JKH increases stake in SAGT

John Keells Holdings has increased its control in South Asia Gateway Terminals (SAGT), the 1.4m TEU container terminal operator at the Colombo Port after acquiring the 7.5% stake held by the Commonwealth Development Corporation a cost of Rs.3.6 billion.
The company now has to 33.75% control of SAGT from 26.25% earlier, brokers said.

While SAGT is estimated to have contributed approximately Rs.800 million to JKH's consolidated earnings in FY06 (26% of group net profits), earnings growth has slowed down during the past year, despite an increase in container throughput, as much of the growth has been in lower margin transshipment traffic. Despite the consideration of Rs.3.6 billion appearing to be relatively high, “we believe that the price paid is a reflection of the longer term growth potential of SAGT, especially in the light of the company possibly being given the opportunity to develop a number of berths in the proposed new Colombo South Harbour,” C.T. Smith Stockbrokers said in reviewing JKH’s new deal.

JKH’s transportation sector reported a net profit of Rs 2.1 billion in FY06, accounting for 69% of group net profit.

“There is also the possibility of JKH further increasing its stake in SAGT with the recent changes in ownership in P&O Ports and P&O Nedlloyd B.V, who together own 26.25% of SAGT,” the report said.

The current ownership structure of SAGT is JKH 33.75 %, P&O Ports 16.25 %, P&O Nedlloyd B.V 10 %, Sri Lanka Ports Authority 15 %, Evergreen Group Taiwan 10%, IFC 7.5 % and ADB 7.5 %