Sri Lanka's tea production highest in May

July 10, Colombo: Sri Lanka's tea production rose sharply in the month of May this year recording the highest tea production in the first six months of this year.

According to the Director General of the Sri Lanka Tea Board, K Mihindukulasooriya, month of May recorded the highest tea production in the history.

In May the tea production was recorded at 39,045,037 kg, 16 percent higher than the 33,669,479 kg output recorded for the same period last year.

Sri Lanka exported 27,414,368 kg of tea in May 2014.

The official attributed the success in tea production to the relief granted to tea smallholders. The relief programme is being implemented in 14 tea growing districts.
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Sri Lanka stocks up for seventh straight session

(Reuters) - Sri Lankan stocks rose for a seventh straight session on Thursday to their highest close in 33 months as lower interest rates compelled investors to buy risky assets, while foreign buying also boosted sentiment, stockbrokers said.

The main stock index ended up 0.83 percent, or 55.02 points, at 6,668.86, its highest close since Oct. 10, 2011. It has gained 4.5 percent in seven straight sessions through Thursday.

"We see the resistance level at 7,000. With a P/E ratio of around 14.5, there is still room for gains," said a stockbroker on condition of anonymity. "I don't see this as overheating. There could be some profit-taking from time-to-time."

The gains were led by large-cap consumer staples shares like Ceylon Tobacco Company PLC, which gained 3.12 percent to 1,100 rupees.

Lower interest rates have prompted local investors to buy shares and shift their savings from unattractive fixed assets, analysts said, as yields on treasury bills edged down further at a weekly auction on Wednesday.

Turnover was 2.36 billion rupees ($18.12 million), more than twice this year's daily average of around 1.07 billion rupees.

Foreign investors were net buyers of 349.8 million rupees worth of shares on Thursday, extending the foreign inflows to 9.29 billion rupees worth of shares so far this year.

Analysts said foreigners have been buying risky assets because they see value in them, while falling yields in fixed assets gradually prompt local investors to shift to equities.

The market has been on a rising trend since late February due to continued foreign buying and lower interest rates. 

($1 = 130.2300 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Sunil Nair)

Sri Lanka shares close up 0.8-pct

July 10, 2014 (LBO) - Sri Lanka's shares closed 0.83 percent higher with tobacco stocks gaining amid strong foreign buying, brokers said.

The Colombo benchmark All Share Price Index closed 55.02 points higher at 6,668.86, up 0.83 percent. The S&P SL20 closed 29.08 points higher at 3,735.14, up 0.78 percent.

Turnover was 2.36 billion rupees, down from 2.89 billion rupees a day earlier with 122 stocks closed positive against 77 negative.

Nestle Lanka closed 4.50 rupees lower at 2,077.10 rupees with an off-market transaction of 196.77 million rupees changing hands at 2,100.00 rupees per share contributing 8 percent of the turnover.

The aggregate value of all off-the-floor deals represented 27 percent of the turnover.

George Steuart Finance closed 3.70 rupees higher at 54.00 rupees and PCH Holdings closed 10 cents higher at 3.30 rupees, attracting most number of trades during the day.

Foreign investors bought 857.81 million rupees worth shares while selling 507.98 million rupees worth shares.

Ceylon Tobacco Company closed 33.30 rupees higher at 1,100.00 rupees, contributing most to the index gain.

Lion Brewery Ceylon closed 42.00 rupees higher at 571.90 rupees.

Carson Cumberbatch closed 13.00 rupees higher at 430.00 rupees and John Keells Holdings closed 2.40 rupees higher at 240.00 rupees.

JKH’s W0022 warrants closed 80 cents lower at 64.20 rupees and its W0023 warrants closed 1.10 rupees lower at 74.90 rupees.

Dunamis in Rs 1B debt issue

Ceylon FT: Dunamis Capital PLC received regulatory approval to raise Rs 1 billion via a listed debt issue.

The company will issue 10 million rated senior unsecured redeemable debentures at Rs 100 each.

The subscription list opens on 28 July 2014.

Dunamis Capital operates in the fields of financial services, export manufacturing, property development. 

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Overall market grows by 240% - Godahewa

Shirajiv Sirimane

Since the ending of the war five years ago, the Overall market has grown by 4,570 points or 240%, said Chairman, Securities and Exchange Commission, (SEC) Dr. Nalaka Godahewa.

“After several years of turbulence in the market, we have now entered a steady phase of growth in our capital market,” he said in the opening remarks at the ‘Symposium on the Role of Independent Directors.”

“The last 24 months has been a busy period for the SEC. The priorities shifting from crisis management to strategic market development. The main focus in 2013 was the launch of the 10 point project initiatives and their implementation. We are very much on target on all these initiatives. While there is some more work to be done to complete the tasks already undertaken, we are now in a position to think beyond the 10 point project initiatives. We need to identify a new set of priorities in our efforts to make the capital market a key contributor to our economy.”

“We like to see our market being upgraded from frontier market status to emerging market status at the earliest possible date. We like to see more companies identifying the capital market as a channel to raise funds to support their long term investment needs. We like to see our market growing in value and quality. We like to see ‘market cap to GDP ratio’ of at least 40% within the next 3-4 years.”

To achieve these objectives, the investor confidence in our capital market becomes a key factor. The purpose of corporate governance is to facilitate effective entrepreneurial and prudent management that can deliver long term success of the company.

