ERI is controlled by Lionhart Investments, a privately held firm. It is offering one new share for every two held at 30 rupees to raise over two billion for ‘various investment opportunities in both Public as well as Private Assets in Sri Lanka and abroad’.
ERI shares closed trading at 236.25 rupees on Tuesday although net assets per share were only 17 rupees at the end of the 2009 December quarter.
"It’s the lack of transparency and information… we need to see some solid numbers to recommend a stock based on fundamentals," says Saminda Weerasinge, research manager at Acuity Stockbrokers.
He says they are keen to know more about ERI’s business plan, its strategy and what they plan to do with the money being raised.
Environmental Resources Investments' capitalization now tops 32 billion rupees ranking it the tenth largest stock on the Colombo stock exchange ahead of firms like John Keells Hotels, Nestle, DFCC Bank, Chevron and NDB.
"We have asked questions and we are awaiting answers and till we see clear value we will wait," says John Keells Stockbrokers research head Chinthaka Ranasinghe who’s request for a meeting with a top manager of the firm is yet to be granted.
"There are two schools of thought; some people think it’s a money spinning operation while others think their investments are great," explains Acuity's Weerasinge.
ERI acquired a leather goods company followed by a local stock brokering firm. An ERI controlled firm Environmental Resources Limited (ERL) operating out of the British Virgin Islands is acquiring platinum mining interests in South Africa, the firm has said.
“We don’t believe it’s a fundamentally strong stock and believe there could be market manipulation going on,” says Asia Security’s Sanjitha Rajasekaran who heads research at the Asia Capital controlled firm.
“We don’t recommend investors get in to this stock,” she says.
Lionhart Investments owns a controlling 91-percent share of the firm's voting stock and would invest 1.9 billion rupees if they took up their entire rights entitlement.
“The government has to ensure the money is clean and its purposes’ are nothing more than investment,” argues a stockbroker who is not recommending his clients buy ERI shares.
“The board and senior management of the company are not visible as in other companies of similar capitalization,” says the broker who didn’t want to be named.
The market watchdog, Securities and Exchange Commission, earlier this month started probing the sharp increase in ERI’s share price.
ERI has two classes of warrants which have also moved up. The firm's 2010 warrant gives the holder the right to buy an ordinary share at 22 rupees. Its 2011 warrants give the holder the right to buy a share at 24 rupees.
“They can do a press conference or allow analysts to speak to them,” says Acuity’s Weerasinge who estimates around six percent of ERI’s shares are being regularly traded.
Meanwhile in a market disclosure the firm said none of its main shareholders have disposed their holdings and claimed "no knowledge of any material facts which are undisclosed which could be reason for the increase in the share price of the company.”
The ERI statement also said all its activities and flows of foreign funds into the company are in strict accordance with the laws and regulations of Sri Lanka.
1. The share price increase in the recent past did not happen only in GREG but what about the other comapnies such as DIMO,MTD Walkers,Lanka Cement, Hotel Developers all these comapnies should be investigated.
2. All the activities of GREG have been with the approval SEC and the exchange control why did they not ask questions or investigate at that time until the stock whent up.
3. GREG Directors have made clarifications in the media about the comapny as well published accounts . They have also taken over listed comapnies such as Ceylon leather and made it to profitable ventures. HNB Or DNH are stockbrokers linked with the CSE.Investing in Namal fund which is also a listed . are the information provided by the comapny.
4. The directors are well respected individuals who have served public, private and diplomatic institutions and they would not allow their reputaion to be tarnish.
Why is that all the newspaapers, few stockbrokering firms continously making statements on GREG only, including LBO why dont they write about the other comapnies which have not published accounts for the last 12 years. Some comapnies dont even exsist or publish accounts but are not written nor they are investigated.
My point is the SEC should adopt preventive measure's so that invesrtors are kept informed prior to making decsions. This goes thrue for the 4 firms who's names are metioend herein who i belive have clients who hold the same stock.
The other point is that continuously appreaing in the media is foreginers are net sellers, again this gives negative sentiments to small investors who the SEC should protect. Last year when the CSE became the 2nd best performing market it was mainly driven by local investors and not forigen investors who have continously pumped in 1bn turnover levels and kept the momentum.
Why dont the media or SEC talk how many new investors have been registered and the increase in confidence levels of the locals in the markets. The locals are here to stay and belive in the revival of the economy unlike to foriegners who are only to make quick profits.
I hope that the CSE and the Media act with more responsibility and safe gaurd the interest of the small sri lankan investors.
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