Sri Lanka shares close up 0.1-pct

June 16, 2014 (LBO) - Sri Lanka's shares closed 0.11 percent higher on Monday starting the week on a positive territory, brokers said.

The Colombo benchmark All Share Price Index closed 6.88 points higher at 6,344.10 up 0.11 percent. The S&P SL20 closed 15.64 points higher at 3,520.67, up 0.45 percent.

Turnover was 957.31 million rupees, up from 809.41 million rupees last Friday with 105 stocks closed positive against 79 negative.

Softlogic Holdings closed 50 cents higher at 13.70 rupees with two off-market transactions of 148.73 million rupees changing hands at 13.50 rupees per share contributing 16 percent of the turnover.

The Finance Company non-voting closed 30 cents higher at 8.50 rupees, attracting most number of trades during the day.

Foreign investors bought 252.70 million rupees worth shares while selling 53.95 million rupees worth shares.

Commercial Bank of Ceylon closed 1.20 rupees higher at 135.00 rupees and Chevron Lubricants Lanka closed 7.30 rupees higher at 287.70 rupees, contributing most to the index gain.

Carson Cumberbatch closed 4.20 rupees higher at 406.20 rupees and John Keells Holdings closed flat at 234.00 rupees.

JKH’s W0022 warrants closed 20 cents higher at 62.20 rupees and its W0023 warrants closed flat at 72.00 rupees.

Commercial Leasing and Finance closed 10 cents higher at 4.10 rupees and Lanka Orix Leasing Company closed 40 cents higher at 91.20 rupees.

Dialog Axiata closed 10 cents higher at 10.20 rupees and Sri Lanka Telecom closed 10 cents lower at 47.90 rupees.

Nestle Lanka closed 71.00 rupees lower at 1,926.00 rupees and Lion Brewery Ceylon closed 3.00 rupees lower at 430.00 rupees.

HNB closed 1.80 rupees lower at 155.70 rupees and Seylan Bank closed 2.40 rupees lower at 64.00 rupees.

Equity Markets hit 12m high as ASPI surges past 6,300 resistance

Equity markets closed the four day trading week in the green with both indices recording W-o-W gains. The ASPI increased 58.08 points (or 0.92%) to close at 6337.22 points; the S & P SL 20 Index meanwhile, gained 0.74% (or 25.86 points) to close at 3505.03 points.

Turnover and Market Capitalization

JKH was the highest contributor to the week's turnover value as the counter's contribution of Rs. 1.63bn accounted for 36.82% of total turnover. Commercial Bank followed suit accounting for 5.60% of turnover (value of Rs 248.27mn) while Distilleries Company contributed Rs 173.90mn to account for 3.92% of the week's turnover.

The daily average turnover value over the holiday shortened week amounted to Rs 1.11bn (up 40.71% W-o-W) compared to last week's average of Rs 787.25mn.

Total turnover value for the week amounted to Rs 4.43bn relative to last week's value of Rs 3.94bn. Market capitalization meanwhile, increased 0.98% (or Rs 25.69bn) to Rs 2655.60bn relative to last week's value of Rs 2629.91bn.

Liquidity (in Value Terms)

The Diversified sector was the highest contributor to the week's total turnover value, accounting for 52.07% (or Rs 2.31bn) of market turnover. Sector turnover was driven primarily by JKH, Expolanka, Hemas Holdings and Adam Investments which cumulatively accounted for 81.70% of the sector's total contribution.

The second highest sectoral contribution stemmed from the Banking and Finance sector, which contributed 20.22%(or Rs 895.94mn).

The sector was helped by Commercial Bank and HNB (NV) which accounted for 36.63% of the sector's total turnover value.

The Manufacturing sector was also amongst the top sectoral contributors to the market, accounting for 7.84% (or Rs 347.28mn) of the week's total turnover value.

The sector was helped by Royal Ceramics which contributed 19.20% to total sector turnover.

Liquidity (in Volume Terms)

The Diversified sector dominated the market in terms of share volume too, accounting for 32.23% (or 56.14mn shares) of total volume, with a value contribution of Rs 2.31bn.The Banking and Finance sector followed suit as 40.91mn shares (or 23.48%), amounting to Rs 895.94mn changed hands.

The Manufacturing sector meanwhile, contributed 9.68% to the week's total turnover volume as 16.85mn shares changed hands.

