Business Times

Aggressive plans by JKH in post-war era

By Natasha Gunaratne

As the largest market capitalized company on the Colombo Stock Exchange (CSE), blue chip conglomerate John Keells Holdings (JKH) has aggressive plans for all its sectors following the end of the war in May 2009 and the conclusion of the presidential and parliamentary elections earlier this year.

In an interview with the Business Times this week, JKH Deputy Chairman Ajit Gunewardena said the company is in a strong financial position to make sizeable investments to benefit the likely economic upturn. He said a long term policy to position Sri Lanka’s tourism industry to benefit from the end of the conflict is important, particularly in a highly competitive global tourism industry. ‘A long term policy is necessary to ensure sustained growth. Whether it be infrastructure, tourism or some other area, it is important that we develop a long term plan for that industry and implement it well.”

In the leisure sector, Mr. Gunewardena said the company has committed to invest US$50 million in the last six months alone. “With our balance sheet and track record, raising capital is not an issue for the John Keells group and we will be looking at substantial investments over the next three years subject to the viability and approvals being obtained for such projects.” He added that with the positive developments in Sri Lanka, a lot of the focus now is on investments in this country. “However, we continue to evaluate opportunities overseas as well in the leisure sector and in other sectors. There is no specific overseas investment that I can comment on at the moment.”

JKH has seen a big upturn in occupancies and room rates in its resort and city hotels in Sri Lanka. “We have refurbished and re-branded Trans Asia hotel as Cinnamon Lakeside, refurbished and re-branded our Trincomalee hotel which will open as Chaaya Blu in mid May and one wing of the Cinnamon Grand is currently closed for refurbishment,” Mr. Gunewardena said. “We expect that in the next two years, all our other hotels in Sri Lanka will go through some form of refurbishment and upgrade. In addition to this, we plan to build a 190 room hotel in Beruwala on 10 acres of prime beach front land.”

The company is expecting tourist arrivals to Sri Lanka to grow rapidly in the next few years and new capacity will be needed. “We plan to build at least 200 new rooms a year on land that we own or land that we may acquire in the future,” he said. “Further investment in upgrading our infrastructure will be critical to facilitate the economic boom that we all expect. It is encouraging to see the progress already made on this front, in particular the development of the road network.”

In terms of the company’s property development sector, Mr. Gunewardena said they are seeing a pick-up in demand for apartments. JKH has a substantial land bank in the heart of Colombo and plans are in place to commence development as the market picks up. “In any fast growing economy property prices increase. We have not seen a big pick up since the end of the war, but I think an uptick in prices is inevitable as the economy goes into a post war high growth phase.”

Mr. Gunewardena also commented on JKH’s operating model, describing it as unique in the local context as the company has a broad shareholder base, a board where are a majority are independent directors and professional management. “Our governance structures are comparable to the best in the world and we are uncompromising on our values when pursuing our business goals. This is reflected in the premium valuation that investors place on the JKH share.”

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