Sri Lankan shares edge down on weaker rupee, policy uncertainty

Reuters: Sri Lankan shares edged down on Friday in light trade for a second session, led by falls in banking and telecommunication shares, as a weakening rupee and high interest rates prompted investors to cut their positions in risky assets, brokers said.

Trading volume remained low as investors awaited cues from the policy of the new government.

The main stock index ended 0.09 percent or 6.45 points weaker at 7,153.49.

Turnover stood at 474.6 million rupees ($3.4 million), well below this year's daily average of 1.13 billion rupees.

"Lack of policy direction is the main problem and investors are waiting to see the budget and how the government is going to bridge the budget deficit," said Dimantha Mathew, a research manager at First Capital Equities (Pvt) Ltd.

"This trend will continue until a clear statement or some sort of a positive signal comes in."

On Tuesday, the bourse hit a near eight-week low as investors waited for economic policies from the newly formed government. A weaker rupee curbed investor risk appetite and rising market interest rates also hit sentiment with t-bill yields were at more than five-month high.

Foreign investors sold a net 86.2 million rupees worth shares on Friday extending the year to date net foreign outflow to 3.29 billion rupees worth of equities so far this year.

Shares in biggest listed lender Commercial Bank of Ceylon Plc fell 0.54 percent and Dialog Axiata Plc fell 0.88 percent, dragging down the overall index. 

($1 = 138.9000 Sri Lankan rupees) 

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

Sri Lanka’s EAP Broadcasting gets [SL]BBB rating from ICRA

ECONOMYNEXT – ICRA Lanka Limited said it has given an issuer rating of [SL]BBB for Sri Lankan television broadcaster EAP Broadcasting Company Limited (EBC) with a stable outlook.

The rating takes into account the strong positioning of some of EBC’s TV and radio channels which has enabled it to generate repeat advertisement revenues from leading corporate houses in Sri Lanka, a statement said.

“EBC has been able to capitalize on these strengths and improve its financial profile which is currently characterised by robust profitability, healthy cash flows, moderate capital structure and comfortable coverage metrics.”

EBC’s flagship channel – Swarnawahini – is estimated to be among the top three viewed TV channels in the island on the strength of its programming content and island wide reach, said ICRA Lanka, a subsidiary of ICRA Ltd, a group company of Moody’s Investors Service.

The full rating report follows:

ICRA Lanka Limited, a wholly owned subsidiary of ICRA Ltd, a group company of Moody’s Investors Service has assigned an Issuer rating of [SL]BBB (pronounced S L triple B1) for EAP Broadcasting Company Limited ("EBC”/ “the Company”). The outlook on the rating is stable.

The rating takes into account the extensive experience of the Company’s management in the media industry and the strong positioning of some of EBC’s Television (TV) and radio channels which has enabled the Company to generate repeat advertisement revenues from leading corporate houses in Sri Lanka. The Company’s flagship channel – Swarnawahini – is estimated to be among the top 3 viewed TV channels in the island on the strength of its programming content and island wide reach.

Despite lower reported market share, the Company’s radio channels also count leading business houses as its customers, indicating healthy listenership levels for some of its prime time shows. The ratings also take note of the strong entry barriers in Sri Lanka’s media industry owing to significant capital investments required to build technical competence, curb on new media license issuances and strong linkages of incumbent market leaders with leading corporate houses which cumulatively bestow existing players with competitive advantages. EBC has been able to capitalize on these strengths and improve its financial profile which is currently characterised by robust profitability, healthy cash flows, moderate capital structure and comfortable coverage metrics. EBC’s revenue profile is also diversified, spread across a broad array of domestic and international corporate clients which mitigates revenue concentration risks to an extent.

These strengths are partially offset by concerns over increasing competitive intensity among existing players necessitating aggressive pricing and high marketing spends, regulatory risks given stringent annual review of media licenses, exposure to cyclicality in corporate ad-spending and volatile profitability of the Company’s radio business on account of under investment in programming content and technology.

ICRA also takes note of significant inter-Group (EBC is part of the EAP Group) balances due to and from EBC. Though the Company has implemented measures to restrict such advances in the future, the outstanding advances expose EBC to the business/financial risks of Group’s firms which are engaged in non-related businesses.

