Sri Lankan shares post worst fall in 28 months on foreign selling

Reuters: Sri Lankan shares fell over 1 percent on Monday, the sharpest in nearly 28 months, as continued foreign selling and concerns about lower economic growth hurt sentiment, stockbrokers said.

Foreign investors sold the island nation’s risky assets for an eighth successive session, extending the foreign outflow to 841.4 million rupees ($5.32 million).

The Colombo stock index ended 1.07 percent weaker to 6,128.34, its biggest intraday percentage fall since March 9, 2016. The index closed lower for 15 sessions in 17, and marked its sixth straight weekly drop last week.

“Foreign selling triggered the market fall. We still do not see government funds actively coming into market and political uncertainty also weigh on sentiment,” said Jaliya Wijeratne, CEO, First Capital Equities.

Foreign investors net sold equities worth 311.2 million rupees ($1.97 million), extending the year-to-date foreign outflows to 1.64 billion rupees this year.

Turnover was 756 million rupees, less than this year’s daily average of 935 million rupees.

Shares in top listed lender Commercial Bank of Ceylon ended 0.2 percent lower, top conglomerate John Keells Holdings closed 1.9 percent lower, and Sri Lanka’s leading mobile phone service provider Dialog Axiata closed 1.4 percent weaker.

Finance Minister Mangala Samaraweera said early this month that the economy was likely to grow about 4.5 percent this year, below a central bank estimate of 5 percent.

The International Monetary Fund (IMF) said on June 20 that Sri Lanka’s economy remained vulnerable to adverse shocks because of sizable public debt and large refinancing needs.

Ratings agency Moody’s said on Wednesday a strengthening U.S. dollar since mid-April has increased the credit risk of several emerging markets, including Sri Lanka, due to currency depreciation.

Moody’s said a strong U.S. dollar would also lead to a drop in foreign exchange reserves of countries such as Argentina, Ghana, Mongolia, Pakistan, Sri Lanka, Turkey, and Zambia.

($1 = 158.3000 Sri Lankan rupees)

(Reporting by Shihar Aneez, Editing by Sherry Jacob-Phillips)

Ascot to raise Rs.633mn via rights issue

Property development and hospitality holding company Ascot Holdings PLC is to raise Rs.632.8 million through a rights issue, subject to shareholder and stock exchange approval, the company announced last Friday.

According to a stock market filing, Ascot Holdings will issue 31.6 million new ordinary shares in the proportion of five new shares for every two ordinary shares held at a price of Rs.20 per share.

Ascot Holdings share closed at Rs.28.90 on Friday. As at March 31, 2018, Ascot Holdings’ consolidated book value per share was Rs.87.16.

The current stated capital of the company is Rs.156.7 million represented by 12.6 million shares.

The company plans to invest Rs.500 million of the rights proceeds in its subsidiary Ascot Developments (Pvt) Ltd. to allow the subsidiary to utilize Rs.250 million to “refurbish by way of addition and alterations to its commercial building situated at Darley Road Colombo 10 and Rs.250 million to settle its balance outstanding loan to Bank of Ceylon Corporate Branch.”

A sum of Rs.100 million of the rights money will also be utilized to buy the minority shareholding held by Fairway Holdings (Pvt) Ltd. and Hemaka Damminda De Alwis in Ascot Developments.

Further Rs.25 million will be utilized to acquire the shares held by Fairway Holdings Ltd. in Ascot Leisure (Pvt) Ltd. in order to facilitate a court settlement in the Commercial High Court of Colombo, pursuant to which the Ascot Holdings would be the 100 percent owner of Ascot Leisure.

Ascot Leisure has obtained a seven-acre land under a 99-year lease for 30-room hotel in Palatupana, Yala.

The company said the balance Rs.7.8 million will be utilized for working capital purposes.

Ascot Holdings’ ownership changed October, last year, with a consortium consisting of foreign and local investors buying a 45 percent stake in the company.