The sector's volume accounted for Rs 347.28mn of total market turnover value.

Week's Top Gainers and Losers

Adam Investments was the week's highest price gainer, increasing 43.33% from its issue price of Rs 3.00 to close at Rs 4.30. SMB Leasing (NV) gained 25.00% W-o-W to close at Rs 0.50. Office Equipment meanwhile, gained 24.86% W-o-W to close at Rs 2,544.00.

Lankem Development and Ramboda Falls were also amongst the week's top price gainers with W-o-W gains of 22.00% and 21.61%, respectively.

Browns Investments was the week's highest price loser as the stock declined 22.73% W-o-W to close at Rs 1.70, relative to Rs 2.20 last week. PC Pharma recorded a W-o-W price decline of 13.33% to close at Rs 1.30 while Sinhaputhra Finance closed at Rs 116.20, representing a W-o-W decline of 9.64%.

Foreign investors closed the week in a net buying position, with daily average net inflows amounting to Rs 0.34bn relative to daily average foreign inflows of Rs 0.337bn recorded last week (+1.50% W-o-W). Daily average foreign purchases increased 51.23% W-o-W to Rs 0.63bn, from Rs 0.42bn recorded last week, while daily average foreign sales amounted to Rs 0.29bn, relative to last week's value of Rs 0.08bn (-260.67% W-o-W). In terms of volume meanwhile, JKH and Hemas Holdings led foreign purchases while Expo Lanka and Renuka Agri led foreign sales. In terms of value, JKH and Namal Acuity Value Fund led foreign purchases while Distilleries and Ceylon Investments led foreign sales.

Point of View

Last week's positive momentum by HNIs and foreign investors continued this week, helping push markets past the key 6300 resistance level.

The benchmark ASPI reached a 12-month high of 6337.22 points, with retail, HNIs and institutional investors showing renewed vigor ahead of the Central Bank's policy decision next week. Banking and Finance counters such as COMB, DFCC and HNB [NV] contributed significantly to volume with turnover value reaching a 4-week high of Rs 1.41bn to boost average daily turnover value (for the week) to Rs 1.11bn.

Markets in the week ahead are likely to look for direction from the Central Bank's monetary policy directive.

Still, the recent recovery in sentiment is likely to remain as foreign buying and HNIs and institutional investors continue to prop market activity. Some retail profit-taking is, nevertheless, likely.

WB Estimates Sri Lanka GDP at 7.2% In its mid-year appraisal and estimation of global economic prospects, the World Bank (WB) forecasted World GDP at 2.8% in 2014E, 40bps lower than its initial estimate in January (3.2%). The Bank added that the setbacks in early 2014 - namely US weather patterns and geopolitical tensions in Eastern Europe - are temporary and that a partial rebound is likely toward year end.

The WB projects global growth picking up to 3.4% in 2015E and 3.5% in 2016E as high-income countries gain momentum as fiscal consolidation slows, employment stabilizes and financial conditions remain accommodative.

Tailwinds from these are expected to benefit developing countries with growth projected at 5.4% in 2015E and 5.5% in 2016E.

Sri Lanka's economic growth meanwhile, is estimated at 7.2% in 2014E, significantly ahead of the rest of the South Asian region.

Sri Lanka's economic growth is expected to remain broadly stable (7.2%) in 2014E, and moderate to a more sustainable level of 6.7% by 2016E.

The World Bank added that although international financial conditions continue to add pressure on regional growth, strengthening global demand, particularly from USA and EU and increased domestic investment are likely to drive South Asia's medium-term growth. Risks to growth however exist, with upside to oil prices (due to heightened geopolitical uncertainty), and adverse weather conditions in particular likely to impact regional consumption and growth.

Source:Global Economic Prospects June 2014
www.dailynews.lk

Aitken Spence mulling more Indian hotel acquisitions

By Ravi Ladduwahetty

Ceylon FT: Leisure rich diversified blue chip Aitken Spence will be going in for more Indian hotel acquisitions based on the success of the newly acquired ‘Fern’ the five star property in Chennai for US$ 22 million.

“We are buoyant on the prospects in the Indian hotel industry, with the IT industry also building up there, which has been developing at a rapid pace since 2011. This is the area that is called the OMR stretch, where there are a large number of star class hotels,” Aitken Spence Group Managing Director/ CEO Rajan Brito told Ceylon FT.

