CSE a viable option for investment

The Colombo Stock Exchange (CSE) has witnessed a number of stocks appreciate in price during the first few months of this year, with nearly 87 stocks showing an increase in price of over 5% ; of which nearly 28 stocks have shown a price appreciation of 25%. Similarly stocks within the S&P SL20 index have seen 7 stocks appreciate in price by an excess of 5%.

Furthermore, despite current market volatility in the stock market, Daily Average Turnover in 2015 is proving to be better than 2014. Market conditions are expected to improve further, with changes to the political landscape anticipated during the latter part of the year.

Investors could look at investing in the stock market prudently, and not be dissuaded by volatility; but should see current market conditions as an opportune environment to enter the market and grow their capital in the longer term. With the current low interest rates, the stock market is an alternate investment opportunity for those looking to invest their excess income.

Potential and existing investors should take into consideration that present market volatility has not dissuaded foreign investors, but rather increased their contribution to overall Market Turnover and Daily Average Turnover.

The net foreign inflow in 2015 shows a marked improvement from 2014, despite the positive performance of 2014. Foreign investors have shown an avid interest in the market this year, with the significant political changes that have taken place. The CSE intends to capitalize on this interest and conduct a series of investor forums during the course of this year.

“Despite market volatility in the first few months of this year, it is our belief that the volatility will settle and market confidence will improve in the coming months. Therefore there is significant growth potential in the stock market. Therefore, investors should take the initiative to undertake research by understanding the financial statements of companies and investing wisely by looking at fundamentals of companies and the earning potential of companies in order to maximize their profits,” Head of Market Development, CSE Niroshan Wijesundere said.

Touchwood liquidation plan before June 22 - Lands to be tendered

By Ravi Ladduwahetty

Ceylon Finance Today: Liquidator of the troubled Touchwood Investments PLC G.K. Sudath Kumar will submit a proposal for the liquidation of the company to the Colombo Commercial High Court shortly.

This is a very complex situation and I am currently negotiating with lawyer Sudath Hettiarachchi and a team of Attorneys for a suitable mechanism which will be a win-win situation for all, Sudath Kumar told Ceylon FT yesterday.

This is different to the normal Liquidation, so our lawyers are presently working to submit this plan via special motion and I am confident that we would be able to see that the liquidation plan goes through prior to the next Court hearing date scheduled for June 22nd. The mechanism for the settlement would be that the Arbitrator would be advertising for outside parties to tender for these lands, wait till the trees mature within the next 10-15 years where they will be able to transfer the lands to the company after the trees mature, Sudath Kumar said.

The company in turn, will sell the valuable trees to the market, pay the original owners and get the lands transferred back to the company.

The renderers will be allowed to grow vegetables, pepper and other crops from which they can earn money, while they will have to invest their own money to maintain the valuable trees, he said.

One of the conditions that the renderers will have to meet is that they will not be allowed to levy maintenance fees from the owners of the land, according to Sudath Kumar.

The Liquidator has already identified 100 acres of the 2300 plus acres of lands which belongs to the company.

It is very difficult to handle this liquidation process because identifying the lands is the major problem. Some are also in small blocks, which are limited to 20-30 perches and so it is very difficult to auction those blocks, he said.
www.ceylontoday.lk

The Finance to breakeven by 2016

Fizel Jabir

The Finance Company has been placed on a vigorous recovery platform and set to breakeven in the second quarter of 2016.

The company within one year has achieved a 300 % growth, company Managing Director Aruna Prasad Lekamge said at its 75th year celebrations held in Colombo.

The most remarkable achievement for the company during the recent past is its recovery after facing the results of the Ceylinco collapse. The Finance remained the leader among all financial companies until it faced a sudden descend as a result of the Ceylinco debacle in 2008.

However underpinning the strengths of the company, the Finance successfully faced the troubled period and has entered the path to recovery through a short period of time which is attributable to the prudent management of the present board of directors and the contribution by the members of staff.

The quarter July to September was exceptional and was considered the acid quarter, Executive Finance Director Ramesh Abeywickrama said. During the 2007/2008 financial year, as a result of the Ceylinco debacle TFC has to endure with a depleting asset base from Rs. 38 billion to Rs. 17.5 billion. After 05 years of recovery in 2014/15 the asset base had increased to Rs. billion, a clear indication of stability'. During the same period public deposits decreased from Rs. 28.5 billion to Rs. 20 billion in 2011/12 and today the number has bounced back to Rs. 27.7 billion - a clear indication of growing public confidence.

The troublesome period reduced the net interest income from a positive Rs. 1.5 billion to a negative Rs. 1.3 billion in 2013/14 financial year and the negative index has improved to be at Rs. 1 bn by the end 2014/15 financial year which is a clear indication of fast recovery.

Chairman Dr. S. H. A. M. Abeyrathne said TFC holds a vast pool of public goodwill, trust, integrity, and possesses a record of excellence, gained and earned over a period exceeding seven decades of service to three generations of customers.

"Our strength is the goodwill and public confidence we have earned through many decades.

It is well complimented by a dedicated workforce. I must attribute the current success to everyone's dedication in the Finance Family", Executive Director Tissa Ekanayake said.

Harder the challenges, stronger the company was the norm of the day and the advent of new management and Board of Directors steered the company towards a new era.

The many pragmatic milestones occurred from 2013 to 2015. The company has become robust and is moving on a vigorous momentum to fast recovery.
www.dailynews.lk

Union Assurance to repurchase Ordinary Shares

The Board of Directors of Union Assurance PLC (the Company) resolved on May 28, 2015 to repurchase a maximum of 26,785,714 of its Ordinary Shares at a price of Rs 167.80 per share on a Pro Rata basis of 10 shares for every 32 shares held. This would amount to a maximum value of Rs. 4,494,642,872.

The Board of Directors is of the view that the Company currently has funds that are in excess of what is required to meet its business plans and to meet the regulatory capital requirements that govern the Sri Lankan insurance industry.

Following the share repurchase, the Company will be comfortably placed to comply with the Risk Based Capital (REC) framework that is expected to be introduced on the in of January 2016.

Directors of the Company who are shareholders will not be accepting the offer. (IS)
www.dailynews.lk

Sri Lanka Inflation in May 2015

Inflation in May 2015 Inflation, as measured by the change in the Colombo Consumers’ Price Index (CCPI) (2006/07=100), which is computed by the Department of Census and Statistics, increased marginally to 0.2 per cent, on an year-on-year basis in May 2015, from 0.1 per cent recorded in April 2015. Annual average inflation declined from 2.1 per cent in April 2015 to 1.9 per cent in May 2015

CCPI increased by 0.7 per cent from April to May 2015, which was mainly caused by the increase in food prices. Prices of many vegetable varieties, fresh fish and dried fish, big onion, lime and coconut increased during May 2015. However, prices of rice, sugar, Maldive fish and some varieties of fruits recorded decreases during the month. 

Within the Non-food category, prices in the sub categories of Miscellaneous Goods and Services; and Recreation and Culture increased, while all the other sub categories, namely, Clothing and Footwear; Housing, Water, Electricity, Gas and other Fuels; Furnishing, Household Equipment and Routine Household Maintenance; Health; Transport; Education and Communication remained unchanged during the month. 

Core inflation, which reflects the underlying inflation in the economy, increased marginally to 2.6 per cent in May 2015, from 2.4 per cent in April 2015 on an year-on-year basis. 

Annual average core inflation remained unchanged at 2.9 per cent in May, compared to April 2015.

$ 100 m Development Bond draws $ 400 m demand; Govt. accepts $ 338 m

The latest issuance of $ 100 million Sri Lanka Development Bond (SLDBs) has been oversubscribed by four times, encouraging the Government to accept $ 338 million of the bids received.

The offer of $ 100 million was at a fixed or floating (six months LIBOR plus margin determined through competitive bids). The tenure was one year and one month (13 months) and two years and 11 months (35 months). The issue was open for subscription from 22 to 28 May. Demand was for floating rate with $ 359 million worth of bids received for 13 months tenure. For the 35 months option bids amounted to $ 36.86 million and the fixed rate on 13 months drew just $ 2 million.

The Government accepted $ 329 million from bids for 13 months floating rate (with weighted average margin (bps) over six month LIBOR at 316.69) and $ 9 million from 35 months at floating rate (with weighted average margin (bps) over six month LIBOR at 353.89).

www.ft.lk

Softlogic ups after tax profit by 88% to Rs. 2.4 b in FY15

Softlogic Holdings Plc yesterday announced a consolidated turnover growth of 35% to Rs. 40 billion in the financial year ended 31 March 2015 with a Rs. 11.7 billion contribution in the fourth quarter, up by 56.5% over the previous year.

Profit Before Tax recorded an exceptional growth of over 87.7% YoY to record Rs. 2.4 billion while the quarter registered a significant YoY growth of over three-fold to reach Rs. 930.5 million. Profit After Tax for the period was Rs. 2.4 billion, up 88% YoY. The quarter PAT was Rs. 747.7 million (up 263.5% YoY).

