Sri Lanka’s Trans Asia Hotels Dec net halves

ECONOMYNEXT - Sri Lanka's Trans Asia Hotels Plc, which owns and operates Colombo's five-star Cinnamon Lakeside Hotel, said profit for the December 2017 quarter fell 52 percent to 98.8 million rupees from a year earlierwhile revenue also fell 4 percent in the peak December season.

The hotel reported earnings of 0.49 cents per share for the quarter in accounts filed with the Colombo Stock Exchange. In the nine months to December it reported earnings of 1.64 rupees per share on a profit of 320 million rupees, down 31 percent from a year ago.

The share last traded at 90 rupees on the Colombo Stock Exchange.

Gross revenue fell 4 percent to 859.3 million rupees, and cost of sales declined by three percent to 353.6 million rupees, shrinking gross profits eight percent to 505.7 million rupees.

Operating expenses was up one percent to 322.7 million rupees and finance cost increased 150 percent to nearly two million rupees.

Tax expenses increased 136 percent to 78 million rupees.

Trans Asia Hotels is a unit of John Keells Holdings which has interest in ports, consumer goods and finance.

Sri Lankan shares drop in dull trade; banks top drag

Reuters: Sri Lankan shares declined on Monday, marking their eighth session of fall in nine, as investors sold banking stocks in dull trade.

The Colombo Stock index ended 0.34 percent weaker at 6,421.40. On Thursday, it closed at its lowest since Dec. 29.

The bourse has shed 2 percent in the past nine sessions, and dropped 0.47 percent last week, recording its second straight weekly fall.

“The market was quiet till late. We saw some activities in the latter part of the day,” said Hussain Gani, Deputy CEO at Softlogic Stockbrokers.

“There were some selling in banks which brought the market down,” he said, adding that investors were waiting to see clarity on the political front from a local election which will be held on Feb. 10 after a long delay.

Turnover stood at 460.7 billion rupees, half of last year’s daily average of 915.3 million rupees.

However, foreign investors bought a net 196.6 million rupees worth of shares on Monday, extending the year-to-date net foreign inflow so far this year to 2.9 billion rupees worth of shares.

They bought equities worth 18.5 billion rupees last year and 633.5 million rupees in 2016.

After market hours on Friday, diversified company Hemas Holdings Plc said it will acquire 75.1 percent of stationery manufacturer Atlas Axillia Co (Pvt) Ltd for 5.7 billion rupees. Hemas fell 5.4 percent on Monday.

Shares in Lanka ORIX Leasing Co Plc dropped 3.5 percent, while Hatton National Bank Plc declined 1.1 percent. 

($1 = 153.8500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Most stocks traded are undervalued

By Duruthu Edirimuni Chandrasekera

Most stocks that are traded on the Colombo Stock Exchange (CSE) are undervalued estimated by analysts to at least 40 per cent, experts say.

“When analysing price to book value of certain shares that are trading on the CSE, their book value is higher,” an industry expert noted to the Business Times. “These are the things that investment advisors should educate retail traders on. But this isn’t happening. It’s important to point out the benefits of holding onto a stock for a longer term. Now is the time to do so,” he stressed.

Another expert acknowledged this saying that the biggest issue right now is lack of local institutional investors in the CSE. “It’s partly due to the bond scam which has put these institutions in a fix,” he said explaining that now local superannuation funds are at a bigger dilemma to invest in the CSE owing to this latest turn of events.

In addition to the probes that are ongoing, they’re hesitant to invest due to fear of being hauled in front of commissions and courts should the government change, he added. The Employee Provident Fund (EPF) and Employees’ Trust Fund (ETF) are currently being probed following the bad blood during the pump and dump in the CSE three years ago, and also owing to the recent bond scam.

The CSE has lobbied the Treasury to get the Central Bank to lure both agencies to restart their investments.

The two mandatory and state-managed superannuation funds dominate the pensions industry and about 92 per cent of these funds are invested in government securities. Only 6.5 per cent of the Rs. 3.1 trillion market capitalisation of the CSE is owned by institutional institutions such as EPF, ETF, insurance companies and unit trusts.

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CSE gears to weed out bad eggs on its boards

By Duruthu Edirimuni Chandrasekera

At least 20 per cent of Sri Lanka’s listed companies at the Colombo bourse have run afoul of regulations pertaining to the prescribed minimum percentage of shares held by the public.

Figures as at September 2017 show that 59 listed companies are non-compliant with the minimum public float rule of the Colombo Stock Exchange (CSE). Since then in the past few months, more companies have said that they are not compliant with these rules.

Of the figures as at September, between 30 to 40 firms are likely to exit the exchange through this mechanism which is meant to weed out bad eggs, officials say.

“There’re 44 main board companies and 15 on the Diri Savi Board (pertaining to violating this rule). They issued announcements with regard to their non compliance as it’s now a requirement to issue them till June this year when the enforcement rules kick in,” an official told the Business Times.

The CSE has 295 companies representing 20 business sectors as at September 30, 2017 with a market capitalization of Rs. 2,919 billion.

Earlier when a company listed on the CSE, there was a minimum stake (10 per cent) that it has to part with, but it wasn’t mandatory to maintain this amount. To maintain a certain percentage which corresponds to a certain number of minimum shareholders was introduced in 2016.

By end June, the non-compliant firms will be transferred to a ‘watch list’ according to Section 7 of the CSE’s listing rules and remain there for a further six months. In the instance they are unable to rectify the situation, they will be delisted, one official said. “This enforcement policy has been introduced following the grant of a period of over three years since the initial introduction of minimum public holding as a continuous listing requirement in 2013 and a further grace period of six months,” he said.

Some listed firms such as TAL Lanka Hotels Plc have said in their announcement that they were compelled to engage in a financial restructure due to adverse market conditions in the hospitality industry till the financial year 2001/02.

