Sri Lanka index closes at 33-month high on low rates

(Reuters) - Sri Lankan stocks hit a 33-month high on Monday as investors bought beverage and banking sector shares, while lower interest rates and continued foreign buying after the central bank left policy rates steady also helped.

The central bank kept policy rates steady at multi-year lows for a sixth straight month, as expected, despite private sector credit growth slowing to a 4-1/2 year low.

The main stock index rose 0.56 percent, or 37.63 points, to 6,699.03, its highest close since Oct. 5, 2011.

The index is in overbought region since July 3 and the index has gained 5.02 percent so far this month, Thomson Reuters data showed.

"Investors are looking at good investment opportunities with the low interest rates," said Reshan Kurukulasuriya, COO of Richard Peiris Securities.

Turnover was 597.2 million rupees ($4.6 million), half of this year's daily average of around 1.08 billion rupees.

Analysts see room for gains with a P/E ratio of around 14.5 and resistance level at 7,000.

Monday's gains were led by shares of Lion Brewery (Ceylon) Plc, which rose 14.97 percent to 684.2 rupees, while Ceylon Brewery Holdings Plc gained 2.94 percent to close at 672.30 rupees.

Ceylinco Insurance Plc rose 4.09 percent to 1,400 rupees.

Lower interest rates have prompted local investors to buy shares and shift their savings from unattractive fixed assets, analysts said, as yields on treasury bills edged down further at a weekly auction on Wednesday.

Foreign investors net bought 28.35 million rupees worth of shares on Monday, extending net foreign inflows in stocks to 9.42 billion rupees so far this year.

Analysts said foreigners have been buying risky assets because they see value in them, while falling yields in fixed assets gradually prompt local investors to shift to equities.

The market has been on a rising trend since late February due to continued foreign buying and lower interest rates. 

($1 = 130.2000 Sri Lankan Rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Prateek Chatterjee)

Sri Lanka stocks close up 0.6-pct

July 14, 2014 (LBO) - Sri Lanka's stocks closed 0.56 percent higher on Monday extending the gains of food, beverages and tobacco sector amid low foreign participation, brokers said.

The Colombo benchmark All Share Price Index closed 37.63 points higher at 6,699.03, up 0.56 percent. The S&P SL20 closed 13.07 points higher at 3,721.23, up 0.35 percent.

Turnover was 597.19 million rupees, down from 1.67 billion rupees last Friday with 114 stocks closed positive against 68 negative.

DIMO closed 29.90 rupees higher at 564.10 rupees with an off-market transaction of 50.05 million rupees changing hands at 550.00 rupees per share contributing 8 percent of the turnover.

Sierra Cables closed 10 cents lower at 2.10 rupees and FLC Hydro Power closed flat at 6.30 rupees, attracting most number of trades during the day.

Foreign investors bought 84.99 million rupees worth shares while selling 56.65 million rupees worth shares.

Lion Brewery Ceylon closed 89.10 rupees higher at 684.20 rupees, contributing most to the index gain.

Dialog Axiata closed 30 cents higher at 11.20 rupees and Sri Lanka Telecom closed 10 cents higher at 56.10 rupees.

Ceylon Tobacco Company closed 5.60 rupees higher at 1,107.30 rupees and Ceylon Tea Services closed 17.50 rupees lower at 700.50 rupees.

Aitken Spence closed 1.10 rupees lower at 107.00 rupees and John Keells Holdings closed 30 cents higher at 240.30 rupees.

JKH’s W0022 warrants closed 20 cents lower at 63.90 rupees and its W0023 warrants closed 40 cents lower at 73.90 rupees.

Lanka Orix Finance gets Court order against Dynaris selling assets

Lanka Orix Finance Plc (LOFIN) has obtained an order from the High Court preventing Dynaris Holdings Ltd. from disposing of its assets, including shares of PCH Holdings Plc.

This is following default by Dynaris over Rs. 100 million outstanding to LOFIN.

The Colombo Stock Exchange (CSE) on Friday was informed by LOFIN that it understands that Dynaris is planning to dispose of shares held by it in violation of the Court order.

“This illegal sale of PCHH shares by Dynaris amounts to price sensitive information for LOFIN and the investors at large,” stated LOFIN.

It has also said that any stockbroker who facilitates trades in violation of the Court order in shares owned by Dynaris will be liable of contempt of court.

As at 31 December 2013, Dynaris Holdings owned by S.H.M. Rishan held a 39.89% stake in loss-making PCHH or 100.5 million shares. At Friday’s closing price the stake is worth around Rs. 340 million. In the nine months ended on 31 December 2013, PCHH Holdings Group loss was Rs. 1.2 billion.
www.ft.lk

Sierra Cables twisted with Rs. 491 m improprieties

* Write-offs lead to Rs. 354 m loss in FY14 after enjoying Rs. 41.6 m in pre-tax profit in first 9 months

* SIRA Board of Directors assures shareholders it will vigorously pursue action against all those responsible for the improprieties

* Longstanding auditors KPMG issues qualified opinion in FY14 accounts; raises doubt on going concern of loss-making subsidiary Sierra Industries

Sierra Cables Plc on Friday revealed far-reaching lapses in book keeping, best practices in accounting and auditing as well as good governance, leading to improprieties worth Rs. 491 million.

