Wednesday, 18 July 2018

Sri Lankan shares fall; foreign selling continues

Reuters: Sri Lankan shares slipped on Wednesday from their highest close in nearly three weeks recorded in the previous session, as investors sold diversified and telecommunication shares.

Foreign investors sold net equities worth 34.1 million rupees on Wednesday, extending the year-to-date net foreign outflow to 2.7 billion rupees.

The Colombo stock index ended 0.31 percent weaker at 6,160.69.

“There is some profit-taking while foreign selling is still continuing,” said Dimantha Mathew, head of research, First Capital Holdings.

“We see some local buying slowly coming in to the market which is a good sign.”

Turnover stood at 543.8 million rupees ($3.40 million), less than this year’s daily average of 892.3 million rupees.

A downward revision in economic growth estimate by the central bank has also hurt sentiment, analysts said.

Economic growth in 2018 is likely to be between 4 percent and 4.5 percent, falling short of an earlier estimate of 5 percent, Central Bank Governor Indrajit Coomaraswamy said early this month.

Shares in Dialog Axiata Plc fell 1.4 percent, while conglomerate John Keells Holdings Plc ended 1.1 percent weaker and Melstacrop Ltd lost 2.2 percent. 

($1 = 159.8000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Vyas Mohan)

Tuesday, 17 July 2018

Sri Lankan shares rise to 3-wk high on foreign buying

Reuters: Sri Lankan shares climbed to their highest close in nearly three weeks on Tuesday, with foreign trading accounting for about 40 percent of the session’s turnover.

The Colombo stock index ended 0.8 percent firmer at 6,179.88, its highest close since June 29.

“Heavyweights helped the market recover sharply today. We have seen value picking,” said Hussain Gani, deputy CEO, Softlogic Stockbrokers.

“The foreign trade helped the sentiment to improve.”

Turnover stood at 454.9 million rupees ($2.9 million), around half of this year’s daily average of 892.3 million rupees.

Foreign investors bought equities net worth 7.2 million rupees on Tuesday. But they have been net sellers of 2.6 billion rupees worth equities so far this year.

Shares in conglomerate John Keells Holdings Plc rose 3 percent, while Distillers Company of Sri Lanka Plc ended 0.5 percent higher. Dialog Axiata Plc closed 2.1 percent firmer, and Sri Lanka Telecom Plc gained 2.9 percent. 

($1 = 159.7000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)

Monday, 16 July 2018

Sri Lanka's Commercial Bank debt issue raises Rs10bn fresh Basel III capital

ECONOMYNEXT - Sri Lanka's listed Commercial Bank successfully raised 10 billion rupees in fresh capital on Monday to be compliant with Basel III rules, the bank said.

Commercial Bank had offered 50 million listed rated unsecured subordinated redeemable debentures at 100 rupees each to raise 5 billion rupees to raise Basel III capital.

It exercised an option to double the issue upon oversubscription and raised a further 5 billion rupees.

The bank said it received applications for over 100 thousand debentures and closed the offer on Monday.

The basis of allotment will be notified later, the bank said in a Colombo Stock Exchange filing.

Sri Lankan shares slip from 2-week high

Reuters: Sri Lankan shares edged lower on Monday from their highest close in two weeks in lighter-than-usual trading as foreign investors sold stocks.

The Colombo stock index ended 0.12 percent weaker at 6,130.62, slipping from its highest close since June 29 hit on Friday. It rose 0.5 percent last week, its first weekly gain in eight weeks.

“Today we saw some profit taking. There was some selling by those who managed to buy at the bottom,” said Dimantha Mathew, head of research, First Capital Holdings.

“There is not much of selling pressure. So we don’t think this selling will continue for long time.”

Turnover stood at 304.1 million rupees ($1.9 million), around a third of this year’s daily average of 895.8 million rupees.

The benchmark stock index hit its lowest close since March 30, 2017 on July 4, and has declined for 20 sessions in 27 through Monday.

A downward revision in economic growth estimate by the central bank has hit sentiment, analysts said.

Economic growth in 2018 is likely to be between 4 percent and 4.5 percent, falling short of an earlier estimate of 5 percent, the central bank’s governor, Indrajit Coomaraswamy, said early this month.

Foreign investors sold equities net worth 177.7 million rupees on Monday, extending the year-to-date net foreign sale to 2.6 billion rupees.

Shares in Cargills (Ceylon) Plc fell 3.7 percent, while Lanka ORIX leasing Co Plc lost 3.6 percent. The biggest listed lender Commercial Bank of Ceylon Plc closed 1.5 percent lower.