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Sri Lanka’s USD500mn development bond oversubscribed

LBO - The issue of Sri Lanka development bonds amounting to 500 million US dollars has been oversubscribed with close to 527 million US dollars of bids received from investors.

The Central Bank has received 129.27 million dollars of bids for the two year bond and the bank has accepted 93.15 million at a floating rate of six month LIBOR plus 305.39 basis points.

The bank has also received 127.59 million dollars of bids for the three year bond and the bank has accepted 114.59 million at a floating rate of six month LIBOR plus 365.18 basis points.

117.66 million dollars of bids has been received for the four year bond and the bank has accepted 113.66 million at a floating rate of six month LIBOR plus 378.13 basis points.

The Central Bank has received 152.22 million dollars of bids for the five year bond and the bank has accepted 149.17 million at a floating rate of six month LIBOR plus 404.81 basis points.

The issue was open for subscription from 11 to 18 January 2018. It has a settlement date of 22 January 2018.

Development bonds or the treasury bonds denominated in US dollars are issued by the Public Debt Department of the Central Bank and subject to the applicable tax laws in Sri Lanka.

Selected Licensed Commercial Banks & Primary Dealers are the designated agents to purchase these bonds.

Earlier this month, Sri Lanka’s cabinet of ministers granted approval to raise up to 3 billion US dollars from development bonds in this year for loan repayments and financing of development projects.

Sri Lanka’s Hemas buys Atlas Axillia for Rs5.7bn

ECONOMYNEXT – Sri Lanka’s Hemas Holdings has bought acquired 75.1% of Atlas Axillia Co (Pvt) Ltd, a leading school and office brand, for Rs. 5.7 billion.

The existing shareholders of Atlas will retain a stake of 24.9% in the company, a stock exchange filing said.

Atlas Axillia Co., formerly known as Ceylon Pencil Company (Pvt) Ltd., will become the third largest business in the Hemas Group and will operate independently as a subsidiary of Hemas Holdings PLC.

Hemas said the entire proceeds from the April 2015 Rights issue of Rs. 4.1 billion to be invested in FMCG and Healthcare businesses have now been used with the acquisition of Atlas Axillia.

A-Sec Capital (Pvt) Ltd, the investment banking affiliate of Asia Securities (Pvt) Ltd, acted as arranger and sole advisor to the seller on the deal.

During the first quarter of 2017, Hemas allocated Rs. 1.45 billion for the construction of the new Morison PLC pharmaceutical plant.

Steven Enderby, Group Chief Executive Officer of Hemas Holdings, said Hemas Holdings is expanding its presence in the Sri Lankan consumer market by acquiring one of the most respected local brands with market leading positions for its notebooks, pens, pencils and colour products.

“Today’s consumers seek out premium, innovative and design-oriented products and Atlas has demonstrated its ability to do this repeatedly, resulting in its unique position as the most loved school and office brand,” said Enderby.

“Consumer stationery is a new and exciting category for Hemas with significant potential and we will bring the best of our consumer-focussed mindset to deliver superior value to Atlas’ many customers across the island.”

Hemas said it aims to continue to drive Atlas’ track record of sales growth; and strengthen its market leading position, highly effective lean manufacturing and enviable dividend track record.

“The group will cross-fertilise brand and marketing insights between the business and its Home and Personal care portfolio as well as deliver route to market excellence through our two significant island wide sales and distribution networks. In addition, Hemas will look to reduce funding costs and enhance talent attraction and development at Atlas.”

Nirmal Madanayake, Managing Director of Atlas Axillia Co. said Atlas Axillia is growing and were were keen to take the organisation “to the next level”.

“We went through a rigorous process to find the right partner, and we saw a great business and cultural fit with Hemas,” he said.

Atlas Axillia Co. was founded in 1959 by the Madanayake Family.

The brand “Atlas” has been voted Sri Lanka’s most loved brand 2017.

The company is the market leader in school stationery and notebooks, pens, pencils and colour products, with products retailed in over 70,000 outlets across Sri Lanka.

Atlas Axillia brands include “Atlas”, “Zebra X”, “Homerun” and “Innov8”.

The Company employs 1,300 people and operates two production facilities in Peliyagoda and Kerawalapitiya.

Sri Lankan shares snap 7-session losing streak

Reuters: Sri Lankan shares snapped a seven-session streak of declines on Friday, recovering from a near three-week closing low hit in the previous session, as investors picked up battered blue-chip and banking shares.

However, foreign investors, who have been net buyers of 2.7 billion rupees worth shares so far this year, sold equities worth net 62.1 million rupees ($403,640) on Friday.

They bought equities worth 18.5 billion rupees last year and 633.5 million rupees in 2016.

The Colombo Stock index ended 0.52 percent higher at 6,443.50. In the previous session, it closed at its lowest since Dec. 29.

The bourse shed 2 percent in the past seven sessions, and dropped 0.47 percent for the week recording its second straight weekly fall.

“Today we are seeing a lot of foreign activities, but the local investors are buying blue-chip shares,” said Dimantha Mathew, head of research, First Capital Holdings.

“It looks like local, mainly high net worth investors, are eager to buy now,” he added.

Turnover stood at 1.7 billion rupees, nearly twice of last year’s daily average of 915.3 million rupees.

After the market close, diversified company Hemas Holdings Plc said it will take over 75.1 percent of leading stationery manufacturer Atlas Axillia Co (Pvt) Ltd for 5.7 billion rupees.

Shares in conglomerate John Keells Holdings Plc ended 2.5 percent higher, while Hemas Holdings closed 2.5 percent up, and Sri Lanka Telecom Plc ended 2.5 percent higher.

($1 = 153.8500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sherry Jacob-Phillips)