One of the Group’s businesses (ETI Finance) which was primarily engaged in pawning has incurred heavy write-downs in the recent past which accentuates spill over risks given considerable intergroup transactions. These risks are now being managed through the Group’s Treasury & Investments Committee, Board Risk Management Committee and Board Audit Committee. Ability of the Group to ensure strict control over such advances would be a key sensitivity to the ratings. In this context, ICRA Lanka derives comfort from the recent induction of experienced professionals across key verticals of the Group which would aid in strengthening strategy formulation besides also ensuring implementation of sound corporate governance practices.

In arriving at the rating, ICRA has assessed the EAP Group’s proposed restructuring plans under which EBC’s recently setup subsidiary– Galaxy Landmark – is likely to buy out several properties worth over LKR 1,500Mn from ETI Finance as part of recapitalization efforts. The funding for the said transaction would be in the form of debt and equity from EBC. EBC is in turn expected to fund the same through a mix of accruals and external borrowings. Galaxy Landmark proposes to convert these properties into rentable commercial real estate assets. The first such project would be the construction of a mall in Rajagiriya (Impala Cinema) at a cost of ~LKR 980 Mn, funded by incremental bank debt taken in Galaxy Landmark’s books.

The entry into the commercial real estate business increases the overall risk in the group, given the lumpy nature of cash flows and project specific risks inherent to the real estate business. However, ICRA has taken comfort from the expected healthy cash flow generation from EBC’s existing standalone business lines on the back of expected growth in corporate ad-spends led by economic growth, which is expected to be adequate to cover debt obligations. EBC’s continuous efforts to improve programming content as well as expanding reach is also expected to help improve market share which would aid in sustaining wallet share with corporate entities and thereby improving EBC’s standalone financial profile.

However, any unforeseen delays in the proposed mall construction which would require incremental funding support from EBC or inability of the Group to sustain the growth in profitability of the volatile radio business could adversely impact cash flows and hence would remain key sensitivities to the rating. ICRA would continue to monitor the progress of the mall construction and would re-assess the impact of any new developments on EBC’s cash flows on a case-to-case basis.

Company Profile

EBC is a part of the EAP group of companies which has wide spread business interests across sectors such as financial services, jewellery retailing, cinema distribution, real estate and hotels. EBC is one of the flagship entities of the group and is engaged in the production, sourcing and broadcasting of content over television. It has two free-to-air (FTA) channels – ETV and Swarnawahini. Swarnawahini is considered to be market leader in several Sinhala based programmes and is estimated to be ranked among top 3 channels in Sri Lanka. ETV on the other hand focuses on English channels. EBC also produce and broadcasts content over three radio channels (E FM, Ran FM and Shree FM) for which licenses are held by EBC’s subsidiary Colombo Communications Limited.

According to recently made available audited statements, on a standalone basis, for the FYE Mar-15, EBC reported a net profit of LKR 442.5 Million on a total income of LKR 2.565.5 Million compared to a net profit of LKR 211.9 Million reported on a total income of LKR 2,088.2 Million in FYE Mar-14.

On a consolidated basis, for the FYE Mar-15, EBC reported a net profit of LKR 433.8 Million on a total income of LKR 2,565.5 Million compared to a net profit of LKR 261.9 Million reported on a total income of LKR 2,388.1 Million in FYE Mar-14.

Rs 60 Billion in the pipeline L & T to invest in Infrastructure here

(PTI Mumbai, September 10): Engineering major Larsen & Toubro (L&T) is expecting Rs 60 Billion Lankan rupees worth infrastructure projects in Sri Lanka as it seeks to expand its global presence, an Indian media reported yesterday.

"We are looking at expanding our global presence. There is an opportunity we are looking at in Sri Lanka. Almost three infrastructure projects worth Rs. 60 Sri Lankan rupees are likely to come up and we believe that we have a good chance of getting them," Chairman and Managing Director A.M. Naik told reporters on the sidelines of the company's 70th Annual General Meeting.

Once the resources are tied up, these projects are likely to be materialized during the fourth quarter and the company can bag those projects, he added. Naik said the company is also looking at a few more countries to expand its international presence.

"We are already in West Asia and also made a foray into the African markets. We will continue to look at some more countries for expansion. But our order mix will continue to be 20-25 per cent international and 75-80 per cent domestic, as the market here is now looking promising," he said.

L&T is also expecting a 15 per cent growth in order inflow this fiscal, he said.
While orders in the hydrocarbons segment in West Asia have not picked up, there is scope in the infrastructure sector.

The current order book of L&T stands at around Rs 2,39,000 crore.

Naik further said the company will continue to be cautious while selecting road projects and will continue to concentrate on its core business.

