ISSN: 1391 - 0531
Sunday, November 19, 2006
Vol. 41 - No 25
Financial Times  

GoldQuest seeking respectability?

By Duruthu Edirimuni

Questions are being raised in the stock market as to whether GoldQuest’s aggressive foray into blue chip John Keels Holdings (JKH) is to seek a board seat in the conglomerate and gain the elusive ‘respectability’ the company lost with its dubious multi-level marketing scheme.

The company is in further trouble after its takeover of Ferntea has been challenged in court.

Last week the Colombo Stock Exchange (CSE) called for information from Ferntea regarding reports of an Exchange Control violation after a shareholder filed action against the company.

Suntex International Holdings Ltd, a foreign company which is a subsidiary of GoldQuest invested in Ferntea, which in turn is a local listed trading firm. The shareholder has alleged that under the Exchange Control Act, a foreign entity cannot invest in a company and obtain shares, if the particular company’s capital is less than Rs.100 million or US$ 1 million, which Ferntea has permitted Suntex to do.

Also the shareholder has said that Ferntea has further violated Exchange Control Regulations because it illegally transferred a sum of Rs.50 million as a loan to Suntex.

Current laws don’t permit a foreign entity to lend money to a local entity without prior approval from the Department of Exchange Control.

Ironically local law firm DL & F. De Saram, at the request of Hong Kong-based QuestNet International (GoldQuest’s holding company), has looked at the Suntex investment in Ferntea and advised that it appears to

have violated the maximum 40 percent stake in such companies. This advice was given in September 2005. Stockmarket analysts said that GoldQuest's new strategy is to buy into ‘sound stocks’ in a bid to regain its lost glory.

“The ‘rude easing out’ GoldQuest suffered in the NDB investment angered them – especially at a time when they were striving to project the company as a respectable firm,” one analyst said.

He said there is strong speculation in the market that GoldQuest has also bought Sri Lanka Telecom (SLT) parcels last week. “If it is so, there could be some truth about regaining the company’s respectability,” an industry analyst said.

He said that GoldQuest, by virtue of ‘money power’ will always look at liquid shares. “They want big stocks that they can quickly get into and get out,” he added. He said that companies like JKH fit the bill beautifully and a board seat on one of the firms will be an added bonus.

Further questions are being raised as to whether the government is turning a blind eye towards GoldQuest’s ‘conquests’ because the President has been ill-advised that the company is bringing “lots of investment” into the country.
GoldQuest, with an eye on a board seat in JKH, is rumoured to be looking for another five percent stake in addition to their current five percent. Last Friday JKH traded 616, 000 shares at a high price of Rs.199 and a low of Rs.192. it closed at Rs.197.50.

 
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Copyright 2006 Wijeya Newspapers Ltd.Colombo. Sri Lanka.