JKH rights issue unlikely to change shareholding

John Keels Holdings’ (JKH) oversubscription of its Rs. 13 billion rights issue will fund the company’s ambitious expansion plans while not diluting the existing shareholdings of the top owners of the company.

A stock market analyst said that the rights issue will enable the company to move ahead with its Colombo South Port Development and further consolidation of their hotels in India. “Thus raising of debt will finance these projects and lower their gearing,” Anita Muttukumaru, Research Analyst, C T Smith Stockbrokers said.

The subscription for the issue closed on Tuesday with 17 billion rupees worth of applications while the company offered a rights issue of one for five held at Rs. 140 each, issuing 92 million shares. However the demand was for 120 million shares.

An analyst said that this is the biggest capital raising exercise by a corporate. Stock analysts said that there is a very remote chance of the top shareholders’ ownership in the company, which is the second largest market capitalised firm without a controlling shareholder, getting diluted. “They most certainly would have taken their entitlement and invested more money to retain their positions,” an analyst said. He said that this apparent lack of ownership will always give rise to power plays in a company as attractive as JKH.

The company’s net profit for the quarter ended 31 December 2006 increased by 35 percent to Rs.143 million and for the nine months ended on that date increased by 27 percent to Rs.986 million over the corresponding period in the previous year.