Financial Times

Top ‘dogs’ crash in the market

Three of Colombo ‘top-of-the-pops’ stocks – Dialog, Distilleries and John Keells (JKH) -- have shown disastrous prices in recent times for different reasons, brokers said.

“The telecom industry’s future is not that bright due to the current price war and the impending competition from the fifth operator Airtel. This has impacted Dialog's margins,” a stock analyst said. He said Dialog’s share price has shown a downward trend during the past year mainly due to these reasons. "Investors are getting distracted by their television operation. They are worried about Dialog's core mobile operation which has come under pressure," he noted. In the past six months, Dialog’s share price has crashed 44.9 %.

Distilleries share price is falling purely in anticipation of the Supreme Court judgement due in its holding company, Sri Lanka Insurance Company (SLIC) in the case over the privatisation. The share saw a 28 percent drop during the past six months. "Their cash cow Lanka Bell also poses a concern. Investors are questioning whether the easy money has been made in CDMA phones," the analyst said. Distilleries has nearly 98 % in Lanka Bell.

In the case of JKH, reeling with controversy on the back of the Supreme Court verdict on Lanka Marine Services Ltd (LMSL), the company has seen all its business margins under pressure. "JKH now needs to compete with other players, compared to when they had the LMSL facility. This will shrink their margins from the earlier cash cow of LMSL," he said. He pointed out that during the first quarter 2008 the interest income in the company was Rs. 495.1 million, but during the same period last year, the income was Rs. 664.9 million. "As such the interest income margins are also shrinking," he said. JKH share price has fallen 32 % in six months.

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