Sri Lanka stocks end steady; Commercial Leasing gains

May 22 (Reuters) - Sri Lanka stocks ended steady on Thursday with foreign investors buying into the island nation's risky assets after sentiment was boosted by the central bank's decision to hold policy rates at multi-year lows.

The main stock index ended up 0.01 percent, or 0.85 points, at 6,290.17, after having dipped slightly during early trade.

Stockbrokers expect gains due to lower interest rates after the central bank kept key rates at multi-year lows on Tuesday for the fourth straight month, as expected.

The exchange witnessed a net foreign inflow of 150.2 million rupees ($1.15 million) on Thursday, extending year-to-date net foreign inflow to 1.49 billion rupees.

The day's turnover stood at 611.5 million rupees, less than this year's daily average of 1.03 billion.

Shares of leading fixed-line telephone operator Sri Lanka Telecom Plc rose 1.91 percent to 47.90 rupees.

Shares in Commercial Leasing and Finance PLC rose 2.63 percent to 3.90 rupees.

The market has been on a rising trend since mid-March as many investors were compelled to return to the stock market because low interest rates have made fixed-income assets less attractive, stockbrokers said.

However, analysts have raised concerns over sluggish economic growth due to lower credit growth and consumer spending.

Despite a multi-year low interest rate regime, data showed private sector credit grew 4.3 percent in March from a year earlier, the slowest expansion since May 2010, while imports in February fell 6.2 percent on the year.

On Monday, central bank Governor Ajith Nivard Cabraal said Sri Lanka's private sector credit growth would pick up to around 15 percent by the end of this year and continue to improve through 2016.

On Wednesday, the chief executive of the exchange, Rajeeva Bandaranaike, told Reuters that the bourse is struggling with lack of liquidity, and is trying to increase the free float of the shares it lists to attract foreign funds. 

($1 = 130.3650 Sri Lanka rupees) 

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

Sri Lanka stocks close higher

May 22, 2014 (LBO) - Sri Lanka's stocks closed higher Thursday with low activity on the bourse, brokers said.

The Colombo benchmark All Share Price Index closed 0.85 points higher at 6,290.17 up 0.01 percent. The S&P SL20 closed 0.79 points lower at 3,465.05, down 0.02 percent.

Turnover was 612.40 million rupees, down from 944.28 million rupees a day earlier with 68 stocks closed positive against 104 negative.

Distilleries closed flat at 210.00 rupees with an off market transaction of 71.35 million rupees contributing 12 percent of the daily turnover.

Janashakthi Insurance closed 40 cents higher at 15.50 rupees and Kelani Tyres closed 1.60 rupees higher at 61.60 rupees, attracting most number of trades during the day.

Foreign investors bought 284.65 million rupees worth shares while selling 134.44 million rupees worth shares.

Trans Asia Hotels closed 3.60 rupees higher at 93.80 rupees and Aitken Spence Hotel Holdings closed 1.10 rupees higher at 77.00 rupees.

Commercial Leasing and Finance closed 10 cents higher at 3.90 rupees and LOLC closed flat at 80.00 rupees.

Cargills Ceylon closed 4.00 rupees higher at 144.00 rupees and Access Engineering closed 40 cents higher at 23.70 rupees.

Sri Lanka Telecom closed 90 cents higher at 47.90 rupees and Dialog Axiata closed 10 cents lower at 9.70 rupees.

Hemas Holdings closed 70 cents lower at 41.30 rupees and John Keells Holdings closed 1.20 rupees lower at 232.40 rupees.

JKH’s W0022 warrants closed 1.30 rupees lower at 61.80 rupees and its W0023 warrants closed 40 cents lower at 68.60 rupees.

Nestle Lanka closed 10.60 rupees lower at 1,950.30 rupees.

Orient Garments to amalgamate

Orient Garments in a stock exchange disclosure said Orient Garments will amalgamate with Stafford Orient (Private) Limited, under section 242 (1) of the Companies Act No 07 of 2007, being a fully owned subsidiary of the company from June 20, 2014. Consequent to the amalgamation , Orient Garments will continue as the amalgamated company.

Orient Garments currently operates through five factories with 3,500 employees and 1,950 computerized industrial sewing machines generating 13.2mn items of clothing per annum.
www.dailynews.lk

First Capital reports PAT of Rs 339.9 mn for 2013-14

First Capital Holdings PLC has posted profit after tax of Rs 339.9 million for the year ending March 31, 2014, a performance which the company says was, as expected, lower than the Rs. 494 million achieved the previous year, in which Rs 195 million had been recorded as extraordinary gains on the sale of investment securities, according to a press release.

