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