Broker-directors beware; the regulator is watching you

By Duruthu Edirimuni Chandrasekera

Stockbrokers on director boards of listed firms are on the radar of the regulator, according to informed sources.They said that now with efficient surveillance, these directors are being watched and can be detected unlike earlier. In the past there was a ‘red list’ at the Colombo Stock Exchange (CSE) where names of brokers in listed company boards were entered. “They weren’t permitted to trade on the shares of those companies they were serving,” a source close to the CSE told the Business Times. He added that this measure was aimed at ensuring a transparent market and maintaining records.

But industry analysts point out that stockbrokers on director boards of listed firms are privy to insider information and that they can trade on the shares through another person (based on insider information) or disseminate price sensitive information to a third party. More than three listed firms have broker-directors. The CSE rules say that all employees of broking firms who deal with clients are barred from insider dealing or knowingly assisting such conduct, according to CSE listing rules. “But there’s nothing specific on stockbrokers on director boards of listed firms,” an analyst said. He added that with recent capital market developments, ‘best practice’ is just a buzzword. “How would anyone know that there hasn’t been insider trading?”

Officials say that at present it all boils down to how they conduct themselves. “They should have a hands-off approach where such a company is concerned,” an official told the Business Times. He said that the CSE is currently in consultation with the industry to carry out a total overhaul of their listing rules which will incorporate certain changes to stockbrokers on director boards of listed firms. He said the first draft of the SEC Act was completed recently and that these proposed laws would be armed with rules to counter such instances.

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Company owners in mad rush to beat deadline on new registration revisions

By Bandula Sirimanna

Hundreds of people made a last minute dash to the Department of the Registration of Companies (DRC) and the Department of Immigration and Emigration (DIE) to beat the deadline of new revisions introduced in the 2016 budget with effect from January 1. The 2016 budget has increased the company registration renewal fees and introduced an annual surcharge of Rs. 60,000 and Rs. 250,000 fee when cancelling the registration of companies. The budget has also increased the passport fee.

All those proposals have come into effect from January1 and a large number of people were seen in long queues at the two departments, eyewitnesses said.Registrar General of Companies D.N.R. Siriwardena told the Business Time that there was a sudden increase in the number of persons visiting the department for renewal of company registrations and cancellations as a result of the 2016 budget proposal and he had opened four additional counters during the past few days to cater to the needs of clients.

He disclosed that around 70,000 private companies have been registered with the department and a large number of firms were not submitting annual reports and other relevant details regularly.However an affidavit should be submitted by the owner of the company stating the company’s current status to prove that it was not functioning at present, he said adding that after perusing necessary documents, the department will have to take a decision to cancel the registration.
This process will take some time as the assessment will be made on a case-by-case basis, he pointed out adding that clients should not be hasty as the relevant circular and guidelines have not been received by the department as yet.A large number of company owners have converged on the department to make payments for the renewal of registration of their firms before the introduction of the new increased fees, he disclosed.

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Hotel sector sees good season, will witness better quarter

By Duruthu Edirimuni Chandrasekera

Public quoted hotels of some major conglomerates witnessed low profits in the past quarter but this quarter (Jan-March 2016) will show a rise in their bottomlines owing to a ‘good season’ this December, industry analysts say. Top gainers at the Colombo Stock Exchange (CSE) were hotels during some days last month, stockbrokers say. However they point out that most trades just add lots under 100 shares at most. “This may tantamount to ‘some’ price pushing, but it is also the anticipation (that hotels will do well this quarter),” a stockbroker added.

The increased supply of graded hotel rooms has led to severe price competition and margin erosion, has had a bad impact on the industry, analysts point out. According to them, gaming centered mix development projects would have raised the inbound numbers and more importantly, their spending profile. The number of smaller to midsized hotels is increasing around the country, which will lead to a mini price war whereby the existing operators will be forced to lower their room rates at the cost of occupancies in order to maintain yields, the stockbroker added, but said that since December has seen high occupancies in most hotels, the sector will do well. The government expects to attract 2.5 million tourists by next year. “With increasing tourist arrivals Year on Year (YOY) we expect positive trends to continue,” an analyst said.

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Lankan car dealers want more concessions

Sri Lankan car dealers are in talks with authorities for further concessions on duties imposed in the last budget, sources said. “Many car dealers are in discussion with the Ministry of Finance to reverse the taxes,” a source told the Business Times. According to him, they want the level of duty based on value of the vehicle (not) on engine size or fuel type and they say that it must be applied in progressive slab.Meanwhile Carmudi, an online vehicle classified website, has analysed thousands of its car listings from various Sri Lankan cities to find out about car mileages.