Investors are waiting for some positive news both on the economic and political front, said analysts, adding that the government’s policy implementation had been sluggish since both main parties in the ruling coalition lost local polls in February.

The International Monetary Fund said on June 20 that Sri Lanka’s economy remained vulnerable to adverse shocks because of sizable public debt and large refinancing needs. 

($1 = 159.7000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)

Saturday, 14 July 2018

Two-month production disruption hurts Alumex 2017/18 results Leading aluminum extruder sees building boom prospects down the road

Alumex PLC, the Hayleys subsidiary which is the country’s leading aluminum extruder, posted below target results in terms of both revenue and profits in the year ended Mar. 31, 2018 but is poised to take-off with a new state-of-the- art production facility at Ekala enabling an additional output of 1,000 mt., the company’s annual report said.

"This will undoubtedly enhance the company’s position as the leading aluminum extruder in Sri Lanka, both with a higher capacity and higher quality of products, enabling the company to capture the premium market segments in both Sri Lanka and the South East Asian region," Alumex Chairman Mohan Pandithage said in the company’s recently released annual report.

A fault in the main extrusion line discovered during a plant refurbishment program at the beginning of the financial year resulted in the loss of 750 mt. production capacity. Although production returned to normal within a short time, sales did not recover at the same pace as the overall demand for aluminum products in the construction industry declined in the latter half of 2017, Pandithage said.

"In this backdrop, our marketing strategy had to be reassessed to suit the competitive environment. These changes, together with the increased demand saw a return to profitability in the last quarter of the financial year."

With the GDP from construction expected to grow seven to eight percent in the next few years a consistent demand for aluminum extruded products is projected and with the strategies the company has in place, it was well positioned to restore the momentum of its business, he said.

The year under review saw the company’s turnover down 5% to Rs. 4.5 billion and the group profit after tax down 52% to Rs. 364 million from the previous year’s Rs. 753 million. Net assets per share were down to Rs. 7.53 from Rs. 7.74 and a dividend of Rs. 1.05 per share was paid, down from the previous year’s Rs. 1.45.

Managing Director Rohan Peris said that their having to keep the main extrusion line out of production for two months compounded an unfavourable market situation. There was also an unforeseen downturn in the growth of the construction industry. Curtailing production led to delays in completion of orders and delivery resulting in reduced sales and a drop in market share although they retained their market leadership.

Their upgraded production facility at Ekala will gear the company to supply aluminum extrusion to upcoming large scale infrastructure projects, both ongoing and in the pipeline. These include the Megapolis, Port City, multi-storey luxury hotels and apartments and commercial mixed development projects.

Alumex has a stated capital of Rs. 283.7 million, reserves of Rs. 665.5 million and retained earnings of Rs. 1.3 billion in its books. Total assets ran at Rs. 6.4 billion and liabilities at Rs. 4.15 billion.

Hayleys with 52.59% of the company is the controlling shareholder, followed by Akbar Brothers (13.50%) and Rosewood (Hirdaramani) 9.80%. Dean Foster, a Hayleys subsidiary owns 4.75%.

The directors of the company are Messrs. Mohan Pandithage (chairman), RP Peris (MD), DWPN Dediwela (COO), SC Ganegoda, RP Pathirana (alternate AJ Hirdaramani), AA Akbarally (alternate T. Akbarally), Dr. H. Cabral and S. Munaweera.

Browns seek shareholder nod for rights issue as market price slumps below issue price

Old established Brown and Co. PLC has summoned an extraordinary general meeting (EGM) of shareholders on Tuesday (July 17) to seek their approval for a rights issue of 141.75 million ordinary shares of the company, in the proportion two new shares for every share already held priced at Rs. 50 a share.

A circular to shareholders indicated that funds to be raised by the rights issue, to be underwritten without charge by Lanka Orix Leasing Company PLC (LOLC), is intended to settle outstanding borrowings of Rs. 7.087 billion (approx) of a total of approx. 7.094 billion due as at June 1, 2018.

A substantial component of the company’s borrowings as at May 31 is due to related parties with approx. Rs. 6.66 billion due to related parties while approx Rs. 10.03 billion is due to other parties.

Although the Brown’s share traded at highs ranging from Rs. 74.50 to Rs. 73.20 and lows of Rs. 68.50 to Rs. 55.50 in March, April and May, the current downturn in the Colombo Stock Exchange has driven the share below the fifty-rupee rights issue price.

The share closed on Friday at Rs. 48.50 with a small quantity of 672 shares trading between this price and Rs. 50, and closing at Rs. 48.50.

