Sri Lankan stocks end at 2-wk high; foreign buying boosts turnover

Oct 29 (Reuters) - Sri Lankan stocks extended their winning streak to a fifth session on Wednesday and ended at a two-week closing high, helped by buying in banking and telecommunication shares, while foreign-investor interest boosted sentiment.

Sri Lanka's main stock index ended up 0.54 percent, or 38.78 points, at 7,265.90, its highest close since Oct. 15.

"Despite some volatility, the market was largely on an upward path with positive contributions from banking sector counters," said Reshan Wediwardana, research analyst at First Capital Equities (pvt) Ltd.

Large parcel trades helped boost market turnover, while strong foreign buying in John Keells Holdings Plc and Dialog Axiata Plc contributed to the day's net foreign inflows.

The market saw net foreign inflows of 580.2 million rupees ($4.44 million) on Wednesday, extending the year-to-date net foreign inflows to 12.33 billion rupees worth of shares, exchange data showed.

Analysts said retail participation was poor due to the lower-than-expected stimulus in the budget, while the market awaited further clarity.

Rajapaksa, also the country's finance minister, unveiled a budget that sought to trim value-added tax and cut the deficit while providing a range of handouts, mainly for rural communities.

The day's turnover was 2.2 billion rupees, well above this year's daily average of 1.36 billion rupees.

The gains were led by Sri Lanka Telecom Plc, which rose 0.40 percent to 50.20 rupees.

John Keells gained 0.28 percent, while Dialog added 0.81 percent.

Stockbrokers said trading in local shares may be volatile in the near-term due to the revised presidential poll schedule and a possible bottoming out of interest rates. 

$1 = 130.8000 Sri Lankan rupee) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Prateek Chatterjee)

Fitch Affirms Nations Trust Bank at 'A(lka)'; Outlook Stable

(The following statement was released by the rating agency) 

COLOMBO/TAIPEI, October 29 (Fitch) Fitch Ratings Lanka has affirmed Sri Lanka-based Nations Trust Bank PLC's (NTB) National Long-Term Rating at 'A(lka)'. The Outlook is Stable. Fitch has also affirmed NTB's subordinated debt at 'A-(lka)' and assigned an expected rating of 'A(lka)(EXP)' to its proposed senior unsecured debentures of up to LKR3bn. The final rating on the proposed debentures is contingent upon receipt of final documents conforming to information already received. 

KEY RATING DRIVERS 

The ratings reflect NTB's expanding franchise, continued process improvements, and its high and increasing exposure to customer segments that are more susceptible to economic cycles. Fitch believes that although the successful implementation of the bank's medium-term strategic plan could strengthen its overall franchise and funding profile, overly aggressive lending to SME and consumer segments could weaken its risk profile, if not well managed. 

NTB's loan growth slowed during 1H14 to 4% from 12% in 2013, although it was still above the sector average. NTB's exposure to the SME, consumer lending, credit card and lease segments increased to 77% of gross loans at end-1H14 from 75% at end-2013. 

The increase in exposure to segments that are more susceptible to economic cycles could put pressure on NTB's asset quality. Deterioration in its asset quality was already apparent as its reported gross non-performing loan (NPL) ratio increased to 4.82% in 1H14 from 3.51% in 2013. NTB's provisioning coverage remained lower than the average of higher-rated peers. NTB's net interest margins (NIM) have remained higher than that of its peers, a reflection of its portfolio, which has higher-yielding customer segments. 

However, Fitch expects NTB's NIM to fall with decreasing lending rates. This could put more pressure on its profitability given potentially higher credit costs and high operating costs alongside its plans for expansion. 

The proposed debentures are rated at the same level as NTB's National Long-Term Rating as they constitute unsecured and unsubordinated obligations of the bank. 

The debentures have tenors of four and five years and carry fixed coupons, and are to be listed on the Colombo Stock Exchange. NTB expects to use the proceeds to fund its medium-term lending and reduce asset and liability mismatches. 

RATING SENSITIVITIES 

An increase in risk appetite in conjunction with its efforts to speedily implement its strategic plan by expanding in segments that are susceptible to economic cycles could result in a rating downgrade. Aggressive loan growth or loan pricing leading to weaker asset quality or weaker capitalisation would be key indicators of this. An upgrade is contingent upon NTB demonstrating progress in building a strong commercial banking franchise, which will enhance the stability of its funding profile; and the achievement of capital and asset quality levels in line with higher-rated commercial banks. The senior and subordinated debt ratings will move in tandem with NTB's National Long-Term Rating. 