The disclosure is following the receipt of final report from its auditors on the difference in the work in progress balance and certain unrecorded transactions.

In a filing to the Colombo Stock Exchange, Sierra Cables (SIRA) said that no additional findings which have material financial impact to the required adjustments disclosed by the Board of Directors on 11 June 2014 have been established.

Furthermore, this has been reconfirmed by the report of the forensic investigation initiated by the Board. Auditors of SIRA are KPMG and Chairman of the Audit Committee of the SIRA Board is Dr. D.G.K.E. Weerapperuma.

The SIRA filing said the Board of Directors confirm that the difference of Rs. 172 million in the value of work in progress of inventories between the General Ledger and the valuation carried out as at 31 March 2014 remains unchanged.

Since the Board of Directors is unable to make a reliable assessment of the impact relating to previous periods in the absence of records, the difference has been written off in the financial statements for the year ended on 31 March 2014.

Further, certain revenue, expenses and assets of the Company have not been recorded in the General Ledger and Financial Statements during previous years disclosed by the SIRA Board of Directors on 11 June 2014 remains unchanged to be (a) income of Rs. 113 million, (b) expenses amounting to Rs. 107 million and (c) assets of Rs. 6 million and have now been brought in and are reflected in the financial statements for the year ended on 31 March 2014.

The Company also revealed that the difference between the physical finished goods stock and the stock value in the General Ledger disclosed on 11 June 2014 by the Board remains unchanged. The difference amounting to Rs. 93 million has been written off in the financial statements for the year ended on 31 March 2014.

Incorporating these changes, the audit of the financial statements for FY14 has been completed.

“The Board of Directors of Sierra Cables Plc assures its shareholders that it will vigorously pursue action against all those responsible for the improprieties following due procedures and thanks its shareholders for their patience, understanding and support,” the SIRA Board said in its filing to the CSE.

The Company has reported a pre-tax loss of Rs. 353.6 million in FY14, as against a profit of Rs. 17 million in the previous year. The Group has posted a pre-tax loss of Rs. 376.3 million in comparison to a loss of Rs. 20 million in FY13. At the end of first nine months the Company reported a pre-tax profit of Rs. 41.3 million and at Group level pre-tax profit was Rs. 14 million.

Group revenue rose to Rs. 2.28 billion in FY14 from Rs. 2.14 billion in FY13.
As at 31 March 2014, Group retained earnings has slump to Rs. 88 million, from Rs. 334 million a year earlier.

In the just released accounts for FY14, external auditors KPMG giving a qualified opinion said the Company has neither followed the established accounting procedures nor used the accounting system of the Company for recording and accounting for these transactions as it has followed for recording and accounting for other transactions of the Company up to 31 March 2014.

In FY13, according to KPMG, the Company has maintained proper accounting records.
However in its original filing to CSE on 3 June, SIRA Board admitted to significant misstatements in financial statements of the Company for the years 2010/11, 2011/12, 2012/13 and 2013/14.

Separately the auditors has also raised doubt on the going concern of Sierra Industries Ltd., a subsidiary of the Group, which has Rs. 93 million in accumulated losses and its current liabilities has exceeded its current assets by Rs. 93 million. The subsidiary is also facing serious loss of capital. However the Directors of the subsidiary have made an assessment of the Company’s ability to continue as a going concern and do not intend either to liquidate or cease trading.

Auditors have also flagged off the non-completion of contractual agreement between the main contractor Sierra Power Ltd., a subsidiary of the Group, and the Company.

Sierra Cables PLC has made a payment of Rs. 53 million on behalf of its subsidiary, Sierra Power Ltd., to one of its main contractor during the year ended 31st March 2014. However the contractual agreement between this contractor and Sierra (Power) Ltd., had not been finalized until 4th June 2014, the date on which the financial statements of the subsidiary were authorized for issue by the Board of Directors.

Sierra Holdings Pvt Ltd owns 58% and with related parties control additional stakes. Browns Investments Plc is the second largest shareholder with 6% stake. Public float of SIRA is 37%.

Board of Directors of Sierra Cables comprises of Priyantha Perera (Chairman), E.A.D.T.B. Perera, D. Shamendra Panditha (Managing Director) D.N.N. Lokuge, D.G.K.E. Weerapperuma, G.S.M. Irugalbandara (Alternate Director F.A.W. Irugalbandara), B.W.N. Rupasinghe, A.K.W. Jayawardane and P.R. Saldin.
www.ft.lk

NSB to float US$ 500M bond

By Paneetha Ameresekere

Ceylon FT: The exchange rate (ER) further strengthened by three Sri Lanka cents (SLc) to Rs 130.20/25 to the US dollar, Friday over Thursday due to inflows, market sources told Ceylon FT. Talks that State- owned NSB is to float another US$ 500 million bond (following last year's US$ 750 million bond), the recent "SLDBs" and the SriLankan Airlines' bond, coupled with improved country ratings, have given a boost to the rupee, they said.

