Govt. funds boost bourse

By Paneetha Ameresekere

Ceylon Finance Today: Market activity on Friday was boosted due to mix of government funds, controversial high networth individuals and retailers trading, boosting the benchmark ASPI index at Friday's (28 November) trading, though the more sensitive S&P SL 20 Index declined due to continued political uncertainty, market sources told Ceylon FT.

The ASPI gained by 0.53% to 7,153.90 points, while the S&P marginally decreased by 0.15% to 3,971.02 points on a Rs 2.08 billion turnover.

"However, the market will go through the roof if it feels that former UPFA Minister and SLFP General Secretary Maithripala Sirisena will win the 8 January poll," sources told Ceylon FT.

Meanwhile, the number of shares traded declined by 19.9% to 58,521,701 shares on Friday.

ASPI's gains would have been muted and the S&P's decline sharper, if not for spurious increases by the bourse's 2nd largest capitalized stock CTC and Cargills (28th), where their share prices (SPs) increased by 0.09% and 3.13% to Rs 1,091 and Rs 154 on share volumes (SVs) of 522 and 102 and on turnovers of Rs 568,112.88 and Rs 15,789.80 respectively.

Similar spurious trades have been the hallmark of the bourse in recent times.

Due to the political uncertainty caused after Sirisena announced his candidature on 21 November, the ASPI has declined by 5% and the S&P by 5.3% by Friday.And the other was the 18th largest capitalized stock Access with Rs 390 million on a 10.7 million SV. Access closed up 3.36% to Rs 36.90 a share.

The bourse saw 153 gainers as opposed to 44 losers. The bourse saw a Rs 323.8 million net foreign inflow (NFI), taking NFIs in year-to-date to Rs 20.7 billion. NFIs were led by Access (Rs 285.7 million).

Meanwhile, a dissection of money market statistics showed that only a mere Rs 278.58 million more were parked in CBSL's standing deposit facility (SDF) and repo windows on a net basis, compared to the excess liquidity facility at the beginning of the day on Friday and by the end of that day, discounting excess liquidity generated by CBSL's purchase of Treasury bills.

This net excess may be due to inflows. With inflows to the bourse settled after two market days of trading from the date of transaction, part of that amount would have had been due to the bourse enjoying a Rs 400.7 million NFI on Wednesday, while the balance may have had been dissipated due to CBSL's defence of the rupee and banks having to square CBSL's six per cent statutory reserves' ratio (SRR) equivalent to their deposit holdings by Friday.

This SRR has to be met by a combination of cash and banks' vault deposits (amounting to a minimum of two per cent of SRR and a maximum of four per cent which however don't earn interest to banks, unlike when excess liquidity is parked on CBSL's SDF and repo facilities.
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People's Leasing among top 25

People's Leasing and Finance PLC (PLC), the flagship subsidiary of the People's Bank, remained among the 'Top 25' listed companies for the second consecutive year while moving up four notches, from 18 last year to 14 this year at the 'Business Today Top 25 - 2013-14 Awards' held at the Hilton recently.

The award was received by PLC Director N. Vasantha Kumar and DGM, Finance and Administration, K.S. Bandaranayake. The selection criteria was based on financial performance during the financial year 2013-14 and published information of companies listed on the Colombo Stock Exchange.

Financial criteria included share turnover, revenue, profit after tax, return on equity, earnings per share, market capitalisation, value of shares transacted and value addition.

PLC was incorporated in August 1995 and became a listed company in November 2011. People's Leasing Group consists of five subsidiaries which are engaged in general insurance, micro-finance, fleet management and property development.
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Transparency, a weak area in corporate governance

The Chairman of the Securities and Exchange Commission of Sri Lanka (SEC), Dr Nalaka Godahewa last week said the principle of transparency within the corporate governance framework is a ‘weak area’ amongst listed companies. Speaking at the seminar on ‘Corporate Governance’ at the Directors Symposium for the NBFI sector, Dr Godahewa said that the principle of transparency within the corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation including the financial situation, performance, ownership and governance of the company.

“This is another weak area amongst some of our listed companies. Even though we can be proud of high disclosure standards maintained by most of our public listed companies still there are some companies who do not have much regard for disclosure requirements. If a listed company fails to submit a Quarterly or Annual Report within the stipulated time, enforcement actions are initiated by transferring these companies to a Default Board until the requirement is fulfilled. But disclosure requirements go beyond financial information. We expect the companies to keep shareholders informed of any material development in the company,” the SEC chairman said.

Noting that the SEC keeps receiving complaints from minority shareholders of certain companies about decisions which are made favoring the controlling shareholders, the Chairman further noted that the SEC, being the regulator alone cannot prevent such things happening within existing provisions of the Act and exiting regulations.

“But regulations are improving. Shareholders have to know their rights under the Companies Act to challenge these,” he pointed out.

He further added that there are questions raised about some past IPOs where the funds raised are not yet used for the original purpose.

“If there are valid reasons for such delays it’s the duty of the Board Members of such companies to make sure shareholders are kept informed. Failure to do so affects the overall investor confidence of the market,” the Chairman highlighted.

He added, “We all know that foreign participation of CSE is currently around 30%. The Net Foreign Inflow to the Colombo capital market over the last three years is around Rs.90 billion. But our concern is that most of these foreign activities are limited to a few companies. What is the reason for this? Why hasn’t more than 2/3rd of the 293 listed companies in our market not yet benefited from this surge of foreign investments? The conclusion we can arrive is that it has a lot to do with the level of confidence that investors have about governance structures of these companies.”

The SEC Chairman also mentioned that a market survey conducted recently by SEC, both the local and foreign investors rated ‘company reputation’ and ‘trust in management’ as more important factors in making an investment decision than just looking at the history of returns.

“So obviously investors are more confident of the future of companies which are better governed. The findings of this local survey is, in fact, similar to a global survey conducted by the McKenzie group a few years ago where it was found that institutional investors would be willing to pay a premium of 22% for investments in well-governed companies, as opposed to other companies with comparable market potential but poor in Corporate Governance. It is important for us to remember that no market has a divine right to investors’ capital. If a country does not have a reputation for strong Corporate Governance practice, capital will flow elsewhere. If investors are not confident with the level of disclosure also, capital will flow elsewhere,” Dr. Godahewa said.

Speaking on the way forward, Dr. Godahewa noted that in 2015, SEC is planning to take another major step and establish a system to give due recognition to public listed companies who excel in Corporate Governance.

“We have already started discussions to introduce a national award for excellence in Corporate Governance. We are hoping to rate all public listed companies on the effectives of governance. The Institute of Chartered Accountants who partnered us in formulating the Code of Best Practices on Corporate Governance, will partner organizing this event. You will hear more about this when we launch the competition most probably during the first quarter of 2015,” he concluded.
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No relief for private banks over 12% interest issue to seniors

By Duruthu Edirimuni Chandrasekera

Commercial banks have been informed by the Treasury that the Rs. 30 billion bridging bond to three state banks to enable these institutions to offer 12 per cent annual interest rate for deposits of pensioners and elders will not be extended to private banks, officials said.

The Central Bank along with Treasury officials had a meeting with the private banks this week in a bid to discuss a game plan in order to avoid a flight of deposits to state banks from the private sector banks, but had decided this proposal in the budget won’t impact the latter ‘much’.

This was after it was revealed that some 750,000 senior citizens hold accounts in 33 banks worth Rs. 750 billion, as per Sri Lanka Banks’ Association (SLBA) data.

“There will be a cap (upper limit) on the amount that this 12 per cent annual interest rate will be offered (by state banks),” Upali de Silva, Secretary-General, SLBA told the Business Times. He said that the maximum deposit amount will be below Rs. 1 million and only one such account per person will be permitted.

He added that SLBA members were concerned about this budget proposal ‘on principle’. Currently the interest rate for senior citizens is at 6 to 6.5 per cent.
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Defence Ministry takes over Lanka Cement property in Jaffna

Sri Lanka’s Defence Ministry has acquired a 104-acre block of land and buildings owned by state-run Lanka Cement Plc at Kankesanthurai in the northern Jaffna peninsula, the company announced on Tuesday.

In a statement to the Colombo Stock Exchange (CSE), Lanka Cement, which is a listed stock in the CSE, said it has requested compensation for the acquisition of the land and buildings. All staff, it said, would be retired under the state’s Voluntary Retirement Scheme.

No reason was given for the acquisition.
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Investors of some banks ‘coerced’ to open margin trading accounts, top governance activist says

Concern has been raised over some banks being influenced and coerced to request independent minority investors (IMS) in Sri Lanka to convert normal overdraft/loan facilities granted for investments to margin trading accounts, a top investor and governance activist has said.K.C. Vignarajah, a well-known fighter of the rights of small investors, said in a letter to the Chairmen of the Securities and Exchange Commission (SEC) and the Colombo Stock Exchange (CSE) that customers have been told that these valuable assets could be transferred to margin trading accounts if part of it is used to invest in listed company shares.

“The best banks with management and staff dedicated to the best tradition of banking, will certainly not heed such advice or request. The culture of such banks will not permit any of them to forsake the customers’ interests,” he said in the letter.

He said undesirables brought in through the back door to the boards of companies by outside powerful forces have occasionally been, and must in future be, thwarted by powerful employees’ unions, alert customers and concerned shareholders. “I hope they will continue to ensure this position in all banks. A bank’s primary responsibility is to nurture the faith, confidence and ease of doing business,” Mr. Vignarajah said.

