Sri Lanka stocks end at 2-week low on profit-taking in large-caps

(Reuters) - Sri Lanka stocks ended at a two-week low on Friday as investors booked profits in large-cap shares, but foreign investors bought into the island nation's risky assets as sentiment got a boost from the central bank's decision to hold policy rates at multi-year lows.

The main stock index ended down 0.16 percent, or 9.86 points, at 6,280.31, its lowest close since May 8.

Stockbrokers expect the market to gain in the near future 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 296.7 million rupees ($2.28 million) on Friday, extending year-to-date net foreign inflow to 1.79 billion rupees.

The day's turnover stood at 803.6 million rupees, less than this year's daily average of 1.03 billion.

Shares of Ceylon Tobacco Company PLC fell 1.86 percent to 1.061.9 rupees a share in low volume.

Shares in Lanka IOC PLC, the Sri Lankan arm of Indian Oil Corp, fell 3.23 percent, after the company posted a 10.6 percent fall in net profit for the three months ended March 31.

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. 

($1 = 130.3750 Sri Lanka rupees) 

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

Sri Lanka stocks close lower

May 23, 2014 (LBO) - Sri Lanka's stocks closed 0.16 percent lower with tobacco stocks losing ground despite foreign buying, brokers said.

The Colombo benchmark All Share Price Index closed 9.86 points lower at 6,280.31 down 0.16 percent. The S&P SL20 closed 5.62 points lower at 3,459.43, down 0.16 percent.

Turnover was 804.00 million rupees, up from 612.40 million rupees a day earlier with 103 stocks closed positive against 81 negative.

John Keells Holdings closed 1.60 rupees higher at 234.00 rupees with market transactions of 289.30 million rupees contributing 36 percent of the daily turnover.

JKH’s W0022 warrants closed 50 cents higher at 62.30 rupees and its W0023 warrants closed 20 cents higher at 68.80 rupees.

Commercial Bank closed flat at 126.50 rupees with an off market deal of 22.14 million rupees contributing 3 percent of the turnover.

Lanka Indian Oil Company closed 1.40 rupees lower at 42.00 rupees and Kelani Tyres closed 1.50 rupees higher at 63.10 rupees, attracting most number of trades during the day.

Foreign investors bought 413.90 million rupees worth shares while selling 117.21 million rupees worth shares.

Ceylon Tobacco Company closed 20.10 rupees lower at 1,061.90 rupees, contributing most to the index drop.

Indo-Malay closed 150.00 rupees lower at 1,700.00 rupees and Shalimar (Malay) closed 98.00 rupees lower at 1,600.00 rupees.

Asian Hotels and Properties closed 2.30 rupees lower at 70.00 rupees and Trans Asia Hotels closed 1.20 rupees higher at 95.00 rupees.

Distilleries closed 2.50 rupees lower at 207.50 rupees and Lion Brewery Ceylon closed 8.70 rupees lower at 440.00 rupees.

Dialog Axiata closed 10 cents higher at 9.80 rupees and Sri Lanka Telecom closed 20 cents higher at 48.10 rupees.

Nestle Lanka closed 9.80 rupees higher at 1,960.10 rupees.

Sri Lanka guarantee on pawning loans good for banks: Moody's

May 23, 2014 (LBO) - A credit guarantee scheme announced by Sri Lanka for banks lending against gold is positive for banks which have been hit by defaults, Moody's, a rating agency said.

Sri Lanka's which is recovering from a balance of payments crisis triggered by credit financed energy subsidies, saw non performing loans in the banking system rise to 5.6 percent of total by end 2013 from 3.7 percent a year earlier.

Moody's said 75 percent of the total increase in bad loans were from gold-backed or pawning defaults. World gold prices topped 1800 US dollars an ounce amid excessive money printing by the US Fed and fell to 1200-1300 dollar levels last year.

Gold bears expect the precious metal to fall to around 1,000 an ounce as the Fed pulls back is quantity easing.

Moody's said underwriting standards fell in Sri Lanka after 2009 and banks were advancing as much as 80 to 95 percent of loan-to-values against gold and were exposed once prices fell.



State-run banks were among the biggest lenders. The credit is used by small and medium enterprises.

Moody's said banks reduced the LTV ratio to 65 percent and raised interest rates to around 18.7 percent from 17.5 percent when lending rates were falling to discourage gold backed loans.

The pawning loans stock had fallen 17 percent over 2013.

The Central Bank announced a credit guarantee scheme that may see about 15 percent of cover for loan to value ratios.

"Although the government's details on the mechanism are scant at this stage, we estimate that a partial guarantee is more likely because of the government's constrained fiscal capacity and the history of government guarantees," Nick Caes, a Moody's Associate Analyst said in a statement.

"Still, even a partial guarantee would be credit positive for Sri Lanka's banks because it will support the currently weak quality of their pawning loans, which constituted a substantial part of the recent increase in banks' nonperforming loans."

Although the new guarantee scheme will focus only on new pawning loans, Moody's says may help existing borrowers to refinance their pawning loans, perhaps at a lower rate, leading to improvements in the quality of the asset class.

