Sri Lanka's Fitch assigns Singer debentures 'A-(lka)' final rating

May 13, 2015 (LBO) - Sri Lanka's Fitch Ratings has assigned Singer's unsecured redeemable debentures issue of up to 3 billion rupees a final national long term rating of 'A-(lka)'.

The final rating is the same as the expected rating assigned on 20 April 2015, and follows the receipt of documents conforming to information already received, Fitch Ratings said in a statement.

"The debentures are rated in line with Singer's national long term rating as they represent senior unsecured obligations of the retailer of consumer durables and would rank equally with the company's other senior unsecured debt."

The statement follows:

KEY RATING DRIVERS
Strong Market Share: Singer's position as a leading consumer durables retailer is supported by its extensive distribution network, multi-brand strategy, and robust after-sales service. Singer's extensive reach of over 1,000 outlets is important given its mass market focus; this includes 414 exclusive Singer showrooms. Singer retails a range of products across a number of brands and price points, including its well-known, competitively priced in-house brands, Singer and Sisil, which account for over half of Singer's consumer durables revenue.

Improved Operating Environment: Consumer durables sales rose 14.4% in 2014, following a 0.6% decline in 2013, due to an improvement in demand. Electricity tariff and fuel price reductions implemented in late 2014, low interest rates and a relatively stable exchange rate environment have also supported better consumer durables demand. Fitch expects initiatives announced in the government's interim budget in February 2015 to sustain this trend. These measures include higher salaries and allowances for public-sector employees (who form about 25% of households), and a further reduction in fuel prices in line with market pricing.

Cyclical Demand and Currency Risk: The discretionary nature of consumer durables makes demand volatile across business cycles. Singer is also vulnerable to exchange rate risk because a range of its products are imported. Singer locally produces and procures close to 35% of its products from related companies and local suppliers, which mitigates this risk.

Well-Managed Consumer Loans: In-house financing accounted for around 40% of Singer's sales in 2014 and is important given Singer's mass market positioning. In-house financing makes products available to individuals who may otherwise have limited access to credit. The portfolio of loans is well-managed, with average duration of less than a year, average loan-to-value ratio of 85%, while staff are strongly incentivised to recover debts. At end-2014, overdue accounts stood at 4.4% of the portfolio (2013: 3.7%), while write-offs remain negligible.

KEY ASSUMPTIONS
Fitch's key assumptions within our rating case for the issuer include:
- Revenue to increase due to improved consumer purchasing power.
- Margins to improve gradually as a benign demand environment lowers competitive pricing pressure.
- No material capex as Singer consolidates its store network.

RATING SENSITIVITIES
Negative: Future developments that may, individually or collectively, lead to a negative rating action include:
- A sustained increase in Singer's leverage (measured as adjusted net debt/EBITDAR excluding Singer Finance) to over 5.5x (2014: 4.76x)
- EBITDA margin sustained below 7% (2014: 7.5%)
- A material weakening in Singer's (company-level) liquidity profile
- A material weakening of the credit profile of Singer's 80% subsidiary, Singer Finance (Lanka) PLC (BBB+(lka)/Stable), given strong linkages between the entities Positive: Future developments that may individually or collectively lead to a positive rating action include:
- Singer's leverage falling below 4.5x on a sustained basis
- EBITDA margin sustained above 10%

Ceylon Tobacco sales up 11-pct on increase of disposable income: Interim Report

May 13, 2015 (LBO) – Sri Lanka's Ceylon Tobacco Company’s sales volumes increased 11 percent during the quarter which could be attributed to a higher level of consumer confidence and an increase in disposable income, the company said in its interim report.

“During the first quarter we continued to see a volume growth in the Beedi segment,” the company said.

The volume growth in unregulated low priced products such as Beedi remains a key risk to government revenue contribution from the regulated cigarette industry.

The law enforcement agencies continued to effectively curtail the spread of unauthorized and illicit tobacco products.


In the first three months of 2015, a total of 249 raids have yielded 6 million illegal cigarettes at a market value of 180 million rupees.

However the cigarette maker added 21.3 billion rupees to the Government’s revenue in the first quarter of 2015, an increase of 20 percent in comparison to the same period last year primarily driven by an excise led price increase experienced in October 2014 and higher volumes.