Contacts: 

Primary Analyst Kanishka de Silva Analyst +94 1 1254 1900 Fitch Ratings Lanka Limited Level 15-04, East Tower, World Trade Center Colombo 01, Sri Lanka Secondary Analyst Jeewanthi Malagala, CFA Analyst +94 1 1254 1900 Committee Chairperson Jonathan Lee Senior Director +886 2 8175 7601 Media Relations: Bindu Menon, Mumbai, Tel: +91 22 4000 1727, Email: bindu.menon@fitchratings.com. Note to editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(lka)' for National ratings in Sri Lanka. Specific letter grades are not therefore internationally comparable. Additional information is available at www.fitchratings.com. Applicable criteria, "Global Financial Institutions Rating Criteria", dated 31 January 2014, "National Scale Ratings Criteria", dated 30 October 2013, "Assessing and Rating Bank Subordinated and Hybrid Securities" dated 31 January 2014, and "Evaluating Corporate Governance", dated 12 December 2012 are available at www.fitchratings.com. 

Applicable Criteria and Related Research: 

Global Financial Institutions Rating Criteria here 

National Scale Ratings Criteria here 

Assessing and Rating Bank Subordinated and Hybrid Securities Criteria here 

Evaluating Corporate Governance here 

Additional Disclosure Solicitation Status here 

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Sri Lanka stocks close up 0.5-pct

Oct 29, 2014 (LBO) - Sri Lanka's stocks closed 0.54 percent higher with banking stocks gaining amid continued net foreign buying, brokers said.

The Colombo benchmark All Share Price Index closed 38.78 points higher at 7,265.90, up 0.54 percent. The S&P SL20 closed 21.33 points higher at 4,029.43, up 0.53 percent.

Turnover was 2.20 billion rupees, up from 1.66 billion rupees a day earlier with 125 stocks closed positive against 54 negative.

People’s Leasing and Finance closed 50 cents higher at 21.30 rupees with nine off market transactions of 295.10 million rupees contributing 13 percent of the turnover.

John Keells Holdings closed 70 cents higher at 249.80 rupees with four off market transactions of 241.57 million rupees contributing 11 percent of the turnover.

The aggregate value of all off-the-floor deals represented 37 percent of the daily turnover.

ODEL closed 3.10 rupees higher at 27.20 rupees, attracting most number of trades during the day.

Foreign investors bought 963.15 million rupees worth shares while selling 382.98 million rupees worth shares.

Lanka IOC closed 2.80 rupees higher at 51.80 rupees and Lanka Orix Leasing Company closed 2.80 rupees higher at 90.00 rupees, contributing most to the index gain.

Hatton National Bank closed 4.00 rupees higher at 194.50 rupees and DFCC Bank closed 3.90 rupees higher at 219.40 rupees.

Commercial Bank of Ceylon closed 1.20 rupees higher at 160.20 rupees and NDB closed 3.00 rupees lower at 240.00 rupees.

Ceylon Tobacco Company closed 9.00 rupees lower at 1,141.00 rupees.

Haycarbs records turnover of Rs. 5 Billion & PBT of Rs. 362 Million for 1H 2014/15

Tax incentives failing

By Mario Andree

Ceylon Finance Today: A senior tax expert highlighting several tax benefits given to promote more foreign direct investment, questioned the tax structure and asked why major multinationals did not enter Sri Lanka.

President Mahinda Rajapaksa through Budget 2015 presented to Parliament last week announced several tax incentives for foreign direct investment and extended deadlines for completion.

Senior partner Gajma and Company N. R. Gajendran highlighting the tax incentives questioned why major multinationals have not eyed Sri Lanka as a favourable investment destination.

According to him some tax benefits granted by the Ministry of Investment Promotion and Board of Investment, extended beyond the term of the project, which did not make any sense.

Further, though the government had claimed that major companies were eyeing Sri Lanka for investment opportunities, the actual large scale multinationals had not shown an interest, he said.

According to Minister of Investment Promotion Lakshman Yapa Abeywardena the land law was creating more difficulties for his ministry to attract foreign investment.

He said that both local and foreign investors were disgusted with the government's decision to restrict holding and purchase of land by foreigners in the country.

Sri Lanka during the first three quarters of this year had received more than US$ 1.36 billion through foreign direct investment, despite failing to achieve the target during the last two years.

Minister of Investment Promotion Lakshman Yapa Abeywardena highlighting the challenges said, that despite drawbacks, the country was attracting major multinationals.

Sri Lanka failed to achieve FDI targets, falling short of US$ 160 million in 2012 and US$ 610 million 2013 to achieve US$ 1.5 billion and US$ 2 billion respectively.

However, Minister Abeywardena claimed that the country would be able to achieve this year's revised FDI target, with some major international firms entering the country.

Strength (IFS) Rating of 'B' on RWN.
"The one-notch downgrade of AAIP's national ratings follows the significant deterioration of its ultimate parent Softlogic Holdings Plc's (SHL; BBB-(lka)/RWN) credit profile which is reflected by SHL's two-notch downgrade on 2 October 2014.
www.ceylontoday.lk

Hemas Power divests 50% of Heladhanavi for Rs. 532 m

Hemas Power Plc said yesterday that it has divested 50% stake in Heladhanavi Ltd. for Rs. 531.75 million.