Exporters, and almost everybody else holding dollars, are converting the same. That has given a boost to the local currency, the sources said. There is sufficient liquidity, things are positive, despite the State and its agents borrowing commercially, they said. Rates of borrowing that Sri Lanka commands in international markets are now attractive due to the fact that economic indicators pertaining to the island are positive, they said.

The State on Friday was buying dollars at the Rs 130.20 level, if not for which the rupee would have strengthened further, they said.

Week on week (WoW) as at Friday, the ER has had strengthened by between five and 10 SLc, having had closed the previous week at the Rs 130.25/35 level in two way quotes to the dollar, they said. The sources further said that secondary market trading in government securities was dull, with the market looking for direction from Monday's monetary policy announcement. The benchmark one year maturity closed the week at 6.85% in secondary market trading, six basis points less than the weighted average yield it commanded at that week's primary auction, which was 6.91%.

At the time of going to press, Central Bank of Sri Lanka hadn't released details of its "open market operations" as at Friday. Therefore, it is not possible to give a synopsis of Friday's money market's excess liquidity position, and matters related to the same.
www.ceylontoday.lk

CIFL depositors urge formation of joint Depositors Forum to safeguard investments in all finance companies

Depositors at the crashed CIFL (Central Investment and Finance Ltd) are preparing to file objections as a prelude in appeal in the Supreme Court against the Appeal Court dismissal of its case against the Central Bank (CB)-led recovery plan.

K. Wijaya Gunawardena, President, CIFL Depositors Association (CIFLDA) said the collapse of the case has seriously affected the moral of the members and they are much concerned that there could be a spate of deaths due to heartburn, shock and despair. The CIFLDA is trying to seek the assistance of a rights group or any other organisation to save their members from mounting medical bills, particularly those who are unable to pay.

He said that the least the government could do is save these lives because all these happened due to the irresponsibility of the CB. He said that the finance companies are set up with the complete knowledge of the CB but it has now become completely unreliable.“Therefore at least to save the depositors in the existing finance companies the CB should create a safety net by way of an insurance framework so that whenever a finance company fails depositors funds could be refunded,” he said.

He suggested that all the depositors of the existing finance companies should form into an association like a deposiotrs forum and demand that the CB set up this safety net.

Apart from the activities of the CIFLDA, a large number of depositors have complained to the Police Fraud Bureau. An official of the Fraud Bureau told the Business Times that 218 CIFL depositors have complained against the CIFL and these were forwarded to the Attorney General for advice on prosecution.
(QP) www.sundaytimes.lk

Fears of Touchwood disposing foreign assets

By Sunimalee Dias

Fresh concerns that assets of troubled Touchwood Investments PLC are being disposed came amidst fears that its former management may have flown to Thailand. This follows the company failing to submit the necessary documents relating to its assets.

The company which was wound up on June 5 following a Commercial High Court order appointing a liquidator to take charge of the assets to settle the investors, has failed to submit details of its assets in a Statement of Affairs to the court appointed liquidator Sudath Kumar.

“There is a significant risk if there are assets outside the country if they would be disposed by the company without the knowledge of the investors,” the liquidator said in an interview with the Business Times on Friday. The main asset highlighted in the petitioner’s written submissions in the Touchwood winding up case related to properties in Thailand, which lawyers for the petitioner Avindra Rodrigo believes was worth over Rs.300 million.

Mr. Kumar was informed by the company’s former Chairman/CEO Lanka Kiwlegedera that he would submit the Statement of Affairs within two weeks in letter dated June 23.

However, this time period has now lapsed and the liquidator with Mr. Rodrigo has filed an application in court since he has not submitted the necessary information to commence the liquidation process.

In this respect the Commercial High Court issued an order on Friday for Mr. Kiwlegedere to appear in court on July 31. Mr. Kumar observed that in the letter sent by Mr. Kiwlegedera it appeared to him that the former management wanted to still take control of the assets and feared they would not reveal the assets of the company since he had signed the letter as Chairman/CEO and it was sent on a company letter head.

He noted that this was not possible since it was going against the court order for the winding up of the company.

In addition, he pointed out that since this letter was copied to the Securities and Exchange Commission and Colombo Stock Exchange it raises questions as to why the regulator remained silent on the matter.

The next date for the hearing and submission of the report by the liquidator in the Touchwood winding up case is scheduled for August 6.

At present over 100 investors had submitted their affidavits on their properties which the liquidator would use for the settlement of the dues to these persons upon the maturity of the agreements.

Touchwood Investments PLC said on June 23 that it has submitted a ‘notice’ of appeal in the Supreme Court against the winding up order issued by the Commercial High Court. The regulator was also informed of this move.

However, so far, no proper appeal has yet been submitted. The company has time within 60 days from the court order to do so.
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