“Some of the independent directors seem to have been appointed only to accommodate regulatory requirements, but their contributions at Board level seem to be influenced by their appointing authorities. This limitation we observe in certain companies could be largely due to the fact that no one has made an effort so far to highlight the issue. We believe that this situation can easily be corrected through better communication and engagement.”

“In USA for example, between 1950 and 2005, the composition of large public company Boards dramatically shifted towards independent directors, from approximately 20% to 75% independents. In Sri Lanka, the code of best practices on corporate governance advocates at least 1/3 rd of the board to be independent directors.”

“We would like all independent directors of Sri Lankan companies to fully understand and appreciate their role. The ordinary shareholder looks up to the independent directors to bring about the right balance at the Board level.”
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CSE encourages SMEs with separate board

H.D.H Senewiratne 
hsenewiratne@gmail.com

The Colombo Stock Exchange (CSE) is planning to set up a separate board to encourage small and medium sized (SME) companies to be listed in the market, which represents more than 80 percent of the national economy.

At present the local agriculture sector and SME sector representation in the CSE is very minimal.

To increase the CSE's contribution to the national GDP, it is the need of the hour to encourage such companies to get listed in the CSE Chairman Vajira Kulatilake told the Daily News Business.

He said special board will be created to encourage such companies to be listed in the CSE.

Because the stock market representation in agriculture sector especially paddy sector small scale agriculture sector and even apparel sector are not being listed in the CSE, Kulatilake said.

The CSE is expecting three to four new Initial Public Offerings this year. But if we have set up a new board for the SME sector and another for the commodity market to encourage more listings.

The main purpose of the new board for the SME sector is to encourage regional companies to be listed in the market, he said.

He said the CSE can be promoted among foreign investors if we have to have enough liquidity in the market. But at present the CSE is not developed enough to attract big time foreign investors into the market, Kulatilake said.

Kulatilake said CSE contribution to the GDP is 33 percent now with the encouraging number of SME sector listings they could double the CSE contribution towards the GDP.

“We could increase the liquidity ratio in the market to attract foreign investors into the market”, he said.

Top foreign investor Chairman VVS Lanka Holdings (Pvt) Ltd Henry Xia said the Sri Lankan stock market doest not have enough liquidity to promote top Chinese investors, because there are very rich Chinese investors willing to invest in the CSE.

The CSE is a company limited by guarantee, established under the Companies Act No. 17 of 1982 and is licensed by the Securities and Exchange Commission of Sri Lanka (SEC).

The CSE is a mutual exchange and has 15 full members and 13 Trading Members licensed to trade both equity and debt securities, while two members are licensed to trade in debt securities only. At present around 250 companies are listed with the market.
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Sinhaputhra Finance FY14 profits up by 13.5% to Rs. 84 m

Sinhaputhra recorded a growth in profitability in FYE 2014 vs. FYE 2013, despite the industry’s profitability falling from Rs. 14 billion to Rs. 7 billion.

Managing Director Ravana Wijeyeratne said that Sinhaputhra’s conservative expansion on credit growth allows it to steadily maintain its growth momentum without large variations that could be extremely damaging.

Although Sinhaputhra faces the same market conditions, the fact that it had not accelerated beyond its means and also thanks to its time-tested product, loans, it has always been able to steady itself during a lacklustre performance in the vehicle market.

Hence while the industry loan book growth shrunk from 21.6% to 12.1% in FYE 2013 vs. FYE 2014, Sinhaputhra’s loan book grew around the same space, at 16% and 15%, which explains a growth in profitability against the industry norms.

Director Operations Saliya De Alwis commented that the past experience of secondhand vehicles appreciating no longer holds due to successive tax reductions, bringing in greater risk to the industry requiring caution on lending exposures on vehicles.

Sinhaputhra’s growth in profits for the last three years has been from Rs. 52 million to Rs. 74 million and this year Rs. 84 million.

However, despite this growth, the company was concerned about rapid credit expansion 
to meet the regulator’s wishes, when the industry had faced higher NPA ratios this year than in the last year was the view of Senior AGM Credit Supervision and Risk Management Sabriya Amanulla. The senior management also stated that the company needs to focus on products outside the vehicle market as well.

Sinhaputhra Finance PLC has had a long history and expertise in small scale business loans not to be confused with the more aggressive product of micro credit, and has found it to be a successful product.

Senior AGM Credit Pandula Aluvihare commented that this product is versatile and suits all markets and even the company’s focused line of tourism related investments is easily served through this flexible loan product.

Furthermore, Sinhaputhra’s limited exposure to gold pawning did not have the adverse effects of the present depressed climate for gold prices that many have faced.
With a fall in interest rates, the margins have widened, allowing Sinhaputhra to reduce its rates for its borrowers. Whilst this has been advantageous for the company, Consultant Investment Promotions Michael Cooke noted that it has become a severe hardship for many Sinhaputhra depositors who depend on their monthly interest. Yet, despite these lower rates, Sinhaputhra has experienced a surge in deposits that has considerably reduced their requirement for Bank credit lines.

In the year going forward Sinhaputhra hopes to cross the Rs. 1 billion mark in capital and the Rs. 8 billion mark in assets, to be in line with CBSL requirements either through internal generation or an acquisition or merger with a smaller company.

The Board of Directors of Sinhaputhra Finance PLC comprises J.R.J. Nanayakkara (Chairman), K.R.B Wijeyeratne (Managing Director), K.G.D.S.J. De Alwis (Director Operations), E.A.P.D. Ekanayake and Dr. A.R. Karunaratna. They are strengthened by Senior Consultants to the Board K.H.K. Wijayadasa and A.M.G. Weerakoon.
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