The shareholder circular said that LOLC is currently the ultimate holder of 54% of Browns shares through various related companies while owning 4.77% in its own account. It further said that if, resulting from the underwriting, LOLC were to hold above 30% of Browns, the mandatory offer provisions of the Company’s Takeovers and Mergers Code will not apply to LOLC.

Browns plan to dispatch provisional letters of allotment on July 24 upon receiving shareholder approval for the rights issue at the EGM.

Browns have paid no dividend for 2017/18, a dividend of 50 cents per share the previous year and 30 cents per share a year earlier. In 2014/15 it paid a dividend of Rs. 2.65 a share according to figures furnished in the rights issue circular.

Asset rich John Keells Hotels looking at leaner expansion model Bentota Beach closure & part closure of two Maldives resorts impact on profits New Cinnamon Red in Kandy

John Keells Hotels PLC. (KHL), one of Sri Lanka’s largest hotel operators owning and managing a portfolio of 1,204 four and five-star rooms in 10 hotels across Sri Lanka and the Maldives saw a decline in both revenue and profitability in the year ended Mar. 31, 2018, with revenue down to Rs. 11.6 billion from the previous year and after-tax profit down to Rs. 1.1 billion from the previous year’s Rs. 1.86 billion.

The company’s chairman, Mr. Susantha Ratnayake, attributed the decline to the complete closure of Bentota Beach by Cinnamon for redevelopment and the partial closure of Cinnamon Dhonveli Maldives and Ellaidhoo Maldives by Cinnamon to facilitate refurbishments.
"The closures resulted in KHL recording a profit before tax of Rs. 1. 35 billion for the financial year ended Mar. 31, 2017, a decline of 40% over the previous year. Excluding the impact of the closures, KHL recorded a satisfactory performance given the increased room supply in the informal and graded sector, particularly in the coastal areas of the country," Ratnayake said.

The company which claims to be Sri Lanka’s hospitality trendsetter commands assets of Rs. 33.2 billion and a net asset value per share of Rs. 18. It posted 81% occupancy in the Sri Lanka sector, up marginally from 80% the previous year, and 82% in the Maldives, down from the previous year’s 89%.

Ratnayake said that Sri Lanka’s tourism sector recorded a subdued 3.2% growth in 2017 to 2.1 million arrivals against the robust 14% in 2016 falling short of the government’s target of 2.5 million arrivals. This was due to three month partial closure of the BIA for renovations and travel advisories from key markets due to floods, dengue and the declaration of a 12-day State of Emergency.

Maldives had recorded 1.39 million tourist arrivals in calendar year 2017, up 8% over the previous year. Arrivals were impacted by the unfavorable political climate in the country resulting in travel advisories being issued from key source markets including China, USA, UK and India. But Russia had recorded a strong recovery in outbound travel to the Maldives growing 33.1% over the previous year with nearly 62,000 arrivals.

Ratnayake said that the redevelopment of 159 rooms and Bentota Beach is ongoing with the hotel due to recommence operations next year. Exceptional expenses at Bentota Beach included an asset write-off and a voluntary retirement scheme expenses.

Looking at the outlook for the future, he said that the government has targeted 2.5 million arrivals this year with traffic from India expected to reach 450,000. The Sri Lanka Tourist Proportion Bureau is focusing on increasing awareness of Sri Lanka as a destination promoting film tourism, destination weddings, MICE (meetings, incentives, conferences and exhibitions) travel and religious and pilgrimage related travel to position Sri Lanka as a ‘destination for all seasons.’

"The group has strong conviction on the long-term growth prospects of the industry and is actively pursuing investment opportunities and partners to expand the Cinnamon hotels portfolio," Ratnayake said.

"The group is conscious of the high asset base of the industry group and in this light, in line with global trends, the group’s future expansion will be executed through asset-light models."

He also announced that they will strengthen their Sri Lanka presence and have made plans to commence construction of Cinnamon Red in Kandy with a room inventory of 210.

JKH with 80.32% of the company, followed by the EPF (5.39%) and the Sri Lanka Insurance Corporation’s Life Fund (4.80%) are the largest shareholders of Keells Hotels. All other shareholders individually own less than one percent.

The share traded at a high of Rs. 11.90 and a low of Rs. 8.30 during the year, closing at Rs. 9.30. This compared to a trading range of Rs. 13.50 to Rs. 9.80 closing at Rs. 10 the previous year.

The directors of the company are Messrs. SC Ratnayake (chairman), KNJ Balendra, JGA Cooray, JR Guneratne, JEP Kehelpannala. BJSM Senanayake, NB Weerasekera and Ms. AK Moonesinghe.