Lankan equities still attractive amid foreign outflow blip

Bloomberg: The biggest single-day outflow in at least 11 years from Sri Lankan stocks is a blip and foreigners, the key drivers of the nation’s equities this year, will likely overlook the negative reading.

Retail Holdings Sri Lanka BV on Wednesday agreed to sell its 61.73% stake in Singer Sri Lanka, a maker of sewing machines, to Hayleys Plc for about $ 71 million. A matching outflow was reported by the exchange on Friday.

“This is a one-off deal that has nothing to do with inflows,” said Sanjeewa Fernando, strategist at CT CLSA Securities in Colombo. “We have to adjust for this outflow.”

Foreigners have been buyers of Sri Lankan stocks for seven straight months through August, the longest streak since May 2015, drawn by the growth in company earnings and renewed confidence in the Government’s policies. The nation’s benchmark equity index trades at 10 times one-year forward earnings, versus a multiple of 15 for the MSCI Frontier Emerging Markets Index.

“Our price-to-earnings is still about the cheapest,” Fernando said. “Until we reach valuation of 14 times, foreigners are likely to transfer some of their funds from pricier markets.”
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Sri Lankan shares mark 4-wk closing high on foreign buying

Reuters: Sri Lankan shares gained for a fourth straight session on Tuesday to mark a four-week closing high on foreign buying in blue-chips.

Foreign investors bought a net 129.9 million rupees ($848,188) worth of shares on Tuesday, extending the year-to-date net foreign inflow to 17.1 billion rupees.

The Colombo stock index ended up 0.29 percent at 6,428.07, its highest close since Aug. 18.

“Foreign investors were active today, helping to push the turnover above one billion. Foreign interest were buying blue-chips and that helped boost local investor confidence,” said Hussain Gani, deputy CEO of Softlogic Stockbrokers.

Shares of Ceylon Cold Stores Plc rose 1.5 percent, while Trans Asia Hotel Plc ended 6.7 percent firmer and conglomerate John Keells Holdings Plc gained 0.2 percent.

Turnover stood at 1.6 billion rupees, well above this year’s daily average of around 922.4 million rupees.

Recent block deals also helped boost sentiment, traders said.

Last Wednesday, after market hours, diversified conglomerate Hayleys Plc said it had agreed to purchase 61.73 percent of Singer Sri Lanka Plc for 10.9 billion rupees from Retail Holdings (Sri Lanka) BV a subsidiary of Retail Holdings NV.

Hayleys in a corporate disclosure said on Friday that Hayleys Plc and its subsidiaries purchased 231.9 million shares or 61.73 percent of Singer Sri Lanka Plc at a price of 47 rupees per share.

Last week, top mobile phone operator Dialog Axiata Plc said it acquired 80.34 percent of Colombo Trust Finance Plc for 1.072 billion rupees ($7 million). 

($1 = 153.1500 Sri Lankan rupees) 

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

Mercantile Investments and Finance records PAT of Rs 202 mn for 2016-17

Mercantile Investments and Finance has recorded a steady pre-tax profit of Rs 314 million and a post- tax profit of Rs 202 million for the financial year ending March 31, 2017.

However both pre and post-tax profits reported a notable decline of 61% and 60% respectively, when compared with the previous year mainly on account of recording impairment charges.

Further, as witnessed across the finance industry, the continued upward movement in interest rates and its resulting re-pricing effect impacted the cost of funding and core business margins which pegged back profitability levels against what was envisaged, Mercantile Investments and Finance Chairman Saro Weerasuriya told shareholders in company’s Annual Report for the financial year 2016/17.

“We experienced steady growth in our lending volumes which resulted in the loan book growing buoyantly by 14% year-on-year. In contrast, the deposit base grew moderately increasing by 8% year-on-year.

In the backdrop of rising market interest rates, we were conservative in the mobilisation of deposits that were deemed relatively more costly than other sources of funding available, and hence, we were able to access less costly sources of funding through borrowings on the strength of our brand.”
www.dailynews.lk

Sri Lankan shares hit 3-week closing high as blue chips gain

Reuters: Sri Lankan shares rose for a third straight session on Monday and ended at a three-week closing high as investors picked up diversified and telecom shares, brokers said.

The Colombo stock index ended 0.12 percent firmer at 6,409.65, its highest close since Aug.28.

