Historic Sri Lanka listed oil palm firms to go private after interventionist rule

May 06, 2014 (LBO) - Sri Lanka listed palm oil plantations in East Asia that date back to the British Colonial period are on track to be de-listed following an interventionist rule requiring a minimum 'public float'.

Shalimar (Malay), Selinsing, Good Hope and Indo Malay, were companies set up in then Ceylon to raise capital to start plantations in Malaysia at a time when plantations stock was traded in Colombo and it was a fledgling financial centre in Asia.

The firms are part of Sri Lanka's Carson Cumberbatch group, itself a British Colonial-era firm that served the plantations sector.

Sri Lanka introduced a 25 percent minimum public float rule for main board companies in last December.

The oil palm firms have been on a private path for some time.

Chairman H Selvanathan said the parent company had earlier made a voluntary offer to buy out minority shareholders and continued to pick up shares after that.

"..[T]he majority shareholder does not have any intention of diluting its holding nor does the Company intend to issue further shares in order to conform to the said Rule, and as such the Company is considering the option of de-listing from the Colombo Stock Exchange which would be done in consultation with the Regulator and required shareholder approval," he said in the annual reports of the companies.

Sri Lanka's Securities and Exchange Commission brought the rules following pressure interventionists who wanted to force companies to maintain what is called a 'minimum public float'.

Critics say the collective-punishment style rules were originally pushed by European interventionists as a solution to tackle collusive market behavior in illiquid companies, though it is not known which percentage of a company actually discourages such behavior.

Stock manipulations usually happen during credit bubbles, when low interest rates persist and worsen when rates are kept down through state interventions.

There is also quicker price discovery in liquid shares.

Regulators around the world have picked various percentages ranging from 10 to 25 percent as the so-called minimum public float, where non public shareholders are the key promoters of a firm.

Further underlining the subjective nature of such percentages, India brought rules in 2010 where state companies have 10 percent floor, compared to 25 percent for others.

There are also quantity rules, where larger firms are allowed to have lower 'public floats'. Sri Lanka's tiny bourse has a minimum quantity rule of 5 billion rupees, about half that of the New York stock exchange.

Countries like the US and UK, also have smaller stock exchanges that firms can move to when they fall beneath the minimum public float but Sri Lanka has only one stock exchange.

It however has a lower limit of 10 percent for its second board.

The negative outcome of such rules are that well-managed firm that give steady dividends are pushed out of the market despite the availability of investors who are prepared to hold on to illiquid shares out of free choice.

Tourist arrivals up 27.6%

By Mario Andree

Ceylon FT: Tourist arrivals in the first four months of this year increased 27.6% to 534,132 up from 418,456 a year earlier as arrivals in April reached 112,631, up 39.5% from 80,737 recorded in 2013, data released by the Sri Lanka Tourism Development Authority showed.

After successfully surpassing last year’s 1.2 million tourist arrivals goal, thanks to a data revision, the government and the hospitality industry hopes to welcome more than 1.5 million this year.

Aiming at increasing the country’s GDP to US$ 100 billion with a per capita income of US$ 4,000, the government hopes the income generated through the tourism industry would reach US$ 2.7 billion by 2016 with 2.5 million arrivals to the country. Last year, Sri Lanka earned 1.7 billion, up 35% from 1.3 in 2012 with more than 1.27 million arrivals.India continued to lead tourist arrivals to Sri Lanka with 71,346 arrivals recorded during the first four months of this year followed by 51,415 visitors from the United Kingdom and 41,101 from Germany.

Regionally, Western Europe lead tourist arrivals followed by South Asia and East Asia.
Overall tourist arrivals for the four months from North America increased 13.7% to 23,954 from 21,062 with arrivals in April up 25.0% to 5,514 from 33,204, while arrivals from Latin America and the Caribbean increased 38.6% to 1,390 from 1,003 with arrivals in April up 20.6% to 281 from 233.