The stake amounted to 60 million shares and the deal price was Rs. 8.86 per share and the buyer was Lakdhanavi Ltd.

Early this month, Hemas Holdings Plc signed a share sale and purchase deal to divest 75% stake in Hemas Power to a consortium comprising NDB Capital Holdings, ACL Cables, and Trydan Partners for Rs. 1.68 billion.

The sale of stake in Heladhanavi, which produces thermal power, was part of the conditions of the larger deal.
www.ft.lk

WATA churns Rs. 262 m PAT for 1HFY15, supported by strong palm oil profits

Watawala Plantations PLC reported revenues of Rs. 3.7 b for the six months ended 30 September 2014 (1HFY15), up 27.9% YoY. Net profit or PAT for 1HFY15 amounted to Rs. 262 m, against Rs. 99 m in the same period last year. WATA was able to post strong bottom line performance in a challenging environment for the plantation sector.

Profit for the 2nd quarter (2QFY15) amounted to Rs. 31 m, down 64.2% YoY due to challenges in the tea sector.

Palm oil contributed Rs. 421 m to the group bottom line in 1HFY15 which helped WATA to cover its losses in the tea and rubber sectors. Profit for 2QFY15 alone amounted to Rs. 237 m, a growth of 26.4% YoY.

Revenue for 1HFY15 amounted to Rs. 822 m, up 7.4% YoY. The growth in revenue is attributed to 5.7% YoY increase in crop which amounted to 4.62m kg, and an 11.2% YoY increase in NSA. The average NSA for 1HFY15 was Rs. 179 per kg. The increase in crop is attributed to better yield as a result of good agri practices, and new fields yielding FFB. 

Palm oil revenue for 2QFY15 amounted to Rs. 445 m, up 9.2% YoY.

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 68.3% of total revenue, increased 37.8% YoY to Rs. 2.5 b in 1HFY15, mainly on the back of improved volumes. Weather conditions were favorable for tea during 1QFY15, but not so much in 2QFY15. For 1HFY15, own crop was up 17.8% to 3.31m kg, and bought crop increased 30.3% YoY to 1.98m kg.

The NSA for 1HFY15 stood at Rs. 396 per kg, down 2% from same period last year. 

Instability in key export markets such as CIS, and the Middle East has put pressure on auction prices. For 1HFY15, the tea segment had made a loss of Rs. 199 m, compared to a loss of Rs. 234 m in 1HFY14.

Meanwhile, 2QFY15 has been a very challenging period with production volumes being affected by inclement weather and NSA being hit by weak demand at the auction. 2QFY15 loss of Rs. 231 m has completely erased the 1QFY15 profit of Rs. 32 m. Revenue for 2QFY15 amounted to Rs. 1.2 b, up 54.7% YoY. WATA remains the largest single tea producer in Sri Lanka.

Export segment
The export sector recorded a significant improvement in revenue driven by value added teas sold at a higher price, compared to mainly bulk orders in 1HFY14. Enhanced volumes on herbs and black teas have contributed towards revenue of Rs. 302 m in 1HFY15, up 36.6% YoY. PAT on export amounted to Rs. 13 m in 1HFY15, against Rs. 11 m recorded in the same period last year.

Rubber segment
The rubber segment was hard hit by the 25% YoY dip in average NSA which stood at Rs. 271 per kg in 1HFY15 compared to Rs. 363 per kg in 1HFY14. Revenue was further impacted by a 30% YoY drop in volumes. Cultivation extent of rubber was reduced by 19% from 652 ha in 1HFY14 to 521 ha in 1HFY15. The increase number of wet days also had a negative impact on tapping and yield.

Rubber revenue amounted to Rs. 40 m in 1HFY15, down 39.4% YoY. The segment made a net loss of Rs. 41 m in 1HFY15, compared to a loss of Rs. 16 m in the same period last year.

Overall, WATA posted strong results for 1HFY15, mainly driven by palm oil. It expects the palm oil segment to continue its strong performance for 2HFY15.

It is mindful of the demand side issues with buying at the auctions slowing down due to issues in key Ceylon tea markets in CIS and the Middle East. With its long term agri practices in place, it is reasonably confident that it will overcome the difficult environment expected for the rest of the year.

The Board has approved a dividend of Rs. 0.95 per share which amounts to Rs. 225 m in total.

A member of the Sunshine Group, Watawala Plantations PLC is a diversified plantation company in Sri Lanka, managed by the Group’s subsidiary, Estate Management Services Pvt. Ltd., a joint venture with the TATA Global Beverages and Pyramid Wilmar Plantations (subsidiary of Wilmar International).

The company manages a total land extent of over 12,000 Ha in palm oil, tea, and rubber with a workforce of over 11,000 people. The company has the largest palm oil plantation and the largest rubber factory in Sri Lanka to augment the production of almost 10m kgs of Ceylon tea annually.
www.ft.lk