem to be
in lead with twelve out of the eighteen listed plantations having
made to the top performers subsequent to the heavy speculations
towards the end of the year.
Liquidity – Return matrix
High div 2007 We
believe that high dividend paying companies are attractive to long
term investors who seek for continuous and stable returns on their
investments. However, certain high dividend yield counters are fairly
illiquid in the market (refer trades per day in the list). The average
dividend per share (DPS) was SLRs. 3.92 in the year 2007 compared
to SLRs. 3.42 in the year 2006. The dividend yields on most counters
remain much lower than the base rates that prevailed. The
following ratios had been used in the calculations. |
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