Sri Lanka stocks at 3-year high on retail buying

(Reuters) - Sri Lankan stocks edged up on Tuesday, hovering near three-year highs, led by retail buying in manufacturing and telecommunication shares, while the low interest rates boosted sentiment, brokers said.

Analysts say an increase in speculative trading in fundamentally weak shares could dent the healthy growth the index has seen this year.

The main stock index ended 0.42 percent, or 29.29 points firmer, at 7,013.32, its highest close since Aug. 18, 2011.

The index has gained 18.61 percent so far this year.

"Big caps are slightly slow today the index is up on some illiquid shares and on retail activity," said Dimantha Mathew manager, research at First Capital Equities (Pvt) Ltd.

The index plummeted more than 20 percent after it hit a record peak in February 2011 mainly due to speculative trading.

Companies' earnings were recovering and the bourse had seen a 22 percent year on year net growth in earnings of 272 companies, First Capital Equities said in a note to investors.

Richard Pieris and Co Plc, which led the overall gain in the index, rose 16.67 percent to 9.10 rupees, while Sri Lanka Telecom Plc rose 1.11 percent to 54.60 rupees.

Shares in Commercial Leasing & Finance Plc rose 4.65 percent to 4.50 rupees.

Tuesday's turnover stood at 1.73 billion rupees ($13.3 million), more than this year's daily average of 1.2 billion rupees.

The bourse saw a net foreign inflow of 480.1 million rupees on Tuesday, extending the year-to-date net foreign inflow to 8 billion rupees worth of shares. 

($1 = 130.1700 Sri Lankan rupee) 

(Reporting by Ranga Sirilal; Editing by Anand Basu)

Sri Lanka stocks close up 0.4-pct

Aug 26, 2014 (LBO) - Sri Lanka's stocks continued to rise above the 7,000 mark with price gains witnessed in Richard Pieris and telco stocks amid strong foreign buying, brokers said.

The Colombo benchmark All Share Price Index closed 29.29 points higher at 7,013.32, up 0.42percent. The S&P SL20 closed 3.42 points lower at 3,851.85, down 0.09 percent.

Turnover was 1.73 billion rupees, up from 1.22 billion rupees a day earlier with 124 stocks closed positive against 79 negative.

John Keells Holdings closed 1.00 rupee lower at 242.00 rupees with three off-market transactions of 379.39 million rupees contributing 22 percent of the daily turnover.

JKH’s W0022 warrants closed 10 cents lower at 68.50 rupees and its W0023 warrants closed 20 cents higher at 78.30 rupees.

The aggregate value of all off-the-floor deals represented 31 percent of the turnover.

Lanka Cement closed 1.60 rupees higher at 11.00 rupees and HVA Foods closed 40 cents higher at 12.50 rupees, attracting most number of trades during the day.

Foreign investors bought 543.15 million rupees worth shares while selling 62.80 million rupees worth shares.

Richard Pieris closed 1.30 rupees higher at 9.10 rupees, contributing most to the index gain.

Sri Lanka Telecom closed 60 cents higher at 54.60 rupees and Dialog Axiata closed 10 cents higher at 11.20 rupees.

Commercial Leasing and Finance closed 20 cents higher at 4.50 rupees.

Singer ranked Most Respected Consumer Electronics Company

Singer has been adjudged the “Most Respected Consumer Electronics Company” in Sri Lanka and has been placed amongst the top 15 Most Respected Entities in the country, according to the results of a survey conducted by Nielsen on behalf of LMD.

Speaking to LMD, Mahesh Wijewardene, Director Marketing and Commercial at Singer, said that it was “a great honour, because [the survey] is an independently conducted ranking which positions us among the most respected corporates in Sri Lanka.” He also emphasized the importance of benchmarks like the Most Respected Entities list in enhancing internal performance indicators.

He said the Most Respected Entities ranking will be a blueprint enabling them to achieve their objectives, including gaining market leadership for our products and market segment, providing customers with the best service and shopping experience, optimizing employee potential, and maximizing shareholder wealth with steady asset growth and a return on investment that is above industry norms.”

