Sri Lanka bourse at over 1-yr high on Keells; Hemas boosts turnover, inflows

(Reuters) - Sri Lankan stocks hit a more than one-year high on Wednesday, helped by strong foreign buying and a drop in yields of fixed income assets.

Stockbrokers said foreign investors see value in shares, while local investors are gradually shifting to risky assets from fixed ones.

The main stock index ended 0.89 percent, or 56.51 points, at 6,432.52, its highest close since June 4, 2013.

Turnover was 2.43 billion rupees ($18.7 million), about 2-1/2 times this year's daily average of 1.04 billion rupees.

Foreign investors were net buyers for a seventh straight session, buying 1.66 billion rupees of stocks on Wednesday and extending foreign inflows this year to 8.93 billion rupees.

Stockbrokers said foreign investors mainly bought into Hemas Holdings Plc.

"If foreign participation continues and there are no unnecessary hiccups, the market will continue to run," said a stockbroker asking not to be named.

Shares of Hemas Holdings, which accounted for 64.3 percent of the day's turnover, rose 3.17 percent to 45.50 rupees. Foreign investors bought 33.5 million shares of the company.

Brokers said state funds like the Employees Provident Fund (EPF) and Sri Lanka Insurance sold their stakes to foreign investors. They expect the state funds to buy stocks with the funds they got from Wednesday's dealings.

Conglomerate John Keells Holdings Plc rose 1.71 percent to 226.10 rupees, while Ceylon Tobacco Co Plc rose 2.18 percent 1076.30 rupees.

Analysts said foreign buying could continue due to lower inflation after government data showed annual inflation eased to 2.8 percent in June, its lowest since February 2012, down from 3.2 percent a month earlier.

The yields on treasury bills edged down further at a weekly auction on Wednesday.

However, analysts said investors are concerned over the recent ethnic violence and possible implications of a government spokesman saying Sri Lanka bought Iranian crude via third parties.

The market has been on a rising trend since late February due to continued foreign buying and lower interest rates. ($1 = 130.2500 Sri Lankan Rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Prateek Chatterjee)

Sri Lanka Treasuries yields steady

July 02, 2014 (LBO) - Sri Lanka's Treasuries yields were marginally down at Wednesday's auction though the debt office did not accept market bids to roll over all the offered volume, data showed.

The 3-month yield fell 01 basis point to 6.50 percent, the 6-month yield fell 01 basis point to 6.68 percent and the 12-month yield fell 02 basis points to 6.97 percent.

The office sold 1.5 billion rupees of 3-month bills, 1.0 billion rupees of 6-month bills and 6.8 billion rupees of 12-month bills totaling 9.4 billion rupees.

The debt office offered 10 billion rupees in bills for rollover.

Related news:

Singer Sri Lanka Rs1.5bn plan debt rated 'A- (lka)'

July 02, 2014 (LBO) - Fitch Ratings said it had given an 'A-(lka)' expected rating to a planned Singer (Sri Lanka) debenture issue of up to 1.5 billion rupees.

The senior unsecured debentures are rated the same as Singer (Sri Lanka) Plc.

Fitch said the 3-year fixed rate debenture proceeds will be used to refinance a 10 million US dollar floating rate loan falling due in July 2014.

The full statement is reproduced below:-

Fitch Rates Singer's Debentures 'A-(lka)(EXP)'

Fitch Ratings-Colombo/Sydney-02 July 2014: Fitch Ratings has assigned Singer (Sri Lanka) PLC's proposed senior unsecured redeemable debenture issue of up to LKR1.5bn an expected National Long-Term Rating of 'A-(lka)(EXP)'.

The debentures are rated at the same level as Singer's National Long-Term Rating of 'A-(lka)' because they represent senior unsecured obligations of the company and would rank equally with the company's other senior unsecured debt. The final rating is contingent on the receipt of final transaction documents conforming to information already received.


