Abans Finance (AFSL) reports modest profit, deposits at 6.5bn, balance sheet shrinks sequentially

LBO – Colombo Stock Exchange listed Abans Finance PLC (AFSL) released quarterly results for the period ended June 2018.

The CBSL registered finance company reported a modest profit of Rs18mn for the quarter on an equity base of over Rs1.5bn. Total assets were Rs8.8bn, while total deposits were Rs6.5bn.

The balance sheet of the company actually shrank from the previous quarter with total assets and deposits both down 2% in the 3 months ended June 30 2018.

Approximately 2 years ago AFSL attracted a private equity investment from newly established Sri Lanka private equity fund Ironwood Investment Holding. Currently Ironwood owns approximately 42% of the total shares outstanding. The shares were acquired and capital infused into the company in several transactions at Rs25/share.

With a minority stake in the company, and the firm’s book value close to Rs24/share, it is unclear whether this will turn out to be a successful investment for the private equity firm. Many higher quality finance related stocks are trading at a fraction of book value, with much better liquidity.

In addition to likely overpaying for their investment in AFSL, Ironwood may also be troubled by the fact that minority shareholders in Sri Lanka have had a long history of being oppressed. Minority shareholder oppression has been a key factor that has stunted the development of the private equity industry in Sri Lanka.

Pan Asia Bank PAT tops Rs.800Mn in 1H 2018

LBO - Pan Asia Banking Corporation PLC reported its best ever profit recorded in a first half in 2018 anchored by solid growth in new loans, prudent margin and asset-liability management.

For the six months ended in June 30, 2018 (1H’18), the bank reported a profit after tax of Rs.819.6 million, up by a strong 33 percent from the same period in 2017.The net interest income rose by 18% on a year-on-year (yoy) basis to Rs.2.8 billion supported by better margins recorded amid the rising cost of funds.

The net interest margin increased to 3.92% during this period from 3.61% in December 2017 as the bank continuously reviewed the pricing of its asset and liability portfolio and managed them efficiently. This improvement is a testament to the bank’s ability to recalibrate its asset portfolio from low yielding ones to high yielding ones in order to optimize the margins.

Meanwhile for the quarter ended in June 30, 2018 (2Q’18), the bank reported a profit of Rs.506.8 million on a net interest income of Rs.1.5 billion compared to Rs.263.5 million profit and Rs.1.2 billion net interest income reported in the same quarter last year. The better top line performance in the 1H’18 is also a reflection of relatively strong growth in new loans.

“We recorded a commendable growth in our loan book during the first half of 2018 amid the many headwinds we faced during this period. I consider this achievement noteworthy because we recorded it amid a moderation in sector loan growth and rising non-performing loans”, said Nimal Tillekeratne, Pan Asia Bank’s Director/ Chief Executive Officer.

Singer (Sri Lanka) revenue up 16-pct in 1Q

LBO – Singer (Sri Lanka) PLC announced a 16 percent increase in its revenue to 15.1 billion rupees in the first quarter of FY19 in spite of challenging business conditions, the Company said in a statement.

While an improvement in the rural economy was noted in April-May, the company noted a lower consumer demand in urban areas. The consumer durables industry, where Singer is present, is more susceptible to market conditions than other industries.

In the period under review, the profit before tax increased to 640 million rupees while profit for the period increased by 7 percent to 450 million rupees.

In a statement, Singer said it anticipates gradual improvements in the business conditions during 2018 with an improved harvest in August/September and will pursue strategies to improve revenue and margins while lowering costs via key business initiatives.

Group CEO Asoka Pieris said: “Despite a challenging environment, Singer is continuing to increase market share and market leadership in consumer durables. We are confident that, with the new strategies and initiatives in place, combined with synergies of Hayleys Group, the Singer Group can look forward to significant growth.”

Group Chairman Mohan Pandithage said: “As the major shareholder, Hayleys Group is poised to significantly strengthen Singer’s growth prospects as the leader in consumer durables and maximise its potential further.”

CSE listed CDB reports profit of Rs339mn; Deposits grow to Rs47bn

LBO – Colombo Stock Exchange listed Citizens Development Business Finance (CDB) reported robust profits for the June 2018 quarter.

Profits at the CBSL registered finance company were Rs339mn for the quarter on equity of approximately Rs7.6bn. The firm is operating a full balance sheet with assets of approximately Rs80bn.

Deposits grew to a massive Rs47bn by the end of the quarter.

Despite regularly stellar performance, the company’s stock trades at close to just 1/2 of its book value.

Controlled by parent Ceylinco Insurance (CINS), the company has failed to inspire confidence with minority shareholders and therefore trades at strikingly low valuation.

