Sri Lankan stocks hit over 3-month closing high on retail buying

Reuters: Sri Lankan shares rose for a second straight session on Friday and hit their highest close in more than three months, helped by retail buying in blue-chip stocks.

The Colombo stock index ended 0.45 percent firmer at 6,572.29, its highest close since Nov. 8, 2017. The bourse rose 0.8 percent during the week recording its third straight weekly gain.

“Retail buying helped boost the market,” said Prashan Fernando CEO at Acuity Stockbrokers.

Foreign buying in Softlogic Holdings by a middle eastern fund and speculation over Swarnamahal Finance Services Plc, which is facing financial difficulties, getting a business partner to continue the business, helped retail interest, he added.

Softlogic Holdings Plc rose 6.5 percent, Janashakthi Insurance Company Plc ended 0.98 percent weaker, and Swarnamahal Financial Service Plc ended steady.

Shares in large-caps Bukit Dhara Plc jumped 22.7 percent and Carson Cumberbatch Plc ended 6.5 percent higher.

Sri Lanka will hold a long-delayed local government election on Saturday amid worries about the future of the country’s coalition government.

The market turnover stood at 451.7 million Sri Lankan rupees ($2.93 million), well below last year’s daily average of 915.3 million rupees.

Foreign investors bought a net 90.7 million rupees worth of shares on Friday, extending the year-to-date net foreign inflow to 5.0 billion rupees worth of equities. 

($1 = 154.2000 Sri Lankan rupees) 

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

Strong Agri and Consumer Goods sector performances boost Sunshine group profits by 23% in 9MFY18

Fueled by strong growth in its health, consumer and agri-business sectors, diversified Sri Lankan conglomerate Sunshine Holdings (CSE: SUN) reported impressive growth in top and bottom line performances during the first nine months of the current financial year (9MFY18). During this period, the Group posted consolidated revenue of Rs. 15.6 billion, delivering a 23% Year-on-Year (YoY) increase in Profits After Tax (PAT).

Group’s healthcare business emerged as the largest contributor to Sunshine’s top-line performance, accounting for 39% of total revenue, while agribusiness and consumer sectors of the Group contributed 34% and 25% respectively of the total revenue.

Profit after tax (PAT) for the period in review rose to Rs. 1.6 billion, on the back of strong performance in the agri sector, with strong positive results also being carried through to the Group’s Profit After Tax & Minority Interest (PATMI) which grew by 63.8% YoY to Rs 722 million. Watawala Plantation PLC (CSE: WATA) and Hatton Plantations PLC (CSE: HPL), Group’s agribusiness subsidiaries together were the largest contributor to PATMI, accounting for 38% of the total and healthcare accounting for 27%.

"Our continuous focus on improving quality and internal efficiency through well-placed strategies has yielded strong results for the group yet again, transforming another quarter into a successful, highly dynamic one," Sunshine Holdings Group Managing Director, Vish Govindsamy stated. "It is noteworthy to mention that Group’s healthcare arm has been able to post strong results over the last nine months and become the largest contributor to Group revenue, after it grappled significantly due to the implementation of the price controls over 48 molecules during last year. Agri and Consumer sectors have also been able to continue their momentum and contribute significantly as both sectors have reported impressive revenue growth during this period."

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Germany, Munich based Allianz to sell-back Sri Lanka land to Janashakthi

ECONOMYNEXT - Janashakthi General Insurance, which is to be controlled by Germany, Munich based Allianz after a 16.4 billion rupee deal, will sell-back land valued 2.0 billion rupees to its parent Janashakthi Insurance or related company.

Sri Lanka slapped nationalist rules on land ownership during the ousted Rajapaksa administration which made foreign investment in the country more complex.

Stocks valued at 1.7 billion rupees will also be sold-back, Janashakthi told shareholders.

Janashakthi Insurance intends to distribute an unspecified amount of the remaining cash to shareholders through a buyback.

Janashakthi Insurance Plc, has called a meeting of shareholders on February 24 to pass resolutions to allow the sale of Janashakthi General Insurance to Allianz and buyback its shares.

Sri Lanka's Watawala Plantations profits slide 58-pct

ECONOMYNEXT - Profits at Sri Lanka's Watawala Plantations fell 58 percent to 202.1 million rupees in the December 2017 quarter on sliding oil palm margins and losses from a dairy start-up, interim accounts showed.

The company reported earnings of 85 cents per share in the quarter. In the nine months to end December, it reported earnings of 4.0 rupees per share on total profits of 945.5 million rupees, down seven percent from a year earlier.

Revenue fell 57 percent in the quarter to 615.9 million rupees, cost of sales increased 56 percent to 378.3 million rupees, shrinking gross profits 58 percent, to 237.6 million rupees.

Revenue from oil palm was 462.8 million rupees, down nine percent from a year ago. Oil palm accounted for 75 percent of total revenue in the quarter.

