Sri Lanka's John Keells Plc June quarter net down 25-pct

ECONOMYNEXT - Sri Lanka's John Keells Plc, a commodity broker, said net profits fell 25 percent from a year ago to 45 million rupees in the June 2018 quarter on falling revenues from trading in tea and rubber and stock broking unit.

John Keells Plc reported earnings of 74 cents a share in the quarter, interim results filed with the Colombo Stock Exchange showed. The share last traded at 55 rupees.

June quarter revenue fell 4 percent from a year earlier to 206.8 million rupees, but cost of sales growing at a faster 15 percent to 69.5 million rupees saw gross profits contract 11 percent to 137.3 million rupees.

Administrative expenses grew 1 percent from a year earlier to 61.9 million rupees and distribution costs grew 15 percent to 3.4 million rupees.

Other operating income fell 99 percent to 30 thousand rupees in the quarter, down from 3.73 million rupees a year earlier.

Finance costs in the June quarter was 24.4 million rupees, up marginally from a year earlier while finance income grew 3 percent to 16.4 million rupees, contracting net finance expenses by 4 percent to 8 million rupees.

The company reported a 12.6 million gain on financial assets available for sale in the June 2018 quarter, compared to loss of 11.8 million rupees the previous year.

In segment results reported by John Keells Plc, revenue from tea and rubber broking fell 1.36 percent from a year earlier to 140.2 million rupees in the June 2018 quarter and revenue from stock broking (John Keells Stockbrokers) fell 19.5 percent to 42.4 million rupees.

Revenue from tea warehousing operations grew 20.4 percent to 25.7 million rupees.

John Keells Plc is a unit of listed group of companies John Keells Holdings which reported revenues of 121.2 billion rupees for the year to end March 2018, up 14 percent from a year earlier.

A John Keells Holdings share closed Friday at 148.10 rupees.

Sri Lankan Treasuries yields ease across tenors

ECONOMYNEXT – Sri Lankan Treasury Bill yields edged lower across all maturities at an auction Tuesday with the 01-year bill yield falling 04 basis points to 9.27 percent from last week, data from the the Public Debt Department of the central bank showed.

It raised 21 billion rupees from 01-year bills, having offered 12 billion rupees worth of bills and getting bids worth almost 54 billion rupees.

The 03-month bill yield edged down one basis point to 8.24 percent while the 06-month bill yield was also down one basis point to 8.74 percent.

The debt office raised 24 billion rupees from all tenors, the same amount offered, having got bids worth 76 billion rupees.

Sri Lanka’s Asian Hotels and Properties June net down 77-percent

ECONOMYNEXT – Net profit at Sri Lanka’s Asian Hotels and Properties plunged 77% to Rs81 million in the June 2018 quarter from a year ago as competition increased with the opening of new city hotels in Colombo.

June quarter sales of the firm, which operates the five-star Cinnamon Grand Colombo and Cinnamon Lakeside Colombo hotels, fell 14 percent to Rs1.7 billion over the period, according to interim accounts filed with the stock exchange.

June quarter earnings per share of the firm, part of the John Keells Holdings group, fell to 15 cents from 63 cents the previous year.

Asian Hotels and Properties share was trading at Rs45 Tuesday morning.

In the March 2018 quarter also net profit had fallen, down 17% to Rs689 million from a year ago.

Earnings in the March 2018 quarter included significant non-cash gains on changes in fair value of investment property in the firm's property business, Crescat Boulevard shopping mall.

Bad loans keep Sri Lanka's HDFC Bank on 'Ratings Watch Negative'

ECONOMYNEXT – Fitch Ratings Lanka says it will keep Sri Lanka's state-controlled Housing Development Finance Corporation Bank (HDFC) on Rating Watch Negative with a rating of BBB-(lka) on account of weak capital position and high non-performing loans.

The Rating Watch Negative was placed in August 2017 pending a capital infusion from government to help HDFC meet the 5 billion rupee minimum regulatory capital requirement, Fitch Ratings said.

"We expect the state, the bank's major shareholder, to extend its support but the timinof the capital infusion depends on regulatory clearance," the ratings agency said in a statement Tuesday.