Group Gross profit increased 28.3% YoY to Rs. 14.1 billion in FY15 with quarterly gross profit recording a 35.4% YoY growth to Rs. 4.1 billion.

Operating Profit increased 73.4% YoY to Rs. 1.2 billion during 4QFY15 to read a 22.1% YoY to Rs. 4.4 billion for the full year. Operating cost margins were contained at 27% during the year despite the group’s increasing scale of operation with notable cost savings emerging during the last quarter of operations (from 32.6% to 26.2% in OP cost margins).

Other Operating Income of Rs. 1.0 billion was a result of realised mark-to-market gains on equity and Available-For-Sale portfolio at Asian Alliance Insurance Plc (Rs. 585.9 million).

Primary contributors to Group Operating Profit for the year were Healthcare Services, Financial Services, Retail and ICT. Finance Income, primarily comprising gains in Asian Alliance Insurance Plc’s investment portfolio, registered a marginal decline of 3.7% YoY to record Rs.1.1 billion during the year while the quarter reported a decline of 75.7% YoY to Rs. 135.1 million.

The latter was primarily due to mark-to-market losses in their equity and fixed income portfolio being highly sensitive to treasury/ bond market rates. Of this Rs. 944.3 million was transferred as share to life policyholders/insurance contract liabilities during the year while the quarter recorded a transfer of Rs. 194.2 million.

Finance Expenses increased marginally by 3.5% to Rs. 2.8 billion during the period with market interest rates continuing to decline. Consequently, net consolidated finance expenses reduced by 9.0% YoY to Rs. 1.6 billion for the year.

A gain of Rs. 513.4 million was recorded as change in fair value of investment property of Asiri Central Hospital at Horton Place during the quarter.

Softlogic said the FY15 marked its pivot with the acquisition of Odel Plc to ensure greater synergy and breath. Critical management input and restructuring expertise both have seen the retailer rapidly and efficiently moving out of operating losses incurred the previous year to a healthy operating profit after six months of Softlogic’s acquisition of this entity.

“With Movepick City Hotels targeted for completion early 2016, this would significantly unlock cash flows and improve revenues and contributions to the Group. With most sectors demonstrating promising results at this stage, a wave of growth expectations is clearly visible for the upcoming periods,” Softlogic added.
www.ft.lk

NSB ups 1Q pre-tax profit by 32% to Rs. 3 b

National Savings Bank said yesterday it has increased its first quarter profit before tax by 32% to Rs. 3 billion. 

“This is despite a Rs. 1.1 billion one off gain reported during 1Q last year. Therefore, on an organic business as usual basis, the growth is most impressive at 137%,” NSB added.

Net interest income of the bank increased by 73% to Rs. 6,968 million in 1Q 2015 as compared to Rs. 4,026 million recorded for 1Q last year. Total operating income comprised of net interest income, net gain from trading and financial investments and other income, increased by 21% to Rs. 6,792 million from Rs. 5,635 million recorded in correspondent period last year. While net operating income increased by 26% to Rs. 6,166 million from Rs. 4,891 million recorded in 1Q 2014.

Net interest margin also improved to 3.56% by end of March 2015 from 2.98% recorded at the end of 2014. Also return on average assets (before tax) increased to 1.52% as at 31 March 2015 from 1.46% recorded as at 31 December 2014.

The bank also witnessed a positive change in deposit mobilisation mix during the first three months of the year and total mobilisation for the period was 6,036 million which consisted of Rs. 5,612 million savings deposits. Total deposits of the bank stood at Rs. 558 billion at the end of 1Q 2015.

Total loans and receivables recorded a growth of 5.4% during the first quarter when excluded the negative growth of pawning advances and with pawning advances growth rate was 3.9%. Total assets of the bank stood at Rs. 785.2 billion at the end of 1Q, 2015.

In another positive change the bank’s gross and net Non-Performing Loans (NPL) ratios stood at 7.19% and 6.76% respectively down from 7.80% and 7.38% at the end of 2014.
The bank’s Tier 1 capital adequacy ratio reduced from 20.46% to 19.93%, while total capital adequacy for the reviewed quarter reduced to 18.45% from 18.98%. These ratios however, remain well above the regulatory standards for well capitalised banks. Liquidity ratio of the Bank stood at 83.24% by the end of March 2015, which is well above the regulatory requirement of 20%.

Widening its reach, the bank opened four new branches at Thambiluvil, Periyakallar, Galenbindunuwewa and Horowpathana increasing the total branch network of the bank to 240 as at 31 March 2015. The bank is scheduled to open several more branches in under penetrated areas going forward as well.
www.ft.lk

CB successfully raises $ 650 m; global investor appetite swells to $ 2b

The Central Bank on behalf of the Government successfully launched and priced a US$ 650 million 10-year International Sovereign Bond (Issue) at a yield of 6.125% per annum.

It said the Issue represents the eighth US Dollar benchmark offering in the international bond markets by Sri Lanka since 2007.

Citigroup Global Markets Inc., Deutsche Bank, The Hongkong and Shanghai Banking Corporation Limited and Standard Chartered Bank acted as Joint Lead Managers/Bookrunners on the transaction.

Fitch Ratings, Moody's Investors Service and Standard and Poor’s have rated the Issue at 'BB-', ‘B1’ and ‘B+' respectively.

The Issue was announced during the Asia morning on May 28, 2015 with an initial price guidance of 6.375% per annum. The order books grew steadily, allowing Sri Lanka to price the Issue at a yield of 6.125% or a spread of 397.7 bps vs the 10-year US Treasury.

The compression in yield of 25 basis points reflects the continued confidence that the international investors have placed in the sovereign bond issuance of Sri Lanka.

"The final order books stood at US$ 2 billion, an oversubscription ratio of 3.08 times, from 173 accounts," the Central Bank said.

Distribution was very well diversified, with Asia taking 23%, Europe 27% and the US at 50%. Global Fund Managers were the largest investors in the transaction, representing 79%, with Banks, Pension Funds/Insurance and Private Banks taking 9%, 7% and 5% respectively.

Central Bank said with this transaction, this Issue represents the first Sovereign Bond Issue for Sri Lanka in the international capital markets in 2015, post the change in government.

"This Issue also succeeded in achieving a ten-year cost of funds which is inside the current Sri Lanka US$ secondary levels and at tighter spread vs the US Treasury compared to the last ten-year Sri Lanka US$ in 2012. This achievement is all the more impressive, given the recent volatility in US Treasury yields and anticipated Fed rate hike later this year," the Central Bank added.
www.ft.lk

Sri Lankan shares fall to near 3-week low

May 29 Sri Lankan shares ended near a three-week low on Friday led by large-caps and foreign selling in blue-chips while investors cautiously bought the island nation's risky assets due to political uncertainty ahead of a parliament poll.

The main stock index ended 0.49 percent weaker at 7,220.29, near its lowest close since May 11.

Foreign investors sold a net 188.4 million rupees ($1.41 million) worth of shares on Friday, extending foreign outflows to 1.49 billion in the last four sessions. But the bourse has seen net inflows of 4.45 billion rupees in equities so far this year.

Turnover was 1.26 billion rupees, higher than this year's daily average of about 1.14 billion rupees.

Political uncertainty due to the Ranil Wickremesinghe-led government not having a majority has been a drag on the market, though the trend reversed after the central bank cut key monetary policy rates to record lows on April 15.

The index has gained 4.6 percent since the rate cut.

Large-cap Ceylon Tobacco Company fell 3.3 percent while market heavyweight John Keells Holdings and top lender Commercial bank of Ceylon lost 2.5 percent and 0.8 percent respectively on foreign selling.

President Maithripala Sirisena's government has said it would dissolve parliament once some crucial reform bills are passed. But it has not scheduled the date for the election.

Analysts say investors hope a new stable government after the election coupled with strong economic measures would boost confidence. 

($1 = 133.9000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Sunil Nair)

Sri Lankan shares end steady despite foreign selling

May 28 Sri Lankan shares ended steady near a two-week low on Thursday as local buying offset foreign selling in blue-chips.

Stockbrokers, however, said that most investors have been cautiously optimistic in a lower interest rate environment as concerns about political stability and the timing of a parliamentary election weigh on sentiment.

The main stock index ended a tad firmer, up 0.03 percent to 7,255.71, and near its lowest close since May 14 hit in the previous session.

Foreign investors sold a net 451.3 million rupees ($3.4 million) worth of shares on Thursday, extending foreign outflows to 1.13 billion in the last three sessions. But the bourse has seen net inflows of 4.63 billion rupees in equities so far this year.

Turnover was 1.38 billion rupees, beating this year's daily average of about 1.14 billion rupees.

Among the gainers, Distilleries Company of Sri Lanka Plc rose 2.87 percent, while Bukit Darah Plc added 1.2 percent.

Political uncertainty due to the Ranil Wickremesinghe-led government not having a majority has been a drag on the market, though the trend reversed after the central bank cut key monetary policy rates to record lows on April 15.

The index has gained 5.2 percent since the rate cut.

Analysts say a new stable government after the election coupled with strong economic measures would boost confidence.