He also said that the group would be monitoring the performance of the newly acquired hotel for the next three years against the Indian hotel backdrop and if the performance was positive, they would be proceeding with more acquisitions in the sub continental market, which would impact the group’s bottom line.

The group would also be looking forward to merging tourism synergies between its local chain of hotels, its new Indian acquisition and the already operated ones in the Maldives as well. “This will be a new option that we will be offering to the European visitors in our sales programmes, Brito said.

One of the reasons for the Spence decision of acquiring the Fern was due to the belief that the Indian economy would be booming under the leadership of Prime Minister Narendra Modi, who transformed the state of Gurarat as its former Chief Minister

He also described the acquisition price of US$ 22 million for Fern as very competitive as the Indian seller – the Rayala Group had wanted to sell it due to being burdened by debt. “They had finished the hotel at a cost of 120 Crore (1 Crore= Indian Rs 10 million) and decided to get rid of it due to these problems and the price was cheap,” he said. One of the principle challenges that the Spence Group would be faced with, would be maintain average prices and rates, which would also be impacting the group’s bottom line.
www.ceylontoday.lk

AIG must submit detailed plan before withdrawing, says IBSL Chairperson

AIG Insurance will not be allowed to withdraw from Sri Lanka until it submits a detailed plan of action of closure on issues that will apparently crop up after exiting, Insurance Board of Sri Lanka (IBSL) Chairperson Indrani Sugathadasa said.

She told the Business Times that the AIG should submit a written notice and an action plan including details of what they intend to do on general insurance policies issued to local customers since the commencement of their operations in the country, settlements of claims, payment of compensation and other dues to employees, etc . Ms. Sugathadasa revealed that AIG’s Regional Director had informed her verbally that the company is withdrawing from Sri Lanka when he met her on Wednesday. 

www.sundaytimes.lk

State telecom operator has invested over Rs. 57 bln in past 7 years

Sri Lanka Telecom (SLT), the flagship national ICT solutions provider and the national backbone network (NBN) operator, said this week that Sri Lanka is heading towards achieving the country’s ICT objectives, to accelerate economic development.The company said in a statement that the overall investment the group has made throughout its entire 150 year span is enormous in terms of magnitude. Since 2007, SLT has invested in excess of Rs. 57 billion (US$485 million) to improve the country’s telecommunication infrastructure.

Lalith de Silva, Group CEO of SLT, expressing his views on these industry developments, said, “In line with the Government roadmap, we have invested heavily in establishing the NBN aimed at encouraging all operators to benefit through economies of scale. We believe in sharing communication and ICT infrastructure towards achieving the development goals of the country. From the inception, we have been sharing our infrastructure such as global connectivity, national backbone, towers, data centre, cloud services, coverage and building spaces as well as our ICT infrastructure under the wholesale business unit for other operators and service providers, ISPs, etc. whilst ensuring that the highest standards are met in terms of quality and reliability”.

SLT says it has already taken proactive steps to invest in a futuristic global connectivity option exceeding 24 Tera bits per second (24Tbps) bandwidth capability via the new cable system SEA ME WE 5, upgrading of the existing SEA ME WE 4 cable system with 100G technologies and expanding the terrestrial backbone network (National Fibre Optic Backbone Network) to bring gigantic capacity to users in Sri Lanka accessible for future focused data demands.

The statement said SLT has embarked on massive network modernisation and expansion projects. NBN supports sustainable national progress connecting all 329 Divisional Secretariats to strengthen connected government activities. 100% fibre optic coverage of electorates was achieved well within the NBN target date requirement and fibre optic network exceeds the NBN requirement of at least one point of interconnection per electorate. NBN facilitates high speed and uninterrupted backbone connectivity with highest redundancy across the country for all operators.
www.sundaytimes.lk

Distilleries vying for stockbroking licence

By Duruthu Edirimuni Chandrasekera

Contrary to popular belief that stockbroking firms are in the doldrums, many Sri Lankan companies with deep pockets are eyeing broking licences, according to industry sources.

One such entity is the Distilleries Company of Sri Lanka (DCSL) who is said to be in negotiations with a high networth individual (HNWI) owning a stockbroking firm, sources close to DCSL told the Business Times.

“This HNWI is in talks with other conglomerates and entities as well, but DCSL is the frontrunner in the bid,” a source said. He said that this particular firm was set up four years ago as a joint venture between the HNWI and a foreign party, with the latter exiting Lankan operations by divesting its entire holding to the HNWI recently.

