Mano still bullish about Colombo bourse

In this time of gloom and doom reports in Sri Lanka’s economy, politics and society at large ,the bearish stock market still appears to hold some sway, with investors claiming that, there is hidden hope in the public quoted companies. For Mano Nanayakkara, an investment specialist managing a private equity, who has considerable interests in the Sri Lanka stock exchange, says the fundamentals of the Sri Lankan market scenario, is still very strong, even though, sentiment might be dipping its head.

“There is money to be made in this market, and if the primary players, have an active dynamic outlook towards the stock market, the bearish scenario can be overcome. The problem we have is that, most companies are inward looking and need to change their mindset” Nanayakara says.

Nanayakkara is hot on the Sri Lankan market. He claims that, he holds contrary views and indicates that, there are several undervalued companies in Sri Lanka ,even after adjusting for increased hostilities, between the Government and the LTTE. He quotes Rothschild, to justify his optimism, invest at the sound of guns, divest on the sounds of trumpets and evidences companies, such as NDB Bank, to justify his optimism.

In a recent market report Mano Nanayakkara, whilst praising NDB Bank, for its successful merging of development and retail banking, commendable growth spurts and superior performance in asset quality, was also highly critical of the bank’s over capitalised balance sheet. Nanayakkara says that, financing NDB’s fixed asset portfolio, whilst surrendering the opportunity to reap capital gains, has dealt a double blow, to the bank’s unsuspecting shareholders,

Nanayakkara, Senior Chartered Management Accountant and holder of three masters degrees; MBA, Master of Applied Finance and a Masters of Science in Accounting, says that, NDB Bank is positively the worst performing bank from the perspective of market price, with negative returns of 13% compared to the 57% of HNB, which HNB although good, certainly performed less well, than the NDB. Nanayakkara has stated that, Bank’s management should take immediate action, to return the capital to shareholders, who could make better use of it, through an extra-ordinary dividend distribution of 500%, if the bank does not have enough opportunities, to lend in the current economic environment. In his analytical report made public, Nanayakkara claims that, NDB’s capital adequacy of 26 percent, while strengthening its balance sheet, also indicates inefficient use of shareholder money and low profitability.

All in all, Mr. Nanayakkara concludes that, the NDB share is worth over Rs. 200, from its current Rs. 170, and a dividend pay-out will enable small shareholders, to reap the benefit of full-valuation.

The management of the Bank, in their statement to LBO, has disagreed to such a distribution, on the basis of plans, to use the money to better effect, and also saying that, the time is not right, for a distribution.

However, Nanayakkara’s report has attracted considerable interest in the blog-sphere, with several readers supporting his analysis. Some have commended Nanayakkara, for opening up the debate, recognising that, such shareholder activism is unusual, for Colombo, where management generally have their way.

Mano Nanayakkara who has considerable interests in the Sri Lankan market, continues to invest his personal money in Sri Lanka, and says that currently what’s of primary interest to him is, Sri Lanka Telecom, which he has been following closely over the last two years, especially since his masters research report was on the company. He has invested substantially in SLT stock about, two years ago, and hopes to continue holding the shares, even after the general offer by Maxis is concluded.

He indicated that, he has developed a probabilistic model, to forecast mobile telephony growth, using past data from over 170 countries, and believes that, given the current competitive conditions and deregulation is continued, mobile penetration is likely to reach over 80% by 2012. He expects Maxis, as the only true integrated provider, to significantly increase market share, despite enhanced competition and increase it’s market dominance and profitability. “The only threat to the small shareholders is, Maxis attempting to take the company private, after the General Offer. However, this would be contrary to public policy, with the Government unable to support such a move, as it would be a direct contradiction, to their earlier positions on capital market development and privatisation. Meanwhile, with the free-float being reduced, and having a stake in SLT, being a must for all fund managers for portfolio diversification, the share price is likely to be very responsive, to improved results” he said. His target price for SLT is Rs. 80.

Mano Nanayakkara was involved with capital market development, since the late 1980’s. As a Project Officer working for the US Agency for International Development (USAID,) he spear-headed an assistance program, to the Sri Lanka Government in its early-privatisation, capital market development and assisting the analytical capability of private sector chambers. He was responsible for designing the Financial Markets project under which the Colombo Stock Exchange (CSE) was automated, with a CDS and screen-based trading, and was responsible for bringing in the CFA certification program, for financial analysts in Sri Lanka.

In 1996, he was head-hunted by the Government to set-up the Bureau for Infrastructure Investment and was its first General-Manager. As Chief Government Negotiator, he concluded a wide-variety of public-private partnership projects, including the P&O and several power generation projects.

In the private sector, he was instrumental in reorganising Richard Pieris & Co. in 1985, and set up the CF Venture Fund. Between 1998 – 2002, as a Group Director of Asian Hotels Corporation and Chief Operating Officer of Crescat, he managed a turn-around of the then distressed company.

Since 2002, Nanayakkara has headed Pradana Limited, a boutique-investment management company, managing private equity investing in the region.