The acquisition was followed by a mandatory offer by Eighth Wonder, a Mauritius-based company and Joseph McVeigh, one of the UK-based individuals of the initial purchase.

As at March 31, 2018, Eighth Wonder and McVeigh held 58.19 percent stake in Ascot Holdings.

Eighth Wonder this June disposed 1.26 million shares or 10 percent of its shareholding in Ascot Holdings to an individual named Piers Morgan for Rs.42.50 per share, a stock exchange filing said.
www.dailynews.lk

Laugfs Gas cries foul over LPG price reduction

Laugfs Gas PLC, the second largest distributor of liquid petroleum gas (LPG) or cooking gas in Sri Lanka yesterday cried foul over the “baseless” price reduction of 12.5 kg LPG cylinder, which came into effect from last Saturday, contrary to the trend of increasing LPG prices in the world market.

Speaking to Mirror Business, Laugfs Gas PLC Group Managing Director Thilak De Silva lamented the Consumer Affairs Authority’s (CAA) decision to cut the price of standard LPG cylinder arbitrarily by Rs.138 to Rs.1, 538.

De Silva noted that neither Laugfs Gas nor the State-run Litro Gas was consulted beforehand and the reduction is not based on any criteria.

“We didn’t know anything until we got the letter and on the same day, it was announced on media,” he said.

De Silva charged that a certain official at the CAA has provided false information to reduce LPG prices.

He pointed out that during last four months (March – June) LPG prices in the world market increased by nearly 22 percent from US$ 459.50 per MT to US$560.

“Very clearly, the prices are on an increasing trend. There’s no reason to for it to reduce,” he stressed.

According to De Silva, with the latest price reduction, Laugfs Gas PLC stands to lose an additional Rs.80 million a month.

He noted that earlier the company made a loss of almost Rs.1.4 billion as the government artificially maintained LPG prices in local market despite increases in the world market.

He said that Laugfs Gas is hopeful the President and Prime Minister will intervene and correct the prices as earlier the Prime Minister and Development Strategies and International Trade Minister, Malik Smarawickrama intervened to increase LPG prices by Rs.245.

De Silva recalled that at the recent AGM of the company, officials were challenged by shareholders on the issue.

“We had the AGM the day before yesterday and we couldn’t face our shareholders. Our shareholders wanted us to protest to the government on this price reduction.”
He noted that Laugfs Gas might be forced to take legal action.

“We are on a formula, which was given by the Supreme Court. You can’t just play around with the formula given by the Supreme Court,” he stressed. (NF)
www.dailymirror.lk

Noteworthy asset quality deterioration in Sri Lankan finance companies

LBO – ICRA Lanka, a group company of Moody’s Investors Service is cognisant of the asset quality deterioration in licensed finance companies in Sri Lanka, during the financial year ended March 31, 2018.

“As per our analysis about 100bps increase (5.82% in March 2018 vis-s-vis 4.89% in March 2017) in gross NPA (non-performing loans) levels during the period is attributable to a number of factors,” ICRA Lanka said in a statement.

The statement outlines overall slow-down in economic growth, particularly affecting lower tiers of the economy and adverse weather conditions that prevailed from the last quarter of 2016 to latter part of the year 2017 as those factors.

Particularly high NPAs in SME related lending: In the last couple of years, NBFIs were extensively growing their SME related lending portfolios, due to relatively better yields in SME lending and due challenging market dynamics in the traditional vehicle leasing segment. SME related loans are granted in the form of factoring, post-dated cheque discounting and short-term loans. However, we observe increasing slippages in these product segments of the SME portfolios as the macro conditions were challenging.

ICRA Lanka also observes a significant moderation in portfolio growth, in NBFIs that are involved in SME lending, as the focus has shifted towards recovery efforts of the same facilities.

Further, according to new capital adequacy requirements (June 2018), risk weighting for unsecured lending has increased to 125 percent, which is expected to limit NBFIs’ exposure to the asset class, in view of maintaining healthy capitalization.

