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Future upside prompts Dilith to buy 10% stake in HVA Foods for Rs. 300 m

Aug 29, 2011 3:55:32 PM - www.ft.lk

High net worth investor Dilith Jayaweera yesterday described the 10% stake bought in HVA Foods Plc for Rs. 300 million as strategic given the upside.
“I see great value in HVA Foods considering some of the initiatives undertaken in China in promoting its Ceylon tea brands as well as other plans. It was bought for strategic reasons and not for immediate trading,” Dilith told the Daily FT last night.

The stake amounting to 6.64 million shares was bought at Rs. 45 each via Dilith’s pure investment arm Divasa Equity Ltd from HVA’s 70% controlling shareholder HVA Lanka Exports Ltd.               

Soon after the transaction went through many perceived it to be a ‘home and home deal.” Divasa Equity Director Varuni Amunugama Fernando also serves on the Board of HVA Foods.
HVA Foods, which has had a sensational two weeks of late, was the star yesterday as well with 25.2 million of its shares changing hands via 5,420 trades for Rs. 1.09 billion. It peaked to an all time high of Rs. 46.40 before closing at Rs. 44.80, still up by Rs. 6.30 or 16%.
Analysts said that the market had got wind of an impending deal though not necessarily involving Divasa hence HVA price gained after trading began opening at Rs. 39.10 which was its lowest. Net Asset Per Share of HVA Foods is Rs. 13 and in 2010/11 financial year earnings per shares was 69 cents.
HVA Foods’ turnover in FY11 was Rs. 561.6 million, up by 15% whilst gross profit dipped by 13.7% to Rs. 80.6 million and pre-tax profit in a similar percentage to Rs. 48.3 million. Net profit was down by 15% to Rs. 46 million over 2009/10’s figure of Rs. 54.2 million. In fourth quarter of FY11 bottom line was down by 37% to Rs. 8.3 million whilst turnover grew by 6.5% to Rs. 146.6 million.
HVA Foods which offered 19.9 m shares through an Initial Public Offering priced at Rs.16 per share in January, manufactures and markets value added tea based products, tea extract based products, tea concentrate based products and operates franchises.
Apart from deal involving HVA Foods, the rest of the market remained lacklustre. The ASI slipped 0.23 % and the Milanka Index edged up 0.01% whilst turnover was healthy at Rs. 2.6 billion.

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