Browns Capital PLC (FLCH) formerly known as Free Lanka Capital Holdings has heavy stakes in plantations which have been running at a loss. Only fair value gains of biological assets were helping positive EPS for some quarters. After disappointments to the shareholders, the stock was trading at 0.90/- till early this week when news of a sale of stake prompted the price to double in the next couple of days.

FLCH as a group had 3.79/- per share of net assets and  2.07/- at company level as at 31st December 2016. FLCH has 55% stake of FLMC Plantations (Pvt) Ltd which was carried in the company balance sheet at Rs. 600m. A 45.1% stake had been divested to 3 different companies believed to be part of the Damro Group for a staggering Rs. 4.7b. That amounts to 3.43/- cash per share (before taxes) which is huge compared to the share price.

After some profit taking by the long standing shareholders who would have realized more than 50% profit from the position a week ago, the price settled at 1.50/- which can still be considered a bargain.

Question remains, will the shareholders get a fraction of this proceeds as dividends? On another note, WHT on dividends will be 14% from previous 10% with effect from 1st April 2017

Tags:
About Author: LankanInvestor