‘Income improved by a modest 3.5 per cent to Rs 1.83 billion, the company said in a filing with the Colombo Stock Exchange, but net trading income fell by 4.7 per cent to Rs 614 million.

"Operationally, the Group has turned in a sound performance, although volumes were lower in some sectors of business due to market conditions," First Capital Holdings’ Managing Director Manjula Mathews said. "Although profit before tax at Rs 395.2 million reflects a reduction of 23.6 per cent, discounting the one-off capital gains of 2012/13, the Group’s pre-tax profit grew by more than 20 per cent."

‘She said the Group’s largest subsidiary First Capital Treasuries Limited was a major contributor to the results in terms of turnover and net profit, maintaining an optimal level of trading positions throughout the year. The company seized trading opportunities that arose from three policy rate cuts in the period under review, and was also active in the structuring and placement of corporate debt securities and in investment management.

‘However, the Group did not see adequate trading activities in the stockbroking division and margin trading operations were also stagnant, she said. The Group’s unit trust, First Capital Wealth Fund, surpassed the Rs 1 billion milestone at the end of the year and declared a dividend of Rs. 100/- per unit for 2013/14.
www.island.lk

Japan’s Daiwa Securities interested in SL’s Capital Market

Ambassador Admiral Wasantha Karannagoda explaining the structure of the economy and Capital Market of Sri Lanka to Yutaka Yokoyama, Managing Director, and Kenichi Kanda, Head of Capital Markets of Daiwa Securities. Ambassador Admiral Karannagoda is associated with Deputy Chief of Mission, Saj Mendis, and Commercial Counsellor, D. Premaratne, of the embassy

On the initiation of the Embassy of Sri Lanka in Tokyo the senior management of Daiwa Securities visited Sri Lanka in order to assess and to benchmark the viability of the debt market of Sri Lanka. Yutaka Yokoyama, Managing Director of Global Investment Banking and Kenichi Kanda, Executive Director and Head of Debt Capital Markets of Daiwa Securities visited Sri Lanka, recently.

Daiwa Securities is the second largest securities brokerage and investment bank in Japan and among the ten largest in the world with over USD 560 billion assets under management. The Daiwa Securities offers retail services to institutional investors and investment banking services to clients and corporates in Asia, Europe and North America. It also provides advisory services on mergers & acquisitions, global asset management and private equity funds, among others.

During the visit of the senior management of Daiwa Securities to Colombo, they called on the Governor of the Central Bank of Sri Lanka, chairman of Securities & Exchange Commission and other related senior officials in Sri Lanka, which were coordinated by the Embassy. At a briefing session with Ambassador Admiral Wasantha Karannagoda, the senior management of Daiwa stated that they were impressed with the rapid economic advancement of the country as well as of the sophistication of the debt and equity market structure of the country.

The senior management of Daiwa also added that the Multilateral Investment Guarantee Agency [MIGA], member of the World Bank Group, could guarantee the debt of Sri Lanka in close coordination with the Daiwa Securities. In the past, Daiwa has been working closely with the MIGA, in this sphere, as well as in the equity market. The Daiwa also expressed interest to introduce Government Japanese Bonds, which would diversify the debt market of Sri Lanka.
- Embassy of Sri Lanka Tokyo
www.island.lk

Touchwood verdict postponed again

The final verdict on the case filed by investors claiming that the Touchwood, the company engaged in reforestation had not paid the expected dividends to them, several cheques issued by the company had been not honoured and hence it should be liquidated, has been postponed again.

The case taken up today by the Colombo commercial court No. 03 has been postponed to 05 June 2014 when the final verdict is expected to be delivered.

www.adaderana.lk

‘In palm oil we trust,’ says Watawala Plantations

Ends FY14 with revenue up and lower profit

Watawala Plantations PLC has reported revenue of Rs. 6.2 billion for the year ended 31 March 2014 (FY14), up 14.9% YoY. Net profit declined to Rs. 434 million for FY14, from Rs. 725 million recorded in the previous year.

The overall decline in YoY PAT is mainly attributed to the 20.0% YoY wage hike which came into effect from April 2013, which increased the cost of production across all crops. Other income also contracted in FY14 to Rs. 90 million, down 35.7% YoY.