"We have around 17 road projects out of which 6-7 are not profit-making. Few years back, everyone went aggressive when they thought that roads sector is a sunrise industry. That time we did not understand there could be impediments in terms of right of way, or work will stop, cost will rise and government will not give extra claims because of which majority projects not going well."

"Our focus will be to make them profitable and until that happens we will not invest more. It might take another two years for the projects becoming profitable. But we will continue to review the mood conservatively and selectively bid for projects," he said.
Naik further said the company will continue to monetise its non-core assets.

"Last year we sold the Dhamra Port in Odisha and we will continue to sell some more, especially in the realty sector. Realty projects in Chandigarh and Seawoods, Navi Mumbai, would be put on block. Also we will sell the Kattupalli Port (Tamil Nadu). These projects, especially the real estate ones, are meant to be churned and invested in other projects," Naik added.

When asked whether the company was planning to sell its road projects as well, he said, 

"We will focus on making them profitable and not sell them."

The Chairman, earlier told the shareholders, that the company will keep unlocking value by listing subsidiaries that are unrelated to its core infrastructure business.

"Value unlocking will impact shares of L&T positively. We are offering a platform by listing the subsidiaries which will allow them to grow much faster. Spinning L&Ts' infrastructure business is not considered wise by the Board.

But, we will unlock value by selling subsidiaries which are nowhere aligned to our core business," he said.
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Nimal Perera to bring all his investments under Kalamazoo

By Ishara Gamage

Ceylon Finance Today: High net worth investor and Pan Asia Bank Chairman Nimal Perera yesterday brought a controlling stake of Kalamazoo Systems PLC for Rs 32 million rupees, stock broking sources said.

According to sources 65 % of Kalamazoo is now controlled by Nimal Perera. According to sources, this investment is in his personal capacity and he is planning to bring his all investments under Kalamazoo Systems PLC.

The sellers were C T Holdings PLC and it related T Ratnanather family, sources said.

Nimal Perera bought control of Mercantile Produce Brokers Ltd, for Rs 200 million. He made all his personnel investments through his investment arm Don Wilbert Capital.

Don Wilbert Capital has a subsidiary N Capital, which invested in Tangalle Bay Resorts.
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Sampath Bank Chairman,CEO to change next year

Hiran H. Senewiratne

Sampath Bank Chairman Dhammika Perera will retire from the Board next year.

The new Chairman to be appointed is Harris Premaratne with Perera's retirement after nine years.

Premaratne is currently in Softlogic Group as a Director and was the CEO of Cargills Bank will be absorbed into the Sampath Bank director board in order to appoint him to the post next year, sources said.

Further, present Chief Executive Officer Aravinda Perera who is now on extension will be retiring from the Bank next year. Interviews have begun to select a suitable CEO for the Bank now.

Perera has served nine years in the Sampath Bank director board and will complete his term next August as Chairman under the Central Bank ruling, sources said.
www.dailynews.lk

Asia Asset Finance posts Rs 100 m profit

Vishmi Wijeratne

Asia Asset Finance (AAF) recorded a 100% increase in profitability with Rs. 100 million profit.

Asian Asset Finance Director and CEO Rajiv Gunawardena said this is a milestone in the company's journey as this is the first time such a record has been achieved by the company.

He further stated that the significance of such an achievement increases further in its value as it was recorded within an extremely volatile economic and political environment. Furthermore AAF increased its client base by 40% to 12,000 active clients. Gunawardena said the company has a few ventures in the pipeline. He said the company plans to launch money transfer operations, currency exchange services and insurance related services to provide its customers with a wider product range.

He also stated that hope to upgrade the existing system and provide more interactive technological avenues so as to ease the communication process between stakeholders. The upgrading of technologically advanced avenues will increase transparency and efficiency.

AAF Chairman Manohan Nanayakkara said profits after tax has increased by 118% when compared with last year. He stated that the growth is due to the increase in turnover.
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Bimputh Finance ups profits to Rs 143.5 m

Vishmi Wijeratne

Bimputh Finance has recorded an outstanding growth of 156% from Rs. 194 million to Rs 498 million.

Former Chairman of Bimputh Finance Daya Gamage said they have also achieved a growth of 126% with regard to post tax profit to Rs. 143.5 million as opposed Rs. 63.5 million recorded last year.