The bank is exposed to above-industry exposure to low- and middle-income borrowers, mainly through housing loans, who are more susceptible to economic cycles, Fitch said.

The bank reported a high non-performing loan ratio of nearly 20 percent at end March 2018.

This was mainly due to defaults from housing finance backed by the Employees' Provident Fund (EPF).

Sri Lanka's Central Bank which managers the EPF annually reimburses HDFC Bank for EPF-backed loans in arrears for more than three months, Fitch noted.

"The bank's NPL ratio remained high even without the EPF-backed housing loans at 8.9 percent at end-March 2018."

Fitch Ratings statement in full:

Fitch Ratings has maintained Housing Development Finance Corporation Bank of Sri Lanka's (HDFC Bank) National Long-Term Rating of 'BBB-(lka)' on Rating Watch Negative (RWN). The agency has also maintained the RWN on the 'BBB-(lka)' rating of HDFC Bank's senior secured and senior unsecured debentures.

--Key rating drivers--

The RWN, first placed in August 2017, has been maintained pending a capital infusion from the Sri Lankan state (B+/Stable) to help HDFC Bank meet the LKR5 billion minimum regulatory capital requirement. We expect the state, the bank's major shareholder, to extend its support but the timing of the capital infusion depends on regulatory clearance. The minimum capital requirement has been in force since 2016. Fitch downgraded HDFC Bank on 29 January 2018 after the state failed to provide the capital to the bank in a timely manner.

HDFC Bank's rating reflects Fitch's expectation that the bank will receive extraordinary support from the sovereign, if required. Our assessment captures the state's 51% effective holding, which includes the National Housing Development Authority's direct ownership of 49%; the bank's quasi-policy role in supporting housing-development initiatives; as well as HDFC Bank's low systemic importance.

The bank's weak standalone profile is characterised by its above-industry exposure to low- and middle-income customers, mainly through housing loans, who tend to be more susceptible to economic cycles. The share of housing loans has declined over the years but it has remained high, at 82% at end-March 2018.

The bank continued to have a high reported non-performing loan (NPL) ratio, which stood at 19.7% at end-March 2018. This was mainly due to defaults from housing finance backed by the Employees' Provident Fund (EPF), which contributed slightly more than half of the bank's total housing NPLs at end-March 2018. Nevertheless, the Central Bank of Sri Lanka annually reimburses HDFC Bank for EPF-backed loans in arrears for more than three months. The bank's NPL ratio remained high even without the EPF-backed housing loans at 8.9% at end-March 2018 (9.0% at end-2017), which reflects the concentration of its credit risk in the low- and middleincome housing-finance market.

We see HDFC Bank's capitalisation as weak despite the bank's Fitch Core Capital (FCC) ratio of 16.8% at end-March 2018 because of the bank's substantial unreserved NPLs.

Fitch expects HDFC Bank's asset and liability mismatches to persist due to its longer-tenor loan book and short-tenor deposit base, exerting pressure on the bank's liquidity. The bank's dependence on high-cost term deposits also weighs on its net interest margins and profitability.

--Senior debt ratings--

The bank's senior debentures are rated in line with its National Long-Term Rating and rank equally with the claims of other senior unsecured creditors. Fitch has not provided any rating uplift for the collateralisation on the senior secured notes as we consider recovery prospects to be average and comparable with that of unsecured notes in a developing legal system.

--Rating sensitivities national ratings and senior debt--

Fitch may downgrade the bank's rating if there is a change in our expectation of state support for the bank. This may occur due to a weakening of the bank's linkages with the state, evident from a dilution of the state's majority-ownership of the bank, or a revision in Fitch's view of the bank's policy role.

HDFC Bank's rating could be downgraded by several notches if the sovereign's ability to support is significantly impaired or if Fitch concludes that the bank can no longer rely on sovereign support.

HDFC Bank's rating could be affirmed and removed from RWN if the state were to provide the additional capital required in the next six months.

The ratings of the senior secured and senior unsecured debentures will move in tandem with HDFC Bank's National Long-Term Rating.