($1 = 133.9000 Sri Lankan rupees) (Reporting by Shihar Aneez; Editing by Prateek Chatterjee)

Sri Lanka Treasuries yields edge lower at auction

COLOMBO (EconomyNext) - Sri Lanka's Treasury bill yields eased across maturities at Wednesday's auction with the 12-month yield falling 02 basis points to 6.29 percent, data from the state debt office showed.

The 03-month yield fell 01 basis points to 6.07 percent and the 6-month yield also fell 01 basis point to 6.18 percent.

The debt office sold 10.1 billion rupees of 3-month bills, 13.4 billion rupees of 6-month bills and 4.3 billion rupees of 12-month bills totalling 27.9 billion rupees.

The debt office, which is a unit of the Central Bank offered 21 billion rupees of bills for sale.

MTD Walkers posts impressive profit increase

MTD Walkers PLC for the year ended March 31, 2015 posted Rs. 1.148 billion profit after tax on a revenue of Rs.14.014 billion, up from Rs. 10.092 billion last year.

This is its sixth consecutive year of 39.1% compound annual revenue growth, ending the year posting a 91.0% growth in profit after tax.

“As we head into a new financial year, we are confident that our interest in the fields of infrastructure related diversification and continued focus on our core areas will yield us strong growth across our businesses as we look to maintain and build on our industry leading position,” MTD Walkers Executive Deputy Chairman Jehan Amaratunga said.

MTD Walkers recently acquired Wincon Development Ceylon (Private) Limited, a property development company registered with the Board of Investment of Sri Lanka, for the purpose of residential property development for both public and private sector.

“Acquiring this through the Rs. 2.4 billion rights issue completed in Q4 2015 has completely restructured our balance sheet and we are now ready to support our planned diversification strategy in property development and marine engineering,” Amaratunga said.

“Despite the market remaining competitive and challenging, the company continued to deliver consistent growth and an increase in profit after tax from 6.0% in 2014 to 8.2% in 2015. To ensure our long-term sustainable success we invested in effective management, cost control measures, innovative engineering and building capabilities of our people,” MTD Walkers Group Chief Financial Officer Viraj De Silva said .
www.dailynews.lk

Central Finance Rs 3 b debenture oversubscribed

The issue of Central Finance Company's 30,000,000 Rated Secured Redeemable Debentures for the value of Rs 3 billion has been oversubscribed.

Therefore, the issue was closed at 4.30 p.m. yesterday as per the Prospectus. The basis of allotment will be notified to the CSE in the due course.
www.dailynews.lk

Dealers report increase in car sales in past twelve months

Carmudi launched its white paper on ‘The Booming Automotive Industry in Emerging Markets’ yesterday.

The Carmudi study found that 70% of car dealers in Sri Lanka reported an increase in car sales over the past twelve months due to the changing economic climate, while 20% of car dealers surveyed reported a decrease.

The findings in this report are the result of Carmudi’s surveys conducted online with both car buyers and car dealers, and in-depth interviews with industry influencers throughout Sri Lanka.

New motor vehicle registrations in 2011 jumped 46% higher than the previous 12 months. Import duties were revised in 2012 to regulate the rising motor vehicle imports, presenting a

The motor industry in Sri Lanka has witnessed a number of changes in recent years. Prices fell sharply in 2010 due to cutback of duty charges, which resulted in a surge of vehicle imports.

New motor vehicle registrations in 2011 jumped 46% higher than the previous 12 months. Import duties were revised in 2012 to regulate the rising motor vehicle imports, presenting a major impact on the volume of imports.

Global automotive sales for 2015 are expected to reach close to $89M, a 2.4% growth from 2014. Emerging markets’ share of global sales will rise from 50% in 2012 to 60% by 2020, while their share of global profits is also set to rise by 10%. When it comes to new cars, purchase intent is strongest in Asia, where 65% of respondents say they will buy new cars in the next two years, compared with 7% who plan to buy used cars.

The President of Sri Lanka’s Vehicle Importers Association stated to the media that reductions up to Rs. 300,000 for the prices of vehicles with 1000cc or less engine capacities are in the plans.

These plans were later executed in hopes of reviving the sluggish attitude of the overall motor sector and to allow all motor sector players a positive impact.

Car dealers in Sri Lanka have reported that over 30% of car buyers mentioned turning to the Internet and 10% of car buyers are turning to dealer sites when researching for cars. Car dealers also reported that 60% of car buyers are still using offline media such as newspaper classifieds as a source of information when searching for a car.
www.dailynews.lk

BoC starts the year with Rs.4.4 bn PBT for 1Q 2015

After completing its 75th anniversary year with a commendable achievement of Rs.20.3 billion PBT, BoC has reported Rs. 4.4 billion PBT for the 1Q 2015 by achieving a 15% growth over 1Q of the previous year. Profit After Tax (PAT) stood at Rs.3.0billion resulting 15% growth. The Group reported Rs.4.3 billion PBT resulting in a 10% growth over the corresponding period of the previous year and the Bank dominates the results of the Group accounting for 96% of earnings and 97% of the Group’s assets.

A press release said: ‘PBT has mainly accelerated due to increased net interest income and fee income. The Bank has been able to achieve lower interest expenses through improved CASA mix (Current Account and Savings Account to total deposits) resulting in a 34% increase in net interest income over 1Q 2014.Net fee and commission income have also increased by 25% to Rs. 2.1 billion contributing 14% to total operating income.

‘Impairment charge on loans and advances has increased by 17% to Rs.3.9 billion mainly due to increase in individual impairment compared to that of the corresponding period of 2014. However, collective impairment provision showed a marginal increase of 6% reflecting quality of the portfolio and prudential methods adopted in credit management.

‘Preserving its position as the first domestic bank to achieve a trillion assets Balance Sheet the Bank’s assets grew by 5% to Rs.1.4trillion as of end March 2015.Loans and advances accounted for 58% of the Bank’s assets base and gross loans stood at Rs.845.5 billion as at end 1Q 2015 and showed a marginal growth of 9% recovering from the slower credit growth that prevailed during last year. Deposits accounted for 70% of the Bank’s liabilities as at the end of 1Q 2015 and showed a slight decrease compared to end 2014.

‘As at end of 1Q 2015 the Bank’s Return on Average Assets (ROAA) ratio stood at 1.3% and Return on Average Equity (ROAE) ratio stood at 15.7% indicating slight dip compared to end 2014 mainly due to increased assets base and the Rs. 5 billion capital infusion made in December 2014. Meanwhile cost to income ratio showed an improvement from 42% to 39% in line with the improved operational efficiencies.

‘The Bank’s domestic liquid asset ratio was 26.6% as at the end of 1Q 2015 while the off-shore liquid asset ratio was 31.7%. Both ratios stand well above the Central Bank’s required benchmark of 20%.The Bank managed to maintain a better trade off between liquidity and interest earning assets continuously under the excess liquidity scenario which prevailed last year. Capital infusion of Rs. 5 billion and issue of Rs.8 billion debentures helped to improve Tier I and Tier II Capital Adequacy Ratios (CAR) as of end 2014. The Bank managed to sustain CAR by maintaining Tier I at 8.6% and Tier II at 12.4% levels against the Central Bank’s minimum requirements of 5% and 10% respectively.

‘ In view of the promising results and the strong fundamentals, it is anticipated that the Bank will be able to sustain the ratings it currently possesses. While we deploy strategies to implement our Corporate Plan for the year 2015 by capturing the growing in credit demand, we will continue to invest in developing the human capital and technological infrastructure to enhance robustness, efficiency and effectiveness in all areas of the Bank. www.island.lk

First Capital Holdings successfully concludes 2014/15 with solid financial performance

First Capital Holdings PLC has reported notable growth in performance during the 2014/15financial year. The company has recorded a consolidated profit after tax of LKR 997Mn for the year 2014/15. The results reflect anincrease of 200% from the previous financial year.

Reflecting on the results, Chief Executive Officer of First Capital Holdings PLC, Dilshan Wirasekara, said: "We are delighted with our financial performance and remarkable business momentum during the past year and will endeavour to keep raising the bar for investment banking services in Sri Lanka. Our commitment towards becoming the country’s leading investment bank has beenvalidated over the year through our performance, management discipline and perpetual emphasis on ethics".

First Capital Holdings PLC comprises of First Capital Treasuries Limited, First Capital Asset Management Limited, First Capital Equities (Private) Limited, First Capital Markets Limited and First Capital Limited. The Group’s largest subsidiary, First Capital Treasuries Limited, was the prime contributor towards the Group’s Net Earnings (Net Profit after Tax) for this year. First Capital Treasuries Limited capitalized on opportunities arising from the continuous decline in secondary market interest rates and realized net trading gains of LKR 900Mn during the period under review. This is a significant increase in comparison to LKR 227Mn reported during the previous year. First Capital Treasuries Limited also fortified its long term capital base (Tier II) through a Listed Debenture Issue of 500Mn in the fourth quarter of the financial year.