Arrivals from Western Europe, which continues to be the largest market for Sri Lanka, increased 18.5% to 181,129 from 152,914 with arrivals in April up 47.9% to 37,369 from 25,259, while arrivals from Eastern Europe increased 51.1% to 77,265 from 51,129 with arrivals in April up 24.8% to 10,844 from 8,687.

Tourist arrivals from Africa increased 75.1% to 3,576 from 2,042 supported by a 145% growth in April to 1,083 from 442, while arrivals from the Middle East increased 16.9% to 23,692 from 20,275 with arrivals in April up 24.8% to 5,302 from 4,248.

Arrivals from East Asia, the third largest market, increased 54.7% to 91,055 from 58,870 with arrivals in April up 61.4% to 18,416 from 11,409, while arrivals from South Asia increased 20.0% to 112,232 from 93,547 with arrivals in April up 28.0% to 27,954 from 21,837.

Arrivals from Australasia increased 12.6% to 19,839 from 17,614 with arrivals in April up 39.3% to 5,868 from 4,211.

Deputy Minister of Investment Promotions Faizer Mustpha, who last week highlighted that potential investors have raised concerns over the contrivances pertaining to the three projects which were alleged to include casinos, said that the country was aiming to increase the number of hotel rooms by 35,000 by 2016 and some constructions were taking place.

Refusing to divulge any further details he said that there were several hospitality projects in the pipeline which were awaiting negotiation and approvals.
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Sri Lankan bourse steady at over 3-month high; turnover high

May 5 (Reuters) - Sri Lankan shares edged up on Monday, rising for the fifth straight session to hit their highest in more than three months on foreign inflows as a lower interest rate regime helped boost sentiment.

The country's main stock index edged up 0.02 percent, or 0.99 points, to 6,249.43, its highest close since Jan. 29. It has gained 1.32 percent in the last five sessions.

The market gained 4.28 percent in April as some retail investors started buying risky assets given low interest rates, with buying seen across the board.

The central bank on April 22 kept policy rates steady at multi-year lows.

The day's turnover was 1.25 billion rupees ($9.57 million), more than this year's daily average of 964 million rupees.

Offshore investors were net buyers of 153.2 million rupees worth of stocks on Monday, but they have been net sellers of 7.25 billion rupees so far this year.

Conglomerate Aitken Spence PLC rose 3.42 percent to 102.80 rupees a share, while Dialog Axiata PLC rose 1.08 percent to 9.40 rupees. 

($1 = 130.6250 Sri Lanka rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

Sri Lanka stocks close higher

May 05, 2014 (LBO) - Sri Lanka's stocks close higher Monday with conglomerate Aitken Spence gaining amid strong foreign participation, brokers said.

The Colombo benchmark All Share Price Index closed 0.99 points higher at 6,249.43 up 0.02 percent. The S&P SL20 closed 5.88 points higher at 3,441.69, up 0.17 percent.

Turnover was 1.25 billion rupees, down from 1.31 billion rupees last Friday with 105 stocks close positive against 88 negative.

Expolanka Holdings closed 30 cents lower at 10.40 rupees with market transactions of 218.00 million rupees contributing 17 percent of the turnover.

All off market deals accounted for 13 percent of the daily turnover.

ACME Printing and Packaging closed 2.50 rupees higher at 11.90 rupees and Textured Jersey Lanka closed 70 cents higher at 18.60 rupees, attracting most number of trades.

Foreign investors bought 458.00 million rupees worth shares while selling 304.78 million rupees worth shares.

Aitken Spence closed 3.40 rupees higher at 102.80 rupees and Lion Brewery Ceylon closed 14.50 rupees higher at 435.00 rupees, contributing most to the index gain.

LOLC closed 1.80 rupees higher at 77.90 rupees and Chevron Lubricants Lanka closed 5.80 rupees higher at 274.80 rupees.

Dialog Axiata closed 10 cents higher at 9.40 rupees and Sri Lanka Telecom closed 40 cents lower at 47.70 rupees.

