The Morning Leader - 29.12.2006

FCEPL taps Malaysian, US investors

First Capital Equities (Pvt.) Ltd. (FCEPL), one of five new stockbroking firms to enter the market recently, has done well since the little over a month period that they have been into trading, with the monies made thus far sufficient to cover for their operational costs till the year-end. The company operates from the World Trade Centre in Colombo.

First Capital is an associate company of Singer Sri Lanka, by virtue of the fact that First Captial Ltd. (FCL), a primary dealer, in which Singer has a 50% stake, has in turn a 40% equity stake in FCEPL.

FCEPL Managing Director (MD) Rohan Goonewardene (33) in an interview said that as per their mandate, they are seeking to attract new players to the market, while at the same time trying to provide the market’s existing clientele a "value for money" service.

"Ours is a stewardship and we have to execute our responsibilities to the client who pays us," said Goonewardene. The brokerage fees which are regulated are 1% net of taxes in the case of transactions that are below Rs one million and 0.8% for those which are over a million.

"We have a number of high networth individuals (HNWIs) and institutions that are among our clientele," he said. Some of them, due to their loyalty to Goonewardene, has stuck only with him and gone with him, in the few other stockbroking firms he had worked before, prior to joining FCEPL.

Goonewardene said that in their thrust to inveigle more players into the market, they are trying to tap the Sri Lankan community living in certain parts of the USA. "That is being done through my cousin Ranjan Hulugalle (jnr.) who is domiciled in the USA," he said.

Hulugalle is also a director at FCEPL by virtue of the fact that he and Goonewardene who have floated a company called Guardian Equity Ltd., has a 30% stake in FCEPL.

The target areas are Las Vegas, Los Angeles and San Diego. "We have got Sri Lankan doctors in those areas to invest in the market and they have actually profited from their investments by trading in their shares," he said.

"Despite the fact that our country has been at war for over 20 years, our institutions, such as the legal and democratic systems are strong and the blue-chips have been fairing well due to sound management, this is the story that we have to tell investors," he said.

Goonewardene who has an MBA from Webster University, UK, has some over 20 years experience in dabbling with the stockmarket.

"My introduction to the market began when I was 10 years old, when an uncle of mine presented me with 1,000 CIC shares," he said. Goonewardene also has had overseas exposure in the trade, having worked for Barclays Global Investors, UK, said to be the biggest fund manager, in terms of managing investments of corporates.

"But my heart was in Sri Lanka, that’s why I decided to return," he said. "When considering the PE ratio (PER) of certain companies, I realized their potential, especially if there was a marginal improvement in the country’s security climate," said Goonewardene.

FCEPL also operates through a network of international agents. "There are around 20 Malaysian high networth individuals (HNWIs) who have queued up to invest in the market," said Goonewardene. But the problem is to satisfy the voluminous amount of information required by the Colombo Stock Exchange’s (CSE’s) Central Depository System (CDS) after the passing of recent legislations in order to detect money laundering, he said.

The CDS requires such things as proof of residence and utility bills before registering accounts in the CDS for the purpose of investment in the stockmarket, he said. Besides, under the new laws, monies into the country have to flow in through reputable banks.

Other areas that FCEPL is seeking to tap are certain places of Colombo’s commercial centres and the outstation.

"We recently had a successful seminar at Kandy by which we were able to bring in a couple of investors," Goonewardene said. "We also plan to open offices in Singer Mega centres," he said.

Unlisted companies are another target of Goonewardene’s. FCEPL is currently working with two financial services companies in order to get them listed. "The difficulty is that these people have a fear that if they go for a listing that they would lose control of the company," said Goonewardene.

Family owned companies are also in his radar screen. Some of these companies have a good brand value, but their accounts are in a mess, he said. "We have only got one or two companies listed for the year so far.

Our portfolio of blue chip companies is also limited. When we go overseas for road shows it the same old blue-chip companies, some 10 or so in number that we have to tout over and over again," Goonewardene said.

He also said that they are in the process of introducing internet trading by the year end. "Abroad, HNWIs are provided with a personalized service, while internet trading is for retailers, but here, the prestige tag is attached to web based trading," Goonewardene said. Under stockmarket conditions, new stockbroking firms have to have a minimum Rs 50 million capital (out of which FCEPL had to pay Rs 28.75 million to the CSE, being the once and for all entry fee with VAT payable to the government ).

FCEPL’s directors are Hemaka Amarasuriya (chairman), Rohan Goonewardene (MD), B.R.L. Fernando, Ranil Pathirana (who is also the finance director of the Hirdaramani Group), Maninda Wickremasinghe (who is also the MD of FCL) and Ranjan Hulugalle (jnr.). Its shareholders are FCL (40%), Guardian Equity (30%), Raj Rajaratnam (15%) and the Hirdaramani Group (15%).