Recording its highest ever fee income, First Capital Limited mobilized LKR 22Bn through corporate debt for its clients during the financial year under review. The company reported a fee income of LKR 124Mn during 2014/15, reflecting almost a 3.2 times growth from the previous year. First Capital Limited also achieved significant milestones during 2014/15. The company recorded its largest ever listed debenture issue of LKR 5Bn; managed its largest asset backed securitization of LKR 1Bn and reported its first private equity placement of LKR 100Mn. During the year 2014/15, the company became the leader in managing listed corporate debentures through its management of listed debenture Issues worth LKR 10Bn. The Group’s other subsidiaries also reflected positive growth over the period under review. The Group’s investment management arm, First Capital Asset Management Limited, reported assets under management amounting to LKR 4.2Bn as at 31 March 2015 compared to LKR 1.3Bn the previous year. As per industry reports,  First Capital Wealth Fund was recognized as the  best performing Fixed Income Fund in Sri Lanka  for the second consecutive year, with a return of 15.48% (31 March 2015).
www.island.lk

Sri Lankan shares down for second day; Lanka IOC drags

May 27 Sri Lankan shares fell for a second session on Wednesday led by Lanka IOC after its poor performance in the March quarter, and also on foreign outflows, stockbrokers said.

However, most investors have been cautiously optimistic on the island nation's risky assets due to a lack of clarity on the political front and the timing of a parliamentary election as concerns over stability weighed on sentiment.

The main stock index ended down 0.11 percent at 7,253.50, the lowest close since May 14.

"The index will be moving zig-zag until you see some kind of positive news on political stability," a stockbroker said.

Political uncertainty due to the Ranil Wickremesinghe-led government not having a majority has been a drag on the market, though the trend reversed after the central bank cut key monetary policy rates to record lows on April 15.

The index has gained 5.2 percent since the rate cut.

Analysts say a new stable government after the election coupled with strong economic measures would boost confidence.

Foreign investors sold a net 482.3 million rupees ($3.60 million) worth of shares on Wednesday. But the bourse has seen net foreign inflows of 5.09 billion rupees in equities so far this year.

Turnover was 1.49 billion rupees, more than this year's daily average of about 1.13 billion rupees.

Lanka IOC, which last week posted a 1.06 billion rupee loss in the March quarter compared to a profit of 722.8 million rupees in the same period last year, fell 5.97 percent to 29.90 rupees, its lowest close since Nov. 28, 2013.

Stockbrokers said they had been expecting a better performance from Lanka IOC during the March quarter.

Analysts expect banking and financial shares to gain due to rising private sector credit growth, which grew 13.9 percent on-year in March from 12.6 percent in February. 

($1 = 133.9000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Sunil Nair)

Fitch rates Singer Finance's senior debt final 'BBB(lka)'

Fitch Ratings has today assigned Sri Lanka-based Singer Finance (Lanka) PLC's (SFL; BBB(lka)/Stable) senior secured debt a final National Long-Term Rating of 'BBB(lka)'. The final rating is at the same level as the expected rating assigned on 18 February 2015.

On 21 May 2015, SFL signed the trust deed to issue up to Rs1.5billion of senior secured debentures. The proposed issuance will have a maturity of five......years with bullet principal repayment at maturity. Coupon payments will be at a fixed rate, and paid annually.

SFL expects to use the proceeds to fund lending growth, lengthen maturities of its liabilities, and reduce structural maturity mismatches. The debentures are to be listed on the Colombo Stock Exchange.

KEY RATING DRIVERS
NATIONAL RATINGS AND SENIOR DEBT
The issue has been rated at the same level as SFL's National Long-Term Rating. Fitch has not provided any rating uplift for the colateralization as the secured notes' recovery prospects are considered to be average and comparable with those of unsecured notes in a developing legal system.

SLFL's rating reflects Fitch's view that support would be available from its parent, Singer (Sri Lanka) PLC (Singer; A-(lka)/Stable), if needed. This view is based on Singer's majority shareholding and board representation on SFL, the common Singer brand and a track record of support from Singer through equity injections and funding lines.

SFL's National Long-Term Rating is underpinned by its standalone credit profile, which reflects better capitalisation levels, modest profitability and satisfactory asset-quality when compared with similarly rated domestic peers.

RATING SENSITIVITIES
NATIONAL RATINGS AND SENIOR DEBT
Any changes to Singer Finance (Lanka) PLC's (SFL) National Long-Term Rating would impact the issue's rating. As such, the issue rating is sensitive to changes to Fitch's view on Singer (Sri Lanka) PLC's (Singer) ability and propensity to provide support to SFL. A weakening in SFL's intrinsic strength would only trigger a downgrade of its National Long-Term Rating if Fitch's support assessment were to change at the same time.

Fitch believes that an upgrade for SFL would most likely result from a significant increase in SFL's strategic importance to Singer. Positive rating action could also result if SFL develops its franchise, while maintaining its financial profile relative to higher-rated peers. 

www.ceylontoday.lk

Arpico Insurance renamed

Arpico Insurance Company has been renamed as Arpico Insurance subsequent to the entity being listed on the Dirisavi Board in the Colombo Stock Exchange. This is with effect from January 16, 2015.

The company annual general meeting will be held on June 26, at their Navinna office.
www.dailynews.lk

Textured Jersey to buy Quenby for US$ 3.5 m

Textured Jersey Lanka has decided to proceed with the acquisition of Quenby Lanka Prints for US$ 3.5 million.

The entire consideration is due to be paid out in cash to the shareholders of Quenby Lanka in order to acquire the shares of the company.

Quenby Lanka, a 50%-50% joint venture between Brandix Lanka Limited and Trust Family industries, , is a leading Fabric Printer based in Sri Lanka. Quenby Lanka is registered with the Board of investments of Sri Lanka and its facility is located on 4.4 acres of land in the Seethawaka International Industrial Park, in close proximity to TJL.

"In addition to the printing capability enhancement for TIL, the acquisition also offers potential for further capacity optimization and margin improvement through synergies. As a strategically located vendor, over the years Quenby Lanka has developed a strong working relationship with TJL," an official from Textured Jersey said.
www.dailynews.lk

United Motors Lanka property value increases on revaluation

The Board of Directors of United Motors Lanka PLC approved a report dated 22 May 2015 on the lands and owned and occupied by the company.

The properties on which the report has mentioned are the ones at Hyde Park Corner, Colombo 02, Majeed Place, Orugodawatte, Vauxhall Street, Colombo 02, Maligawa Road, Ratmalana and Kandy Road, Navatkuli, Jaffna.

Following this revaluation the value of the owner occupied lands increased to Rs. 3,879,590,350 and adopted by the Board as fair value of owner occupied properties and hence the surplus of Rs. 1,733,106,312 has been transferred to then revaluation account as at 31 March 2015.
www.adaderana.lk

Sri Lanka's John Keells Holdings net up 12-pct on capital gains

COLOMBO (EconomyNext) – Profits at Sri Lanka's John Keells Holdings, which has interests in ports, tourism, financial services and consumer goods rose 12 percent to from a year earlier to 5.2 billion rupees in the March 2015 quarter helped by capital gains from the sale of stock in an insurer, interim accounts showed.

The group reported earnings of 5.24 rupees for the quarter. In the year to March the firm reported earnings of 14.44 rupees on total profits of 14.3 billion rupees which grew 22 percent.

The firm had not provided for any tax from retrospective tax 25 percent extra income tax slapped by the new administration.

Revenues barely grew 1 percent to 22.6 billion rupees and cost of sales was also flat at 15.9 billion rupees allowing gross profits to be flat at 6.7 billion rupees.

Administration expenses fell to 1.9 billion rupees from 2.3 billion rupees and other operating income rose 37 percent to 1.8 billion rupees.

Early in 2015, JKH sold a part of its general insurance unit at a capital gain.

Net finance income also fell 9 percent to 1.32 billion rupees.

Sri Lankan shares down on profit-taking, foreign outflows

May 26 Sri Lankan shares fell on Tuesday due to foreign outflows and as investors took profits in stocks that had rallied since the central bank's policy rate cut, stockbrokers said.

However, investors awaited clarity on the political front and the timing of a parliamentary election as concerns over stability weighed on sentiment.

The main stock index ended down 0.32 percent at 7,261.78, the lowest close since May 18.

"Investors are eagerly waiting for the announcement on the election and hope for a stable government," a stockbroker said on condition of anonymity.

Political uncertainty due to Prime Minister Ranil Wickremesinghe-led government not having a majority has been a drag on the market, though the trend reversed after the central bank cut key monetary policy rates to record lows on April 15.

The index has gained 5.3 percent since the rate cut.

Analysts say a new stable government after the election coupled with strong economic measures would boost confidence.

Foreign investors sold a net 370.7 million rupees worth of shares on Tuesday. But the bourse has seen net foreign inflows of 5.57 billion rupees in equities so far this year.

Turnover was 1.18 billion rupees ($8.8 million), just above this year's daily average of about 1.13 billion rupees.

Carson Cumberbatch Plc lost 6.7 percent, while Ceylinco Insurance Plc fell 6.2 percent.

Shares of market heavyweight John Keells Holdings, which posted a 12 percent growth in its March quarter net profit, closed 0.1 percent up.