"The fluctuations in the import duty component in the sale price and the volatile Malaysian palm oil prices resulted in the lower net sale average for the period," the company told shareholders.

Watawala Plantations dairy business consists of 1,000 cows, half of them milking cows.

"The number of milking cows will increase when the rest of the herd start calving resulting in higher yields," the company said.

"Yields will also be greater when the second lactation cycle of the first herd of 400 cows begins in the ensuing months," it said.

The dairy farm is 11.5 million US dollar joint venture with Singapore-based fund manager Duxton Asset Management.

The company expects a return on investment of about 17 percent producing 30,000 litres of milk.

The farm is located on an estate land in Ginigathhena where tea cultivation is no longer profitable.

In September 2017, Watawala Plantations' upcountry tea business was segregated into a new company, Hatton Plantations which was listed on the stock exchange in February 2018.

Watawala Plantations shares closed 70 cents lower on Wednesday at 28 rupees.

Sri Lanka's Ceylon Grain Elevators Dec profits slide 12-pct

ECONOMYNEXT - Sri Lanka's Ceylon Grain Elevators, a feed milling firm and poultry processing group saw profits fall 12 percent in the December quarter to 366 million rupees, amid a higher tax charge despite better margins at the core feed milling unit after getting a maize import permit.

The company reported earnings of 6.10 rupees a share in the quarter. In the year to end December 2017, it reported earnings of 13.17 rupees a share on a total profit of 790 million rupees, down 40.7 percent from a year ago, interim accounts filed with the stock exchange showed.

The share was at 70 rupees, up four rupees in early trade Wednesday.

Group profits were down partly due to a 152 million income charge for the quarter, against a tax reversal a year ago.

"Performance was curtailed by the shortage of raw materials due to adverse weather and unavailability of an import permit for maize," the company told shareholders in interim accounts filed with the Colombo Stock Exchange.

"However, the group was able to recover from the challenging situation to a certain extent in the December 2017 quarter when it managed to obtain a permit to import maize."

At the standalone company, revenues grew 3.3 percent to 3.6 billion rupees, costs rose 1.7 percent to 3.36 billion rupees but gross profits grew 23.9 percent to 323 million rupees.

Sri Lanka's past practice of issuing import permits to third party suppliers, had come under fire as promoting corruption and rentseeking.

Sri Lanka also charges import duties for maize, in a bid to protect farmers and a group suppliers with political connections, critics have said. <> In August 2017, Ceylon Grain Elevators said it appealed to the government to be allowed to import its maize requirement directly as third party suppliers charged high prices.

Depressed market conditions for poultry affected the selling price of chicken and layer day old chicks, it said.

Group Revenue, which includes poultry processing at subsidiary Three Acre Farms, in the December quarter grew two percent to 3.8 billion rupees, and cost of sales increased three percent to 3.2 billion rupees shrinking gross profits by two percent to 538.8 million rupees.

Selling and distribution expenses fell 50 percent to 25.2 million rupees and administrative expenses decreased by 33 percent to 48 million rupees.

At Three Acre Farms, which has broiler farms, reported a profit of 192.2 million rupees for the December 2017 quarter, down 31 percent from a year ago.

The company reported earnings of 8.16 rupees per share. In the year ending December 2017, Three Acre Farms reported earnings of 27.7 rupees a share on a total profit of 653.8 million rupees, down 19 percent from a year ago.

Revenue fell six percent to 2.4 billion rupees mostly due to depressed demand for eggs, the company said.

Cost of sales increased eight percent during the year to 1.7 billion rupees, contracting gross profit by 27% to 709.8 million rupees.

A Three Acre Farms share was trading at 113.90 rupees, up 4.10 rupees in early trading Wednesday.

High coconut prices causes loss at Sri Lanka’s Renuka Agri Foods

ECONOMYNEXT - Renuka Agri Foods, a Sri Lankan manufacturer of coconut-based food and beverage products, slipped into the red in the December 2017 quarter with a loss of Rs58 million owing to high prices of coconut, its main raw material.

The company, which had made a Rs75 million profit in the same quarter a year ago, reported December 2017 quarter sales rose 3.6% to Rs683 million.

Renuka Agri Foods made a loss per share of 10 cents in the December 2017 quarter, interim accounts filed with the Colombo stock exchange showed.

In the nine months to 31 December 2017, EPS was 12 cents, 74% lower than the previous year, with net profit at Rs70 million profit and sales at Rs2.2 billion.

Renuka Agri Foods Director Executive Shamindra Rajiyah attributed the downturn to high prices of coconut.

“The prevailing high coconut prices significantly increased the cost of raw materials, thereby eroding our Gross Profit percentage to single digits,” he said.

“The manufacturing sector continued to be the main contributor to revenue for the period under review by achieving a turnover of Rs. 2,249 million while the plantation sector recorded revenue of Rs 6 million for the period.”