Revenue before tax grew 22.24 percent to 25,916 million rupees in the March 2015 quarter and net revenue increased 21.17 percent to 6,353 million rupees.

Profits before tax rose 26.10 percent 4,318 million for the quarter and net profits up 22.9 percent to 2,490 million rupees.

The Company’s export sales revenue has increased by 35.4 million rupees for the quarter.

The Company’s estimated liability of the Super Gain Tax as proposed in the interim budget is 3.8 billion calculated at 25 percent of the taxable income for the year of assessment 2013/2014.

However, the Bill to impose the tax is still pending parliamentary approval.

Sri Lanka's Dialog Axiata reports higher profits amid tax uncertainties

COLOMBO (EconomyNext) – Sri Lanka's Dialog Axiata said profits rose 56 percent from a year earlier to 1.9 billion rupees in the March 2015 quarter, though tax uncertainties may result in further costs. 

Group revenues rose 6.0 percent to 17.3 billion rupees and cost of sales fell to 9.5 billion rupees from 9.8 billion a year earlier, helping boost gross profits to 7.7 billion rupees from 6.5 billion rupees. 

The firm estimated additional taxes of 3.0 billion rupees once retrospective tax laws are passed in parliament. 

The firm had remitted 6.1 billion rupees of taxes including 3.5 billion rupees of direct taxes collected on behalf of the government.

Sri Lanka’s Hemas raises Rs4.1bn through Rights issue

COLOMBO (EconomyNext) – Sri Lanka’s Hemas Holdings PLC said its Rights issue raised 4.1 billion rupees of new capital to finance expansion plans in healthcare and personal care.

“The capital raised is one of the most significant on the Colombo Stock Exchange in recent years, with the majority of capital being raised from world leading institutional investors,” a statement said.

As a result of the Rights issue being fully subscribed to, the shareholding of the major shareholder, the Esufally family, reduced to 64.14 percent from 71.26 percent.

The family had previously announced they would not subscribe for their rights in this capital raising on which Hemas Holdings was advised by CT CLSA Capital (Pvt) Ltd.

This was in order to enable “reputed international institutional investors and domestic investors” who wished to become shareholders, or to increase their existing shareholding in Hemas.

“We are working hard on achieving our vision of being the best at enriching lives through our activities in healthcare, personal care, leisure and transportation,” Steven Enderby, Group Chief Executive said

“We have made a number of key strategic moves recently through the acquisition of JL Morison which has enhanced our presence in pharmaceuticals, the development of our personal care business in Bangladesh and the opening of our third hospital, while divesting our shares in power.

“ It is important for us to have the capital base to continue this growth trajectory while becoming increasingly focused on our strong presence in healthcare and personal care.”

Finlays Colombo March net up 22-pct

COLOMBO (EconomyNext) – Finlays Colombo’s net profit rose 22 percent to 100 million rupees in the March 2015 quarter from a year ago despite a marginal drop in sales with key markets in the Middle East hit by political turmoil.

Earnings per share were 2.86 rupees in the quarter, according to a stock exchange filing by the company, a big tea blender and exporters controlled by the UK’s Swire Group.

Sales fell one percent to 1.4 billion rupees in the March 2015 quarter from the year before while cost of sales fell at faster six percent to just over a billion rupees.

In addition to tea blending and packaging, the company is also engaged in insurance brokering, temperature controlled logistics, environmental services and airline agencies.

Finlays Colombo has said it is trying to diversify away from Middle Eastern markets and also focusing on value-addition.

Tea auction prices in Colombo have fallen sharply in the first quarter of 2015 owing to turmoil in the Middle East and the devaluation of the rouble in Russia, another big market.

Last year the company expanded its distribution network in Saudi Arabia and increased the number of high value products sold to both the European and Japanese markets.

Sri Lanka’s Balangoda Plantations makes Rs102mn loss in March 2015 quarter

COLOMBO (EconomyNext) – Lower tea and rubber prices have taken their toll on Sri Lanka’s Balangoda Plantations, pushing it into the red in the March 2015 quarter as sales also fell.

