Odel reports revenue growth of 13.5 % in first quarter

Odel PLC has reported sales of Rs 1,096 million for the first quarter of 2014-15, an increase of 13.5 per cent over the corresponding quarter of the previous year.

Gross profit for the three months ending 30th June 2014 amounted to Rs 449.5 million, a growth of 12%, the Group said in a filing with the Colombo Stock Exchange. 

However, higher administrative costs mainly due to increased rent and employee costs together with increased finance costs impacted profitability. The bottom line was further impacted with a drop in other investment income in a low interest rate environment resulting in a marginal profit for the quarter. 

In the quarter under review the company made an investment of Rs 800 million to purchase land adjoining its flagship store at Alexandra Place to further strengthen its retail footprint.
http://www.cse.lk/cmt/upload_report_file/960_1406712432763.pdf

Sri Lankan stocks up on expectation of better earnings

(Reuters) - Sri Lankan stocks rose on Wednesday to a near three-year closing high on expectation of strong corporate earnings after market heavyweight John Keells Holdings' upbeat results, while lower interest rates also helped sentiment.

The main stock index ended 0.26 percent, or 17.57 points, higher at 6,801.84, its highest close since Sept. 20, 2011. It has gained 6.6 percent so far this month.

"Earning prospects are good and the market will continue to run on earning hopes though some expect a correction," said a stockbroker asking not to be named.

Lower interest rates have prompted local investors to buy shares and move away from unattractive fixed assets, analysts said. Yields on treasury bills edged down further by 7-10 basis points at a weekly auction on Wednesday.

The International Monetary Fund urged Sri Lanka on Wednesday to keep key interest rates on hold for the near term and said a cautious approach is warranted.

The global lender said the central bank should be ready to raise policy rates "with economic activity and private credit growth on the rise, while there was also an opportunity for a cut in the rates that might benefit the investment environment and because of the current low inflation of below 5 percent.

Turnover was 973 million rupees ($7.47 million), less than this year's daily average of about 1.09 billion rupees.

Foreign investors were net buyers of 151.2 million rupees worth of shares, extending the year-to-date net foreign inflow in shares to 10.85 billion rupees.

The index has been in the overbought region since July 3, having risen 15.04 percent so far this year as local investors moved funds from fixed income to riskier assets because of low interest rates.

Shares of Ceylon Tobacco Company Plc, which mainly moved up the index, jumped 4.48 percent to 1,150.40 rupees, while Dialog Axiata Plc rose 0.93 percent to 10.90 rupees.

Conglomerate John Keells Holdings Plc, which posted a 35 percent growth in its June-quarter profit, fell 0.42 percent to 237 rupees. Analysts said investors sold the stock, saying it was overheated. 

($1 = 130.2000 Sri Lankan Rupees)

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lanka 6-month Treasuries yield plunge to four decade lows

July 30, 2014 (LBO) - Sri Lanka's three and six month Treasuries yields have dropped below the overnight cash withdrawal policy rate, plunging to levels not seen since the mid 1970s, official data showed.

The 6-month yield dropped 7 basis points to 6.47 percent at Wednesday's auction to three ticks below the 6.5 percent overnight cash withdrawal window rate.

The 3-month rate fell 07 basis points to 6.47 percent. The 3-month auction yield dropped to 6.5 percent on July 02 and to 6.49 percent on July 09, data from the state debt office showed.

The 12-month rate 10 basis points to 6.58 percent.

Excess liquidity from dollar purchases by the Central Bank has driven interest rates lower and but banks can deposit cash overnight at 6.5 percent at the standing 'repo' window of the Central Bank.

According to official Central Bank data the 3-month Treasury bill rate was last seen at 5.0 percent in 1976, when a lender of last resort 'bank rate' was 6.5 percent.

At the time there were no auctions to transmit market signals and most Treasury bills outstanding was bought by the Central Bank leading to forex shortages and the worst exchange controls seen in the country's history.

In 1977 the 3-month yield was raised to 9.0 percent, official records show. Amid heavy deficit spending, oil subsidies, war, money printing and ensuring balance of payments crises, the three months yield then topped 20 percent at time on ensuing years.

But in 2014 weak credit has put upward pressure on the currency and the Central Bank is withdrawing liquidity instead of injecting cash (printing money). The policy rate for injecting money is now at 8.0 percent.

Similar situations were seen after balance of payments crisis in 2001 and 2009, with better budgeting, market priced energy and foreign capital inflows.

Available records show Sri Lanka's Treasuries yields also fell to around 7 percent in 2010 with the 6-month yield at 6.95 percent on September 07.

In 2003 also Treasuries rates touched 7 percent with the 12-month yield dropping to 6.98 percent on November 07.

In 2003 measured consumer inflation was near zero or lower until the Janatha Vimukthi Peramuna, a faction of Sri Lanka's elected ruling class through its 'removing the plug' theorem pushed the country into fuel subsidies and money printing leading to near 20 percent inflation and currency depreciation in 2004.