Asset quality in Micro-lending is also affected: As per ICRA Lanka’s observations, microlending (Grameen model group lending and other micro related lending) of the NBFI sector has grown by about 28% CAGR between the period FY2015 to FY2017. As per their estimates, aggregate microlending by licensed finance companies stood at about LKR 90-100Bn as in March 2017.

“Number of factors including the recent weather conditions affecting rural areas, as well as multiple lending is done by unregulated microfinance lenders has affected the credit quality dynamics of the segment, However, as per our observation, the NPAs of this segment (NBFI microlending) remains better than that of the SME segment of NBFIs,”







“Going forward, ICRA Lanka will continue to monitor the NPA movement of the rated NBFIs and specific rating actions will be announced accordingly.”

Anilana (ALHP) investor to make mandatory offer at 18% premium

LBO – The Securities and Exchange Commission of Sri Lanka (SEC) has approved investment into Anilana Hotels and Properties (ALHP) by Singapore based SOMAP International.

The investment by way of private placement will result in an infusion of Rs667mn (US$4.2mn) into the company at Rs1.3/share. After the private placement SOMAP will own 51% of CSE listed ALHP.

After execution of the private placement SOMAP will be required to make a mandatory offer to all other shareholders of ALHP at Rs1.3/share. This price is currently 18% above where the stock is currently trading at Rs.1.1.

It is yet to be disclosed if ALHP major shareholder Asanga Seneviratne and related parties intend to sell into the mandatory offer. The CSE disclosure today states that further announcement will follow on July 2nd, after allotment of the private placement shares is complete.

The company went public in a 2013 Colombo Stock Exchange IPO at an offering price of Rs12/share. Original investors are therefore sitting on losses close to 90%.

Vallibel Finance crosses Rs.1Bn mark for net profits

LBO – Vallibel Finance PLC crossed the one billion rupee net profit mark with the company announcing its income statement for the financial year ended on 31 March, 2018, recording growth across key indicators including income and profitability.

Gross income for the financial year grew 35 percent over the previous year to reach 6.9 billion rupees with the previous year’s income at 5.1 billion rupees.

Net interest income accounted for a 38 percent increase over the previous year’s figure, reaching 2.7 billion rupees from 1.9 billion rupees.

Operating profits for the year under review grew exponentially by 43 percent to 1.9 billion rupees from the previous 1.3 billion rupees.

Net profit amassed to one billion rupees, growing by 40.3 percent on the back of outstanding performance built on prudent financial stewardship. Net profits for the previous year stood at 726 million rupees thus leading the company pass the billion rupee milestone in profits.

Deposits grew by 24 percent to 22.2 billion rupees over the previous year’s 17.8 billion rupees.

“We have been able to record impeccable performance, both qualitative and quantitative during a very challenging and daunting period of time”, Jayantha Rangamuwa, managing director of Vallibel Finance said.

Meanwhile, assets climbed to.38.4 billion rupees from the previous 30.6 billion rupees, accounting to a growth of 25.2 percent.

Sri Lanka development bond issue oversubscribed, 4 year bids rejected

LBO – The issue of Sri Lanka development bonds amounting to 700 million US dollars have been oversubscribed with 937 million dollars of bids received from investors.

The central bank received 829.60 million bids for the 2 years 10 months bond and accepted 693.89 million dollars worth bids at a weighted average fixed rate of 5.25 percent.

The central bank accepted only 6.11 million from the 44.11 million worth bids received for the 3 years 10 months bond at a weighted average fixed rate of 5.52 percent.

The bank rejected 63.21 million dollars of bids received for the 4 years 10 months bond offered.

The central bank has the authority to accept any amount not exceeding the total amount offered at auction depending on the market conditions.

The offer or the Treasury bonds denominated in US dollars was opened from 19 to 25 June for bidding with the settlement on 02 July 2018.