Plantations impact Sunshine Holdings' profits

Ceylon FT: Sunshine Holdings PLC reported a net profit of Rs 1.16 billion for the year ended 31 March 2014, down 7% from a year ago, interim financial results showed.

The group recorded a consolidated revenue of Rs 14.7 billion for the year, up 12.5% from a year ago supported by contributions from the healthcare (37.5%), plantations (42.5%) and FMCG (16.9%) sectors.

Revenue for the fourth quarter ended 31 March 2014 amounted to Rs 4.0 billion, up 21.6% from the previous year.

In his message to shareholders, Sunshine Holdings Chairman Rienzie T. Wijetilleke said healthcare revenue was up 4.1% to Rs 5.5 billion, compared to Rs 5.3 billion last year. PAT was Rs 358 million compared to Rs 360 million for the last year. "This was a commendable performance by the segment, despite stagnant market growth in FY14," he said.

"Plantations revenue amounted to Rs 6.2 billion, an increase of 14.9% from Rs 5.4 billion. Growth in revenue was mainly driven by the tea sub segment which increased by Rs 509 million compared to last year. The increased volumes experienced during the second half of the year (2HFY14), on the back of favourable weather conditions, mitigated the crop loss experienced due to heavy rainfall during 1QFY14.

"FMCG sector has shown strong revenue growth, contributing Rs 2.5 billion to the group, an increase of 23.8%. The growth was driven by higher volumes sold in branded tea. With the market for branded tea remaining still during FY14, your company was able to grow by further increase its market share through aggressive marketing and distribution of its brands.

"Packaging recorded revenues of Rs 293 million in FY14, up 41.1%, but the power sector witnessed a marginal drop in revenue to Rs.97 million, down 3.1% due to low rainfall.

"The group saw a dip in profit after tax (PAT), which declined by 6.4% to Rs 1.1 billion resulting from the drop in profit in the plantations sector from Rs 725 million in FY13 to Rs 434 million in FY14, mainly attributed to the 20% wage hike which came into effect from April 2013.

"Nevertheless, profits attributable to equity share holders of Sunshine Holdings reduced narrowly by Rs 13 million (Rs.599 million in FY14 from Rs 612 million in FY13) as compared to the total PAT reduction of Rs 77 million for FY14.

"The group EPS for FY14 stood at Rs 4.47 compared to Rs 4.59 in the same period last year. For 4QFY14, profit to equity holders amounted to Rs 170 million, up 36%. The company stand-alone profit was up to Rs 1.2 billion in FY14, against Rs 179 million last year, mainly on account of a profit from sale of shares in one of its subsidiaries," Wijetilleke said.
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Lanka IOC profits surge 65%

Ceylon FT: A unit of the Indian oil company, Lanka IOC PLC saw net earnings surge 65% to Rs 4.81 billion for the year ended 31 March 2014, up from Rs 2.91 billion a year ago, financial results filed with the stock exchange showed.

Sales grew 8.9% to Rs 81.8 billion and gross profit grew 54.22% to Rs 8.31 billion.

Selling and distribution expenses amounted to Rs 1.74 billion, up from Rs 1.67 billion a year ago, administration expenses fell to Rs 875.3 million, down from Rs 889.1 million the previous year. Finance income grew to Rs 301 million, up from Rs 267 million a year ago and finance costs grew to Rs 258.5 million, up from Rs 138.8 million the previous year.

The company's assets grew 9.24% to Rs 26.98 billion.

Export sales fell to Rs 12.84 billion during the year ended 31 March 2014, down from Rs 18.12 billion a year ago.
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First Capital profits affected by previous year’s extraordinary gains

First Capital Holdings PLC has posted profit after tax of Rs 339.9 million for the year ending 31st March 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.

Income improved by a modest 3.5% to Rs 1.83 billion, the company said in a filing with the Colombo Stock Exchange, but net trading income fell by 4.7% 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%, discounting the one-off capital gains of 2012/13, the Group’s pre-tax profit grew by more than 20%.”

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.

Another highlight of the year reviewed was the success of First Capital Holdings PLC’s first listed debenture issue of Rs 500 million which enhanced the company’s long term capital base and was oversubscribed within the first hour of opening.

“The Group expects continuous growth momentum in the next financial year especially in the structuring and placement of corporate debt securities as a result of the low interest rate regime and tax benefits,”  Ms Mathews said. “We will also be focusing more on corporate advisory services while managing all our risks effectively in our evolution into a fully-fledged investment bank.”

“In building for the future, we have enhanced the profile of our staff and moved our offices to a more appropriate location which has facilitated our objectives for growth.

This has had an impact on our administration expenses which increased to Rs 266.6 million from Rs 130.9 million in the previous year. Expenses were further impacted by the consolidation of the stock broking company, First Capital Equities (Private) Limited which was acquired in May 2013,” she added.

First Capital Holdings PLC is the holding company of First Capital Limited, First Capital Treasuries Limited, First Capital Markets Limited, First Capital Asset Management Limited and First Capital Equities (Private) Limited.