The research team gathered and compared averages of mileage based on brand, fuel type, as well as age, with cars ranging from two to five years old and had discussion with some 20 car dealers,” Firaz Markar, Managing Director Carmudi told the Business Times.The average mileage for cars in Sri Lanka was 38,500 km, which is 9 per cent lower than the average across Carmudi markets (42,000 km), according to the research. “The youngest cars averaged 23,000 km while 5 year-old cars reached an average mileage of 57000 km. The samples had dealers who deal with new cars, he said.

A factor leading to Sri Lanka’s lower average mileage may be a lack of roadways conducive to long-distance travel on the island. With over 70 per cent of traffic in the country being carried out on national roads, it is vital that they be well maintained, a Carmudi media release stated.Uncontrolled roadside development and substandard maintenance hinder traffic.” A good quality of interstate roadways is essential, as over 65 per cent of the country’s populace lives in the villages, making them dependent on interconnected roads, according to the release.

After investigating the effect of brand on mileage, the Carmudi team found that Japanese brands travelled the most distance before being offered on Carmudi.lk. Makes like Honda, Toyota and Nissan range between 31,000 km and 34,000 km. The highest mileage belongs to Suzuki with an average 47,000 km travelled, it added.“Carmudi looked at the effect of fuel type on mileage. The cars with the highest mileage run on diesel fuel, averaging 49,000 km. They are followed by hybrids (29,100 km) and petrol-fueled cars (22,000 km). The reason for diesel cars being driven the furthest, could be that diesel engines can be up to 15 per cent more fuel-efficient, encouraging longer commutes.”

Mr. Markar said that the low cost per kilometre associated with diesel vehicles is a key factor in the higher usage seen in these types of vehicles. “However, we expect to see hybrid vehicles overtake the usage levels of diesel vehicles in the future due to customers being able to gain similar mileage along with more environmentally friendly combustion. Average resale values for hybrid vehicles also tend to be higher than diesel counterparts. We’re glad to see this trend of getting more bang for the buck while also being more environmentally conscious,” he added.

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SL’s 2016 tourism strategy unveiled; 2.2 mln arrivals and $2.7 bln revenue

Sri Lanka Tourism this week unveiled its 2016 marketing strategy in which PR agencies are to be appointed to handle specific markets, arrivals are seen rising to 2.2 million and 500 agents and travel writers are to be invited on familiarisation tours.Revenue is also set to rise to US$2.75 billion, according to the tourism marketing plan for 2016, the Sri Lanka Tourism Promotion Bureau (SLTPB) said in a media announcement. Increasing average daily expenditure of a tourist up to $200 and uplifting Sri Lanka’s brand value up to $80 million through tactical marketing campaigns focusing on main product offerings of the county are among the plans.

File picture of a group of Chinese travel agents with their Sri Lankan partners.

PR agencies will be appointed in Europe, East Asia, Benelux and emerging markets “in order to achieve country promotional objectives and aggressively promote the country enhancing tourism brand in the world”.A fully-fledged online and digital marketing campaign will also get underway in which language specific web sites for all main markets will be created. Special prominence has been given to attract travel bloggers with high reputation who will act as brand ambassadors generating credibility providing first-hand publicity for Sri Lanka based on experience gathered by visiting the country, the statement said.

“Overall 300 travel agents and 200 travel media will be facilitated from the countries around the world under the familiarisation tours hosted by Sri Lanka Tourism. Familiarisation tours will attract prominent print and electronic media to Sri Lanka to produce and generate articles on the destination and its tourism products,” it said. In 2016 the SLTPB will participate at 46 travel fairs and road shows in 20 key countries in order to develop the product brand and generate sales by Business to Business agent interactions.The bureau said the new tourism strategic marketing plan of 2016 will focus on the long term result oriented approach to develop tourism industry in Sri Lanka than serving short term goals.

“The Budget Proposal of 2016 has introduced a comprehensive policy framework for tourism development. Under the guidence of the Prime Minister several key initiatives have been proposed such as setting up an Aquaculture park in Batticaloa, promote sale of gem and jewellery, encourage MICE tourism by establishing necessary infrastructure, encourage spending by tourists, transform and upgrade tourist attraction sites and local tourism zones, encourage theme parks and removal of tax for water sport equipments yachts, etc and introduce hovercrafts and other water based sports for tourists, tax holidays for investors and removal of Tourism Development Levy are key areas proposed. With the view of improving operational efficiency and to facilitate investement a new organisation will be formed under the name ‘Agency for Development’. Tourism branding plan, training and development for tourism youth, registration of tourist hotels based on quality standards, etc of the Budget Proposal 2016, will heavily contribute to sustainable tourism development strategy for Sri Lanka,” the release said.