The bourse rose 0.4 percent last week, ending an eight-week long losing streak.

“We are yet to see the bullish trend, but it is slowly coming into the market with some foreign buying,” said Dimantha Mathew, head of research, First Capital Holdings.

“The Locals are a bit more conservative and are looking at only blue chips yet.”

Shares of conglomerate John Keells Holdings Plc gain 1.2 percent while Sri Lanka Telecom Plc ended 4.6 percent firmer, Melstacorp Ltd rose 1.7 percent and Dialog Axiata Plc ended 0.9 percent higher.

Foreign investors net bought 97.7 billion rupees worth of shares on Monday, extending the year-to-date net foreign inflow to 17 billion rupees worth of equities.

Turnover stood at 459.2 million rupees, half of this year’s daily average of around 918.3 million rupees.

According to traders, recent block deals also helped boost the market sentiment.

On Wednesday after market hours, diversified conglomerate Hayleys Plc said it had agreed to purchase 61.73 percent of Singer Sri Lanka Plc for 10.9 billion rupees from Retail Holdings (Sri Lanka) BV a subsidiary of Retail Holdings NV.

Hayleys in a corporate disclosure said on Friday that Hayleys Plc and its subsidiaries purchased 231.9 million shares or 61.73 percent of Singer Sri Lanka Plc at a price of 47 rupees per share.

Last week, top mobile phone operator Dialog Axiata Plc said that it acquired 80.34 percent of Colombo Trust Finance Plc for 1.072 billion rupees ($7 million). 

($1 = 152.9500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Vyas Mohan)

Lanka Cement’s affairs in a mess,7 annual reports presented together

Over Rs. 2.3 bn. retained losses, lease on 92-acre factory land not renewed

Lanka Cement PLC has published its annual report for 2016 to be considered by shareholders at its 23rd Annual General Meeting as well as a second volume comprising annual reports for the years 2010 to 2015 (inclusive) to be considered at what is described as a 23rd Extraordinary General Meeting.

Although the affairs of the company, which has been importing and selling cement since its Kankesanturai factory was closed in 1991, is in a mess and auditors have declined to express an opinion on its accounts, its shares continue to be traded on the Colombo Stock Exchange.

On Thursday over 0.7 million shares of the company were transacted at a low of Rs. 4.10 and a high of Rs. 4.50 closing at Rs. 4.40 in 20 trades.

The company’s present chairman, Mr. Lalinda Liyanage, has said in the latest annual report that Lanka Cement had a great history and the successes and failures of the domestic cement industry could be understood in reviewing this history.

He said their factory was located on 92.8 acres of land granted by a 30-year government lease which ended May 30, 2014. But neither the Lanka Cement board nor its management had acted to renew the lease.

The factory which was under control of the security forces has been looted and valuable steel taken away.

Liyanage expressed the view that the Kankesanturai operation should be revived with high quality limestone deposits, raw material for cement manufacture, belonging to the company exploited to make it a factor in the cement world.

He expressed the hope of putting the company on a firm footing in coming years.

The year ended Dec. 31, 2016, has seen the company which is carrying retained losses of Rs. 2.37 billion in its books, posting a loss of Rs. 5.68 million, down from the previous year’s loss of Rs. 8.05 million and a loss of Rs. 15.53 million a year earlier.

The 2013 loss was Rs. 192.9 million while a loss Rs. 385.2 million was posted in 2012.

The public shareholding of the company which has paid no dividends for several years amounts to 42.9 million shares (24.73%) with the ordinary share capital at Rs. 1.74 billion. Assets were stated in the latest published accounts as Rs. 275.3 million. Debt stood at Rs. 833.2 million and current liabilities at Rs. 76.2 million.

The auditors, Ernst and Young, have said that they have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Although property, plant and equipment valued at Rs. 230 million is described as located in the company’s factory, the factory had been completely destroyed in the war. The recoverable value has not yet been determined by the company.

The directors of the company are Messrs. Lalinda Liyanage (chairman), Reyyaz Salley (MD), Janaka Karunaratne, Abdul Rafeek, Malith Perera, AN Hapugala and NM Munawwar.

www.island.lk

First Capital Holdings bounces back in 2016/17

First Capital Holdings PLC (FCH), a member of the Janashakthi Group, has performed strongly in the year ended March 31, 2017, posting what its new chairman, Mr. Nishan Fernando, called a phenomenal increase in net profit which grew to Rs. 232 million from the previous year’s Rs. 47 million.