The company made a net loss of 102 million rupees in the March 2015 quarter compared with a profit of 23 million rupees the year before, a stock exchange filing said.

It made a loss per share of 4.33 rupees compared with earnings of 98 cents the previous year.

Sales in the quarter fell 23 percent to 564 million rupees with cost of sales at 667 million rupees being more than revenue.

Both the tea and rubber businesses of Balangoda Plantations made losses during the quarter as Colombo tea auction prices sank to levels below 2013 prices and the firm was also hit by the slump in global natural rubber prices.

Balangoda Plantations said its tea sector made a loss of 99 million rupees in the March 2015 quarter compared with a gross profit of 24 million rupees the year before.

The company’s rubber business made a loss of 3.6 million rupees compared with a profit of 4.9 million rupees in the March 2014 quarter.
 

Sri Lanka's HNB profits up 75-pct in March quarter

COLOMBO (EconomyNext) - Sri Lanka's Hatton National Bank said profits rose 75 percent to 1.9 billion rupees in the March 2015 quarter, helped by net interest income and lower loan loss provisions.

The group reported earnings of 4.75 rupees per share for the quarte amid tax uncertainties.

The firm estimated a 2.0 billion rupee charge on a retrospective tax imposed by Sri Lanka's new administration, the has not yet been passed.

Interest income fell 3 percent to 15.8 billion rupees amid lower interest rates, but interest expenses fell at a faster 6 percent to 12.9 billion rupees, allowing net interest income to rise 9 percent to 6.9 billion rupees.

The bank said loans grew 12 percent in the March quarter, up 13 percent from a year earlier. Loans grew 3 percent by end March from end December, which was slower than the December quarter, the bank told shareholders in a statement.

At bank level, gross non-performing loans rose to 3.6 percent of advances up from 3.16 percent a quarter earlier.

Deposits grew 16.5 percent during the quarter.

General loan loss provisions fell to 408 million rupees from 1.8 billion rupees a year earlier, with lower losses on gold loans.

Fee and commission income rose 9 percent to 1.46 billion rupees.

Group gross assets grew 4 percent to 624 billion rupees. Net assets fell 2 percent to 68.2 billion rupees.

At standalone bank level, net assets fell 2 percent to 59.5 billion rupees from a quarter earlier, with a dividend payment.

Tier I capital fell to 44.5 billion rupees from 47.2 billion rupees. Total capital adequacy ratio fell to 13.7 percent from 14.8 percent as loans also grew, but remains above the statutory 10 percent.

Sri Lanka index slips from 10-week high on diversified shares

May 13 Sri Lankan shares ended slightly weaker on Wednesday, slipping from more than 10-week high hit in the previous session, led by diversified shares as political uncertainty weighed on sentiment.

The main stock index ended 0.19 percent weaker at 7,245.05, slipping from its highest close since Feb. 27 hit on Tuesday. It had gained 4.98 percent since the central bank cut key rates on April 15, while yields on t-bills have fallen 46-61 basis points since then.

Earnings of 37 listed companies released so far have on average increased 19.5 percent year-on-year in the first quarter, a stockbroker said.

Foreign investors were net buyers for the first time in eight sessions. They bought 47.1 million rupees ($352,808.99) worth of shares on Wednesday, extending the net foreign inflow so far this year to 2.92 billion rupees worth of shares.

Turnover was boosted by local buying and stood at 1.23 billion rupees, more than this year's daily average of around 1.06 billion rupees.

Investors are waiting for direction on the political front and cues from earnings, analysts said, adding the market could be dull in the medium term until the perception of political uncertainty is addressed.

Sri Lanka's parliament is expected to debate and pass some key reforms next week and President Maithripala Sirisena has promised to dissolve parliament after that.

Shares of conglomerate John Keells Holdings Plc ended 0.69 percent weaker, while Carson Cumberbatch Plc fell 1.57 percent. 

($1 = 133.5000 Sri Lankan rupees) 

(Reporting by Shihar Aneez and Ranga Sirilal; Editing by Anand Basu)

Sri Lanka’s Amãna Bank March 2015 net Rs23mn

COLOMBO (EconomyNext) – Amãna Bank said it made a net profit of 23.0 million rupees for the first quarter of 2015 compared with a loss of 49.3 million rupees in the March 2014 quarter.