Ceylon Tobacco Company closed 10.10 rupees lower at 1,099.90 rupees and John Keells Holdings closed 2.00 rupees lower at 235.00 rupees.

JKH’s W0022 warrants closed 80 cents lower at 65.30 rupees and its W0023 warrants closed 10 cents lower at 71.90 rupees.

Carson Cumberbatch closed 4.10 rupees lower at 401.00 rupees.

Sri Lanka's Expolanka Holdings draws interest on take-over speculation

May 05, 2014 (LBO) - Expolanka Holdings Plc, which has interests in logistics, leisure and trading is seeing heightened investor interest on take-over speculation, brokers said.

On Monday, 25 million Expolanka shares changed hands.

The stock closed at 10.30 rupees after opening at 10.70 rupees. Expolanka is up from 9.50 rupees levels in the last week of April.

Investors have shown interest on speculation of a take-over or strategic purchase by a foreign logistics firm, brokers said. Among the possible contenders mentioned is a Japan-based firm.

A top Expolanka official declined comment.

Expolanka Holdings' core business is logistics and it has an international network spanning East Asia and Sub Saharan Africa.

CSE head warns against oligopoly

CB Asst. Gov. recommends 'unemotional' approach to staff issues

By Charumini De Silva

Ceylon FT: The Chairman of the Colombo Stock Exchange Krishan Balendra while highlighting the benefits of financial sector consolidation said companies must be unemotional when dealing with the elimination of staff and warned the regulator against the emergence of a banking oligopoly with high lending rates and low deposit rates. "Research has shown that the majority of the consolidation processes elsewhere could not deliver shareholder value so we need to be cautious and avoid risk," Balendra said addressing a recent forum on financial sector consolidation. He pointed out that in the consolidation process, having joint managing directors and joint chief executive officers on the board would not work, as the board must comprise credible and accountable personalities.

"Therefore, the companies have to be unemotional when eliminating the over-lap," he said. "Another macro issue which could arise at the end of the financial consolidation process is the high lending rates and low deposit interest rates creating an oligopoly effect in the market," Balendra noted.

Balendra, like many of the speakers at the forum welcomed the Central Bank's initiative to consolidate the financial services system of the country.

"There is a misconception in the industry that in the financial consolidation process we are forced to find partners, but I would like to rephrase it by saying that it is actually very encouraging to have a regulatory-enabled financial consolidation," NDB Bank CEO, Rajendra Theagarajah said.

He urged the industry to look at the entire picture of the financial consolidation plan for the next five to 10 years and not at the immediate model. "We must not look at the short-term benefits of making 2+2=4, but we must look beyond for 2+2=6 or 7, and destination businesses".

The Finance Company PLC Chairman, Preethi Jayawardena said the financial sector contributed around 9% of the GDP and 58 companies were competing for this small market proportion, predominantly depending on short-term outlooks.

Elaborating on a recent incident in the NBFI sector he said, the weak balance sheet of CIFL had a negative impact across the board, creating an uneasy environment. Hence, the financial consolidation process would be an ideal opportunity to create a strong financial sector in our economy.

However, Jayawardena noted that the NBFI sector mainly catered to the SMEs where banks did not tap into. He therefore strongly suggested that everyone should be mindful of what President Mahinda Rajapaksa emphasized about the increasing inequality of the economy.

Central Bank Assistant Governor C.J.P. Siriwardana said, in this financial consolidation process the synergy of two financial companies depended on finding the correct partner. Companies should look for key areas such as structure, culture, IT systems, accounting systems and features of the two companies in carefully finding partners.

He said the valuation document was the base of the commencement of the financial consolidation. At present, nine audit firms selected by the Central Bank were conducting valuations on banks, and NBFIs will soon be finalized and the reports submitted on 2 May. 

The first round of the consolidation process was a voluntary one, but if companies fail to find partners by 31 March 2015 the Central Bank would have to intervene.

Further explaining, Siriwardana said some of the small companies had asked for huge premiums for mergers and acquisitions. If these companies continue doing it till the last moment, the Central Bank would finally have no good partnering companies to go on with the financial consolidation, and in such a situation if companies are unable to find possible partners the Central Bank would have to intervene.

