Room for indices to decline by 100 points - Sources

By Paneetha Ameresekere

Ceylon FT: Market turnover slipped by 70.1% yesterday compared to the previous week's daily average, with market sources telling Ceylon FT that simultaneous with poor turnover, indices gaining ground yesterday however was abnormal, saying that there is space for indices to come down by 100 points.

"Indices making gains yesterday was not good, only when it comes down can it go up," they said.

On a turnover of Rs 597.2 million, the ASPI gained by 0.56% to 6,699.03 points; while the S&P SL 20 Index increased by 0.35% to 3,721.23 points yesterday, over their closings the previous market day, Friday, 11 July.

In the previous week, daily average turnover was Rs 2,000 million.

The market yesterday recorded a pyrrhic net foreign inflow (NFI) of Rs 28.3 million led by Anilana Hotels, taking NFIs in the year to date to Rs 9.694 billion, from the previous day's figure of Rs 9.666 billion.

On a day largely dominated by traders (that is, those who don't have the holding power to hang on to their purchases and generally dispose of such at the first given opportunity and who generally the capacity to invest in only low value stocks), yesterday's turnover was given a boost by Com Bank, the market's fourth largest capitalized stock with Rs 43.4 million on a share volume of 297,241. Com Bank closed, down 0.14% over its previous day's close at Rs 146.10 a share.

The second largest contributor to yesterday's turnover was JKH with Rs 28.5 million on a share volume of 118,693. JKH closed at Rs 240.30 a share, up 0.12% over its previous day's close.

As the value of market indices is directly linked to market capitalization (market cap), when the share value of a stock increases, its market cap also increases. Stocks such as JKH and Com Bank which have large market caps, have a greater weightage in regard to the movement of market indices.

In this context, yesterday, the market's second and third largest capitalized stocks, namely CTC and Nestlé also saw their market shares gain in value, the former on a low turnover figure and the latter on both a low turnover and share volume, thereby giving a thrust to market indices.

CTC, on a Rs 3.7 million turnover saw its share value increase by 0.51% to Rs 1,107.30 a share, while Nestlé, on a Rs 1 million turnover, saw its share price gain by 0.28% to Rs 2,071.40 a share. CTC saw 3,330 shares traded, while in the case of Nestlé it was a miserly 499 shares.

CTC's gains come in the backdrop of the Supreme Court giving an adverse ruling to the company, asking it to display graphic warnings on its packs from next year, of the dangers of smoking.

Yesterday saw 123 gainers and 74 stock market losers of listed companies.
www.ceylontoday.lk

Global apparel label and packaging giant to set up joint venture with Printcare under BOI

Royal Pac Printcare Lanka (Private) Limited has signed an agreement with the Board of Investment (BOI) to establish an operation for the manufacture of apparel labels and packaging material for the apparel industry of Sri Lanka.

r-pac International Holding Co., the foreign investor in the new venture, is a company based in New York, USA, and is one of the largest label and packaging material suppliers to the global apparel industry. It currently has operations in over 25 worldwide locations including the Americas, Europe, Middle East and Asia, and currently enjoys an exceptionally large retailer contact base with particular access to the US market. With worldwide accreditation, r-pac International has also been experiencing continuous and steady growth in South Asian markets such as Bangladesh and India.

The company has a highly advanced manufacturing technology process including significant technological advances in RFID technology which is increasingly deployed in apparel packaging and its supply chain. These attributes coupled with the company’s innovative approach and intense focus on customer service has made it a preferred and leading supplier of apparel labels to the global apparel industry.

The local partner, Printcare Packaging Pvt Ltd, a fully-owned subsidiary of Printcare PLC, one of the largest and most sophisticated printing operations in Sri Lanka, is a leading provider of innovative printing and packaging services to export industries in Sri Lanka.

Pradeep Sugathadasa, Director, Royal Pac Printcare, said that this collaboration between the two majors is a great opportunity to add value to the apparel industry. "The new joint venture is a timely investment and will significantly contribute to the Sri Lankan economy, while enhancing the competitiveness and flexibility of the apparel sector by making available a wide variety of apparel labels and packaging products". He also added that, "The locally produced apparel labels and packaging material will be made available to the apparel sector at competitive prices and faster lead times." The new venture will enable local apparel manufacturers to reduce their reliance upon imported labels and packaging products, while generating significant foreign exchange savings. The joint venture will also greatly enhance the opportunity for indirect exports, resulting in further corresponding foreign exchange inflows into the country.

The apparel industry in Sri Lanka accounts for over 40% of exports and is therefore the leading export sector contributor to the country’s economic growth. The current annual value of this industry is estimated at USD 4 billion, and the industry is projected to achieve further significant growth in the next few years due to various changing factors in the global apparel industry. Sri Lanka has a strong backward integration in the industry, geographic location and the concurrent economic benefits of market access and an advanced manufacturing base which facilitates better product development and penetrative marketing capability. The prevalent labour standards and compliance with ethical requirements of the industry are also deemed as factors influencing the projected growth of the industry.
-BOI
www.island.lk

Adam Investments gets further Court orders over PCHH

Adam Investments Ltd. said yesterday it has got further Court orders concerning PCH Holdings, which is under takeover by the former.

In a filing to the CSE, Adam Investments said it has received the following interim orders from Commercial High Court (Case no. HC Civil 23/2014/CO) on 11 July: Interim order restraining the sale, transfer of shares of Bieco Link Carbons Ltd. to MMD Ventures Lanka Ltd. from PCH Holdings Plc; restraining MMD Ventures Lanka Ltd. from taking possession, removal of assets or alienating assets of Bieco Link Carbons Ltd.; interim order restraining Global Corporate Solutions Ltd. of 3rd Floor, No. 451, Galle Road, Colombo 3 acting as the company secretary of PCH Holdings Plc and Bieco Link Carbons Ltd.; and appointing PWC Corporate Secretarial Services Ltd. as the company secretary of PCH Holdings Plc and Bieco Link Carbons Ltd. until holding an EGM of both
companies.

These orders were issued in addition to the orders already issued by the Commercial High Court on 4 July, which were: Restraining the present directors from alienating, transferring of assets of PCH Holdings Plc and Bieco Link Carbons Ltd.; appointment of two Directors, Chaminda Dayan Banduthilake and Dharshana Padmal Galabodage to the Board of Directors of PCH Holdings Plc and Bieco Link Carbons Ltd.; and appointing Kay-Jay Group as the independent security form to secure the Bieco Link Carbons Ltd. factory premises in Giriulla.
www.ft.lk

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