Sri Lanka shares close up 0.3-pct

July 30, 2014 (LBO) - Sri Lanka's shares closed 0.26 percent higher on Wednesday with Ceylon Tobacco Company gaining amid net foreign buying, brokers said.

The Colombo benchmark All Share Price Index closed 17.57 points higher at 6,801.84, up 0.26 percent. The S&P SL20 closed 6.75 points higher at 3,768.18, up 0.18 percent.

Turnover was 973.71 million rupees, up from 493.10 million rupees last Monday with 87 stocks closed positive against 98 negative.

Amana Bank closed flat at 5.70 rupees with two off-market transactions of 160.71 million rupees changing hands at 7.50 rupees per share contributing 16 percent of the daily turnover.

The aggregate value of all off-the-floor deals represented 29 percent of the turnover.

Fresh entrant Lucky Lanka Milk Processing non-voting closed 60 cents higher at 3.60 rupees and its ordinary shares closed flat at 6.00 rupees, attracting most number of trades during the day.

Foreign investors bought 254.96 million rupees worth shares while selling 103.80 million rupees worth shares.

Ceylon Tobacco Company closed 49.30 rupees higher at 1,150.40 rupees, contributing most to the index gain.

Dialog Axiata closed 10 cents higher at 10.90 rupees and Sri Lanka Telecom closed 1.00 rupee lower at 53.60 rupees.

Finlays Colombo closed 17.50 rupees lower at 320.90 rupees and John Keells Holdings closed 1.00 rupee lower at 237.00 rupees.

JKH’s W0022 warrants closed flat at 65.00 rupees and its W0023 warrants closed 2.50 rupees lower at 71.50 rupees.

WATA posts highest-ever Q1 profits; PAT of Rs. 230 m

Watawala Plantations PLC reported revenue of Rs. 1.8 b for the quarter ended 30 June 2014 (1QFY15), up 25% YoY. Net profit or PAT for the quarter amounted to Rs. 230 m in 1QFY15 against Rs. 11 m in the same quarter last year.

Management attributes the strong topline growth mainly to its tea segment which saw higher volumes aided by favorable weather and increased quantities of bought crop. Other income also grew in 1QFY15 to Rs. 28 m, up 28.5% YoY.

Palm Oil segment
The Palm Oil segment registered a revenue growth of 5.6% YoY to reach Rs. 377 m in 1QFY15, which accounted for 20.0% of the company’s revenue during the quarter.
The Crude Palm Oil (CPO) production remained flat marginally flat to post 2.08m kg for 1QFY15 from 2.05m kg recorded same quarter last year. This came on the back of better yield as a result of good agri practices, and new fields yielding FFB.

The segment maintained its position as the highest contributor to company profitability, having made a net profit of Rs. 185 m for 1QFY15. WATA continues to be the single biggest CPO producer in Sri Lanka.


Tea segment
The Tea segment, the largest revenue contributor which accounted for over 69.4% of the total revenue, increased 25.1% YoY to Rs. 1.3 b in 1QFY15, mainly on the back of improved volumes. Weather conditions were favorable for tea during 1QFY15, compared to last year which saw high levels of rains and floods.

Own crop was up 18% to 2.01m kg and bought crop increased 95% YoY to 1.43m kg. As a result the company was able to bring its COP down by 8% YoY as a result of fixed costs being absorbed by higher volumes of tea.

Profit from tea stood at Rs. 32 m in 1QFY15 compared to a loss of Rs. 156 m previous year. Given FY15 being a non-wage year, management expected the tea segment to break even during 1QFY15. But due to the impressive yields as a result of favorable weather conditions, the segment was able to make profits, exceeding management expectations.

Rubber segment
The Rubber segment which only accounted for 1% of the total revenue in 1QFY15, experienced a 29.0% YoY drop in revenue to Rs. 22 m, from Rs. 31 m recorded in the same quarter last year due to a decline in production by 16.9% YoY.

NSA for rubber stood at Rs. 276 per kg, compared to Rs. 345 in 1QFY14. The drop in production is primarily due to reduction in the rubber extent by 131 Ha during the current season. The net loss for rubber amounted to Rs. 24 m in 1QFY15against a loss of Rs. 10 m recorded same quarter last year.

Export segment
Export sector recorded a significant improvement in revenue driven by value added teas sold at a higher price, compared to mainly bulk orders in 1QFY14. Enhanced volumes on herbs and black teas have contributed towards revenue growing three folds in 1QFY15.

PAT on export amounted to Rs. 9.5 m in 1QFY15 against Rs. 2.6 m recorded in the same period last year. The profit is mainly from export of the value added tea and herbs to Australia. Further the bulk tea export to Russia, Pakistan, India and UK also contributed for the export profit during the period.

Outlook
With its resilient agri practices and innovation culture, the company is reasonably confident that it will overcome the difficult environment it continues to operate in.
www.ft.lk

Lucky Lanka Milk to debut on CSE today

Lucky Lanka Milk Processing Company Ltd., will debut on the Colombo Stock Exchange today following a successful Initial Public Offering (IPO) in early July.

