Tuesday, October 16, 2018

So there are buyers queuing up for JKH, but they are being put off by the uncertainty and corruption of the State

Read this excellent link below on the state of play of JKH, whose share price has tanked due to the international interest rate meltdown that has immediately lead to the 10% drop in the rupee vs the US dollar, to say nothing of the rupee price itself delivering a double whammy blow to existing investors, fearful of further losses, and who want to exit now to minimize the drop in their portfolio values.


There are a few conglomerates who see an opportunity, which if the SL Government was SMART would welcome them as it would mean an immediate infusion of US$2.5B into the Country.

This is to say that smart investors now see value in JKH. They are willing to go up to US$2.5B to buy the group. They know they can break it up, into its parts and float them away, making the Sri Lanka Stock Market more liquid in the rush, and have their value increase to US$4B.

Remember this is 250% of the current share price and CURRENT INVESTORS TO A MAN WILL SELL.

So what is the problem?

Simple, some jokers in Govt. want bribes to allow them to do this, and the payer is not allowed to pay bribes, however it is sugar coated as it is illegal in their own country anyway. 10% or US$250M was bandied about, but they will not even countenance a penny. Just sell to existing shareholders, who cash out, this company looks at all the Companies and decides how to carve it up, to maximize value and sell at least 50% of the shares to the public and overseas on a much better performance budget, while the fat is all taken out.

What is standing in their way are the labor laws about compensation for firing the useless baggage called staff who are not pulling their way. The inability to put foreign managers to run the newly carved out businesses for a year to be able to make them attractive entities to float.

They don't want lawsuits and delays and state intervention to intercede, as the whole deal is one that needs a minimum of delay so that in one year all new entities can be hived off, creating about 25 different stock market entities out of JKH.

This frankly is the best thing that can happen to JKH as existing investors will have the funds to do as they please, with local investors also then getting funds to grow their businesses or invest in the new businesses thus created.

Making a company more efficient will help that company grow, be it in the hospitality business, or retail, or internet sales, incentivising performance and not old age or service. these lean businesses that hitherto had hopeless time serving management who only wanted their salaries cars and perks, but who were inherently lazy have no time in a business that needs to grow double digits.

This foundation can then create companies that in 4 years will be worth at least US$20B, and the economy, the investors, the foreign investor who is willing to do this, if he is given cast iron guarantees will all luck out including the new management who will be rewarded by options.

Hitherto, JKH had been led by a bunch of goons for their own benefit, who have not added an iota to the value of JKH in their tenure, and have helped themselves to illegal stock options, at the expense of the real workers and investors who see their shares drop in value.

So this is a plea to the Island Mentality Government to make it clear that they are open to a take over bid for the whole group and they will not stand in the way and further more permit it to happen in 30 days the time investor needs, as they are not willing to entertain any delays.

This will prevent the oligopolistic inefficiency with NO inward foreign investment that will result and will just run the companies to the ground as their intentions are purely greed and not to add value to the economy.

So Govt. of SL it is your call to make the statement loud and clear that you will not stand in your way 


  1. Unfortunately the SL Government does not have people with the grey cells that will work to save this Country from currency depreciation. They only have grey cells to personally profit from these transactions. This is a clear case of a value investor wishing to make an inefficient and corrupt company more efficient, more transparent and more investor friendly by breaking it up to strategic entities to maximize value, something JKH has singularly failed to do to its existing long suffering shareholders both in SL and overseas.

    It has been a case of past and present directors brazenly paying themselves stock options at the expense of everyone else, due to the badly mismanaged nature of the group.

    Look at the cost of Cinnamon Life, the biggest investment in the history of Sri Lanka by a private entity. It is simply a botched up disaster.

    They needed the Crown Casino to make economic sense and now they are struggling, and only a foreign investor with sufficient clout to dictate to a wretchedly incompetent SL Government can change things if the fools in the Government realize they are in fact fools, and allow competent people to take over to save their behinds from an even worse fate of the Rupee dropping to Rs300.

    Frankly this is the opportunity to redeem Sri Lanka and prevent total disaster and it is time the leaders open their arms and accept this investment opportunity without delay

  2. This is the classic model that has taught foreigners NOT to invest in Sri Lanka, in the stock market as exiting is fraught with risk and potential disastrous. So no wonder then that there is an investor for JKH who wants to buy the whole company as a business deal, take it apart and sell it in 50 units, hopefully all in the Stock Market by listing them, so that they recover their investment in full, and depending on market conditions, have a profit also, but at the same time still hold 50% in the companies that they bring into the market, so they will one day be able to reap the rewards of this investment, a smart move.

    Our business men cannot see this. They are simply asset strippers and so will not make the gains that an experienced foreign investor can. That is why our entrepreneurial class is still in its infancy, as greed and corruption are in the forefront and real business ethics and long term growth still a swear word in their vocabulary.

  3. Forget the Government in this, it is the self same Oligarchs who will pressure the Government to stop this sale, as they are the one's who stand to lose, and they don't want to see their gravy train stopping. They have no interest in improving the efficiency of the economy at all. Only picking up a few bargains, so they can exert monopoly power and pricing working against the consumer.

  4. Sri Lanka is a rogue state, so ethical and honest buyers will deal with a corrupt regime, and that is to say until the political atmosphere completely changes to bring trust back into the system.

    For that to happen all the existing players in Govt. and opposition, in short all in parliament have to change for confidence to return. So it is time for all Parliamentarians to say that they will not seek re election in the National Interest and give new people with minimum entry standards a chance to show that transparency and good governance can allow FDI without corruption so the economy can grow, otherwise there is no hope for Sri Lanka