He said a cabal of crooked persons belonging to so-called reputed professions/ institutions influences codes of best practice/ethics and their implementation are behind these moves by some banks.

Some of the honest officials of the SEC have for many years been trying to implement their prime role of protecting the investors in the stock market, but appear to be hampered in doing so by powerful forces inimical to this fundamental process, he added
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Extra EPF would cost Rs.466.6 mln more to reeling SL plantations

The additional 2 per cent EPF payment to workers as decided in the 2015 budget will cost Sri Lanka’s already-reeling plantation companies a staggering Rs. 466.6 million annually, the Employers Federation of Ceylon (EFC) has said.

In a November 25 letter to Gamini Lokuge, Minister of Labour and Labour Relations and copied to the media, EFC Director General Ravi Peiris has said that this sudden impact on employers is bound to have serious implications. The issue was also raised at the National Labour Advisory Council meeting held on November 13.

“As you know, the Regional Plantation Companies are currently operating under severe constraints and an enhancement of this nature will only result in aggravating the difficulties,” he has said.

Mr. Peiris has noted that in general private sector employers are one of the leading contributors in relation to superannuation schemes and even unemployment benefits compensation comparable with other countries in the region.

“Currently an employer contributes 12 per cent of an employee’s earnings in respect of EPF, an additional 3 per cent in respect of ETF and over and above these contributions a gratuity payment is made to all employees who have completed five years continuous employment with an employer, on cessation of employment. Above all, Sri Lanka also has one of the highest compensation formulae in relation to retrenchment compensation under the formula gazetted by the Commissioner of Labour in terms of the Termination of Employment of Workmen (Special Provisions) Act No.45 of 1971 (as amended),” the letter said.

Mr. Peiris said that at a time when the country is looking for more investment and employment generation, changes such as these are bound to be counter-productive. “In the circumstances, we wish to place on record our serious reservations in bringing about any changes to the existing legislation right now to implement these proposals,” he has said.

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Share market on a roller-coaster

The Colombo Stock Market will be on a roller- coaster ride next month, spilling over to the first week of next year, owing to the multitude of political uncertainties impacting traders’ buying patterns, analysts say.

“With each evolving development the share market will ebb and flow,” Murtaza Jafferjee, CEO JB Stockbrokers said. However, he also noted that the environment for equities will remain favourable in this low interest rate regime. “But with the (political) uncertainties investors are holding on to (shares),” he said. Analysts say that the lower interest rates will dampen investor appetite for long dated debentures, and they will always look to equities. Savers who enjoyed fixed deposit rates of 11-13 per cent one year back are now getting 7-9 per cent and those seeking higher returns are being attracted to equities, according to them.

Analysts say it’s a wait and see game all around in equity, currency and bonds. Mr. Jafferjee added that all these markets are slated to ebb and flow with the news. “The slightest (news of a) crossover will affect indices in the Colombo Stock Exchange (CSE),” an analyst said, adding that rumours of crossovers by government MPs to the main opposition coalition led by ‘dissident’ former Health Minister, Maithreepala Sirisena in the coming month will change the CSE movements.

“The traders are awaiting a change and selling is on top of their minds,” a CEO of a large retail base broking firm said. He said this is the hot topic of conversation, but investors are frustrated as there’s no clarity in the political climate.

Interestingly, this is only a local phenomenon as foreigners haven’t reacted to the local news on the current political brouhaha. “What we saw has been an ‘entirely’ local sell out. The foreign interest is continuing,” Deshan Pushparajah, Head of Investment Banking, Capital Alliance told the Business Times.

The All Share Index has fallen by 5 per cent since Thursday, November 20, the day before Mr. Sirisena crossed over.
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Share option bonanza for JKH executive directors

Mr. Susantha Ratnayake, Chairman of John Keells Holding, Mr. Ajit Gunawardene, Deputy Chairman and Mr. Ronnie Peiris, Finance Director have last week disposed of substantial shareholdings in the company and utilized the cash raised to exercise their rights under the company’s Employees Share Option Scheme.

All disposals have been at a price of Rs. 244 per share on Nov. 26 while the share options had been exercised the same day at Rs. 127.50.

Mr. Ratnayake has disposed 468,000 shares, Mr. Gunawardene 330,000 shares and Mr. Peiris 50,000 shares. Mr. Ratnayake had purchased 628,430 shares, Mr. Gunawardene 549,876 shares and Mr. Peiris 426,707 shares.

These details have been disclosed to the Colombo Stock Exchange under the requirement of the dealings in shares by directors of listed companies.

Executive directors of JKH are substantial shareholders of the company although they are not listed among the top 20 shareholders. According to the last quarterly financials of JKH, Ratnayake owned 5,839,930 shares of JKH as at Sept. 30, 2014, Gunawardene 7,079,022 shares and Peiris 1,332,375.

Analysts said that JKH’s executive directors are substantial beneficiaries of the company’s share option sheme issued for exercise at a future date at a determined price. They are cancelled if not exercised by that date.

"The beneficiary has the opportunity of exercising the options at times when the market price of the share is ahead of the option price and the added benefit of selling a portion of their existing shareholding in the company to raise the cash to exercise their options. Almost inevitably, in this way they can acquire many more shares than they have sold by the exercise of their options," an analyst explained.

"The share options are a major factor in the compensation package of executive directors and senior management."

Mr. S.E. Captain is the biggest single shareholder of JKH with the connected Paints and General Industries and his son, Rusi, listed among the top twenty shareholders of the company. The majority on this list are foreign funds. No serving executive directors are on this list although Mr. K. Balendra, a former chairman, is on it.
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Hunters sell Bankshall St.property for Rs. 253.5 mn.

Hunter and Co. PLC has disposed an undisclosed extent of Pettah land and buildings at Bankshall Street last week for Rs. 253.5 million, the company said in a Stock Exchange filing.

The land and buildings thereon that have been sold bore 17 assessment numbers. The filing did not include the extent of the land although the assessments numbers were disclosed.

Hunters is a company founded in the colonial period with its main business premises located in an imposing Pettah building and a branch operation on a sprawling site on T.B. Jayah Mawatha, previously Darley Road.
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Commercial Bank receives licence from Central Bank of Myanmar

Sri Lanka’s largest private bank seeks to emulate its success in Bangladesh with second overseas operation

The Commercial Bank has become the first Sri Lankan bank to be granted a licence by the Central Bank of Myanmar to operate a Representative Office in the South East Asian republic of more than 50 million people.

"We believe that there is further potential to increase bi-Iateral trade between Myanmar and Sri Lanka, and that there is a likelihood of some of Sri Lanka’s leading apparel exporters and other industries setting up operations in Myanmar," Commercial Bank’s Chairman Mr Dharma Dheerasinghe said. "The presence of a Representative Office of Sri Lanka’s largest private bank would facilitate this process, and be mutually beneficial to the two countries."

Commercial Bank’s Managing Director and CEO Mr Jegan Durairatnam said the Bank is in the process of planning out the services it will offer initially in Myanmar, as well as the timelines for setting up its Representative Office there. Commercial Bank envisages that its Representative Office will offer Advisory Services to Sri Lankan and Bangladeshi businessmen wishing to enter the Myanmar Market and arrange Banking and Advisory facilities and funds transfer and encashment services, subject to approval of the Central Bank of Myanmar.

"The Banking Sector in Myanmar is expanding fast" Mr Durairatnam added. "By opening a Representative Office, it would also be possible for Commercial Bank to build closer relationships with local banks and offer them its experience in very successfully moving from manual and mechanical systems to high-tech banking."

According to the Asian Development Bank (ADB), Myanmar could follow Asia’s fast growing economies and expand at 7-8% a year, become a middle income nation and triple per capita income by 2030.

Myanmar will be Commercial Bank’s second overseas operation after Bangladesh, which the Bank entered in July 2003, with the acquisition of the Bangladesh operations of Credit Agricole Indosuez (CAI), Commercial Bank’s first ever acquisition of a banking operation. Today, Commercial Bank’s operations in Bangladesh have grown to 18 outlets, and have won numerous awards including a CSR Award from The Bankers Forum in Bangladesh, the Financial Mirror - Robintex Business Award for outstanding performance, the Financial News Services (FNS) Business Award for the ‘Best Performing Foreign Bank’ in Bangladesh and the ICMAB, National Best Corporate Award.

Ranked the ‘Strongest Bank in Sri Lanka in 2014’ by The Asian Banker and the only Sri Lankan bank to be ranked among the Top 1000 banks of the world for four consecutive years, Commercial Bank is also the most valuable private sector brand in the country in 2014. Commercial Bank operates a network of 239 branches and 605 ATMs in Sri Lanka. The Bank has won multiple awards as Sri Lanka’s best bank over several years, was adjudged one of the country’s 10 best corporate citizens by the Ceylon Chamber of Commerce in 2013 and has been rated the Most Respected Bank in Sri Lanka by LMD for the past 10 years. It has also been the second Most Respected Corporate entity in the country overall for the past four years in the LMD rankings, and has been rated NO 1 in Sri Lanka for Honesty in 2013 and 2014 by the Magazine.
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Sri Lankan stocks edge up; political woes weigh

Nov 28 (Reuters) - Sri Lankan stocks ended higher on Friday, recovering from a 12-week low hit in the previous session on last-hour bargain-hunting while investors were cautious about buying risky assets due to political uncertainty ahead of the presidential election.

