Sri Lankan stocks hit over 3-yr closing high, block deals boost turnover

(Reuters) - Sri Lankan stocks hit their highest closing in more than three years on Thursday, led by banking and telecommunications companies, as low interest rates and continued buying by foreign investors into risky assets buoyed sentiment while block deals boosted turnover.

The main stock index rose 0.5 percent, or 36 points, to 7,199.25, its highest close since June 10, 2011, boosting market capitalisation by 37.5 billion rupees ($287.91 million) to 3.04 trillion rupees.

"We saw a layer of foreign buying coming into the market which helped local sentiment also," said a stockbroker asking not to be named.

"If earnings support, the trend would continue as investors have little choices with low interest rates," he added.

Brokers said the market would continue its bull run with foreign buying, despite profit-taking in some counters by retail investors.

The index has gained nearly 21.76 percent so far this year.

The bourse has been in an overbought region since July. The Relative Strength Index, a momentum indicator tracked by chartists, was at 84.495 on Thursday, Thomson Reuters data showed.

Stocks are deemed "overbought" above the 70-mark, signalling a reversal in the near term.

Top fixed line telephone operator Sri Lanka Telecom Plc led gains with a rise of 3.6 percent, while Commercial Bank of Ceylon, the country's biggest listed lender by market capitalisation, rose 2.3 percent.

Softlogic Holdings Plc bought a 45 percent stake in departmental store Odel Plc for about 2.7 billion rupees from its founders, Softlogic Chairman Ashok Pathirage told Reuters.

Odel rose 2.3 percent, while Softlogic closed unchanged.

Exchange turnover was 5.59 billion rupees ($42.92 million), its highest since Aug. 19 and well above this year's daily average of 1.24 billion rupees.

Foreign investors were net buyers of shares worth 565 million rupees, extending the year-to-date net foreign inflows to 10.38 billion rupees.

($1 = 130.2500 Sri Lankan rupee) 

(Reporting by Ranga Sirilal; Editing by Subhranshu Sahu)

Sri Lanka stocks close up 0.5-pct

Sep 11, 2014 (LBO) - Sri Lanka's stocks close higher with banking and telco stocks gaining while the turnover nearing 5.6 billion rupees amid continued strong foreign buying, brokers said.

The Colombo benchmark All Share Price Index closed 36.00 points higher at 7,199.25, up 0.50 percent. The S&P SL20 closed 24.59 points higher at 4,013.18, up 0.62 percent.

Turnover was 5.59 billion rupees, up from 2.06 billion rupees a day earlier with 125 stocks closed positive against 76 negative.

ODEL closed 50 cents higher at 22.00 rupees with four massive off-market transactions of 2.67 billion rupees changing hands at 22.00 rupees per share contributing 48 percent of the daily turnover.

The aggregate value of all off-the-floor deals represented 68 percent of the turnover.

Union Bank of Colombo closed 1.10 rupees higher at 22.30 rupees, attracting most number of trades during the day.

Foreign investors bought 736.51 million rupees worth shares while selling 171.55 million rupees worth shares.

Sri Lanka Telecom closed 1.90 rupees higher at 55.00 rupees and Commercial Bank of Ceylon closed 3.70 rupees higher at 163.90 rupees, contributing most to the index gain.

Commercial Leasing and Finance closed 40 cents higher at 5.00 rupees and Ceylon Tobacco Company closed 19.90 rupees lower at 1,180.00 rupees.

Fitch Affirms Sri Lanka's Lion Brewery at 'AA-(lka)'

September 10, 2014 (LBO) - Sri Lanka's Fitch Ratings has affirmed Sri Lanka-based Lion Brewery (Ceylon) PLC's (Lion) National Long-Term rating at 'AA-(lka)' with a stable Outlook, Fitch said in a statement.

The full statement is reproduced below:-

The agency also affirmed the company's senior unsecured rating at 'AA-(lka)' and assigned an expected National Long-Term rating of 'AA-(lka)(EXP)' to Lion's proposed unsecured redeemable debentures of up to LKR2bn (USD15.4m).

Lion plans to use the proceeds from the proposed debenture issue to refinance short-term facilities. The proposed debentures are rated in line with Lion's National Long-Term Rating as they will rank equally with the company's other unsecured debt. Fitch will assign a final rating to the debenture subject to the receipt of final transaction documents conforming to information already received.