Keells announced a share split of seven subdivided into eight, the company said in a statement, boosting liquidity in the market.

Analysts expect banking and financial shares to gain due to rising private sector credit growth, which grew 13.9 percent on-year in March from 12.6 percent in February.

($1 = 133.9000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Prateek Chatterjee)

Gold struggles near $1,200

Gold was trading close to its lowest level in over a week on Monday after Federal Reserve Chair Janet Yellen indicated the U.S. central bank was likely to raise interest rates this year and as the dollar strengthened to its highest in a month.

Spot gold was little changed at $1,205.06 an ounce by 0637 GMT, close to $1,201.20, the metal's lowest since May 13 reached in the previous session.

Yellen was clearer than ever on Friday that the

central bank was poised to raise interest rates this year, as the U.S. economy was set to bounce back from an early-year slump and headwinds at home and abroad waned.

“Yellen's comments and the positive impact it has had on the dollar is not helping gold,” said a trader in Singapore.

Reuters
www.dailynews.lk

Sunshine Holdings achieves above average growth in key segments

Sunshine Holdings posted a consolidated revenue of Rs. 16.3 billion in FY15, an improvement of 11.1% year-on-year (YoY).

Key business segments, particularly Healthcare and Agribusiness, grew above industry averages despite challenging conditions.

“Despite the challenging conditions in many of our key segments, we were successful in increasing revenue growth above industry averages; this healthy financial performance underscores Sunshine Holdings’ solid fundamentals,” Sunshine Holdings Group Managing Director, Vish Govindasamy said.

“The company’s visionary strategic initiatives are continuing to pay dividends in boosting long-term growth - such as the diversification into palm oil - and we remain optimistic about future prospects, despite potential future challenges.”

There was growth across the board; fast moving consumer goods (FMCG), healthcare and agribusiness revenues grew at 20.4%, 10.2% and 9.6% respectively YoY; group profit after tax (PAT), however, was affected partially by goodwill written off (Rs. 62 million) and declined by 10.4% to Rs. 1,047 million for the financial year ended March 31, 2015. Net asset value per share of the company increased to Rs. 39.23, compared to Rs. 36.23 at the beginning of the year (FY14), Profit to equity holders (PATMI) was down 21.1% YoY to Rs. 542 million at group level.

The EBIT (earnings before interest and tax) margin experienced a marginal contraction, to 8.7% in FY15 from 10.9% in FY14; improved margins in the FMCG segment were offset by a contraction of margins in the Agribusiness and Healthcare sectors because of unfavourable market conditions.

Healthcare, which accounted for 37.2% of the group’s turnover for the period, posted strong revenue growth at 10.2% YoY to Rs. 6.1 billion; however, stagnation in overall market growth, according to IMS data adversely impacted the pharma segment (which accounted for 67.3% of Healthcare revenue in FY15).

Despite difficult market conditions, revenue from pharma grew 9.7% YoY to Rs. 4.1 billion while Surgical, Retail, Diagnostics and Wellness sub-sectors expanded 18.1%, 14.9%, 9.7% and 3.5% YoY.
www.dailynews.lk

PM calls for full report on past deals of CB

By Chamodi Gunwardana

Prime Minister Ranil Wickremesinghe has called for a full report on all past transactions of the Central Bank immediately.

The directive was given to the Central Bank Governor Arjuna Mahendran and the Monetary Board. The detailed report has to be submitted to the Ministry of Policy Planning and Economic Affairs under whose purview the Central Bank now functions.

The Ministry will thereafter hand over that report to the Committee on Public Enterprises (COPE) as well as the special committee appointed to probe capital market and relevant institutions headed by Harsha Sosa for further analysis.
www.ft.lk

Aitken Spence PAT up 6.6% to Rs. 4.9 b in FY 15

Blue chip conglomerate Aitken Spence PLC yesterday announced its profit after tax in the financial year ended on 31 March 2015 has increased by 6.6% to Rs. 4.9 billion.

Profit before tax amounted to Rs. 5.7 billion a growth of 4.9% over the previous year. The diversified Group’s annual revenue rose a marginal 0.7 percent to Rs. 35.3 billion whilst earnings per share declined by 2.5% to Rs. 8.82 for the financial year.

“Although this year has been a difficult year in terms of performance, it must be noted that while riding the wave of external challenges, we have turned inwards to strengthen ourselves to reap the opportunities of the future. We are thus optimistic about the future growth of the Company,” said Aitken Spence PLC’s Chairman Deshamanya D.H.S. Jayawardena.

“Aitken Spence has recorded another year of resilient performance. Diversification held the Group in good stead in 2014/15, to grow amidst challenging global economic conditions and intense competition,” Aitken Spence Deputy Chairman and Managing Director J.M.S. Brito said.

The revenue of the tourism sector for the financial year grew by 5.1% to Rs. 17.8 billion whilst recording a profit before tax of Rs. 4.2 billion and a profit after tax of Rs. 3.7 billion, a decline of 2.2% and 1.2% respectively, for the year.

The decline in tourism sector bottom line was mainly due to the decline in profits from hotels in Sri Lanka and overseas which was primarily attributable to the adverse impacts of the global political and economic climate. The company owns and manages a chain of hotels in Sri Lanka, Maldives, Oman and India.

The Group’s destination management segment performed remarkably well. Aitken Spence Travels is Sri Lanka’s largest destination management company which during 2014/15, became the first and only company to handle 100,000 tourists to the country within a financial year.

“The coming year will be an exciting one for the sector, as we add Heritance Negombo to our portfolio and also expand capacity at The Sands, Kalutara by 91 rooms. Construction of the RIU Hotel in Ahungalla is well on target and we are excited by the possibilities offered by our partnership with RIU, and its parent company TUI,” added Brito.

Annual revenue for the Maritime Logistics sector increased by 3.9% to Rs. 7.7 billion whilst profits before tax increased by 4.3% to Rs. 735 million and profit after tax increased by 8.1% to Rs. 614 million. The Maritime and Logistic sector experienced weaker performances from the freight forwarding and the logistics segments whilst overseas investments performed well.

Strategic Investments sector’s profits surged during the year, with profit before tax swelling by 207% and profit after tax rising by 341% to Rs. 613 million and Rs. 509 million respectively. However, the sector reported a year-on-year decrease of 6.4% in revenue to Rs. 15.2 billion mainly due to the reduction in revenue from the power segment. The sector’s printing and garments segments have reported exceptional performances.

The Company expanded the garment sector’s production capacity by up to 40% during the period under review, by commissioning a new environment-friendly production facility in Koggala. The plant was built in four months and will create 750 jobs once in full operation.

The Plantations segment reported outstanding results driven by an efficient diversification initiative. The Power generation segment also showed an increase in profits compared to the previous year due to the sale of two idling power plants which resulted in a lower cost of maintenance.

Services sector reported a revenue of Rs. 1.1 billion for the financial year which was a growth of 15.1%. The sector’s profit before tax stood at Rs 132 million, a decline of 38% compared to the previous year. Profit after tax reported a drop of 52% to Rs. 83 million.

Except for insurance, elevators and property businesses, the other segments within the sector recorded disappointing performances. The relatively nascent information technology segment accounted for a significant share of the losses in this sector. The company has addressed the poor performance by restructuring the company, which is expected to lead to a better performance in the next financial year.

With a history spanning 150 years, Aitken Spence PLC is among Sri Lanka’s leading and most respected corporate entities with operations in South Asia, the Middle East, Africa and South Pacific. Listed in the Colombo Stock Exchange since 1983, it is an industry leader in hotels, travel, maritime services, logistics, power generation and printing, with a significant presence in plantations, apparel, financial services, insurance and information technology.
www.ft.lk

Access Engineering posts solid performance in FY15

Access Engineering PLC released its unaudited results for the financial year 2014/15 to the Colombo Stock Exchange on 22 May.

Accordingly, turnover at the Company level for the year ended 31 March 2015 was recorded at Rs. 11.2 b with an after tax profit attributable to shareholders of Rs. 1.8 b.

Top line for the fourth quarter of 2014/15 FY was recorded at Rs. 2.5 b with a corresponding profit of Rs. 316 m. During the quarter under review the Company further expanded its operations overseas with the opening of its East Africa Branch Office.

At the Group level, turnover for the year was recorded at Rs. 16.4 b with an after tax profit of Rs. 2.5 b. During the year under review the Company’s 100%-owned subsidiaries Access Realties Ltd. and Access Projects Ltd. have contributed approximately Rs. 312 m and Rs. 156 m respectively to the bottom line.

The Company’s 84%-owned subsidiary Sathosa Motors PLC has contributed Rs. 278 m to the bottom line while the contribution from its 30% Associate undertaking, ZMPC Lanka Ltd., amounted to approximately Rs. 12 m.

The total asset base of the Group stood at Rs. 22.67 b with approximately Rs. 2.9 b held in short-term deposits and cash. Equity attributable to owners of the Company of Rs. 16.3 b at the Group level translates into a net asset per share of Rs. 16.3, a growth of approximately 10% since 31 March 2014. During the year the Company also invested approximately Rs. 714 m in building its capacity.