The main stock index ended up 0.53 percent at 7,153.90, edging up from its lowest since Sept. 5 hit on Thursday.

"The market was in a negative mood and there was no buying interest at all. But suddenly buying interest came from nowhere at the last minute," said Dimantha Mathew manager, research at First Capital Equities (pvt) Ltd.

"Until the last moment market was struggling with no direction. No investor was interested in the market. But during the final hour, things changed significantly and saw a steep upward trend."

Investors expect the market to be volatile over political uncertainty while some investors said prices have fallen to attractive levels.

Eight loyalists from President Mahinda Rajapaksa's United People's Freedom Alliance, including Health Minister Mithripala Sirisena, have defected since Rajapaksa announced a snap poll last week. Sirisena has resigned to contest against Rajapaksa as the consensus candidate of a united opposition.

Speculation over more defections weighed on sentiment, analysts said.

Friday's turnover was 2.08 billion rupees ($15.88 million), exchange data showed, well above this year's daily average of 1.45 billion rupees. Foreign investors bought a net 323.8 million rupees worth of stocks, extending purchases during the year to 20.45 billion rupees, exchange data showed.

Shares in Lanka IOC Plc rose 4.4 percent, leading the overall gain, while fixed-line telephone operator Sri Lanka Telecom Plc rose 1.5 percent.

($1 = 131.0000 Sri Lankan rupee) 

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

Lion Brewery Debenture oversubscribed

The Listed Debenture Issue of Lion Brewery (Ceylon) PLC was oversubscribed during the early hours of the opening day (28) as per the disclosures made to the CSE by the Registrars to the Debenture Issue.

NDB Investment Bank acted as the Financial Advisors and Managers to the Debenture Issue.

The debenture issue of Lion Brewery (Ceylon) PLC was for Rs. 1.0 billion with a green-shoe option to go up to Rs. 2.0 billion and was rated AA- (lka) by Fitch Ratings Lanka Limited.
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Fitch rates Singer's debenture 'A-(lka)'

Nov 28, 2014 (LBO) – Fitch Ratings has assigned Sri Lanka’s Singer PLC's unsecured redeemable debenture issue of up to 1.5 billion rupees a final National Long-Term rating of 'A-(lka)', the rating agency said in a media statement.

The final rating is the same as the expected rating assigned on 2 July 2014, and follows the receipt of documents conforming to information already received, the statement said.

The debentures are rated in line with Singer's National Long-Term Rating as they represent senior unsecured obligations of the retailer of consumer durables and would rank equally with the company's other senior unsecured debt.

Press Release by Fitch Ratings

KEY RATING DRIVERS

Margin Pressure: Singer's National Long-Term rating reflects Fitch's expectations of margin pressure due to given macroeconomic stresses and the resultant negative impact on demand for consumer durables.

This should be partially offset by recent fiscal measures including a 25% reduction in electricity tariffs on households. In 2013, Singer's margins shrank due to an increase in value-added tax (VAT) at a time when demand for consumer durables was declining.

This is reflected in leverage of 4.8x (annualised) as at end-1H14, up from 3.3x (annualised) as at end-1H13. Leverage at end-2013 and end-2012 stood at 4.7x and 3.4x, respectively.

Strong Market Share: Singer's strong reputation is illustrated by its ability to secure agency for new brands including Beko, Grundig, Sharp, Dell, Sony and Lenovo. It has an extensive retail network of over 1,000 retail points in Sri Lanka. Singer's diversified product portfolio includes its Singer and Sisil in-house brands, which target the mass market and provide Singer with price point diversity.

Well-Managed Consumer Loans: In-house hire purchase facilities, which make products more affordable in line with the mass-market proposition of Singer's in-house brands, financed around 45% of Singer's sales in 2013 (2012: 44%). At end-2013, overdue accounts accounted for just 3.7% of the portfolio (end-2012: 2.3%), supported by average durations of less than a year and strong staff incentives for debt recovery, while write-offs were negligible.

Currency Risk: Singer manufactures and locally procures close to 35% of its products through related companies and local suppliers, thus mitigating foreign currency risk.

RATING SENSITIVITIES

Negative: Future developments that may, individually or collectively, lead to a negative rating action include:

- A sustained increase in Singer's leverage (measured as adjusted net debt/EBITDAR excluding Singer Finance) to over 5.5x

- EBITDA margin sustained below 7% (2013: 8%)

- A material weakening in Singer's (company-level) liquidity profile

- A material weakening of the credit profile of Singer's 80% subsidiary, Singer Finance (BBB+(lka)/Stable), given strong linkages between the entities Positive: Future developments that may individually or collectively lead to a positive rating action include:

- Singer's leverage falling below 4.5x on a sustained basis

- EBITDA margin sustained above 10%

Whiff of Maithri win will see bourse go through roof Rs 176B shareholder wealth lost due to political turbulence

By Paneetha Ameresekere

Ceylon Finance Today: The bourse continued to tumble due to the turbulent political situation in the country, with the benchmark ASPI falling by 0.89% to 7,115.89 points and the more sensitive.

S&P SL 20 Index by 1.39% to 3,968.58 points on a Rs 1.32 billion turnover at yesterday's trading.

The bourse, since former UPFA Minister and SLFP General Secretary Maithripala Sirisena, with the backing of the market friendly opposition UNP, announced his presidential candidature on Friday, has seen the ASPI fall by 5.5% and the S&P by 5.3%, while shareholder wealth lost has been Rs 176 billion.

"If, however, the market feels that Sirisena will win the 8 January poll, the bourse will go through the roof," market sources told Ceylon FT.

Losers outnumbered gainers by a ratio of 36:184.

Nevertheless, even a sharper fall of the bourse was prevented yesterday due to spurious trades of just three high flying stocks which are also captured in the S&P, revealing the flippancy of the Colombo Stock Exchange.

Those were the bourse's 8th largest capitalized stock Bukit Darah and 21st and 22nd largest stocks Cargills and Asian Hotels, gaining in price by 1.28%, 0.07% and 1.49% to Rs 714, Rs 150.10 and Rs 68 a share on share volumes (SVs) of 146, 10 and 228, whilst contributing meagre turnover figures of Rs 101,561; Rs 1,501 and Rs 15,472 respectively.

Total number of shares traded yesterday declined by 21% to 73,084,843.

Meanwhile, the biggest contributor to yesterday's turnover was the 19th largest capitalized stock Access with Rs 235.8 million on a 6.4 million SV. Access closed, down 3.25% a share to Rs 35.70; while the 2nd biggest was the 5th largest capitalized stock Dialog with Rs 128.4 million on a 9.8 million SV. Dialog closed flat at Rs 13.10 a share.

The bourse however received a Rs 320.1 million net foreign inflow (NFI), taking NFIs in the year-to date to Rs 20.4 billion. NFIs were led by Access (Rs 193.1 million) and Dialog (Rs 124.8 million).

Market capitalization fell by 0.89% to Rs 3.023 trillion.
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Unenthusiastic response to Blue Diamonds Rights Loss making company seeks infusion of capital

By J. Kurukulasuriya

Ceylon Finance Today: Blue Diamonds Jewellery Worldwide, which initially announced its Rights Issue of shares on 16 October have announced the details and proportions of the issue today — Wednesday. Voting shares will be sold to shareholders at a price of Rs 1.30 per share and non-voting shares at 75 cents each.

The share traded at Rs 1.80 per voting share and 80 cents per non-voting share, today. However, leading share brokers whom Ceylon Today spoke to were unenthusiastic about the prospects of the share. "It is not an actively traded share, furthermore there are many shares on the market with much better fundamentals", one broker said.


During the six months ended 30 September the company made a loss of Rs 28 million, up by 385% from the loss of 6 million sustained in the previous corresponding period. The balance sheet carries an accumulated loss of Rs 124 million.

The company had a close relationship with Fior Drissage Jewellers Ltd- FDJ — to whom they have loaned approximately Rs 4.2 million as at 30 September. But the company has passed a board resolution "to cease the identification of investment in FDJ as an investment in an associate, due to fall in percentage of investment in FDJ and non availability of factors to exercise significant influence over the operations & business affairs of FDJ".

The company is hoping to raise a sum of Rs 134 million in the form of ordinary voting as well as another Rs 115 million in the form of ordinary non-voting shares, a total of approximately Rs 250 million. They will be issued to existing shareholders in the ratio of one new share for every one existing share. In effect the company is seeking to double its share capital.

"The purpose for which the proceeds of the issue are to be utilized are for the establishment of a research & development unit, establishment of a global design centre, investment in new machinery, marketing, and international trade fair participation, and for investment in inventory", states the company's interim financial report as at 30 September.

Xia Liqiang is the largest shareholder of the company with 15.51% of the shares or 16,023,215 shares. Sri Lanka Insurance Corporation Ltd – General Fund holds 10.22% of shares. The public holding as defined by the CSE is 89.20%.

The company announced that the general meeting for the approval of this issue and provisional allotment of shares will take place on 16 December, and the rights will commence trading on 30 December.
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Dialog Axiata launches Digital Holdings Lanka

Dialog Axiata made an announcement to CSE regarding an incorporation of a wholly owned subsidiary of Dialog Axiata under the name of Digital Holdings Lanka (Private) Limited.

This company will operate as Dialog Group's investments holding company and would look at new business areas.