Expolanka Holdings reports Rs 21.1 bn revenue for quarter

Expolanka Holdings PLC reported a revenue of Rs. 21.1 billion (growth of 23% YOY) for the quarter primarily driven by the performance of its logistics sector.

The company also announced that gross profits for the quarter had increased by 34% YoY to Rs. 3.7 billion while the group’s Profit After Tax (PAT) posted a healthy growth rate of 24.6% YoY up to Rs. 426 million during the same period, in line with

During the 3rd Quarter, Expolanka’s logistics sector contributed Rs. 20 billion towards group turnover, reflecting growth of 36% YoY, with the sector’s air and ocean freight businesses posting impressive growth of 38% and 24% respectively.

Consequently, the logistics sector’s Gross Profits expanded by 42% YoY to Rs. 3.4 billion during the quarter and YTD Gross Profit of Rs. 8.6 billion, up by 19% YoY, despite continued pressure on margins.

Efforts to improve procurement and introduce greater efficiency enabled improvements in profitability within the logistics sector despite higher freight rates prevalent during the quarter, leading to a PAT of Rs. 522 million during the quarter, reflecting growth of 25% YoY.

All key trade lanes performed to expectation during the quarter with increased outbound volumes being recorded from the East-Asian markets; while efforts to enhance South Asia – USA trade lanes are already showing positive results.

The Warehouse operations continued to show improvements delivering sustainable earnings driven by a focus on building operating scale and efficiencies

Similarly, Expolanka’s leisure sector continued to extend its strong performance over 3Q17, posting turnover of Rs. 274 million and gross profits of Rs. 246 million to conclude the quarter with a PAT of Rs. 40 million and a YTD PAT of Rs. 148 million.

Meanwhile, the group’s investment sector, which includes the group’s perishable export operations contributed a further Rs. 671MN towards group turnover.

The sector recorded a loss during the quarter primarily attributed to the cost of shared services provided by the corporate office, which functions as a strategic and support service centre to the group.
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CSE records strongest start to a year in 2018

Foreign investors indicated a renewed interest in Sri Lankan stocks in 2017 with record breaking purchases worth Rs 112 billion, and CSE has seen that momentum continue into 2018 as well, said Head of Market Development at Colombo Stock Exchange, (CSE) Niroshan Wijesundere.

The level of interest the CSE has seen within the very first month of the year is quite encouraging and indicates that Sri Lankan stocks remain attractive to foreign portfolio investors, especially those with investment interests in frontier markets.

“What is particularly encouraging is that the level of foreign buying we have seen in 2017 and in the early parts of this year mark a sharp reversal from 2015/16, during which we saw significant fund outflows”.

Present developments give us a reason to believe that Sri Lanka at the moment is viewed as a market with considerable growth potential, which is vindicated by the substantial level of foreign investor interest we have experienced in recent times,” he said.

He attributed the attractive valuations with the market Price Earnings Ratio at 10.69 even at present, one of the lowest in the region as one of the key forces behind this success.

“Encouraging performance among listed companies, an improving macroeconomic outlook and a strong value-driven investment case too have contributed to foreign investors placing their confidence in Sri Lankan Stocks,” he said.

Positive developments such as noticeable improvements in the gross official reserves, flexible exchange rate management, a recovering balance of payments position, strong FDI numbers and fiscal consolidation have contributed to an improvement in the macro-economic outlook, which is certainly important when attempting to attract foreign investment to the market.

Sri Lanka was also recently mentioned on the Wall Street Journal as the most attractive frontier market in comparison with 11 other countries, according to a model presented by the Citi Bank.

Record breaking foreign investment in the Sri Lankan stock market has continued into 2018, with Rs 4 billion in net foreign purchases during the month of January, a new record for the first month of any given year.

The month recorded Rs 10.7 billion in foreign purchases in the market, while foreign investors made sales worth Rs. 6.7 billion, which has established a record breaking start to the year in terms of net foreign purchases. “The Sri Lankan stock market has over the years been quite unique, in the sense that it has had a low correlation with developed and emerging markets and their trends.

There is a strong reason to believe that the Sri Lankan stock market is based on local driving forces and the performance of our listed entities, rather than global market related developments.“Foreign inflows certainly do have a positive impact on the balance of payments as witnessed in 2017, which was also acknowledged by the Central Bank,” he pointed out.

Increased international interest in the Stock Market would lead to a broader focus on the country as a whole, and would benefit the Sri Lankan economy and listed companies in their bid for growth.

A stock market that attracts foreign investors has the potential to be perceived as a sign of strength, and of a market-friendly environment, especially in the context of an emerging country like Sri Lanka.

“Foreign investors have certainly been quick to move on the buying opportunity Sri Lankan stocks have presented since 2017and this makes a strong case for improved involvement among local institutional and individual investors as well. The opportunity has always been available for both local and foreign investors and is still on the table.”

The onus is on the local investors to engage in the market and benefit from its value proposition. We as an exchange will work on creating the awareness on these opportunities both among existing and new local investor segments.
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