Sri Lankan shares fall for second straight session

Reuters: Sri Lankan shares extended fall for a second straight session on Tuesday, easing further from a three-week closing high recorded late last week, but foreign buying helped limit losses.

The Colombo stock index ended 0.02 percent weaker at 6,183.64. The index, which is down nearly 3 percent in the year so far, had on Friday recorded its highest close since June 29.

Turnover stood at 273.8 million Sri Lankan rupees ($1.72 million), less than a third of this year’s daily average of 873.1 million rupees.

“Though there is selling pressure in the market, the decline is not huge,” said Dimantha Mathew, head of research, First Capital Holdings.

“Foreigners are net buyers and that creates some positive sentiment.”

Foreign investors bought equities worth net 90.3 million rupees on Tuesday, but they have been net sellers of stocks worth 2.4 billion rupees so far in the year.

A downward revision in economic growth estimate earlier this month by the central bank has hurt sentiment, analysts have said.

Economic growth in 2018 is likely to be between 4 percent and 4.5 percent, falling short of an earlier estimate of 5 percent, Central Bank Governor Indrajit Coomaraswamy said earlier this month.

Shares in conglomerate John Keels Holdings Plc ended 0.7 percent down and Hemas Holding Plc ended 1.1 percent lower while Sri Lanka Telecom Plc shed 1.6 percent. 

($1 = 159.4000 Sri Lankan rupees)

(Reporting by Ranga Sirilal; Editing by Vyas Mohan)

Sri Lankan shares edge lower from 3-wk high in dull trade

Reuters: Sri Lankan shares ended weaker on Monday, slipping from the last session’s three-week closing high, but foreign buying prevented steeper losses.

The Colombo stock index ended 0.1 percent weaker at 6,184.68, edging lower from its highest close since June 29 hit on Friday. The bourse rose 0.86 percent last week, but has fallen 2.9 percent year to date.

Turnover was 238.4 million rupees ($1.5 million) in the session, less than a quarter of this year’s daily average of 877.6 million rupees.

“The selling pressure was absorbed by foreign buying which is a good sign,” said Dimantha Mathew, head of research, First Capital Holdings.

Foreign investors bought equities net worth 98.1 million rupees on Monday, but they have been net sellers of stocks worth 2.5 billion rupees so far this year.

A downward revision in economic growth estimate by the central bank has hurt sentiment, analysts have said.

Economic growth in 2018 is likely to be between 4 percent and 4.5 percent, falling short of an earlier estimate of 5 percent, Central Bank Governor Indrajit Coomaraswamy said earlier this month.

Shares in Ceylon Tobacco Company Plc fell 1.6 percent, while Distillers Company of Sri Lanka Plc ended 1.9 percent weaker and conglomerate John Keels Holdings Plc ended 0.7 percent down. 

($1 = 159.4000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Amrutha Gayathri)

Sri Lankan shares hit 3-wk high, mark second weekly gain in nine

Reuters: Sri Lankan shares rose on Friday to their highest close in three weeks and marked their second weekly gain in nine.

The Colombo stock index ended 0.13 percent firmer at 6,191.17, its highest close since June 29. It rose 0.86 percent on the week, but has fallen 2.8 percent year to date.

Turnover was 207.1 million rupees ($1.30 million) in the session, its lowest since July 10 and less than a quarter of this year’s daily average of 882.5 million rupees.

Foreign investors bought equities net worth 26.2 million rupees on Friday, but they have been net sellers of stocks worth 2.6 billion rupees so far this year.

A downward revision in economic growth estimate by the central bank has hurt sentiment, analysts have said.

Economic growth in 2018 is likely to be between 4 percent and 4.5 percent, falling short of an earlier estimate of 5 percent, Central Bank Governor Indrajit Coomaraswamy said earlier this month.

Shares in Ceylinco Insurance Plc rose 3.4 percent, while Lanka ORIX Leasing Plc gained 2 percent and biggest listed lender Commercial Bank of Ceylon Plc ended 0.3 percent firmer. 

($1 = 159.8500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)