Sri Lankan stocks firmer; turnover at over 4-month low

Dec 8 (Reuters) - Sri Lankan stocks edged up slightly on Monday, erasing early losses in sluggish trade as investors were cautious due to the political uncertainty ahead of the Jan. 8 presidential poll.

The main stock index rose 0.04 percent, or 2.55 points, to close at 7,241.47.

Turnover was 611 million rupees ($4.7 million) on Monday, exchange data showed, the lowest since July 28 and well below this year's daily average of 1.44 billion rupees.

Foreign investors were net buyers of 164.9 million rupees worth of shares on Monday, extending purchases during the year to 21.92 billion rupees, the data showed.

"Investor interest is deteriorating, the market is volatile in low trade, as many are awaiting to see the direction as the election nears," said Dimantha Mathew manager, research at First Capital Equities (pvt) Ltd.

Analysts said many investors were staying away ahead of the elections and the festive season.

Dialog Axiata Plc led the gains, ending up 3.85 percent, while Ceylon Tobacco Co Plc rose 0.95 percent.

Analysts expect volatility to continue and the overall index to be flat until the elections on Jan. 8, with speculation over more defections and likely violence ahead of the polls also weighing on sentiment.

Nine loyalists from Rajapaksa's United People's Freedom Alliance, including Health Minister Mithripala Sirisena, have defected since Rajapaksa announced snap elections last week. Sirisena resigned to contest against Rajapaksa as the consensus candidate of a united opposition.

The general secretary of the main opposition United National Party and another opposition legislator joined Rajapaksa hours after he submitted his nomination on Monday.

Speculation over more defections also weighed on sentiment, analysts said.

($1 = 131.1000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Prateek Chatterjee)

Fitch assigns Abans' debenture 'BBB+(lka)'

Dec 08, 2014 (LBO) - Fitch Ratings has assigned Abans Plc's senior unsecured redeemable debenture issue of up to two billion rupees a final National Long-Term rating of 'BBB+(lka)', the rating agency said in a media release.

The debentures are rated in line with Abans' National Long-Term Rating as they will rank equally with the company's other senior unsecured creditors.

The debenture is expected to be issued in three tranches with maturities of three, four, and five years at fixed coupon rates. The proceeds will be used to re-finance part of the company's short-term borrowings and will help reduce Abans' exposure to refinance and interest rate risk.

Media Release by Fitch Rating

KEY RATING DRIVERS

Weakening Credit Metrics: Abans' net leverage, as measured by adjusted net debt/EBITDAR (excluding finance subsidiary Abans Finance Plc), increased to 8.05x in the financial year ended 31 March 2014 (FY14) from 5.25x in FY13. Abans' fixed-charge coverage (EBITDAR/gross interest + rent, excluding Abans Finance Plc) deteriorated to 0.82x in FY14 from 1.34x in FY13. The deterioration was mainly due to EBITDAR margin (excluding Abans Finance Plc) contracting to 6.5% in FY14 from 9.2% in FY13 because of subdued demand, intense competition and a shift towards lower margin products. Although the company has plans to reduce its debt, Fitch expects Abans' leverage to remain above 4.5x in the medium term due to a weak recovery in EBITDAR margins.

Leading Consumer Durable Retailer: Abans is one of the leading retailers of consumer durables in Sri Lanka, and it has a strong brand portfolio and extensive distribution network. Abans' revenues are supported by its in-house hire-purchase operations, which contributed to 40% of the revenues in FY14. Abans's hire-purchase book is prudently managed with higher down payment requirements and an efficiently and closely monitored recovery system, which has helped the company maintain a low delinquency rate.

Real Estate Project Risk: Abans's investment in a mixed-use development called Colombo City Centre will be capped at LKR1.9bn, most of which was incurred in FY14. Even though the equity contribution is capped, any delay in debt funding or pre-sales of the project could result in further capital calls for Abans.

Furthermore, any delays to construction, which is due to run from FY15-FY17 could increase the business risk for Abans.

Abans is undertaking the project, which has retail, hotel, and apartment components, with Singapore-based Silver Needle Hospitality.

RATING SENSITIVITIES

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

- A sustained increase in Abans' adjusted net debt/EBITDAR excluding Abans Finance Plc to over 5.5x

- Fixed-charge coverage reducing below 1.25x on a sustained basis

- A material delay in progress on the Colombo City Centre project or additional capital calls for the project

- Any delay in the scheduled repayments from related parties.

Positive: No positive rating action is expected given that the rating is on Negative Outlook.

However, future developments that may individually or collectively lead to the Outlook being revised to Stable include:

- Smooth progress of the Colombo City Centre project, which will limit Abans' financial liability to the initial investment value.

- Improvement in the retail environment as reflected in sustained improvement in EBITDAR margins above seven percent.

Sampath Bank debentures oversubscribed

Sampath Bank PLC has issued 60,000,000 rated, unsecured, subordinated, redeemable debentures with an option to issue up to a further 10,000,000 debentures in the event of an over subscription of the initial issue.

The bank disclosed the reception of applications for over Rs. six billion (Rs.6,000,000,000/-) for the debenture issue by Sampath Bank PLC which closed accordingly on December 05. The initial issue has been oversubscribed.