Colombo bourse extended the losses on Thursday as core index lost 63.83 points (-0.89%) to end at 7,115.89. S&P SL 20 index lost 47.55 points (-1.18%) to end at a nearly one month low of 3,977.15. All share price index declined by 285.73 or -3.9% so far during the week while S&P SL 20 index declined by 150.11 points or -3.6%. Price depreciation in counters such as Commercial Bank (closed at 160.10, -4.7%), Sri Lanka Telecom (closed at LKR 47.00, -3.1%) and Hatton National Bank (closed at 191.50, -2.3%) contributed negatively to the market performance. Further sectors such as Information Technology, Footwear & Textiles and Construction & Engineering slumped during the session.

Daily market turnover was LKR 1.3bn. Access Engineering topped the turnover list with LKR 236mn supported by several crossing where 4.4mn shares changed hands at LKR 37.00 per share. Aggregate value of Access Engineering crossings represented 12% of the total market turnover.

Accordingly Dialog Axiata (LKR 128mn) and John Keells Holdings (LKR 74mn) recorded next best contributions to the market turnover.

Other crossings were recorded in Hatton National Bank non-voting as 0.3mn shares traded at LKR 144.00 per share. Total crossings represented 16% of the market turnover.

Losers surpassed the gainers 191 to 43, while 46 equities remained unchanged. 20 counters touched 52wk low prices while only Pan Asia Power reached 52wk high price level. Cash map declined to 46% from 50%.

Shares of Lanka Cement continued to attract heavy investor interest during the session followed by Lanka IOC and Access Engineering.

All the banking sector counters declined during yesterday's trading session. Amana Bank closed at LKR 4.90, -3.9%, National Development Bank closed at LKR 234.00, -3.6%, DFCC Bank closed at LKR 210.60, -0.2%, Sampath Bank closed at LKR 229.90, -0.1%), Nations Trust closed at LKR 91.00, -4.1%, HDFC Bank closed at LKR 61.50, -2.4%, Union Bank closed at LKR 23.30, -3.3%, Sanasa Development Bank closed at LKR 86.00, -2.9%, Seylan Bank closed at LKR 90.50, -6.6% and Pan Asia Bank closed at LKR 23.50, -4.1%.

Foreign investors were net buyers for the 16th consecutive day with net inflow of LKR 320mn. Foreign participation was 22%. Year to date net foreign inflows passed the LKR 20bn mark to record LKR 20.1bn.

Net foreign inflows were seen in counters such as Access Engineering (LKR 193mn), Dialog Axiata (LKR 125mn) and Hemas Holdings (LKR 49mn) while net foreign outflow was mainly seen in John Keells Holdings (LKR 16mn).

Further Sampath Bank announced that the bank obtained the approval of CSE for listing the 70mn rated unsecured redeemable subordinated debentures at LKR 100.00 each.
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SEC lifts mandatory offer suspension on Adam Investments

The Securities and Exchange Commission has granted approval to lift the suspension imposed on Adam Investments Ltd. on the mandatory offer made to remaining shareholders of PCH Holdings Plc.

With this move, AIN’s mandatory offer on PCHH at a revised offer price of Rs. 2.50 per share (as opposed to the original price of Rs. 2) will be continued and kept open for 21 days from 27 November to 18 December.

SEC in August suspended the mandatory offer until the final determination of a case in Commercial High Court. This was settled in November.

The code was triggered when AINV on 2 July acquired 83 million shares at Rs. 2 per share, thereby increasing its stake PCHH to 43%.
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Sri Lankan stocks fall to 12-wk low; political uncertainty weighs

Nov 27 (Reuters) - Sri Lankan stocks fell to a 12-week closing low on Thursday as investors pulled back over worries the defection of some ruling party members would result in a hung parliament after the Jan. 8 presidential polls.

The main stock index closed down 0.89 percent or 63.83 points at 7,115.89, its lowest since Sept. 5, after falling 1.6 percent earlier in the session.

Eight loyalists from President Mahinda Rajapaksa's United People's Freedom Alliance, including Health Minister Mithripala Sirisena, have defected since Rajapaksa announced the snap poll last week. Sirisena has resigned to contest against Rajapaksa as the consensus candidate of a united opposition.

"The crossovers have raised concern over the political stability of the government and some believe it could result in a hung parliament, resulting in political instability," a stockbroker said on condition of anonymity.

"At the moment, it is not clear who will win. But if we see a massive defection in parliament towards one side, then it will be clear who is going to win and that will help the market rebound."

Continued buying by foreign investors, low interest rates and hopes of better corporate earnings pushed the bourse into the overbought zone by Nov. 18, before it slipped on political uncertainty. The bourse is near the oversold region since Friday, Thomson Reuters data showed.

Thursday's turnover was 1.32 billion rupees ($10.08 million), exchange data showed, less than this year's daily average of 1.44 billion rupees. Foreign investors bought a net 320.1 million rupees worth of stocks, extending purchases during the year to 20.12 billion rupees, exchange data showed.

Shares in biggest listed lender Commercial Bank of Ceylon Plc fell 4.40 percent, leading the losers, while fixed line telephone operator Sri Lanka Telecom Plc declined 3.51 percent. 

($1 = 131.0000 Sri Lankan rupee) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

Sri Lanka Sampath Bank to issue debenture

Nov 27, 2014 (LBO) – Sri Lanka, Sampath Bank to issue 70,000,000 rated unsecured redeemable subordinated debenture, the bank said in a stock exchange announcement.

The bank will issue 70,000,000 debenture at a rate of 100 rupees per share has been approved by the regulatory.

The bank said the subscription will open on 05th December this year.

Sri Lanka stocks close down 0.9-pct

Nov 27, 2014 (LBO) - Sri Lanka's stocks closed 0.89 percent lower with telco and banking stocks losing ground despite net foreign buying, brokers said.

The Colombo benchmark All Share Price Index closed 63.83 points lower at 7,115.89, down 0.89 percent.

The S&P SL20 closed 47.55 points lower at 3,977.15, down 1.18 percent.

Turnover was 1.32 billion rupees, down from 1.70 billion rupees a day earlier with 35 stocks closed positive against 183 negative.

Access Engineering closed 1.20 rupees lower at 35.70 rupees with an off market transaction of 162.80 million rupees changing hands at 37.00 rupees per share contributing 12 percent of the turnover.

The aggregate value of all off-the-floor deals represented 16 percent of the daily turnover.

Lanka Cement closed 1.90 rupees lower at 3.40 rupees and Lanka IOC closed 60 cents lower at 54.60 rupees, attracting most number of trades during the day.

Foreign investors bought 445.70 million rupees worth shares while selling 125.55 million rupees worth shares.

Commercial Bank of Ceylon closed 7.40 rupees lower at 160.60 rupees and Sri Lanka Telecom closed 1.70 rupees lower at 46.80 rupees, contributing most to the index drop.

Oil palm firms Shalimar (Malay) closed 382.00 rupees higher at 1,987.00 rupees and Good Hope closed 382.20 rupees higher at 1,998.90 rupees.

Cabraal Spells Out 8-point Agenda For Banks

Central Bank Governor Ajith Nivard Cabraal yesterday spelled out an eight-point agenda for the Lankan banking sector to get themselves aligned with the government’s ‘Vision 2020’.The government hopes to achieve the US $ 150 billion economy and gross domestic product (GDP) per capita of US $ 7000+ by 2020. According to Cabraal, the banking sector, which represents 60 percent of the financial system, has a pivotal role to play in getting the country there.

“Financial inclusion is topping my list. Here we don’t mean how many Sri Lankans have a bank account or not. We are talking about real financial inclusion, where people have real access to finance to do business and carry out their activities.What is the point of having a bank account without money,” Cabraal quipped.According to a recently published working paper by Asian Development Bank Institute, Sri Lanka tops in the region in financial inclusion with comparatively easy access to finance.

As the second point, the Governor urged the banks to develop new fund-based products as margins are shrinking due to the prevailing low interest rate regime, a scenario the Central Bank predicts for the medium and long term.Sri Lanka’s largest private bank Commercial Bank PLC saw its interest income falling 4 percent year-on-year (YoY) to Rs.15.3 billion in 3Q14. The second largest Hatton National Bank PLC’s interest income for the same quarter fell 6 percent YoY to Rs.15.4 billion.

As the third point, Cabraal urged the banks to get involved in the infrastructure projects that are taking place in the country.“For a long time, infrastructure was funded and developed by the government. The key infrastructure of the country such as ports, air ports, power plants have now been built. The next wave of infrastructure development should come from the private sector.”Already, some of the large banks in the country, both private and state-owned, have funded some of the key infrastructure projects.Assistance in reviving ailing businesses was the fourth point in Cabraal’s list. Deriving examples from the Central Bank-driven financial sector consolidation programme, he recommended banks to have dedicated units to help their customers who are struggling.

The Central Bank has a separate unit headed by a Deputy Governor, driving consolidation process.“It is more difficult to recover than revive,” Cabraal noted. He further said banks in most of the developed countries follow this path and stressed that lower NPL ratios in those countries are a result of this practice.“We would like to see a few banks setting up such dedicated units in the coming few months.” As the fifth point, Cabraal said the banks need to reposition themselves as soon as possible as Sri Lanka is going to be a regional hub. “You need to be the trailblazer,” he urged.the ongoing
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Anilana Rights Issue oversubscribed

Anilana Hotels and Properties PLC's Rights Issue, which closed yesterday, was fully subscribed attracting applications over and above the number offered under the rights.