The Board of Directors of AEL comprises Sumal Perera (Chairman), Christopher Joshua (Managing Director), Rohana Fernando (COO), Shevantha Mendis, Dharshana Munasinghe, Ranjan Gomez, Dilhan Perera, Professor Malik Ranasinghe, Niroshan Gunarathna and Dinesh Weerakkody.
www.ft.lk

JKH goes for share subdivision

Premier blue chip John Keells Holdings (JKH) yesterday announced a subdivision of the Ordinary shares in the proportion of eight for every seven shares held.

In a filing to the CSE after the market closed, JKH said that its Board of Directors resolved to recommend to shareholders to increase the number of shares in issue through a subdivision of seven shares into eight.

On this basis the 997,486,491 shares in issue will be increased to 1,139,984,561.

The subdivision will result in an adjustment in the number of warrants accruing to the holders of 2015 Warrants and 2016 Warrants and their respective purchase prices will be adjusted to take into account the subdivision so that the respective warrant holders receive a revised number of shares which he or she would have owned or have been entitled to receive after the division, had such a warrant been exercised prior to the subdivision.

The 43,995,994 2015 Warrants in issue will be adjusted so that after the subdivision 50,281,136 2015 Warrants will be in issue and the existing purchase price of Rs. 185 be adjusted to Rs. 161.87.

The 43,995,994 2016 Warrants in issue will be adjusted so that after the subdivision 50,281,136 2016 Warrants will be in issue and the existing purchase price of Rs. 195 be adjusted to Rs. 170.62.

The moves are subject to shareholder approval at an EGM. 
www.ft.lk

Sri Lankan shares little changed amid political concerns

May 25 Sri Lankan shares were little changed on Monday as investors awaited clarity on the political front and the timing of a parliamentary election as concerns over political stability weighed on sentiment, stockbrokers said.

The main stock index ended down 0.05 percent at 7,284.76.

"There was some profit-taking in those counters which went up last week," said Dimantha Mathew, research manager at First Capital Equities (Pvt) Ltd. "Turnover is low as investors are awaiting the announcement of the parliamentary election."

Analysts said a new stable government after the parliament election with some strong economic policy measures would boost confidence.

Turnover was 763.3 million rupees ($5.71 million), below this year's daily average of about 1.13 billion rupees.

Foreign investors were net buyers on Monday, ending three straight sessions of outflows. They bought 77.5 million rupees worth of shares on Monday, extending the year-to-date net foreign inflow to 5.94 billion rupees.

Shares in biggest listed lender Commercial Bank of Ceylon Plc fell 2.02 percent, while shares in Distillers Sri Lanka Plc fell 3.11 percent.

Analysts expect banking and financial shares to gain due to rising private sector credit growth, which grew 13.9 percent on-year in March from 12.6 percent in February.

Political uncertainty due to the Prime Minister Ranil Wickremesinghe-led UNP not having a parliament majority has been a drag on the market, though the trend reversed after the central bank cut key monetary policy rates to record lows on April 15.

The index has gained 5.6 percent since the rate cut. 

($1 = 133.7000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

Brand new SEC act in 2016

By Ishara Gamage

Ceylon Finance Today: Sri Lanka will introduce a totally new Securities and Exchange Commission (SEC) Act before the end of 2016, SEC Chairman Thilak Karunarathne told Ceylon FT yesterday.

This will totally replace the earlier amendments, which were scheduled to be incorporated in the SEC Act some years ago. "I have three major tasks at the moment. 

Firstly we have to replace our existing act to broad base our regulatory scope. Secondly, we are on the process of establishing a steering cooperation system to mitigate our market's systematic risks, at present, which is poorest in the region. We also have to expedite our market demutualization process, as well, which we hope to finish in 2016, he said. The SEC has also appointed two of its commission members to oversee the new SEC law amendments.

They are experts in Corporate Law and Securities Law, Karunaratne said.
Presently, we are studying the Securities and Exchange Commission Acts of other countries and we hope that the SEC staff could handle these amendments, he said.

The SEC has already appointed the Singapore based BT Consultancy to establish the process of establishing a steering cooperation system.
www.ceylontoday.lk

Fuel pricing formula before Cabinet this week

By Ishara Gamage

Ceylon Finance Today: Minister of Power and Energy Champika Ranawaka will submit a special cabinet paper this week to re-introduce a cost reflective transparent energy pricing formula, based on international market prices.

Secretary to the Minister of Power and Energy Dr Suren Batagoda, while confirming that the Cabinet paper would be presented this week by the Minister, told the Ceylon FT that the new formula would benefit both the consumer and the utility, he said.

According to him, the accumulated and unrecovered losses of the Ceylon Petroleum Corporation over the last ten years, was around Rs. 200 billion.

Generally, the CPC's annual losses were around 70-80 billion. But now we are somehow managing those losses. So far this year, CPC's loss was only Rs. 4 billion from January till May 2015, he said.

With this proposed formula, consumers would be privy to the breakdown of various cost components such as cost of the product in the international market, freight and insurance costs, government taxes and marketing margins, this source said.

However, Ministry sources also revealed that there was some uncertainty within the government to get the approval of this Cabinet paper soon in the light of both Prime Minister Ranil Wickremesinghe and Minister Ranawaka both denying that there was to be an imminent price increase with the Parliamentary elections round the corner.

We are so close to a parliamentary election and during this transit period the scope of getting approval for this cabinet paper was very much limited, the sources said.
www.ceylontoday.lk

PABC submits restructuring plan to CB

By Ishara Gamage

Ceylon Finance Today: Pan Asia Bank (PABC) has submitted its restructuring plan to regulators to request approval and the bank is also actively preparing for further reform and further capital injection, the bank and Central Bank sources confirmed to Ceylon FT .

Our plan is already with the Central bank, that's all we can say at the moment, the PABC CEO Dimantha Seneviratne told Ceylon FT.

Earlier, the Central Bank proposed that PABC merges with Sampath Bank under the previous government's Financial Sector Consolidation Process, but, Dhammika Perera related parties declined to respond to the proposal.

According to Central bank sources, the bank plans to fulfil their capital requirement with its natural growth and future profitability.

"They need an extra capital. They hope that they can fulfil that extra amount with existing shareholders, CB sources said.

Central Bank already restricted its major shareholder Dhammika Perera's voting rights up to 10%, even though he is having 29.99 % of voting shares.

Last Friday, Fitch Ratings Lanka has revised Sri Lanka-based Pan Asia Banking Corporation PLC's (PABC) Outlook to Negative from Stable.

Fitch sees a high risk that PABC will not meet the Central Bank of Sri Lanka's .minimum Tier 1 capital target of Rs 10 billion for licensed commercial banks by 1 January 2016. PABC's Tier 1 capital unadjusted for deductions stood at Rs 4.5 billion at end-March 2015.
The PABC is also expecting favourable response from central bank to fulfill that Tier 1 capital deadline targets, the sources said.

"Fitch will closely monitor how PABC positions itself to meet this requirement. The bank's Fitch core capital ratio declined to 8.6% as at end-1Q15 from 9.5% at end-2014 and 10.1% at end-2013." The Fitch report said.

PABC's asset quality remains significantly weaker than the industry average, with a reported gross non-performing loan ratio of 6.4% at end-1Q15 after a slight improvement to 5.7% at end-2014 from 8% at end-2013 as a result of lower exposure to pawning. Fitch is of the view that the bank's aggressive loan growth with greater exposure to retail and SME customer segments, which are more susceptible to economic conditions, could exert pressure on its asset quality, the report raveled.

"PABC's rating would remain at the current level if it is able to significantly and sustainably improve its capitalization, mostly likely through a timely capital infusion and slower growth in its loan book."

Failure to reverse the trend of capital erosion by end-2015 and to materially enhance its loss absorption buffers would lead to a downgrade. Fitch said. 

www.ceylontoday.lk

Asian Alliance Insurance to subdivide shares

That the Board of Directors of Asian Alliance Insurance PLC have resolved, subject to shareholder approval, at a general meeting and any other regulatory approvals (if any) to subdivide its ordinary shares in the ration of One (01) existing ordinary share into Ten (10) subdivided ordinary shares so that the existing thirty seven million five hundred thousand (37,500,000) shares will be subdivided into three hundred seventy five million (375,000,000) new ordinary shares, there being no change to the stated capital of the company.

Article 62 of the Articles of Association of the Company specifically states that 'The company may, by ordinary resolution, sub-divide its shares.'

The increase in the number of ordinary shares by way of subdivision is subject to shareholder approval at a general meeting of the company.
www.ceylontoday.lk

Sri Lanka’s Fitch Revises Pan Asia Banking’s Outlook to Negative; Affirms at ‘BBB(lka)’

May 22, 2015 (LBO) – Sri Lanka’s Fitch Ratings Lanka has revised Sri Lanka-based Pan Asia Banking Corporation PLC’s outlook to negative from stable due to continued deterioration in bank’s capitalisation amid aggressive loan growth.