KEY RATING DRIVERS

High Leverage: Lion's leverage as measured by net adjusted debt/operating EBITDAR stood at 2.14x at the end of the 2014 financial year on 31 March 2013(end-FY13: 2.61x), and is expected to increase following the company's proposed acquisition of Millers Brewery Limited (MBL), including its trademarks, from Cargills (Ceylon) PLC (Cargills).

However, we expect leverage to reduce over the medium term due to improving profitability. The proposed acquisition, announced in June, is contingent on MBL settling all its liabilities.

The MBL acquisition follows Lion's extensive expansion of its production facility in Sri Lanka, which resulted in high debt over FY13 and FY14. Leverage was exacerbated by margin deterioration because Lion sold more costly imported beer in cans at the same price as its domestic output to meet demand.

Lion stopped the imports half way through FY14 following the completion of additional capacity.

Increased Production Capacity: The recent expansion of Lion's facility has almost doubled production capacity, which will allow Lion to meet additional demand without further significant debt-funded capex.

This will leave cash flows available to pay down debt.

In addition, the potential integration of MBL's production could enhance economies of scale.

Market Leadership: Lion is the leading domestic beer manufacturer with a significant share of beer produced in Sri Lanka in 2012 and 2013. Its flagship product is the Lion brand of beer. The proposed MBL acquisition will be favourable for Lion's business risk profile as it is expected to further increase Lion's share of domestic output and strengthen Lion's hold on beer production in the country.

The proposed acquisition will also bring new products such as MBL's Three Coins, Sando, and Grand Blonde brands, and give Lion access to Cargills' extensive retail chain.

High Regulatory Risk: Domestic producers of alcoholic beverages face frequent and large increases in alcohol tax, which encourages consumers to turn to illicit sources and impacts industry profitability.

The industry also faces restrictions on advertising and retail players, which benefit incumbent licensed players, such as Lion, which have already built up their distribution networks and established their brands.

RATING SENSITIVITIES

Negative: Future developments that may individually, or collectively, lead to negative rating action include:

- Leverage of over 2.0x on a sustained basis

- The rating could be downgraded if Lion is required to inject further cash or take on more liabilities to complete the acquisition.No positive rating action is expected over the next 24 months as leverage is likely to remain high. However, Future developments that may individually or collectively lead to a positive rating action include:

- Leverage of below 1.5x on a sustained basis.

Sri Lanka Odel sells 44.5 Pct shares belongs to Gunawardene family to Softlogic

Sep 11, 2014 (LBO) - The Founder of ODEL Sri Lanka Otara Gunewardene and the directors Ajith Gunewardene and Ruchi Gunewardene sold out 44.5 percent of their company shares to Softlogic Holdings PLC an official said.

The shares has been sold for 22 rupees per share to Softlogic at the Colombo Stock exchange.

A source said the shares had been sold for about 2.6 billion rupees.

Odel Plc is a unit of Malaysia's Parkson Retail Asia Limited.

MEDIA STATEMENT ISSUED BY OTARA GUNEWARDENE

I wish to inform the public that I, along with my family members Ajit Gunewardene and Ruchi Gunewardene, have disposed all of our shares in Odel Plc this morning to the Softlogic Group.

I believe that the sale of our shares to the Softlogic Group is in the best interest of Odel Plc, and a natural progression to its continued growth.

Having being nurtured from a simple retail operation from a car boot into one of the largest retail businesses in Sri Lanka during the last twenty five years, Odel Plc now needs to move to the next level of retailing in order to be competitive, locally and globally.

This requires the entry of a larger player with a deep commitment to retailing: which I believe can best be provided by the Softlogic Group, which has a proven history of dynamism and perhaps an unrivalled track record of such operations in Sri Lanka.

Apart from the overall interests of the growth of Odel Plc, my decision to sell out of the company is also based on my personal desire to focus on another passion I dearly treasure in life: the pursuit of a mission to ensure the welfare of animals and the development of the Embark brand which funds such programs.

The sale of my shares in Odel Plc will hopefully provide me with more time and energy to devote to these activities in the future.

I wish to state that I will continue my association with Odel Plc over the foreseeable future , and will provide all assistance and cooperation during the period of transition.

In conclusion, I wish to express my sincere thanks to all my shareholders,customers, stakeholders and all well- wishes who have made this a truly wonderful journey.

I hope that you will continue to support Odel Plc in the future.