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Over 20 % of India’s Bajaj’s sales revenue in SL

A newly introduced taxi hailing app for local three wheel vehicles, also known as tuk tuks, is promising customers the ability to connect with taxi drivers within a few minutes. 

According to a media statement, this mobile application, named the Tuk Tuk App, which was launched by the Tuk Tuk Network, “makes it easy to get any ride across cities in Sri Lanka with the largest network of registered taxis and three wheelers in the country”. It is downloadable via the Google Play Store for Android devices as well as the Apple App Store.

At the same time, it was also noted that the “Tuk Tuk App” is emerging as your private driver in more than 100 cities in Sri Lanka with thousands of registered Tuk Tuks and other Cab services. Tuk Tuk App offers you on-demand service, which means no reservations required, and no waiting in taxi lines.The app offers you the benefit of comparing rates for different drivers. No credit cards are involved and therefore no risk in using the app and all transactions are handled manually between the driver and the passenger. All you need to do is log in to the Tuk Tuk App and easily set your pick-up location on the map, even if you don’t know the exact address.

The app allows you to get connected to your personal driver and check the progress of your tuk tuk ride any time”.The statement also signalled that the “moment you describe your location most of tuk tuks and cab companies will refuse to come, if the distance you need to travel is less than five kilometres. Well they would say ‘sorry, there is no driver close by to your location’. Besides some tuk tuk drivers have set up their meters in a way such that you will be charged exorbitantly per kilometre. But now you find the convenience of finding any tuk tuk driver or any cab company even individual transportation service providers with the latest app that allows you to send a SMS to get a ride, as fast as possible”.

Additionally, the statement also revealed that “Sri Lanka is home to over 20 per cent of India’s Bajaj’s sales revenue with over 900,000 three wheelers”.It further indicated that “people tend to seek services of the famous ‘tuk tuk’ or the three wheeler or perhaps with the comfort of a cab services whenever they want to reach a destination faster in urban environments. Over the last few years few startups entirely focusing on tours and transport have emerged but most of those companies have not been able to meet the convenience of traveler and offer a timely service”.

It was also stated that the app also accepted “registrations from all the tuk tuks and cab services. All you need to do is type reg (space) tuk (space) <vehicle number> and SMS to 87711″

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OPEC says oil prices will recover to $70 in 2020

Oil producers’ group Opec has said it expects oil prices to recover to $70 a barrel by 2020, according to a BBC report.Prices have fallen from more than $110 a barrel in the summer of 2014 to less than $37 a barrel now due to oversupply and slowing demand.But Opec said oil prices would begin to rise next year and, longer term, would rise due to higher exploration costs.It expects the market share of Opec producers to shrink by 2020 as rivals prove more resilient than expected.The group currently accounts for about 30 per cent of the world’s oil production, down from 50 per cent in the 1970s, BBC said.Part of the reason for this decline is the emergence of vast quantities of shale oil produced in the US.

This has also been factor in pushing down the price of oil to 11-year lows.In its World Oil Outlook report, Opec said it expected supply growth from US shale to slow dramatically next year, as producers struggled to cope with such low prices.Opec’s strategy this year has been to allow prices to fall by maintaining production in the hope that, eventually, US shale producers will be forced out of business, BBC said.Another factor in low prices, Opec said, was weaker economic growth, particularly in developing economies. It highlighted China, where the “economy seems to be maturing and growth is decelerating faster than previously expected”.

Price rebound
The report also highlighted the “huge reductions” in spending on exploration and production by the industry as a whole due to low oil prices.

These cutbacks will ultimately see supply fall, it said, putting upward pressure on prices.Another longer-term factor pushing prices up, Opec said, was higher exploration costs, as companies are forced to look harder for oil as traditional supply sources dwindle. Deep water drilling, for example, is considerably more expensive than drilling onshore, BBC reported.

Finally, Opec said population and economic growth would see demand for energy rise by almost a half by 2040, increasing demand for oil.

Opec was founded in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. These countries have since been joined by Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon (1975) and Angola (2007).

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