The Rights issue offered Ordinary Shares in the ratio of two shares for every seven shares held by the registered holders of Ordinary Voting Shares in the Company at an issue price of Rs 7 per ordinary voting share. The Company offered 109,624,114 Ordinary Voting Shares, making it a total 494 million shares. The offer closed yesterday, raising Rs 767 million partly to finance the balance construction of Phase-I of the Dambulla hotel and to retire Rs 167 million of existing debt.

Chairman Peter Amerasinghe said Anilana Hotels and Properties PLC will continue to investment in expansion and debt restructuring to improve its financial position and will actively streamline cost structures by benchmarking best practices from within and outside the country. In addition, Anilana will focus on continuous staff training and development to achieve a high level of service which would be a hallmark of its resorts in Sri Lanka.

Anilana is one of Sri Lanka’s youngest and brightest hospitality brands, already enjoying positive recognition from guests around the world and is a collection of unique and stylish resorts, designed to present Sri Lanka at her most picturesque and beautiful.

Anilana-Pasikuda, the first resort, opened in May 2013, with Anilana-Nilaveli opening to the public in April 2014.

Anilana-Damublla and Anilana Villas-Panichchankerni are due to open in the latter part of 2015. The company also plans on developing three more resorts in the east coast and also start a joint venture development in the city of Colombo.
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Capital market key contributor to achieve Vision 2020 goals - SEC Chairman

The capital market is expected to be a key contributor to the economy by 2020 with a Market Capitalization of around US$ 100 billion. A strong regulatory framework and a reputation for Corporate Governance are essential pre-requisites in achieving that vision, SEC Chairman Dr Nalaka Godahewa said.

Speaking on ‘Corporate Governance’ at the Directors Symposium for the NBFI sector on Tuesday, he said with the right strategic focus and the commitment of all stakeholders,they have been able to bring the stability back to the market and create an environment where the capital market is viewed as a potential key contributor to the national economy.

"Since the end of the war in 2009, the total value of the equity market has increased to US$ 24 billion. The All Share Price Index (ASPI) of the CSE recorded an impressive growth of nearly 300%. Market Capitalization to GDP ratio has improved from 11% to 37%. Net Foreign Inflow has exceeded Rs. 90 billion during the last 3 years.

Average Market Return over the last 11 months exceeded 26%. The ASPI has crossed the 7000 mark and all signs are that the market has entered a phase of steady growth with normal fluctuations. "I believe most of you are already familiar with the vision 2020 targets of the country.

The government is targeting a US$ 150 billion economy and a Per Capital Income of US$ 7500 by 2020 that will make us on par with some of the upper middle income economies. A key component in this overall economic development strategy of the country is making Sri Lanka a true commercial hub.

“We expect the capital market to be a key contributor to the economy by 2020 with a Market Capitalization of around US$ 100 billion," Dr Godahewa said.

A strong regulatory framework and a reputation for Corporate Governance are essential pre-requisites in achieving that vision.
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PLC recognised by ‘Business Today’ as Listed Top Finance Company

People’s Leasing & Finance PLC (PLC), the flagship subsidiary of People’s Bank, retained the ranking amongst ‘Top 25’ listed companies for the second consecutive year with the improvement of four notches from 18th last year to 14th this year at the ‘Business Today Top 25- 2013/14 Awards’ held at the Hilton Hotel, Colombo recently. The award was received by N. Vasantha Kumar, Director and K.S. Bandaranayake, DGM – Finance and Administration of PLC.

The corporate management of PLC at the award ceremony recently held at Hilton Hotel, Colombo

Being the largest non bank finance company in terms of its asset base and profitability, PLC consolidated its strong position and retained its supremacy by being recognised and ranks as the top listed finance company by this prestigious business magazine.

The selection criteria was based on financial performance during the financial year 2013/14 and published information of companies listed on the Colombo Stock Exchange. 

Financial criteria considered include share turnover, revenue, profit after tax, return on equity, earnings per share, market capitalisation, value of shares transacted and value addition.

People’s Bank CEO/GM, PLC Director N. Vasantha Kumar and DGM – Finance and Administration Sanjeewa Bandaranayake receiving the award

PLC was incorporate in August 1995, and became a listed company on 24 November 2011. People’s Leasing Group consists of five subsidiaries engaged in business activities including general insurance, microfinance, fleet management and property development.
PLC is the only finance company with two international credit ratings from Fitch Rating International and Standard & Poor’s. PLC also retained the market leadership in leasing for the last 12 years consecutively.

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Sri Lanka’s Sampath Bank proposed debt issue rated 'A+(lka): Fitch

Nov 26, 2014 (LBO) – Sri Lanka’s Fitch Ratings has assigned Sampath Bank proposed subordinated debentures of up to seven billion rupees a final national long term rating of 'A+(lka)'.

The full statement is reproduced below:

Fitch Rates Sampath Bank's Subordinated Debentures Final 'A+(lka)'

Fitch Ratings-Colombo/Hong Kong-26 November 2014: Fitch Ratings Lanka has assigned Sampath Bank PLC's (Sampath; AA-(lka)/Stable) proposed subordinated debentures of up to LKR7bn a final National Long-Term Rating of 'A+(lka)'.

The assignment of the final rating follows the receipt of final documents that conform to information previously received. The final rating is at the same level as the expected rating assigned on 11 November 2014.

The debentures, which will have a tenor of five years and carry a fixed coupon, will be listed on the Colombo Stock Exchange. Sampath expects to use the proceeds to strengthen its Tier 2 capital base and reduce asset and liability maturity mismatches.

KEY RATING DRIVERS

The proposed debentures are rated one notch below Sampath's National Long-Term Rating to reflect their subordination to senior unsecured debt.

Sampath Bank's rating is driven by its modest and expanding franchise, and relatively higher risk appetite as seen in its aggressive loan growth and high gold-backed lending until end-2013, which has put pressure on its asset quality. Fitch believes asset quality indicators could be weaker than those reported should a broader definition of impairment be applied. This could put pressure on its rating given the bank's lower capitalisation relative to peers.

RATING SENSITIVITIES

The rating on the debentures will move in tandem with Sampath's National Long-Term Ratings. A full list of Sampath's ratings follows:

National Long-Term Rating: 'AA-(lka)'; Stable Outlook
Outstanding Sri Lanka rupee-denominated subordinated debentures: 'A+(lka)'
Proposed Sri Lanka rupee-denominated subordinated debentures: 'A+(lka)'

Sri Lanka’s Siyapatha Finance subordinated debt rated 'A-(lka)' by Fitch

Nov 26, 2014 (LBO) – Sri Lanka’s Fitch Ratings has assigned Siyapatha Finance proposed subordinated redeemable debentures of up to one billion rupees a final national long term rating of 'A-(lka)'.

The full statement is reproduced below:

Fitch Rates Siyapatha Finance's Subordinated Debt Final 'A-(lka)'

Fitch Ratings-Colombo/Taipei-26 November 2014: Fitch Ratings Lanka has assigned Siyapatha Finance Ltd's (SLFL; A(lka)/Stable) proposed subordinated redeemable debentures of up to LKR1bn a final National Long-Term Rating of 'A-(lka)'.

The assignment of the final rating follows the receipt of final documents that conform to information previously received. The final rating is at the same level as the expected rating assigned on 2 October 2014.

The proposed debentures will have a five-year tenor with bullet principal repayment at maturity. Coupon payments will be made annually at 8.90%. The debentures are to be listed on the Colombo Stock Exchange. SLFL expects to use the proceeds to strengthen its regulatory Tier 2 capital and to reduce maturity mismatches between assets and liabilities.

KEY RATING DRIVERS

The proposed debentures are rated one notched below SLFL's National Long-Term Rating to reflect their subordination to senior unsecured creditors.

SLFL's rating reflects support from its parent, Sampath Bank PLC (AA-(lka)/Stable). SLFL is rated two notches below its parent because Fitch classifies SLFL as strategically important to Sampath Bank. This view is premised on Sampath Bank's 100% ownership of SLFL, involvement in the strategic direction of SLFL through board representation, and the potential reputational repercussions on Sampath Bank should it allow SLFL to fail.

RATING SENSITIVITIES

Any changes to SLFL's National Long-Term Rating would impact the issue's National Long-Term Rating. SLFL's rating could change if Sampath Bank's rating changes or if SLFL's strategic importance to Sampath Bank changes.

Sri Lanka Treasury bill yields frozen

Nov 26, 2014 (LBO) – Sri Lanka's Treasury bill yields were flat at Wednesday's auction with the 12-month yield unchanged at 6.00 percent, data from the state debt office showed.

6-month yield was also frozen at 5.84 percent though the debt office not offered 6-month bills at the last auction.

The debt office offered 12.00 billion rupees of maturing debt for roll-over and sold 10.55 billion rupees in bills.

The debt office which is part of the island's central bank not offered 3-month short term bills for the auction.

Stockbrokers Say No Reason To Panic

The political games taking place in the country seem to have created a sense of panic in the minds of some investors in the Colombo Stock Exchange, which should not be the case, according to top brokers, who seem to be largely unconcerned about the proceedings.“Various unconfirmed crossover stories have scared off retail investors but we still see a foreign inflow into the fundamentally strong stocks. We expect the market to rebound soon,” Capital Trust Securities CEO and MD Tushan Wickramasinghe said.

