March 12, 2019 (LBO) – Colombo Stock Exchange listed East West Properties (EAST) has reported a crippling loss which has almost wiped out the entire equity of the firm.
The group, which is the controlling shareholder of the Marriot hotel in Weligama, is suffering under a crippling debt load of over close to Rs6bn. It is unclear based on the asset base of the firm, and the repeated quarterly losses ,how this debt will be continue to be serviced.
In the quarter ended December 2018, the group lost close to Rs400mn, and lost over Rs1bn for the previous nine months. With the hotel industry down south moving into the off season, it is doubtful that these losses will stop.
The current balance sheet of over Rs7bn is now being supported by equity of approximately Rs300mn as of December. It is a possibility that by the end of the current quarter, there may be no equity left.
The independent auditor has issued a report concerning an emphasis of a matter of going concern.
The company just posted a disclosure of an Extraordinary General Meeting (EGM) where they hope to approve the sale of the company owning the Marriot Hotel in Weligama ‘at the best possible price’. Since this is a major transaction, it needed to be approved at an EGM by shareholders.
Just yesterday there was an unusual flurry of trading and a spike in the share price (EAST). Despite having a net asset value of just Rs2.5/share, the stock is trading at close to Rs18.
East West is owned by the Wijesuriya family. Shares in the company were relatively recently transferred from Nahil Wijesuriya to his children who are the largest shareholders in the company as of the last shareholder list filed with the December quarterly accounts.