The survey is based on the opinions of 800 participants, selected from senior and middle management at listed companies and the organizations ranked in the LMD 100 and the LMD Brands Annual.

These awards are a reflection of Singer’s commitment to continually deliver enhanced value to its customers by evolving through continuous improvements to consistently satisfy customer requirements over time. Backed by the country’s largest retail and service networks – numbering more than 400 retail outlets, ten regional service centres and over 150 service agents – the company remains dedicated to honouring its most important benchmark: giving Sri Lankans “trusted excellence,” a commitment that has stood in good stead for 136 years.
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PABC’s Rs 3 b debentures rated BBB

Lanka Rating Agency has assigned Pan Asia Banking Corporation PLC’s (PABC) respective long- and short-term financial institution ratings at BBB+ and P2. The outlook on the long-term rating is stable. Concurrently, the long-term ratings of the Bank’s proposed Listed Unsecured Subordinated Redeemable Debentures up to Rs 3 billion (2014/2019) carry an issue rating of BBB.

In keeping with the LRA methodology PABC’s proposed debenture is rated one notch below the entity rating to reflect its subordinated status. The rating is supported by the Bank’s average capitalisation, liquidity and improving performance but is tempered by its relatively small size and asset quality.

The Bank remains one of the smallest players in the domestic LCB industry, with an asset base of Rs 64.9 billion and a loan book of Rs 44.7 billion as at end-FY Dec 2013. This accounted for 1.29% of the LCB sector assets and 1.31% of sector loans. Nevertheless, the Bank has been consolidating its presence in the local arena while improving its franchise during the past 5 years. As at end-1Q FY Mar 2014, PABC operated 77 branches with 1232 staff members.
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India’s Muthoot acquires 30% stake in Asia Asset Finance

The largest gold financing company in the world, Muthoot Finance yesterday acquired a 30% stake in Asia Asset Finance.

A stock market filing to the Colombo Stock Exchange by Asset Finance disclosed 167,785,600 ordinary shares of the company had been purchased at Rs.1/60. This constituted 29.98% of the shares in issue, it noted.

Kerala-based non-banking financial company Muthoot Finance Ltd. said it had acquired a 30% stake in Sri Lanka-based Asia Asset Finance Plc (AAF).

In a notice to Bombay Stock Exchange (BSE), Muthoot Finance said it had paid approximately $ 2.1 million to acquire the stake.

India’s…“Muthoot Finance is seeking synergies by helping the AAF to operationalise loan against gold ornaments in Sri Lanka drawing on the expertise of Muthoot Finance in this field. Muthoot Finance through this investment expects AAF to improve its lending operations and profitability in coming years and which may improve value of its present investment in AAF in coming years,” the company said.

AAF, which is listed on the Colombo Stock Exchange, is into retail finance, hire purchase and business loans and has 11 branches across Sri Lanka, according to the release.

The deal was announced after market hours.

On Monday, shares of Muthoot Finance dropped 0.73% to Indian Rs. 189.75 apiece on the BSE, while the exchange’s benchmark index, Sensex gained 0.07% to 26,437.02 points.
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LOLC net up 46%

LOLC Group reported a net profit of Rs 1 billion for the three months ended June 2014, up 46% from Rs 694 million a year ago, interim financial results published showed.

The group reported a Rs 1.35 billion profits before tax (PBT), up 45% over the last year's Rs 934 million, reflecting of the strong profitability recorded from its operating activities which grew by 23% compared to June 2013.

External effects on the company, namely, significant reduction in interest rates have contributed positively to the reduction in borrowing costs which saw an overall drop of 20% compared with last year and this is despite the growth in savings and deposits increasing the overall borrowings of the group. The increase in the borrowings base reflects the growth strategy fuelling higher executions strengthening the financial sector lending portfolio. A reduction in lending interest rates were also seen during the current period however, the higher quantum of lending resulted in the interest income from the group's lending business moving up 7% compared with last year June quarter end.