The main All-Share Price Index, which opened on 7,530 and closed on 7,401 last Friday, closed further down on 7,235 yesterday.Colombo Stock Brokers Association Chairman and Softlogic Stockbrokers CEO Dihan Dedigama said that the uncertainty of the political sphere has been the biggest influence on the situation and added that a statement of economic policies by the opposition’s common candidate could help the situation.“We’ve seen how much the market gained this year under the current political and economic environment, so it is the other side which has to make a statement,” he said.

Meanwhile, according to Acuity Stockbrokers Executive Deputy Chairman Deva Ellepola, policies of both parties in the past have been investor friendly from t he stock market’s point of view and said that in his opinion, a change in regime will not affect the market significantly.

“I feel it should bounce back, I see no reason for panic,” he said and added that most investors are still sitting on profits.

However, he also reasoned that since the market was in its second highest position since 2011, some people may have seen an opportunity for profitmaking and coupled with the political situation, may have sold their stocks.Candor Equities CEO RaviAbeysuriya said that these stocks sold by retail investors only create jitters and are being bought over by high-net-worth investors who see their worth in the long run.“The macroeconomic indicators show there’s much more room for growth. This is a time for buying,” he said, based on the strong growth rates, dividends and the growth of credit.He also expressed sentiments that any change i n t he country’s rule will have miniscule impact on the functioning of the stock market.

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41 financial consolidation plans approved - CB

By Charumini de Silva

Ceylon Finance Today: Sri Lanka's banking watchdog, the Central Bank yesterday confirmed that 41 financial consolidation plans have been implemented of which 36 have been approved by the Monetary Board.

Central Bank Governor, Ajith Nivard Cabraal said that they are on track to achieve the targets that were set by the bank to monitor, identify and track the sources of systemic risk over time to ensure financial system stability.

He said that the biggest function that they undertook this year was the consolidation process. There are 36 confirmed consolidation plans, which have been approved by the Monetary Board and altogether 41 plans have been implemented. Cabraal said, "Over a long period of time we have seen that there were many weaknesses in our financial system. We have been responding to those weaknesses in various ways and each year we have been made improvements, but overall we have not dealt with the root causes which caused instability.

So, there were times where financial companies failed, banks were shaken, and the knock-on effect felt by the other players for a long time and this had become a bit of a habitual situation as well." Reflecting on the measures taken by the Central Bank he said, "We also took some bold decisions. One was to change the laws in order to provide the incentives for mergers to take place, engaged the key consultancy free of charge to the recipients in order to ensure fair play in the due diligence activity as well as there were no constraints as a result of fees having to be paid.

"It was a cohesive effort and not something suddenly thought through however, many thought it was ambitious, yes it was ambitious. But we have diligently worked through that, in order to make it real. Today, we have seen that those efforts are bearing fruits," he added.
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Union Assurance maintains growth momentum

Union Assurance PLC (UA), a leading player in the Sri Lankan insurance sector maintained a steady growth momentum in gross written premium and profits as at the end of the third quarter of 2014.

GWP from life and general insurance for the nine months of 2014 amounted toRs. 8 billion compared to Rs. 7.7 billion in the preceding period. Life insurance premiums contributed Rs. 4.3 billion and non-life premiums contributed Rs. 3.7 billion.

Total net revenue of the company grew by 16% to Rs. 10.1 billion in 2014 from Rs. 8.7 billion in 2013 mainly due to increase in investment income. Benefits, losses and expenses including the increase in the life fund, grew by 16% as well.

Profit after tax (PAT) increased by 5% from Rs. 291 million in 2013 to Rs. 305 million in 2014. PAT excludes the surplus from life insurance business which is determined after an actuarial valuation at the end of the year.

As at September 30 2014, UA’s life fund stood at Rs. 23 billion with a healthy solvency ratio indicating the financial strength of the business. UA was recognised among the top 3 Service Brands in the country for the 3rd consecutive year being awarded the Silver in the “Service Brand of the Year” category at the recently concluded SLIM Brand Excellence Awards.The company was also recogniseda Great Place to Work by the Great Place to Work Institute,celebrating UA’s many initiatives to ensure employee engagement, satisfaction and welfare. UA also received the Gold Award in category 01at the SLITAD People Development Awards 2014 organised by the Sri Lanka Institute of Training and Development.

The Union Assurance brand is positioned on the promise of “trust” and strives to deliver this promise by being transparent, convenient and respectful when dealing with all stakeholders.
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Bourse recovers after Budget vote, but investors cautious

Reuters: Stocks recovered on Tuesday from the previous session’s near-four-week closing low, a day after President Mahinda Rajapaksa won the final 2015 Budget vote, contrary to speculation that he might lose it.

Analysts expect the market to be volatile due to political uncertainty before a snap presidential poll on 8 January. Rajapaksa, who is facing a split in his ruling coalition ahead of the poll, won the final vote on the 2015 Budget with a strong majority.

The main stock index, which rose 1.32% intra-day, ended 0.06% up at 7,239.36, recovering from its lowest close since 28 October, hit on Monday.

Stockbrokers said the market was volatile and late selling saw early gains being surrendered as investors were cautious due to the prevailing political uncertainty ahead of the elections.

Already, seven legislators, including Health Minister Mithripala Sirisena, the main Opposition candidate, have defected from Rajapaksa’s ruling coalition.

Stockbrokers and research analysts said some investors are buying stocks quietly. They said fears of a possible change in the political leadership could be highly volatile to the market, while some investors still remain optimistic about the change.

Continued foreign buying, low interest rates and hopes of better earnings pushed the bourse into the overbought zone by 18 November, before it slipped on political woes. The Bourse is in the oversold region since Friday, Thomson Reuters data showed.

Tuesday’s turnover was Rs. 1.08 billion ($ 8.24 million), exchange data showed, less than this year’s daily average of Rs. 1.44 billion. Foreign investors were net buyers of Rs. 5.2 million, extending foreign buying for this year to Rs. 19.4 billion, exchange data showed.

Shares in Hatton National Bank Plc rose 1.55%, leading the overall gain.
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Sri Lanka stocks close higher

Nov 25, 2014 (LBO) - Sri Lanka's stocks closed 0.06 percent higher with the price gains of Nestle Lanka and C T Holdings, brokers said.

The Colombo benchmark All Share Price Index closed 4.11 points higher at 7,239.36, up 0.06 percent.

The S&P SL20 closed 0.78 points higher at 4,045.72, up 0.02 percent.

Turnover was 1.08 billion rupees, down from 1.70 billion rupees a day earlier with 118 stocks closed positive against 73 negative.

The aggregate value of all off-the-floor deals only represented 7 percent of the daily turnover.

Access Engineering closed 70 cents higher at 38.00 rupees and People’s Leasing & Finance closed 10 cents higher at 23.00 rupees, attracting most number of trades during the day.

Foreign investors bought 262.20 million rupees worth shares while selling 256.99 million rupees worth shares.

Nestle Lanka closed 46.50 rupees higher at 2,157.50 rupees and C T Holdings closed 8.90 rupees higher at 149.00 rupees, contributing most to the index gain.

Ceylon Tobacco Company closed 19.30 rupees lower at 1,076.20 rupees and John Keells Holdings closed 2.90 rupees lower at 244.60 rupees.

Sri Lanka Telecom closed 1.00 rupee lower at 48.20 rupees.

Kandy Hotels shows sparkling results

By J.Kurukulasuriya

Ceylon Finance Today: Recently released results of The Kandy Hotels Co (1938) PLC, shows steady growth of group profit after tax of 31%, reaching Rs 69 million for the six months to 30 September 2014 as compared to the same 2013 period. The company itself made a profit of Rs 81 million in the period.

However, there are several deceased persons on the list of top 20 shareholders — N.V.S. Saackville, P.R.Frossard, Edonard Laravoire, and J.E.I Perera — are all deceased shareholders as per the company's report. Recently, Ceylon FT drew attention to the fact that red tape and bureaucracy at the Central Depository System hindered the representatives of deceased shareholders from selling their shares (particularly when they are foreigners), and predominance of deceased shareholders on the lists of several 'older' companies on the CSE, suggest this.

Kandy Hotels Co, the Co-owners and operators of 'Queens Hotel' and 'Hotel Suisse' in Kandy, are members of the Galle Face Hotels Group, Chaired by Sanjeev Gardiner.

The company has performed remarkably well last year, surpassing all previous records with a turnover of Rs 548 million for the year ended 31 March 2013, and are on target to exceed that in 2014. Hotel Suisse had a turnover of Rs 301 million in 2013, while Queen's Hotel too performed well to have a turnover of Rs 246 million.

Group net finance cost was only Rs 175,000, as compared to Rs 1.12 million in the corresponding period last year, reflecting the way many businesses have benefitted from the prevailing low interest rates and 'cheap' money.

Cash and cash equivalents held by the group have grown to Rs 35 million from the Rs 21 million as at the audited balance sheet date of 31 March. Despite the fall in finance costs, the bank overdraft as at the balance sheet date has increased from Rs 421,000 at 31March, to Rs 28 million on 30 September.

Holders of the 50,000 fully paid 15% cumulative Preference Shares of the company continue to reap rich rewards invariably receiving their 15% dividend each year, at a time when bank interest from fixed deposits are low.

The balance sheet reflects very solid reserves of Rs 5,572 million, plus retained earnings of Rs 476 million as against a Stated Capital of only Rs 16.8 million.

The group has Investment in a joint venture of Rs 186 million.