He added that a broking licence will complete DCSL’s financial sector portfolio, which is the reason why the Harry Jayawardena-controlled conglomerate is in talks with the HNWI.

“During boom times, like we saw in post-war years of 2009 and 2010, there was a lot of investor interest and all broking firms were making merry, which motivated the regulator to issue new licences. But now some broker firms, especially those which got licences four years ago have not been able to attract the expected portfolio investment and they are looking to sell their licences,” he said.

The CEO of a stockbroking firm agreed saying that many broking firms struggle to make profits and if hard times continue for long they may be out of business, but there will always be someone to buy them out. He said that some months ago an entity through its auditing firm had advertised to buy a stockbroking company, which proves this theory.

In the South Asia region, Sri Lanka has the lowest number of stockbroking firms vis-à-vis the population with a figure of just 0.5 million population per firm, whereas the figures for India, Bangladesh and Pakistan stand at 0.86 million, 1.14 million and 1.26 million, respectively, per broking firm, according to international statistics.

Stock broker seeks to sell some stakes

A large stock broking house which was on the market either for part or full divestment by the major shareholder since last year has renewed its efforts to sell two of its subsidiaries, according to stock market sources.

“The major shareholder, who is a foreign party, has given the mandate to sell these firms which have been shown to interested parties,” a source told the Business Times.

He said they are either looking to sell a part or full stake in the company and already have had discussions with some interested parties. He said the company’s asset management and the securities subsidiaries are on the market. “The sale of the asset management firm is currently being negotiated with a foreign party while the securities subsidiary is being negotiated with a local party,” he said. The source said they want to only retain their leisure arm. The company has interests in securities, finance and private equity which include tea, leisure, IT and digital entertainment.
www.sundaytimes.lk

CEAT Plant To Reach 450,000 Tyres A Year

A milestone was achieved on Tuesday, June 10 in the manufacture of tyres in Sri Lanka with the official inauguration of a new hi-tech production facility for radial tyres for passenger cars and Sports Utility Vehicles (SUVs) at CEAT Kelani Holdings. The new plant is to expand its radial tyre building and curing capacity by 70 per cent to 450,000 tyres a year. Economic Development Minister Basil Rajapaksa led a team of government ministers to this milestone event. Since 2009, the CEAT Kelani joint venture has invested Rs. 2.5 billion in enhancing capacity, modernising its factory and setting up this new radial plant. Besides contributing to a substantial saving of foreign exchange, the new plant would also cater to CEAT Kelani’s exports of radial tyres from Sri Lanka. More than a third of current radial tyre production fromthe company’s production facility is exported.

Speaking at the event, CEAT Kelani Chairman Chanaka De Silva said the post-conflict resurgence of Sri Lanka has provided companies with a fresh incentive to grow, and CEAT Kelani has supported this process very tangibly, by investing in capacity expansion, and enhancing the range and quality of its products. “The new radial tyre production facility that has just been declared open is only part of this commitment,” he said.

Elaborating, N. C. Venugopal, Managing Director/CEO of CEAT Kelani Holdings said that the new technology acquisitions for the Radial plant include the latest Bead Apexing Machine, Cap Ply and Cap Strip Machine and improved tyre building machines and curing presses that will enable the company to produce a new grade of high performance radials in all sizes for high end cars.

The market leader in Sri Lanka in both the radial and commercial tyre segments, CEAT has accounted for nearly 50 per cent of the country’s tyre requirements since the second quarter of 2013-14, contributing to a massive saving of foreign exchange for Sri Lanka through import substitution. The brand currently has market shares of 55 per cent for tyres in the Truck/Light Truck category, 31 per cent in radials, 44 per cent in 3-Wheeler, 19 per cent in motorcycle and 73 per cent in the agricultural segments.

Of CEAT Kelani’s total monthly production of 1,450 tons, about 500 tons or a third is exported to markets in South Asia, the Middle East, the African continent and many other countries, and is finding international acceptance. A global tyre brand present in 110 countries and now headquartered in India, CEAT is an acronym that stands for Cavi Electrici Affini Torino, or Electrical Cables & Allied Products of Turin, with origins that date back to 1924 in Italy.
http://www.thesundayleader.lk/2014/06/15/ceat-plant-to-reach-450000-tyres-a-year/