The recent favourable judgment on Touchwood Investments PLC (Touchwood) by the Court of Appeal will see its share being traded by retailers, according to analysts.
Touchwood issued a statement to the Colombo Stock Exchange (CSE) saying that the Court of Appeal on January 26 quashed the decision of the Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB) who ruled against the forestry investment firm’s accounts, where it faulted both the company and its auditors for making 'unreliable' claims.
Arjuna Dassanayake, Vice President Acuitystockbrokers said that this share did go up to Rs 150 on low liquidity and high speculation in 2008, but the market was quite volatile at that time. “Now with stability in the market and favourable court decisions the high risk speculators can once again thrive on this share,” he said.
Touchwood has used an International Accounting Standard (IAS 41) on agriculture and brought tree growth numbers to its books using a fair market value principle. In 2007 February, SLAASMB told CSE that the valuations are not in accordance with the standard, and some young plants were valued at ten times the replacement cost. Some eight months later, in October, Lanka Orix Leasing Company gained control Touchwood.
Some say that Touchwood is ‘grossly’ undervalued. Sarath Rajapakse, Director Capital Trust noted that Touchwood has biological assets (mahogany trees). “These trees will grow come recession or not and they are getting closer to maturity,” he said. He said the net asset value of this share is slated to rise to Rs 200 levels this year. |
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