With a security code LLMP and classified under beverage, food and tobacco sector, the company will be listed on the Diri Savi Board. LLMP will be the 295th listed entity on the CSE.

The company’s IPO was worth Rs. 300 million and received applications worth Rs. 453 million. The final subscription figure reflects an oversubscription of 1.5 times or 66% more. 

The IPO was for 38 million ordinary voting shares at Rs. 6 per share (Rs. 228 million) and 24 million ordinary non-voting shares at Rs. 3 per share (Rs. 72 million). Managers and registrars to the IPO Merchant Bank of Sri Lank (MBSL) said there were 1,341 applications requesting 38 million shares worth Rs. 228 million for the ordinary voting shares issued at Rs. 6 each.

For the non-voting shares on offer at Rs. 3 each, there were 1,681 applications requesting for 75 million shares worth Rs. 224.7 million. The IPO had its official opening on 7 July and was closed on 11 July.

Out of the proceeds, Rs. 200 million will settle high-cost borrowings, and Rs. 75 million will fund the expansion of the existing production plant with new cold room complex including an ammonia refrigeration system, extension to the existing UHT milk processing building and new machinery including conveyer systems and pigging systems. The remaining Rs. 25 million will be utilised for new projects such as ‘Gedarata Kiri’ milk bar outlets and school canteens.
www.ft.lk

Dunamis Capital successfully raises Rs. 1 b

The Rs. 1 billion debenture issue of Dunamis Capital PLC was successfully oversubscribed on its official opening day itself on 28 July. The basis of allotment and final status of total applications received will be disclosed shortly. Rated ‘BBB’ by RAM Ratings Lanka Ltd., the issue was for 10 million rated, senior, unsecured redeemable debentures of Rs. 100 each.

The fundraiser was to increase the long-term funding base of Dunamis Capital PLC, the holding company of First Capital, Kelsey Homes and Premier Synthetic Leather.

The five-year debentures which will be listed on the Colombo Stock Exchange (CSE), offered a fixed interest rate of 12.5 % per annum, payable annually until the maturity of the debenture at the end of five years.

In FY14, Dunamis Capital PLC reported profit after tax of Rs. 121.5 million with its financial services business recording net profit of Rs. 340 million, and property development converting a net loss of Rs. 55 million in 2012-13 into net profit of Rs. 148.6 million.

During the year the company invested Rs. 600 million in Kelsey Homes to fund the purchase of a six-acre property in Mount Lavinia and Rs. 200 million in Premier Synthetic Leather, the only synthetic leather manufacturer in Sri Lanka.

Of the funds raised by the debenture issue, Rs. 500 million is to be utilised to settle short-term commercial papers and loans currently of a tenure less than three months and costing approximately 12%, the company has disclosed. Rs. 250 million is to be invested in listed equities with a medium term-view, and Rs. 250 million will be retained as a reserve to fund future acquisitions and investments.
www.ft.lk

Indian company to buy Asia Asset Finance for Rs 1B York Street Partners to buy Asia Securities for Rs 600M

By Ravi Ladduwahetty

Ceylon FT: An Indian financed company is planning to buy a Sri Lankan finance company for Rs 1 billion sources said.

One of India's largest finance companies, Muthott Finance, which has over 1,000 braches scattered over the subcontinent was tipped to buy Asia Asset Finance Co. Ltd., a subsidiary of the Asia Capital PLC Group for over Rs 1 billion at Rs 2 per share, sources said.

They have also a stated capital of 945.1 million shares, which comprise 559.4 million voting shares. However, the board of directors of Asia Asset Finance announced on 17 July that it will further increase the stated capital by another Rs 447 million with a Rights Issue for one share for every two shares held at Rs 1.60 per share. The total number of shares that will be issued with the Rights would be 279.7 million shares.

It would also mean that the Indian acquisition would be after the Rights Issue.

Meanwhile, York Street Partners, a corporate outfit, which has been set up four young corporate executives and funded by the cofounders and now divested Expo Lanka Group, are to buy Asia Securities for Rs 600 million, market sources told Ceylon FT.

York Street Partners comprises Sujendra Mather, Nayana Mawilamada and Jayamin Pelpola who have all worked at international levels with J.P. Morgan and Goldman Sachs. York Street Partners are funded by the Osman Kassim family who founded the Expo Lanka Holdings PLC Group and who divested 30% of the Group to Japan's Sagawa Group for Rs 6 billion. It is also leant that the Asia Securities acquisition is also coming from the proceeds of the sale of Expo Lanka.

Asia Securities, has been operating at a profit from 2012 and the owners are wanting to sell it from that time due to the cash rich nature of the company.

However, Asia Securities CEO and Acting Chairman Stephan Abeysinghe and former Expo Lanka CEO Hanif Yusuf were not available for comment despite repeated attempts to contact them.
www.ceylontoday.lk