Financing income of the Sri Lankan Islamic bank grew 10 percent to 661 million rupees while financing expenses grew 4.7 pct to 305 million rupees, resulting in net financing income rising 15.2 percent to 356 million rupees, a stock exchange filing said.

A company statement said growth momentum was continuing after it had its first profitable quarter in the fourth quarter of 2014.

It said net operating income grew by 29.9 percent to 449.0 million rupees, mainly attributable to the growth in net financing income and gains from trading activities.

Net fee and commission income rose 19.8 percent to 34 million rupees in the March 2015 quarter from a year ago while net gain from trading shot up 130 percent to 74 million rupees.

“The bank has remained focused in building its advances portfolio whilst maintaining its quality through effective credit risk management policies and procedures,” the statement said.

This resulted in the bank recording a gross non performing advances ratio of 1.52 percent.

The bank surpassed the 30 billion rupee mark in customer deposits during the March 2015 quarter.

Amãna Bank’s main shareholders include Bank Islam Malaysia Berhad, AB Bank in Bangladesh and The Islamic Development Bank based in Saudi Arabia.

Fitch Places PMF on Negative Watch, withdraws Rating

Fitch Ratings Lanka has placed Sri Lanka-based People's Merchant Finance PLC's (PMF) National Long-Term rating of 'BB+(lka)' on Rating Watch Negative and simultaneously withdrawn the rating.

Fitch is withdrawing the rating as PMF has chosen to stop participating in the rating process. Therefore, Fitch will no longer have sufficient information to maintain the rating. Accordingly, Fitch will no longer provide ratings or analytical coverage for PMF.
The Rating Watch Negative reflects Fitch's assessment of potential weakening of the linkages between PMF and its main shareholder, state-owned People's Bank (AA+(lka)/Stable) and a potential decline in PMF's intrinsic financial strength due to a lack of clarity on its future operations.
www.ceylontoday.lk

Overseas Realty posts Rs. 788 m Q1 profit

Overseas Realty (Ceylon) PLC recorded a group profit after tax of Rs. 788 m, for the 1st Quarter ended March 31,2015, a marginal decline over the corresponding period of 2014.

The Group registered a revenue of Rs. 1.1 bn, a decrease of 34% over the corresponding period of last year. The group revenue was affected by lower apartment sales at Havelock City which decreased by 52% to Rs. 601 m.

The performance of the Group was supported by Revenue from Leasing which grew by 15% to Rs. 488 m due to high occupancy levels and average rentals at the World Trade Center (WTC), with Other Services contributing Rs. 40 mn an increase of 30% resulting in a total revenue of Rs. 1.1 b.

The Piling work at the Havelock City Phase 3 and Phase 4 residential development is planned to commence in May 2015. Around 23% of Phase 3 units have already been pre-sold. 

www.dailynews.lk

Singer Q1 net profit grows to Rs. 277.8m

Singer Sri Lanka consolidated revenues grew by 28% over the corresponding period last year to reach Rs.8.6 Billion first quarter financial results. The Group’s net profit for the quarter grew to Rs.277.8 Million, which is an impressive increase of 95% when compared with the previous year.

Group Chief Executive Officer Asoka Pieris noted that an improvement in the overall business environment in the 4th quarter of 2014 continued into the New Year contributing to the growth trajectory. Several strategic initiatives taken by the Group including investing in new shops, dealers and channels of distribution and the introduction of new brands and products has contributed to this outstanding performance.

The Group’s Q1 revenues were shored by its third largest segment, Communication and the Digital Media whose revenue for the quarter rose 88%. The transportation segment performed below expectations but all other sectors experienced significant growth. Its Agro segment grew by 44%, and both Sewing and Kitchen related products recorded a 33% growth while White Goods, Electronics and Furniture improved by 16% each.

Contributing to the Group’s Q1 results was its public listed subsidiary Singer Finance (Lanka) PLC, recording solid growth, with revenue increasing by 3% and net profit increasing by 91%. Growth in business volumes helped negate the reduction in lending rates.
www.dailynews.lk