The Board of Directors of First Capital Holdings PLC comprises of Lalith de Mel (Chairman), Manjula Mathews (Managing Director), Nihara Rodrigo, Eardley Perera, Minette Perera, Dinesh Schaffter and Nishan Fernando.
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Access Engineering rises with highest-ever Rs. 16.4 b revenue, Rs. 13.1 b profit

Access Engineering PLC has wrapped up financial year 2013/14 on a promising note by posting another double digit growth in revenue with Rs. 16.4 billion at group level and Rs. 13.1 billion at company level during the year ended March 2014.

Total comprehensive income attributed to the owners of the company amounted to Rs. 2,965 million and Rs. 2,634 million respectively at group level and company level which is 25% and 24% upturns compared to the year 2012/13.

In a statement, Access said the company has been able to record Rs.2.87 and Rs.2.54 worth of Earning Per Share respectively at group level and company level which is an impressive growth of 21% and 19% in comparison to the previous financial year.

The company was also the overall winner of the National Business Excellence Awards conducted by the National Chamber of Commerce.

The company has reported a total asset base of Rs. 18,314 million and the group asset base stood at Rs. 20,224 million. The equity attributed to the owners of the company is Rs. 14,951 million at the group level and Rs. 14,274 million at company level which translates in to Rs.14.95 net assets per share.

The company recorded revenue of Rs. 4,412 million and Rs. 3,467 million at group level and company respectively for the fourth quarter of 2013/14 whilst the attributed net profit was Rs. 885 million and Rs. 774 million at group and company level respectively.

During the year under review, Access Engineering PLC increased its shareholding in its subsidiary Sathosa Motors PLC up to 84.42%. The subsidiaries continued to perform well and recorded a net profit of Rs. 336 million and Rs. 135 million respectively from Sathosa Motors PLC and Access Realities Ltd.

The company’s newest subsidiary ZPMC Lanka Ltd., which is the joint venture between Shanghai Zhenhua Heavy Industries Company Ltd. (ZPMC), the world’s leading container handling manufacturer, completed seven months of profitable operations.

Access Engineering PLC Chairman Sumal Perera stated: “With unprecedented investments being made in Sri Lanka’s infrastructure, both in the public and private sectors, Access Engineering is well positioned to benefit from the same through its innovative value engineering solutions.”

He added: “As a company that was listed just two years ago, we take great pride and satisfaction that we have been able to deliver on our commitments, for the benefit of all our stakeholders.”

The Board of Directors of Access Engineering PLC comprises Sumal Perera (Chairman/CEO), Christopher Joshua (Managing Director), Rohana Fernando (COO), Shevantha Mendis, Dharshana Munasinghe, Ranjan Gomez, Malik Ranasinghe, Niroshan Gunarathna , Alexis Lovell and Dilhan Perera.
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Kotagala Plantations’ Rs. 1b debentures snapped up

Kotagala Plant-ations (KOTA) announced yesterday that its Rs. 1 billion debenture issue has been oversubscribed.

The issue was five million rated, secured, redeemable debentures at Rs. 100 each, with an option to issue up to a further five million debentures in the event of oversubscription. KOTA had received applications exceeding Rs. 1 billion by yesterday.

Subsequent to the oversubscription, the issue which has a BBB- rating was closed as well. Managers to the issue was People’s Bank Investment Banking Unit.

The issue had four types of debentures (tenure of four, five, six and seven years) with interest rate payable per annum semi annually ranging from 14.25% (Average Effective Rate of 14.76%) to 15% (AER of $ 15.56).

The company plans to use Rs. 1 billion to finance re-planting of tea, rubber and oil palm plants (Rs. 300 million) and repay short term high interest bearing facilities of around Rs. 700 million

Lankem Group owns a 68% stake in Kotagala Plantations Plc.
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Taprobane makes Rs. 2.7 b voluntary offer to GREG’s minority shareholders

Taprobane Holdings (TAP) yesterday announced a Rs. 2.7 billion voluntary offer at Rs. 11 per share to minority shareholders of Lanka Century Investments (GREG).

TAP at present holds a 29% stake in GREG, whilst GREG holds a 20% stake in Browns Investments Plc which in turns own a 20% stake in TAP.

Among major shareholders of TAP are Caledonian Securities Ltd. (28%), Capital Trust Partners (14.6%) and Octagon Asset Management (5%).

The offer is far below the Net Asset Value of GREG which was Rs. 23.24 as at end 2013. It is also lower than yesterday’s closing price of Rs. 10.80 though it hit an intra-day high of Rs. 11.30.

In the 31 December 2013 ended quarter, the highest share price of GREG was Rs. 16 and the closing was Rs. 14.10. One of the shareholders Capital Trust acquired a 7.5% stake in January this year at Rs. 16.50 per share.

In November last year Lionhart sold a 29% stake in ERI to Taprobane Holdings Plc for Rs.1.7 billion (at Rs. 16.70 per share) whilst ERI bought a 20% stake in Browns Investments Plc for Rs. 2 billion from Taprobane Holdings Plc.

GREG has four nominees from TAP on the Board.
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