Ceylinco Insurance (CINS) has a history of minority shareholder oppression and has been subject to litigation by one of its largest shareholders Prabash Subasinghe. Subasinghe has effectively been frozen out of Ceylinco Insurance for several years. The company has failed to grant his request for a board seat, and continues to pay relatively small dividends to shareholders alongside significant compensation to top executives. Subasinghe and related entities own just under 30% of the company, a multibillion rupee holding.

Piramal Glass Sri Lanka unit June net down 55-pct

ECONOMYNEXT – Piramal Glass Ceylon said net profit fell 55% to Rs47 million in the June 2018 quarter from a year ago as despite exports almost doubling domestic sales shrank for the second straight year and costs rose.

Overall sales of Sri Lanka’s sole container glass maker, a unit of India’s Piramal Group, rose 17.5% to Rs1.6 billion during the period, according to interim results filed with the stock exchange.

Earnings per share were five cents in the June quarter. The stock closed Monday at Rs4.30, down 10 cents or 2.27%.

A statement said domestic sales fell 8% to Rs1,016 million from the same quarter in 2017, the second straight year in which sales fell.

“The major impact came through the liquor segment. Over the past two years a shift of consumption was observed from the high end locally filled foreign liquor segment to the low end liquor. This was further aggravated with heavy taxes imposed on the liquor industry,” it said.

“The high end liquor segment uses new bottles whilst the low end uses used, scrapped bottles. Thus this shift has impacted the demand of fresh bottles.”

The company said it has entered into the retail segment with the launch of glass bottles for food and water for house hold consumption, opening a new category of business and providing alternatives to plastics and PET.

Export sales for the quarter grew by 98% to Rs633 million from a year ago.

“This is 39% of the overall sales value as against 23% in the previous year first quarter,” the statement said.

“The company did its best to fill the excess capacity created with the decline in the domestic market through exports. Most of the orders obtained at short notice from the mass market as capacity fillers did not yield the same attractive margins as the domestic and high niche segment of the exports.”

The company said it continuously strives towards gradually shifting the volumes from the mass market to the premium segment.

Presently company is exporting to USA, Canada, New Zealand, Australia, India, Pakistan, Myanmar and several other markets. A significant growth has been experienced in the USA and Canadian markets.

Piramal Glass Ceylon said gross profit for the period fell to Rs286 million from Rs351 million the corresponding period the previous year.

“Whilst product mix being one of the reasons for low margins, the other factors were the energy costs and other input cost increases,” the statement said.

“The LPG rate was an all-time high for the past three years. Diesel rate increased by Rs. 24/= per litre impacting cost of production in several fronts including increases in raw material prices, packing material cost and transportation costs.”

Sri Lanka Telecom private placement to roll over short-term debt

ECONOMYNEXT – Sri Lanka Telecom (SLT), the dominant state-owned fixed line provider, said it will issue almost 80 million new voting shares through a private placement with the funds going to roll over short-term debt.

A stock exchange filing said the private placement of shares, at a price yet to be fixed, will be with local and foreign institutional investors.

The share price will be announced after a share valuation and feedback from potential investors, SLT said.

The main purpose of the new share issue is to meet the stock exchange’s minimum public shareholding requirement.

SLT will issue 89.77 million ordinary voting shares representing 4.74% of issued shares after the private placement.

The company’s present issued capital is Rs18 billion represented by 1.8 billion ordinary voting shares.

Sri Lanka’s Jetwing Symphony losses marginally down in June quarter

ECONOMYNEXT- Sri Lanka's Jetwing Symphony Plc, a hotel owneer and operator, reported net losses of 155.3 million rupees for the June quarter, down 3 percent from a year earlier with revenues and gross profits picking up.

According to interim financials submitted to the Colombo Stock Exchange, Jetwing posted a loss of 31 cents per share. Jetwing shares closed at 12.10 rupees on Friday, down 20 cents.

Gross profits grew 14.8 percent to 241.6 million rupees from a year earlier, with revenue growing 12 percent to 298.7 million rupees and cost of sales growing 2 percent to 57 million rupees.

Finance costs grew 5 percent to 106 million rupees from a year earlier while foreign exchange losses increased 108 percent to 17.7 million rupees.

Retained losses reached up to 1 billion rupees during the quarter for Jetwing, which is operating five hotels opened over the past 5 years.

Final approvals for the sixth, Jetwing Kandy, a 26 room hotel which was to be constructed in two stages, has been delayed, the company said.

“The initial plan was to complete 17 rooms at an estimated cost Rs 500 million and the rest to be developed at a later date.”

“Due to the delay in final approvals, the board of Jetwing Symphony PLC has now decided to construct the 26 rooms in one stage as per the Master Plan at an estimated cost of Rs 753 million.”

Jetwing said that the total cost for the project remains unchanged.

It said that the equity contribution has been increased to 380 million rupees in addition to the revaluation reserve. Another 350 million rupees will come from debt.