The shares traded at a high of Rs 10.70 during the quarter, compared to a high of Rs 9.50 in 2013. It fell to a low of Rs 6.80 in the quarter.

The public share Holdings as at 30 September 2014 was 9.05% and there were 1,557 shareholders.

The Ceylon Hotels Corporation PLC holds 77% of shares, Hotel International Ltd., holds 2.7%, and Ceylon Hotels Holdings Pvt Ltd., 9.78%.
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Amãna Bank records monthly profits with 85% growth in net financing income

Amãna Bank, Sri Lanka’s only licensed commercial bank operating sans interest, has commenced recording monthly operating profits since August 2014.

According to the quarterly financial statements released recently to the Colombo Stock Exchange, the bank’s topline performance has also showcased an impressive growth for the first nine months of 2014.

The bank has achieved a Financing Income of Rs. 1,798 million showcasing a growth of 43% from the corresponding period of last year, whilst Net Financing Income has recorded a growth of 85% to reach Rs. 900 million. The bank achieved a total operating income of Rs. 1,215 million, indicating a growth of 58% for the same period.

As a result of the growing popularity and acceptance of the bank’s unique business proposition, the bank’s advance and deposit portfolios have recorded a significant growth during the nine months ending 30 September 2014.

Total advances recorded a growth of 31% to reach Rs. 19,668 million while total deposits recorded a growth of 46% to reach Rs. 26,302 million, demonstrating the strengthening of customer confidence.

Speaking on the business performance, the Bank’s Chief Executive Officer Mohamed Azmeer said: “I am very happy to note the performance of the bank, especially considering the challenging environment. In the first nine months of 2014 we have seen an impressive growth momentum from all business segments, which include Consumer, SME and Corporate Banking along with Treasury operations. As a result of this momentum, the bank has been able to achieve a break-even level of profitability on a monthly basis since August 2014. We hope to continue this positive trend in line with our plans.”

Apart from the impressive financial performance, Amana Bank was also recently recognized as the World’s Best Up-and-Coming Islamic Bank by ‘Global Finance Magazine’ at the 18th Annual World’s Best Banks Award Ceremony 2014 held in Washington DC, USA, which coincided with the annual IMF and World Bank Conference at the same location.

Amãna Bank is the first licensed commercial bank in Sri Lanka to operate in complete harmony with the non-interest based Islamic banking model and is listed on the Diri Savi Board of the Colombo Stock Exchange.

Powered by the stability and the support of its strategic shareholders including, Bank Islam Malaysia Berhad, AB Bank in Bangladesh and The Islamic Development Bank based in Saudi Arabia, Amãna Bank is making strong inroads within the Sri Lankan banking industry and is focused on capitalising the growing market potential for its unique banking model across the country.
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2015 Budget passed

The third reading of the 2015 Budget was passed in Parliament with a majority of 95 votes. 152 members voted in favour while 57 voted against. The United National Party, Tamil National Alliance and Democratic National Alliance voted against the budget.

Six parliamentarians who crossed over to the opposition including MP Maithripala Sirisena and the MPs of Jathika Hela Urumaya were absent during the vote.
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Sri Lanka stocks near fifteen month intra day drop over political turmoil

Nov 24, 2014 (LBO) - Sri Lanka's stocks closed 2.25 percent lower recording the highest intra-day drop in nearly fifteen months while reflecting investor concerns over the current political situation prevailing in the island, brokers said.

The index plunged 170.14 points on August 28, 2013.

The Colombo benchmark All Share Price Index closed 166.37 points lower at 7,235.25, down 2.25 percent.

The S&P SL20 closed 82.32 points lower at 4,044.94, down 1.99 percent.

Turnover was 1.70 billion rupees, down from 2.14 billion rupees last Friday with 14 stocks closed positive against 222 negative.

Laugfs Gas closed 2.80 rupees lower at 40.10 rupees with an off market transaction of 378.00 million rupees changing hands at 43.00 rupees per share contributing 22 percent of the turnover.

The aggregate value of all off-the-floor deals represented 24 percent of the daily turnover.

Access Engineering closed 2.00 rupees lower at 37.30 rupees, attracting most number of trades during the day.

Foreign investors bought 164.45 million rupees worth shares while selling 64.26 million rupees worth shares.

John Keells Holdings closed 5.70 rupees lower at 247.50 rupees and Carson Cumberbatch closed 23.70 rupees lower at 426.20 rupees, contributing most to the index drop.

Commercial Bank of Ceylon closed 5.60 rupees lower at 169.40 rupees and Dialog Axiata closed 30 cents lower at 12.70 rupees.

Nestle Lanka closed 45.40 rupees lower at 2,111.00 rupees.

Bukit Darah closed 26.00 rupees higher at 736.30 rupees.

Monetary policy stance for 2015 unchanged – Cabraal

By Charumini de Silva

Ceylon Finance Today: Sri Lanka's banking watchdog, the Central Bank yesterday confirmed that the monetary policy stance for 2015 would not be materially different from that of 2014, and that they would continue to balance several variables to ensure that economic and price stability is maintained.

Speaking to Ceylon FT Central Bank Governor Ajith Nivard Cabraal said, that by the end of 2014, we would have enjoyed nearly six years of average single digit inflation, and therefore, we would certainly want to ensure that such track record is maintained.

Commenting on the low interest rate regime, he said that the current low interest rate regime. ...would last as long as they maintain inflation at the current low levels, and as of now, that outcome seems quite sustainable.

"We are confident that the inflation would remain stable in the foreseeable future. On that basis, we could also expect the low interest rate regime to continue over the longer term," he added.

Commenting on the growth projections for next year Cabraal said, "We expect growth for 2015 to be around eight per cent, and based on our current macro-fundamentals, it seems to be a realizable target.
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Cabinet identifies Tata Project as SDP 16-year tax break as goodwill gesture

By Mario Andree

Ceylon Finance Today: The Cabinet has identified the US$ 430 million mixed development project in Slave Island by India's Tata Housing, as a Strategic Development Project in a new gazette notification granting the company a 16 year tax break for the US$ 130 million foreign direct investment.

Tata housing obtained five acres of land free of charge from the Urban Development Authority, as a goodwill gesture for agreeing to build 562 housing units on three acres of land adjoining the location, to relocate the families who occupied the land previously.

In a new gazette notification the Ministry of Investment Promotion identified Tata's US$ 429.5 million re-development and mixed development project as a Strategic Development Project under the SDP Act.

The gazette highlighted that only US$ 130 million out of the US$ 429.5 million would come in the form of foreign direct investment.

The ministry also has decided to grant the company a 16-year tax break for the project which would be completed within eight years from the May 2014, the date agreements were signed with BOI.

Accordingly, the company will be fully exempted from income tax for the first 10 years, other than sale of apartments which is accepted for six years, followed by 50% exemption of corporate tax for six years.

In addition, no withholding tax would be charged on interest for foreign loans, fees to consultants, management and royalty fees below three per cent of gross revenue and 1.5% of marketing fees and further incentives for management fees below 10%.

The company has been exempted from VAT, PAL, Excise Duty, CESS and NBT during the project implementation period of eight years.

Further, the company has been exempted from the payment of Construction Industry Guarantee Fund Levy to the contractors and subcontractors of the project company.

The project will be carried out by locally incorporated One-Colombo Project (Private) Limited.

At the initial stage the company would construct 562 housing and 100 shopping units to relocate those displaced by the land clearance. The relocation is expected to be completed within two-and-a-half years of commencement, followed by the second phase where the company would develop a mixed development project consisting of a 150-room city hotel, 1.1 million sq. ft. of residential apartments, 530,000 sq. ft. of commercial space and 115,000 sq. ft. of retail space.
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Lanka Rating Agency upgrades Vallibel Finance ratings to BBB-/P3; outlook Stable

Lanka Rating Agency (LRA) has upgraded Vallibel Finance PLC’s long- and short-term financial institution ratings from BB+ and NP to BBB- and P3, respectively.

Concurrently, its issue rating of Rs. 500 million Unsecured Subordinated Redeemable Debentures (2014/2019) is upgraded to BB+ from BB. Meanwhile, both long-term rating outlooks are reaffirmed at Stable.

The upgrade is premised on the increase in market share of Vallibel in the LFC sector as well as its improved core performance indicators and improved franchise. Meanwhile, the ratings are supported by Vallibel’s above average asset quality and performance reflected in indicators that compare better than similar rated industry peers’.

Vallibel was incorporated in 1974 as a small family-owned finance company under the name of The Rupee Finance Company. In 2005, it was acquired by Vallibel Investments Ltd. and renamed Vallibel Finance Company. Following the change in ownership, the company has aggressively increased its credit assets, which made up around 1.84% of industry assets as at end-March 2014.

Vallibel, whose principal lending activities include leasing and hire-purchase facilities, 
operates with 20 branches as at end-June 2014.

Vallibel’s asset quality is viewed as above average supported by asset quality indicators that compare better to similar rated peers’. The company’s credit assets grew a healthy 30.22% y-o-y in fiscal 2014 and 23.56% (annualised) in 1H fiscal 2015, reflective of the expansion in its core lease and hire purchase portfolio supported by expansion in its branch network and improving franchise.

However, Vallibel’s absolute NPLs increased to Rs. 509.59 million as at end-FY March 2014 from Rs. 251.97 million as at end-FY Mar 2013, increasing further to Rs. 727.57 million as at end-1H FY Mar 2015 due to the influx of new NPLs.