The full statement reproduced below

Fitch Ratings Lanka has revised Sri Lanka-based Pan Asia Banking Corporation PLC’s (PABC) Outlook to Negative from Stable.
The agency has affirmed PABC’s National Long-Term Rating at ‘BBB(lka)’ and the rating on PABC’s outstanding subordinated debentures at ‘BBB-(lka)’.

The Negative Outlook reflects the continued deterioration in PABC’s capitalisation amid aggressive loan growth. Fitch believes there is a high chance that the bank will not be able to materially increase its capital ratio during 2H15, which would result in a downgrade.

KEY RATING DRIVERS

PABC’s weak capitalisation amid rapid loan book growth has become the most important rating driver. The rating also takes into account the bank’s weak asset quality relative to higher rated peers and moderate franchise.

PABC’s loan book increased by 9.1% qoq in 1Q15 following growth of 27% in 2014, which was above the industry average. The expansion was driven by increased focus on retail and SME customers. Fitch expects PABC to continue to grow faster than its peers.

Fitch sees a high risk that PABC will not meet the Central Bank of Sri Lanka’s minimum Tier 1 capital target of LKR10bn for licensed commercial banks by 1 January 2016. PABC’s Tier 1 capital unadjusted for deductions stood at LKR4.5bn at end-March 2015. Fitch will closely monitor how PABC positions itself to meet this requirement. The bank’s Fitch core capital ratio declined to 8.6% as at end-1Q15 from 9.5% at end-2014 and 10.1% at end-2013.

PABC’s asset quality remains significantly weaker than the industry average, with a reported gross non-performing loan ratio of 6.4% at end-1Q15 after a slight improvement to 5.7% at end-2014 from 8% at end-2013 as a result of lower exposure to pawning. Fitch is of the view that the bank’s aggressive loan growth with greater exposure to retail and SME customer segments, which are more susceptible to economic conditions, could exert pressure on its asset quality.

PABC’s profitability improved, with return on assets of 0.9% in 1Q15 compared with 0.6% in 2014 and 0.2% in 2014. This was largely due to higher net interest margins stemming from re-pricing of deposits and an increase in the current and savings account (CASA) base to 31% of total deposits as at end-1Q15 from 19% at end-2013. PABC will likely find it challenging to maintain a strong CASA base due to its small, but slowly expanding franchise. This, alongside Fitch’s expectation of continued high impairment charges, could continue to put pressure on profitability.

RATING SENSITIVITIES

PABC’s rating would remain at the current level if it is able to significantly and sustainably improve its capitalisation, mostly likely through a timely capital infusion and slower growth in its loan book.

Failure to reverse the trend of capital erosion by end-2015 and to materially enhance its loss absorption buffers would lead to a downgrade.

RATING DRIVERS AND SENSITIVITIES – Subordinated Debt

PABC’s subordinated debentures are rated one notch below PABC’s National Long-Term Rating to reflect their subordination to senior unsecured creditors.

The subordinated debt rating will move in tandem with the issuer’s National Long-Term rating.

EPF lost over one billion rupees on investments in 2013: PAC

By Chandani Kirinde

Ex-Central Bank Governor gives long gestation projects, volatile share market as reasons

In envestment of funds from the Employees Provident Fund – monies meant to provide social security to workers – caused a loss of over one billion rupees, the Public Accounts Committee (PAC) has revealed. The financial watchdog of Parliament noted that the man responsible for those investments, the former Governor of the Central Bank has given different explanations.

The loss on investment was recorded in 2013. The Central Bank’s former Governor Ajith Nivard Cabraal who appeared before the Committee when the EPF accounts were under scrutiny had stated that those investments would certainly bring value in the long run. The report also noted that the EPF had not made any income from the investment of Rs. 500 million in SriLankan Airlines in 2010.

Mr. Cabraal has said in reply that it would take five to ten years to earn a profit from the investment made in SriLankan Airlines as it is a long term investment.
When queried by the Committee as to why the EPF had been unable to gain a profit from an investment of over Rs. 205 million in the share market, Mr. Cabraal had stated that the fluctuations in the prices of shares is the main reason for it.

The Committee which inquired into the current position of the Internal Audit Unit of the EPF considering the fact that nearly one trillion rupees is controlled by it found that there are only eight officers attached to this Unit due to cadre resections and they had to cover 60 district offices including sub offices. Steps have since been taken to computerise the EPF system so that there would be better control over its financial management.

The committee also found that there was a delay in releasing claims to members or their beneficiaries with the balance of non-settled accounts standing at over Rs. 120 million and non-claimed beneficiaries accounts at over Rs. 13 million. The Public Accounts Committee also questioned what action had been taken against the Board of Directors of the Janatha Estates Development Board (JEDB) for misusing the money released by the Treasury to settle the EPF arrears of JEDB workers.

The Chief Accounting Officer of the EPF had informed that it was found that the directors were personally responsible for the non- payment of EPF dues and when questions were raised the Board members had resigned. The PAC headed by Higher Education Minister Dr. Sarath Amunugama probed the accounts, between January 2013 and October 2013, of 43 State institutions and its findings were included in this report.
www.sundaytimes.lk

Pan Asia Bank doubles 1Q’15 net profits to Rs.177 mn

Pan Asia Banking Corporation PLC (PABC) has posted a net profit of Rs.177 million for the quarter ended March 31, 2015 (1Q’15), up 106 per cent from a year earlier.

The growth in the profit before tax was 231 per cent year-on-year (yoy) to Rs. 270.2 million, the bank said in a media release.

The bank has been able to record this commendable performance due to the growth of its loan book coupled with expanding net interest margin. This has also been amply assisted by the cost discipline demonstrated throughout in delivering its services. Pan Asia Bank closed the 2014 financial year expanding its loan book by 34 per cent, among the highest credit growths by a licensed commercial banks in the country, which continued to 1Q’15 as well, the release said.

Commenting on the first quarter performance, the bank’s Director and CEO, Dimantha Seneviratne said the first quarter performance of the bank is a testament to its prudent management strategies in sustainable asset growth and cost management that provides an ideal platform to reach its financial and other targets set for the remainder of 2015. www.sundaytimes.lk

MR regime placed Rs. 2.7 trillion of Bonds privately for cronies benefit: PM

By Jayashika Padmasiri and Chamodi Gunawardana
Prime Minister Ranil Wickremesinghe yesterday revealed that former President Mahinda Rajapaksa and his Central Bank Governor Ajith Nivard Cabraal had hidden Rs. 2.7 trillion worth of Treasury Bonds for the benefit of their cronies.

This shockingly high figure was built up from 2012 to 2014.

“These Rs. 2,700 billion worth of Treasury Bonds were issued without any transparency. 

Therefore it is clear that investigating the recent transaction of Rs. 10 billion, corrupt practices which are 270 times more have been discovered. The previous regime has placed these Treasury Bonds with their friends to make major profits,” Wickremesinghe said.

“These transactions have taken place without going through a tender board or public auction system. They are not transparent at all, as they have been done according to the personal preferences of the authorities of the former Government. None of the members who should have been on the tender board had actually been there during those transactions. Treasury Bonds are normal issued by way of a public auction. Instead these bonds have been issued through private placement,” the Premier said.
Wickremesinghe made this disclosure during a meeting with UNP activists at Sirikotha.

He asked the previous Government what had happened to the ill-gotten funds and said that this profiteering by its cronies had resulted in lower salaries for public servants and less relief to the public.

Wickremesinghe also pointed out that it was the Opposition which requested for this investigation but now since so many corrupt dealings of the previous Government had come to light it was requesting them to keep look away from the corrupt dealings that occurred from 2012-2014 and only focus on Central Bank Governor Arjuna Mahendran’s issue.

“The Opposition MPs are today engaged in a battle where thieves are fighting to protect thieves. MPs such as Vasudeva Nanayakkara, G. L. Peiris and Dinesh Gunawardena are involved in this and are responsible for trying to conceal these crimes. Through the CB issue what the Opposition tried to do was prevent us from conducting these internal investigations at the Central Bank. However, along with President Sirisena, all political parties within the country should unite and help purge the nation of corruption,” Wickremesinghe added.

The Prime Minister added that if Mahendran was proven guilty through investigations conducted by the Committee on Public Enterprises (COPE) then the Government would dismiss him from the Central Bank.
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Sri Lankan shares nudge higher; concerns remain

Reuters: May 22 Sri Lankan shares edged up on Friday, but investors awaited clarity on the political front and the timing of a parliamentary election as concerns over political stability weighed on sentiment, stockbrokers said.

The main stock index gained 0.21 percent, or 15.05 points, to close at 7,288.74. The index rose 0.4 percent for the week, positing its sixth straight weekly gain

"The market is waiting for the election announcement. Investors will wait until the parliamentary election is over," a stockbroker said on condition of anonymity.

"A new stable government with some strong economic policy measures would boost confidence," the stockbroker said.

Analysts said the market shrugged off the central bank's decision to keep the key monetary rates steady at record lows.

The central bank in its monetary policy statement said on Friday the private sector credit grew 13.9 percent on-year in March from 12.6 percent in February. Analysts said the credit growth will help boost banking and financial shares.