The financial services sector shows tremendous performance in the lower interest rate regime along with better collection results coming from all three financial services companies of the group.

The contribution to profits (PBT) from this sector increased from Rs 672 million to Rs 1.14 billion, which is an increase of 71%. LOLC's flagship finance company, Lanka ORIX Finance PLC (LOFC) posted strong profits for the quarter, with Rs 325 million as PBT, which is an increase of 222% over previous year June. This reflects the strong collections together with lower interest costs. The company has managed to reduce its borrowing costs as a result of the reduction in interest rates on its deposits base, which grew by Rs 2 billion to Rs 45 billion over the last year. Strong growth in the deposit base of the company reflects strong financial strength and the customer confidence in LOFC which has drawn funds even at low interest rates. LOFC looks positively to year 2014/15 with lower borrowing costs and higher level of income fuelled by the expansion in the lending book increasing its core interest income.

Commercial Leasing & Finance PLC (CLC) too showed strong performance and maintained profits at the same level as in the last year, despite pressures on collections. The PBT for the June quarter was Rs 381 million. The company's deposit base grew from Rs 3 billion to Rs 9 billion, a growth of 200% over the comparative period last year. CLC commenced its deposit mobilizing activities two-and-a-half years ago and the deposit base growth shows its financial stability and depositors' confidence in the company. The higher level of deposits and other borrowings will fuel higher level of lending, targeting an increase in the asset book, higher earnings from interest income, the key focus for the year 2014/15.

LOLC Micro Credit Ltd (LOMC) too recorded strong profits in the first quarter, with Rs 407 million as PBT compared with Rs 268 million in the last year. The company shows strong profits as a result of the reduced interest rates coupled with superior collections, which was a challenge throughout the year of 2013/14 due to poor weather affecting its agriculture centric customer base. However, strong recovery is seen in the current year, resulting in higher collections.

The two associate companies of LOLC operating in the financial services sector, Seylan Bank and PRASAC Micro Finance Company in Cambodia continues to give strong positive growth in profits, an impressive increase of 74% over last year. The contribution from the share of profits from its associate companies was Rs 423 million against Rs 243 million in June 2013. PRASAC's contribution to these profits is a Rs 201 million compared with Rs 86 million in June 2013.

Though the trading sector of the group shows lower profits compared to last year, Brown and Company PLC which is the main contributor to the trading business of LOLC, shows promising recovery in its core business trading, which was at negative profits last year vs. strong profits in the current quarter of Rs 148 million. Last year's profits were mainly from other income which is seen shifting to its core activities, trading and manufacturing.

LOLC, the parent company records higher profits compared with last year, a 202% growth over last year, reaching Rs 44 million. The company continues to reduce its lending book, which is passed on to its subsidiaries in line with its conversion into a core holding company. The company earns income from the shared services activities that provides common services to group companies. The company also continues to reduce its borrowings, strengthening its balance sheet with stronger gearing.

The borrowing book saw a drastic reduction, Rs 22 billion reducing to Rs 15 billion which has improved the company's gearing ratio to a strong holding company ratio of 0.46
Envisioning LOLC's financial services expansion strategy, LOLC entered into Myanmar through LOLC Micro Investment Ltd (100% subsidiary of LOLC) in 2013, obtaining formal approval to commence lending business in Myanmar. LOLC is one of the first financial services giants to enter Myanmar, which is essentially an untapped market with great potential for the industry. LOLC's operation has already made a positive impact in Myanmar, with its first three branches being opened in Myangone, North Okkalapa and Dalla. The business is already flourishing and the group is extremely positive of this investment, which is expected to derive steady growth in business and long term profitability.

In the coming months, LOLC will align group strategies towards strengthening its financial position further with increasing interest income with higher executions coupled with stronger collections in the financial services sector. The other sectors too will further strengthen its business operations, to derive medium to long term profitability. The group is well positioned and all sectors are being developed with strong investment backing to strengthen its business proposition for long term profitability growth.
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