4QFY14 revenue stood at Rs. 1.7 billion, up 35.2% over the same quarter last year. PAT declined 9.3% YoY to stand at Rs. 123 million. The growth in revenue for 4QFY14 came on the back of higher volumes for both palm oil (+7.2% YoY), and tea (+2.3% YoY).

Palm oil segment 

The Palm Oil segment registered a revenue growth of 5.2% YoY to reach Rs. 1.4 billion in FY14, which accounted for 22.3% of the company’s revenue during the year. The revenue growth was mainly driven by an impressive increase in Fresh Fruit Bunch (FFB) Yield, recorded at 16,833 kg per ha in FY14, from 15,993 kg per ha in the previous year, resulting from the adoption of good agricultural practices over the last few years, in line with the company’s agriculture policy. The Crude Palm Oil (CPO) production grew 9.0% YoY to 8.13m kg for FY14 from 7.46m kg recorded last year, and. The segment maintained its position as the highest contributor to company profitability, having made a net profit of Rs. 633 million for FY14. WATA continues to be the single biggest CPO producer in Sri Lanka.

Tea segment 

Tea segment, the largest revenue contributor which accounted for over 66.7% of the total revenue, increased 13.9% YoY to Rs. 4.2 billion in FY14, mainly on the back of improved tea prices in FY14. The increased volumes experienced during 2HFY14, on the back of favourable weather conditions, mitigated the crop loss experienced due to heavy rainfall during 1QFY14. Tea production was recorded at 9.93 m kg for FY14, which was slightly above the previous year’s production of 9.89 m kg. The net loss from tea stood at Rs. 277 million in FY14 compared to a profit of Rs. 85 million in the previous year. The loss is mainly attributed to a 20.0% YoY wage hike, effective from April 2013, which resulted in an increase of average production cost by Rs. 38 per kg. As a result, the total negative impact on cost of sales amounted to Rs. 379 million for FY14. Although this was common for all three crops, tea was the worst hit as it requires the most number of associates per hector.

Rubber segment 

The rubber segment which accounted for 2.7% of the total revenue in FY14, experienced a 8.2% YoY drop in revenue to Rs. 169 million, from Rs. 184 million recorded last year due to a decline in production by 8.3% YoY.

The drop in production was accounted by lower number of tapping days due to bad weather that set in from May 2013 through till September 2013. The net loss for rubber amounted to Rs. 28 million in FY14 against a loss of Rs. 2 million recorded last year.



Export segment
The export sector recorded a significant improvement in revenue driven by value added teas sold at a higher price, compared to mainly bulk orders in FY13. Volumes were almost flat at 0.36m kg in FY14 compared to 0.39m kg in the previous year. Majority of the exports were to Tata Global Beverages for their Tetley operation in Australia, Russia, Pakistan, and India. In FY14, export revenue grew 91.5% YoY to Rs. 521 million from Rs. 272 million last year. Exports account for 8.3% of total group revenue.

Outlook
WATA has successfully endured a tough FY14, on the back of wage hike and tea crop losses, thanks to its diverse range of agri crops which nulled the risk of a single commodity to the company. FY14 being a ‘wage year’, the company had a 20.0% YoY increase in its staff related cost, but this was somewhat cushioned by a good harvest for our palm oil plantations, and strong tea prices.

With associate wages expected to be fixed during FY15, we expect WATA to record a strong performance for the year ahead. The growth in revenue and profitability is expected to come from the palm oil segment, which has been WATA’s saviour last year. Furthermore, we are hopeful that the tea segment will return to profits during FY15, if the market prices continue to be buoyant.

Management fee
As per the CSE announcement dated 17 March, 2014, management fee paid to its parent, Estate Management Services Ltd. (EMSPL) will be suspended for the next five years. During FY14 management fee was calculated on the basis of 10.0% of EBITDA and amounted to Rs. 92 million (Rs. 138 million in FY13).

Dividend
The Board of Directors have approved a dividend of Rs. 0.50 per share for FY14. This represents a pay-out ratio of 27.2%, and a dividend yield of 5.1% based on year end share price.

A member of the Sunshine Group, Watawala Plantations PLC is a diversified plantation company in Sri Lanka, managed by the Group’s subsidiary, Estate Management Services Ltd., a joint venture with the TATA Global Beverages and Pyramid Wilmar Plantations (subsidiary of Wilmar International). The company manages a total land extent of over 12,000 ha in Tea, Rubber and Palm Oil with a workforce of over 12,000 people. The company has the largest palm oil plantation and the largest rubber factory in Sri Lanka to augment the production of almost 10 m kg of Ceylon tea annually.
www.ft.lk