The debenture is to be issued at a fixed rate with a tenor of three years. Singer plans to use the proceeds from the issue to refinance the USD10m loan falling due in July 2014, and minimise its exposure to short-term floating rate funding.

KEY RATING DRIVERS

Margin Pressure: The National Long-Term rating reflects expectations of continued margin pressure. In 2013, Singer's margins came under pressure due to value-added tax (VAT) revisions and declining demand for consumer durables in a stressed macroeconomic environment. This contributed to higher leverage of 5.3x at end-1Q14 (annualised), up from 4.7x at end-2013 and 3.4x at end-2012. Although Fitch expects revenue will improve, margins are likely to continue to be under pressure as the company increases selling expenses to drive sales.

Strong Market Share: Singer is a leading consumer durable retailer supported by an extensive retail network of over 1,000 retail points, a diverse product portfolio and strong in-house brands. Singer's well-known in-house Singer and Sisil brands are competitively priced and cater to the mass market, providing the company with price-point diversity. Singer's strong reputation is illustrated by its ability to secure agency for new brands, including Beko, Grundig, Sharp and Lenovo, in 2013.

Well-Managed Consumer Loans: In-house hire purchase facilities, which financed about 45% of Singer's sales in 2013 (2012: 44%), make products more affordable and is in line with the mass market proposition of Singer's in-house brands. Singer managed to contain overdue accounts to 3.7% of the portfolio at end-2013 (2012: 2.3%), supported by average durations of less than a year and strong staff incentives for debt recovery, while write-offs were negligible.

Currency Risk: Singer mitigates foreign-currency risk related to imports through local production. Singer manufactures and locally procures close to 35% of products thorough related companies and local suppliers.

RATING SENSITIVITIES

Negative: Future developments that may, individually or collectively, lead to a negative rating action include:

- A sustained increase in Singer's leverage (measured as adjusted net debt/EBITDAR excluding Singer Finance) to over 5.5x (end-2013: 4.7x)

- EBITDA margin sustained below 7% (end-2013: 8%)

- A material weakening in Singer's (company-level) liquidity profile

- A material weakening of the credit profile of Singer's 80% subsidiary, Singer Finance

(BBB+(lka)/Stable), given the strong linkages between the entities

Positive: Future developments that may individually or collectively lead to a positive rating action include:

- Singer's leverage falling below 4.5x on a sustained basis

- EBITDA margin sustained above 10%

Sri Lanka stocks close up 0.9-pct

July 02, 2014 (LBO) - Sri Lanka's shares closed 0.89 percent higher on Wednesday amid strong foreign buying into Hemas Holdings, brokers said.

The Colombo benchmark All Share Price Index closed 56.51 points higher at 6,432.52, up 0.89 percent. The S&P SL20 closed 34.38 points higher at 3,577.94, up 0.97 percent.

Turnover was 2.43 billion rupees, down from 4.72 billion rupees a day earlier with 155 stocks closed positive against 47 negative.

Hemas Holdings closed 1.40 rupees higher at 45.50 rupees with nine off-market transactions of 1.51 billion rupees changing hands at 45.00 rupees per share contributing 62 percent of the daily turnover.

The aggregate value of all off-the-floor deals represented 66 percent of the turnover.

Orient Garments closed 7.80 rupees higher at 27.10 rupees, attracting most number of trades during the day.

Foreign investors bought 1.69 billion rupees worth shares, extending the year-to-date net foreign inflows to 8.9 billion rupees.

Foreign investors sold 31.39 million rupees worth shares.

Ceylon Tobacco Company closed 23.00 rupees higher at 1,076.30 rupees and John Keells Holdings closed 3.80 rupees higher at 226.10 rupees, contributing most to the index gain.

JKH’s W0022 warrants closed 70 cents higher at 62.90 rupees and its W0023 warrants closed 1.80 rupees higher at 73.20 rupees.

Commercial Bank closed 1.70 rupees higher at 143.70 rupees and Lanka Orix Finance closed 40 cents lower at 3.30 rupees.