"The banks and the finance companies have already submitted their proposals, and this indicates their eagerness to actively take part in the consolidation process. With everything going as planned so far, we can finalize the first round of matchmaking soon," he said.

The Central Bank Assistant Governor, echoing Balendra, went on to say that consolidation was a sensitive issue with regard to staff, and recommended an unemotional approach.
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Raigam to invest Rs 150 m on PVD salt plant

By Lalin Fernandopulle

The import of salt has dropped from around 45,000 metric tonnes to around 7,500 mt during the past six years due to investments in local table salt production by Raigam Wayamba Salterns, said Raigam Group Chairman Dr. Ravi Liyanage.

At present there are no imports of crystal salt or free flow table salt except for Pure Vacuum Dried (PVD) salt. The PVD process uses vacuum evaporation technology which ensures pure sodium chloride free from any impurities and consistent quality, despite the condition of raw salt input, he said.

The company will invest Rs. 150 million this year to expand the PVD salt production facility in Puttalam.

“We hope to manufacture around 10,000 MT of PVD salt a year. A substantial amount of PVD salt is yet being imported for high end markets. Production is inadequate to meet the national need.

The production of PVD salt needs high technology. We have already invested Rs.100 million on the PVD plant,” Dr. Liyanage said.

The country’s salt needs in 2007 was 135,000 metric tons for consumption and 20,000 metric tons for industrial use. Of this quantity imported salt was 45,000 metric tons including 30,000 metric tons in crystal form and the remaining 15,000 metric tons in the free flow table salt form.

The annual demand for salt has gone up annually and in 2013 it was 150,000 metric tons for consumption and 25,000 metric tons for direct industrial use.

“After seeing the market switching from crystal salt to free flow table salt, Raigam Wayamba Salterns invested in free flow table salt plants, first in Palavi, then Puttalam and later in Bata Atha, Tangalle,” Dr. Liyanage said.

The present demand for PVD salt is 10,000 metric tons of which 2,500 metric tons is supplied by Raigam's PVD plant. This is Sri Lanka's only PVD plant which was launched in 2012-13 with an investment of Rs.100 million. The import of the remaining 7,500 metric tons of PVD could be stopped when manufacture begins in the new plant.

Paranthan Chemicals which produced caustic soda and allied products was destroyed by terrorists thereby creating a demand for imported salt allied products such as caustic soda, soda ash, chlorine, bleaching powder and hydrochloric acid which have a high commercial value of over one billion rupees in foreign exchange.

The entire national need of these products are being imported whereas Sri Lanka was self-sufficient in these chemicals 30–35 years ago when Paranthan Chemicals was in operation. The largest consumers of caustic soda are soap and detergent factories, plastic, paint and pharmaceutical industries.

Large quantities of caustic soda are also used in the textile, paper and rubber industries and in the production of synthetic fibres. While chlorine, bleaching powder and soda ash are used in large quantities in water treatment applications.

The per capita consumption of salt in Sri Lanka is around 7.5 kilograms whereas in Europe it is less than 4 kilograms. High salt consumption could lead to heart diseases but according to data such risks could be reduced by 40 percent if the consumption of sodium chloride is reduced by around 20 percent.

This is practised in some countries by replacing about 20% of the salt with potassium chloride. In addition to low sodium salt, dual fortification of salt with iron avoids iron deficiencies and is commercially available in international markets with the support of UNICEF. But in Sri Lanka only iodine is permitted to be included in common salt for consumption purposes, which is a barrier to value added salt.

We have called upon the authorities to introduce 'low sodium salt' and 'dual fortified salt' as our CSR program.

In 2013-14, Raigam Wayamba Saltern Plc recorded a turnover of Rs. 339 million in its first three quarters compared to Rs. 226 million in the corresponding period of 2012-13.
http://www.sundayobserver.lk/2014/05/04/fin01.asp