He said the improved performance was mainly attributable to the substantial improved performance by First Capital Treasuries PLC, the primary dealer arm of the group.

FCH is a full service investment bank specializing in capital market advisory services, wealth management, fixed income and equities which serve "an array of companies, institutions, government agencies, high net worth individuals and retail clients seeking truly objective advice, innovative solutions and execution expertise," the company said in its recently released annual report.

The year under review saw income growing 131.34% to Rs. 3.59 billion with net trading income up 13.46% to Rs. 572.2 million while the operating profit grew 368.05% to Rs. 245.5 million. Earnings per share were up to Rs. 2.09 from Rs. 0.46 the previous year and the company paid a dividend of two rupees per share. There was no dividend the previous year.

FCH suffered a sharp downturn in the previous financial year with the after tax profit slumping to Rs. 47.5 million from Rs. 984.9 million a year earlier.

Dunamis Capital PLC, a Janashakthi company, is the dominant shareholder holding over 78% of the company which has been quoted on the Colombo Stock Exchange since 1994.

"With out financials on track, our main thrust for the year was to increase market leverage and position the FCH Group for long-term growth," Fernando said. "Key initiatives in this regard saw renewed efforts to improve our external positioning and strengthen core brand architecture."

He also said that they had strengthened their senior leadership team bringing in experts in corporate finance and strategy.

Looking at future outlook, he said that at present the market appears stable but "in our business nothing is certain." However, thanks to strong fundamentals, he was confident that the FCH group is well equipped to navigate the challenging industry and market environment to reach their growth targets in the years ahead.

CEO Dilshan Wirasekera said the year ended on a high note as a result of proactive action to seize market opportunities. "However, as most often the case in our business, the operating environment did not culminate as we expected."

Mrs. Manjula Mathews, chairperson of the company till April 30, has retired. Her successor described her as an exemplary leader whose dynamic approach and often bold decisions has brought the company to where it is today.

The directors of the company are: Messrs. Nishan Fernando (chairman), Dinesh Schaffter, Dilshan Wirasekera, Eardley Perea, Ms. Minette Perera and Chandrana de Silva.

www.island.lk

Dilmah to consolidate with MJF Teas by the issue of new shares to parent

Dilmah Ceylon Tea Company PLC (previously Ceylon Tea Services PLC) has announced a private placement of its shares with its parent, MJF Teas (Private) Ltd. (MJFT) under which the businesses of the two companies, both engaged in manufacturing and exporting value-added tea bags, will be consolidated.

Under the restructuring for which approval of Dilmah Ceylon shareholders will be sought after that company’s annual general meeting scheduled for Sept. 25, Dilmah will take over the tea export business and related assets of MJFT at a cost of Rs. 442.5 million to be satisfied by the issue of 735,500 ordinary shares of the company to MJFT.

A Dilmah share has been valued at Rs. 600 each for the purpose of this transaction – slightly higher than the current market price of the share on the Colombo Stock Exchange. The 600-rupee price has been determined on the basis of the average traded price of the share from Feb. to July 2017.

MJFT is the controlling shareholder of Dilmah with a stake of 65.38% of the company. This will rise to 66.61% after the private placement of the new shares.

Currently MJFT supplies Russia and other former Soviet States, India and the US while Dilmah supplies the rest of the world.

In a recent circular to shareholders of Dilmah, the company said that "the consolidation of the tea manufacturing and exporting businesses (under Dilmah) will bring numerous benefits to the company" with its revenue and global market share rising significantly as a direct result.

The directors said that the expansion of the customer base across the globe had a potential for increased profits and earnings per share. It was also an opportunity to streamline internal processes of Dilmah which will benefit from economies of scale that will impact positively on the company’s cost base and overall operational efficiency.

Dilmah, which is a closely-held company controlled by Mr. Merril. J. Fernando and his two sons through related parties, will also move from the main board to the Diri Savi Board of the CSE due to the public float liquidity requirements now being enforced.

The new shares will not be entitled to Dilmah’s next dividend due to be formally approved by its shareholders at the forthcoming AGM. But they will qualify for future dividends.

The company is among the higher dividend payers among those quoted on the CSE and shareholders who invested in the company at its initial public offering many years ago has done very well on the share.

www.island.lk