The influx of NPLs stemmed from all asset classes as the loan book seasoned amidst a challenging external environment, this was a phenomenon observed across the LFC sector. 

Subsequently, the gross NPL ratio moderated to 5.66% as at end-1H FY Mar 2015 from 2.55% as at end-FY Mar 2013 (end- FY Mar 2012: 1.81%), albeit the ratio compares better than most similar rated peers.

While Lanka Rating Agency’s concerns hinge on the lack of seasoning in Vallibel’s loan book following robust credit asset growth and the increase in trend of NPLs, it expects this trend to reverse gradually going forward with the improving macroeconomic environment taking effect. Elsewhere, despite the influx in gross NPLs, the company’s NPL coverage ratio improved to 71.43% as at end-1H FY Mar 2015 (end-FY Mar 2013: 56.36%) comparing better than similar rated peers’, reflective of the increase in provisioning made during the same period.

Vallibel’s performance is deemed above average, supported by performance indicators that compare better than similar rated peers’.

The company’s net interest income grew 41.92% y-o-y to Rs. 1,111.34 million in FY-Mar 2014, recording a further growth of 27.76% (annualised) during 1H-FY Mar 2015, largely reflective of the expansion in credit assets. Meanwhile, as expected, Vallibel’s NIM improved to 11.06% in 1H FY Mar 2015 from 10.16% in FY Mar 2013 as funding costs eased amidst deposits re-pricing faster than loans in a receding interest rate environment.

Further Lanka Rating Agency notes that Vallibel’s NIM compares better to that of similar rated LFC sector peers’ engaged in similar lending segments. The company’s overhead costs increased 47.94% y-o-y in fiscal 2014 and a further 19.36% (annualised) in 1H fiscal 2015 in view of branch expansion expenses, higher advertising expenses and increase in personnel costs stemming from higher staff force.

Despite the increase in overhead costs, as expected, Vallibel’s cost-to-income ratio remained relatively stable clocking 46.18% in 1H fiscal 2015 (fiscal 2013: 44.76%) reflective of the increase in earnings levels in line with the broadening of NIM as well as new branches opened during 1H fiscal 2014 breaking even during the review period. 

Despite the slight increase in pre-tax profits, Vallibel’s Return on Assets (ROA) declined to 4.05% in fiscal 2014 from 5.37% in fiscal 2013, mainly due to the increase in overhead costs and higher impairment charges. Nevertheless, the ratio continues to be better than similar rated industry peers’.

Vallibel’s funding composition is dominated by public deposits, accounting for 76.51% of the funding mix as at end-FY Mar 2014 (end-FY Mar 2013: 70.30%). Customer deposits grew a robust 48.37% y-o-y in fiscal 2014 supported by Vallibel’s extended branch reach as well as its improving franchise.

Lanka Rating Agency opines that Vallibel’s capitalisation levels are Average. Its tier-1 and overall risk-weighted capital-adequacy ratios (RWCARs) clocked in at 10.11% and 15.16% as at end-March 2014 (end-March 2013: 10.28% & 14.25%) comparing in line with its industry peers’; the improvement in Vallibel’s overall-RWCAR in fiscal 2014 was supported by the issuance of Rs. 500 million subordinate debentures in February 2014.

Going forward the management expects to issue another Rs. 1.50 billion subordinate debentures in FY Mar 2015. This issuance is expected to strengthen Vallibel’s tier-2 capital supporting its growth plans.
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Nimal says continuity is crucial

With political battle lines drawn following the announcement of key candidates for the presidential poll, the stand the private sector will take is being closely watched.

Though not many will come out in public, drawing first blood however on Saturday was Royal Ceramics Plc Managing Director Nimal Perera, who is also a high net worth investor.

During his address at the well-patronsied annual dinner dance of the company, Nimal, who has risen to be a business leader in his usual unconventional style, said with the crucial presidential election around the corner, continuity was key. The basis for his position was that the post-war environment has been beneficial for businesses.

Citing an example, he said Royal Ceramics has made a strong turnaround in the current financial year. He said Royal Ceramics had posted a Group pre-tax profit of Rs. 1.26 billion in the first half of FY15 up by 210% from a year earlier. The figure in the second quarter had nearly doubled to Rs. 864 million from the corresponding period of FY14. 

Apart from the improved business environment, the consolidation of Lanka Ceramics Group has been a key contributor as well.

Net profit attributable to ordinary shareholders of RCL was up 1,726% to Rs. 596.7 million in the first half, whilst it more tripled in the second quarter to Rs. 435.6 million. Group turnover grew by 21% to Rs. 10.6 billion in the first half whilst for 2Q it improved to Rs. 5.7 billion from Rs. 5.4 billion a year earlier. At Company level, RCL saw top line rise by 23% to Rs. 1.2 billion from 0.97 billion in the first half and to Rs. 704 million from Rs. 598 million in 2Q of FY14.
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Singer achieves Rs. 20.8 billion revenue in first nine months

Singer Sri Lanka, the country’s consumer durables giant, capped a strong third quarter by announcing group revenues of Rs. 20.8 billion in the year to date, a growth of 12% over the prior year. Revenue growth was driven primarily by significant gains in the retailer’s Communication and Digital Media segment, as well as improvements in the country’s business conditions.

The Company’s Communication and Digital Media segment expanded by 31%, when compared to the same period of the previous year. Every other segment in the retailer’s business portfolio, with the sole exception of the Transportation segment, notched substantial gains: the Agro segment grew by 19%, while sewing products grew by 15%, furniture grew by 13%, white goods grew by 12%, kitchen-related products grew by 11%, and consumer electronics grew by 6%.

The Company’s revenue growth boosted its bottom line, with gross profit increasing by 10%. Although selling and administration expenses increased by 12%, due to inflation and an increase in rents and electricity, other operating expenses declined by 8%. The net finance cost decreased by 11% due to a decline in interest rates and a tight control of borrowings.

As a result, Singer Sri Lanka’s net profit increased by a robust 29%. The Company’s subsidiary, Singer Finance (Lanka) PLC, also recorded steady growth, with revenue increasing by 6% and net profit increasing by 3%. The Group’s overall net profit, in the year to date, rose by 23%.

The Group continues to solidify its position as the country’s leader in the retail of consumer durables. Singer (Sri Lanka) is continually strengthening its industry-best retail and service networks and enhancing its portfolio of world-class brands and products. For example, during the nine months under review, Singer (Sri Lanka) was appointed the distributor for three of the world’s most renowned brands: Sony and Sharp, from Japan; and the American computer technology brand, Dell.

By continually enriching its value proposition, Singer is certain that it will continue to set the benchmark for ‘trusted excellence’ in Sri Lanka.
www.island.lk

Govt. split could impact on foreign investment

By Feizal Samath, Business Editor

Economists now have an opportunity to give true picture of the ‘state of the nation’

While Sri Lanka’s business community reacted cautiously to Friday’s stunning split in Government ranks, economists, speaking mostly off the record, said political stability has become an issue for foreign investors while academia and chambers now have an opportunity to speak about the ‘real’ economic statistics.

“The people cannot be fooled by rosy statistics all the time; the facts speak for themselves and people are more intelligent to see through what some top officials always keep saying to please their political masters,” one economist said, referring to the ‘always positive’ economic data on GDP growth and inflation trotted out by the Central Bank and the Treasury.
On Friday, senior Minister Maithripala Sirisena quit the Government with Minister Rajitha Senaratne and more than 20 other UPFA MPs. He later announced that he would be the common opposition Presidential candidate, endorsed by the United National Party, and resulting in the return of former President Chandrika Kumaratunga to the political stage.

Tourism, the first industry to feel the impact of political instability, is however unlikely to get affected unless there is violence and unrest, according to a cross section of industry. “Most people do not know or care about what is happening in another country unless there is a threat to their security. But we need to keep an eye is how travel advisories will be worded,” one veteran hotelier said, noting however that Sri Lanka’s biggest source market, India and emerging market, China don’t issue travel advisories unlike western nations.
Sri Lanka is targetting 1.4 million tourists in 2015 with the November-February period being the peak season for visitors.

The developments rocked the Colombo stock market as rumours and speculation spread across Friday leading to panic selling and erratic decision-making. “Traders were blindsided,” one broker said, adding that investors were weighing options. “There are questions about President Mahinda Rajapaksa’s next move. What will he do, will he postpone the elections, was a common question,” he said.

The main All Share Index fell by 128.7 points and analysts predicted the week ahead would be ‘extremely’ volatile. While business leaders were cautious and unwilling to comment, economists said political stability – a key indicator for foreign investors – was fragile at the moment with the Government losing its 2/3rds control of Parliament. “Foreign investors have sniffed this in the past five years too and that is why FDI never exceeded 1.5 per cent,” an economist attached to local stock brokerage, said.

The crisis in Government was also reflected in the budget process where several factual errors, correction of figures and implementing proposals even before the Budget is passed, has been the hallmark of the 2015 Budget. (See Business Times) A university economist said the Government has been drifting towards handouts and subsidies possibly realising the undercurrents within the government ranks. “This resulted in a reversal of market-led growth towards Government expenditure-led growth undermining the private sector,” he said, adding that in his own estimation, “the split was the culmination of accumulated economic ills plus weak governance”.

He said the failure in attracting high levels of foreign investment was due to the lack of political freedom, good governance and a corruption-free society.
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