Turnover was 904.6 million rupees ($6.77 million), above this year's daily average of about 1.14 billion rupees.

Foreign investors were net sellers on Friday for a third straight session, offloading 83.9 million rupees worth of shares. But they have been net buyers of 5.93 million rupees worth of stocks so far this year.

Lanka Orix Leasing Co Plc gained 1.8 percent, while shares in LB Finance jumped 3.56 percent. Illiquid shares such as Nestle Lanka Plc and Carson Cumberbatch Plc gained 1.84 percent and 3.36 percent respectively.

Political uncertainty due to Prime Minister Ranil Wickremesinghe-led UNP not having a parliament majority has been a drag on the market, though the trend reversed after the central bank cut key monetary policy rates to record lows on April 15.

The index has gained 5.6 percent since the rate cut. 

($1 = 133.6000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Anand Basu)

Hayleys MGT Knitting Mills returns to profit in March 2015 quarter

COLOMBO (EconomyNext) – Fabric manufacturer Hayleys MGT Knitting Mills reported a net profit of 36 million rupees in the March 2015 quarter compared with a loss of 89 million rupees a year ago.

Earnings per share for the quarter of the firm, a unit of the Hayleys group, were 19 cents, as the company recovered after suffering losses stemming from a fraud in 2011.

A stock exchange filing said quarterly sales fell three percent to two billion rupees with cost of sales falling six percent to 1.8 billion rupees.

For the full financial year ended 31st March 2015, EPS was 47 cents while net profit was 90 million rupees compared with a loss of 183 million rupees the year before.

Sri Lanka’s Guardian Capital Partners profit up sharply on sale of Expo, Access stakes

EconomyNext – Gains from the sale of stakes in two investments helped Sri Lanka’s Guardian Capital Partners increase net profit to 184 million rupees in the financial year ended March 31, 2015 from 15.5 million the year before.

Earnings per share for the year were 7.13 rupees compared with 60 cents previously, its annual report filed with the stock exchange showed.

A statement by the company, the private equity investment arm of the Ceylon Guardian Investment Trust Group, said the improvement was mainly driven by profits realized on the divestments of holdings in two investments it had.

Annual revenue rose 591 percent to almost 200 million rupees which was driven by gains made on the sell down of stakes in Expolanka Holdings and Access Engineering which yielded gains of 171 million rupees.

The report said a total gain of 130 million rupees was realized on the sale of 28 million shares of Expolanka and the balance gain of 41.3 million rupees as realized on Access Engineering.

“The sell down was executed in order to reduce the exposure to the company as the risk profile of the company changed significantly during the last quarter of the year,” Guardian Capital Partners told shareholders in its annual report.

The company’s portfolio is managed by Guardian Fund Management Limited.

The company statement said it believes the private equity market to be gaining traction, albeit at a very slow pace.

“With the end of the war have seen some of the largest and most respected global private equity players and investors committing funds into Sri Lanka.

“Guardian Capital Partners PLC is on the lookout for good quality businesses backed by strong entrepreneurial and management teams who seek capital to fund their growth plans,” it said.

Sri Lanka’s Malwatte Valley Plantations makes Rs59mn loss in March 2015 quarter

COLOMBO (EconomyNext) – Sri Lanka’s Malwatte Valley Plantations suffered a loss of 59 million rupees in the March 2015 quarter compared with a net profit of 14 million rupees a year ago as it was affected by the commodities price slump.

The loss per share for the quarter was 27 cents, according to provisional results filed with the stock exchange.

Sales fell 17 percent to 737 million rupees from a year ago with cost of sales at 755 million rupees although lower than the year before.

According to segmental results, the firm’s tea business suffered a loss while rubber and coconut made a marginal gross profit.

Gross profit from other crops like pepper and cinnamon rose to 35 million rupees from 15 million rupees the year before.

Sri Lanka Monetary Policy Review – May 2015 - Policy rates unchanged

Following the reduction in policy rates of the Central Bank in April 2015, market interest rates have adjusted downwards as expected. The continuation of the low interest rate regime has induced demand for bank credit from the private sector. Accordingly, credit obtained by the private sector from commercial banks increased by 13.9 per cent in March 2015 on a year-on-year basis. In absolute value terms, the increase during the month was Rs. 41.4 billion, raising the cumulative increase in credit to the private sector by commercial banks to Rs. 86.9 billion in the first quarter of 2015. As per the Quarterly Survey of Commercial Banks’ Loans and Advances to the Private Sector, the sustained expansion in credit was driven mainly by credit flows to the Industry and the Services sectors. Given continued low market interest rates, it is projected that private sector credit would increase further in the period ahead supporting the growth momentum of the economy. As a result of increased credit flows to both private and public sectors, broad money (M2b) grew by 12.5 per cent in March 2015 on a year-on-year basis, along the expected path for monetary expansion. 

Inflation, as measured by the year-on-year change in the Colombo Consumers’ Price Index (CCPI), remained at 0.1 per cent in April 2015 unchanged from the previous month. Year-on-year headline inflation has remained below 1 per cent from February 2015 largely reflecting the downward revision of domestic energy prices and the reduction in prices of selected consumer items. Annual average inflation declined further to 2.1 per cent in April 2015 from 2.5 per cent in the previous month. Meanwhile, core inflation, on a year-on-year basis increased to 2.4 per cent in April 2015 from 1.4 per cent in March, with price increases being recorded mainly in non-food items such as health services and clothing. Going forward, with improved domestic supply conditions and subdued prices of key commodities in the international market, it is projected that inflation would remain at low levels in the months ahead. 

In the external sector, the recent currency swap agreement with the Reserve Bank of India amounting to US dollars 400 million has strengthened official reserves of the country. The realisation of expected capital inflows in the period ahead and sustained regular inflows in the form of earnings from the export of goods and services, including tourism and workers’ remittances would improve the balance of payments during the year. So far in 2015, the Sri Lankan rupee has depreciated against the US dollar by around 2.0 per cent. 

In this background, the Monetary Board was of the view that the current monetary policy stance is appropriate. Accordingly, the Monetary Board, at its meeting held on 21 May 2015, decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank unchanged at 6.00 per cent and 7.50 per cent, respectively. 

Troubled CIFL Directors write to Central Bank ‘Cabraal ignored our revival proposals’

By Ishara Gamage

Ceylon Finance Today: The remaining Directors of troubled Central Investments and Finance PLC (CIFL) in a scathing attack yesterday, alleged that the former Central Bank Governor Ajit Nivard Cabraal ignored all the revival proposals which were put forward by them in 2013.

Four remaining Non Executive Directors of CIFL, Lakshman Rupasinghe, P.V. Pathirana, D.J.D. Jayakody and H.G.A.P. Samarasinghe, in a letter to the Central Bank Director of Non Banking Financial Institutions Supervision Mrs. N. Daulagala yesterday, said:

" All our revival proposals made above were ignored by the Governor and the Director NBFIS of the CBSL and proceeded with the appointment of Roscoe Maloney and 2 of his nominees to CIFL board by their letter dated 3 May 2013.

They also alleged that the appointment resulted in Roscoe Meloney becoming the Chairman of the company and 'our' CEO resigning his position.

"We were forced to continue on the Board, obviously in non executive capacity. The asset recovery process completely halted because they became the owners of the entire group and took over the management of CIFL," the letter said.

Meloney family managed CIFL for almost two months but did not infuse any capital, but managed to sell one block of land in Beragala and the share portfolio against our objections in the Board. We have not seen the minutes of the said board meeting......because the company secretaries did not provide the minutes of the board meeting to us for approval. The CBSL did not take any action against them, but decided to appoint People's Leasing and Finance PLC (PLC) as the managing Agent of CIFL, making all the existing directors Non Executive, by their letter dated 1 July 2013.

We were in fact surprised about the ignorance of the former Governor (Cabraal) and the Director NBFIS about the bad reputation of the Chairman of Touchwood in financial circles without verifying the financial background or checking about their financial capability to invest USD 12 Million promised. On this basis, we even recommended to organize a meeting with them and to force them to infuse their capital and if they fail to do so, to consider a short term facility under deposit insurance scheme funds by keeping the value of CIFL shares owned by this investor as security for such advance.

Although we did not get any response to this request, the Central Bank proposed the 'liquidity support scheme' to troubled finance companies almost 6 months after our proposal and granted Rs 6 Billion to another finance company, while our company remained in the same situation.

In our opinion, the CBSL repeated the previous mistake by appointing PLC, particularly in an Honourary capacity. This was a 'repeating of history' of the case of previously failed Finance Company Industrial Finance Limited, which was also owned by the same owner Deepthi Perera) We pointed out many losses incurred due to the negligent attitude of PLC to the Director NBFIS, but they did not even listen to the former Governor to deploy a full time CEO to CIFL.

We maintained the position that it was a violation of the Monetary Board decision of making us non executive directors, if we get involved in executive capacity although both PLC and even CBSL officials misinterpreted the wording of this direction, the CIFL Directors' letter to the Central Bank said.

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