The objective of this issue was to strengthen the Tier II Capital base of the bank, to match the assets and liabilities duration of Bank’s long term lending portfolio and capitalize the investor interest in listed Debentures and create prominence and awareness among market participants.
www.dailynews.lk

878% profit increase at Bogala Graphite Exchange rate fluctuation alone gives 19 million

By J Kurukulasuriya

Ceylon Finance Today: Turnover increased 21% to Rs 471 million as Bogala Graphite Lanka PLC, showed a net profit after tax of 76 million to 30th September, up 878% from the corresponding 2013 period. Both sets of accounts are reported as unaudited. The company is engaged in the mining, processing, refining and sale of graphite. Profit for the entire 2013 year was 24.8 million.

"Net Exchange Gain/(Loss) shown separately in the Income Statement amounting to Rs 16.2 million for the 9 months ended 30th September 2014 comprises an unrealized exchange gain of Rs.19.1 million on the revaluation of the euro Loan amounting to One Million Two Hundred and Twenty One Thousand Two Hundred Fifty Five (euro 1,221,255).

Exchange loss for the comparative period was Rs 9.5Million, says the company's financial report for the 9 months" reports the company.

Unlike most listed companies who report up to 31 March annually, Bogala Graphite makes up its accounts to 31 December of each year.

Net finance costs were down 100% reflecting the current low interest environment. The most recent quarter showed a profit of Rs 35 million as opposed to a loss of 10 million in the corresponding 2013 quarter. Earnings per share jumped to Rs 1.61 from 16 cents for the 9 months.

The company has a stated capital of Rs 80 million, with reserves of Rs 193 million. There has been no significant change in the nature of the contingencies and other commitments.

Last year, (ending 31 December 2013), the 30% increase in the electricity rates (announced in April) adversely affected the company's bottom line. "The pressure on profitability and cash generation was further aggravated by having to recognize an increase in royalty, by 2% of the FOB value, in November. The higher royalties were enforced retrospectively from October 2013," they reported.

Due to uncertainty about government regulatory changes in 2013, "capital expenditure plans have been temporarily reduced", they said. The Board has determined that Vijaya Malalasekera and Nissanka De Mel are independent directors in spite of serving on the board for more than 9 years, since they are not directly involved in the management of the company.

The land was revalued during the financial year 2013 by N.M. Jayathilake an independent valuer. The result of such revaluation was incorporated in these financial statements. 

Such asset was valued on an open market value on an existing use basis without considering the mineral deposits and underground works.

The share price fluctuated between Rs 2.70 and 29.90 during the quarter. AMG MINING AG holds over 90% of the shares and the percentage held by the public is 9.6%. The Secretary to the Treasury holds 254,500 shares.

The 3rd and 4th largest shareholders of the company are both deceased persons, apart from others who may be deceased. Ceylon Today has drawn attention to this feature in past reports.
www.ceylontoday.lk

Lion goes for entire Rs. 2 b in debenture issue; offer draws Rs. 2.6 b demand

Lion Brewery (Ceylon) Plc is exercising the option on the recently-oversubscribed debenture issue worth Rs. 2 billion.

The offer was 10 million rated, unsecured, redeemable debentures of Rs. 100 each with an option to increase it by a further 10 million debentures. Rated “AA-” by Fitch Ratings debentures offered a fixed rate offering 7.85% interest rate per annum payable semi annually whilst the annual effective rate is 8% per annum.

The issue drew 22 applications requesting for Rs. 2.6 billion worth of debentures.
Payment made by cheques and RTGS amounted 19 worth Rs. 1.3 billion whilst there were three applications worth Rs. 1.3 billion with payment made by bank guarantees.

The basis of allotment would be 60% of the issue (i.e. 12 million debentures) to indentified institutional investors and to investors identified on a non-preferential basis 100% of debentures applied up to and inclusive of 100,000 debentures and those above 100,000 debentures the minimum allotment will be 100,000 debentures plus 54.6895% of the balance amount applied rounded to the nearest 100 debentures.

Financial advisors and managers to the issue was NDB Investment Bank.

During the financial year 2012/13, LION commenced a capital expenditure program to modernize and upgrade its existing production facilities. The ongoing program will enable LION to introduce latest technology and developments in the brewing techniques, which will improve productivity whilst increasing capacity.

The total cost of the capital expansion project is estimated at approximately Rs. 8 billion.

To finance the cost of the project, LION obtained short-term loan facilities amounting to Rs. 4 billion and raised Rs. 3 billion via a similar listed rated unsecured redeemable debenture issue in June 2013 with the intention of financing the remainder through internally-generated funds.

In order to benefit from the prevailing low interest rate environment, LION intends to utilise the Rs. 2 billion funds raised through this Debenture Issue to refinance part of the said short-term loan facilities. This will enable LION to reorganise the balance sheet of the company and thereby have a better mix of long-term and short-term borrowings. The short-term loan facilities LION has obtained have interest rates which are renewable on a monthly basis.

LION expects to refinance the short-term loan facilities which will have the highest interest rates at the time LION obtains the funds raised through this Debenture Issue.

With regard to the project, LION has incurred to date a total cost of approximately Rs. 5 billion and the remaining cost of approximately Rs. 5 billion is to be incurred to complete the modernisation of the production facilities together with the infrastructure and other ancillary support services. LION expects the entire project to be successfully completed within the current financial year.
www.ft.lk

Orient Finance goes for Rs. 1 b debenture

Orient Finance Plc’s Rs. 1 billion listed debenture issue will be up for grabs from Wednesday with official opening slated for 18 December.

The company will issue 10 million rated, guaranteed redeemable debentures of Rs. 100 each.

The Colombo Stock Exchange has approved in principle for listing the debenture.
Managers to the issue are First Capital Ltd.
www.ft.lk