He stated that due to the strategic entry into micro enterprise segment Bimputh Finanance was able to raise its base to 90, 000 customers as opposed to the 41,000 customers recorded in the previous financial year. He claimed that this increase could be attributed to the increase the company made on the loan quantum so as to provide their clients adequate services their growing requirements. The Company's Financing expenses have supporeted 90,000 families across the country, he sated that this has directly contributed in improving the living standards of these individuals. He stated that in the present year the significant expansion in the lending operations had created 200 job oppertunities. He stated that the growth in loans and advances outranked most of the industry counterparts by tripling to Rs. 3.1 billion as opposed to that of the previous financial year which only recorded Rs. 991.3 million.

Bimputh Finance Director and Chief Executive Officer, A.V. Harsha Silva said the company made a noteworthy investment by the purchasing 28.02% stake in Sinhaputra Finance. Bimputh Finance announced that Chairman Daya D. K. Gamage and Non-Executive Director, Dr. Anoma Gamage resigned from their held positions last month.
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Nimal Perera back in buying mode

• Triggers first personal takeover move by acquiring 67% stake in Kalamazoo for Rs. 35 m

• Plans to convert his first listed entity to an investment holding company

• Ratnanather family and CT Holdings divest ownership

Market mover and investor Nimal Perera got back to buying mode when he acquired a 67% stake in Kalamazoo Systems Plcfor Rs. 35 million, triggering his first-ever personal takeover deal.

The stake comprises 33,489 shares amounting to 66.98% for Rs. 37.75 million or Rs. 1,067.70 per share. With a previously acquired 1% or 500 shares in 2011, Nimal’stotal holding has risen to 33,989 shares or 67.98%.

Nimal, who along with Dhammika Perera has been linked to over a dozen of corporate takeovers in the past, will make a mandatory offer to acquire the remaining stake shortly.

Given the book value of Rs. 533.26 per share at Group level, the price paid reflects a premium. Net asset value at Company level is Rs. 290 per share.

The sellers included the Ratnanather family which had around 51% and CT Holdings Plc which owned 19.5% whilst related party Ceylon Printers Plc also exited.

Longstanding shareholders Cyril Gardiner Ltd. and Sir Chittampalam A. Gardiner Trust collectively owning around a 10% stake didn’t sell.

When compared to the previously traded price, yesterday’s closing at Rs. 1,071.90 was lower by Rs. 748 or 41%. Last week 120 shares of Kalamazoo traded between a 52-week high of Rs. 1,900 and a low of Rs. 1,400 before closing at Rs. 1,300.70, still up by Rs. 519. 

In the previous week, the stock rose by Rs. 60.70 on a volume of mere seven shares.
The Company has around 400 shareholders with number of shares issued being 50,000. There are 397 shareholders owning below 1,000 shares.

Kalamazoo, which is a British brand, specialises in the sale of Kalamazoo Equipment (binders) and Stock Sheets (as well as customised business forms) for the printing industry.

However, Nimal is expected to restructure the company and analysts said he was likely to consolidate his other investments both in listed and non-listed entities under Kalamazoo. 

Nimal has a range of personal ventures in addition to owning Mercantile Produce Brokers 
as well as stakes in listed companies.

The Company had assets worth Rs. 24 million as at June 2015 whilst at Group level the figure was Rs. 37 million. Capital and reserves amounted to Rs. 27 million including retained earnings of Rs. 26 million as at 30 June 2015. Total liabilities were Rs. 9 million, down from Rs. 18 million (Company) and Rs. 17 million (Group) in June 2014. 

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LAUGFS to set up largest solar power plant with Rs. 5 b investment

LAUGFS Holdings Ltd., has further expanded its footprint in the power and energy sector with the acquisition of two solar power projects as part of an ambitious expansion plan to set up the largest generator in the country.

LAUGFS Power, a wholly-owned subsidiary of LAUGFS Gas PLC and engaged in renewable energy solutions, recently announced the acquisition of Anorchi Lanka Ltd. and Irish Eco Power Lanka Ltd., which have the right to develop two solar power projects. Once completed, this is expected to be the largest solar power project in the country with a combined capacity of 20MW and adding around 34GWh to the national grid every year.

Situated in Hambantota in a 90 acre site, the projects are due to be commissioned during 2016 with a total estimated investment of Rs.4.5 to 5 billion and would be a mere precursor to the company’s ambitious plans in the pipeline for the renewable energy sector.

In keeping with global trends, focus on sustainable energy solutions has increased rapidly over the recent few years in Sri Lanka, with the Government’s plans to increase the contribution of renewable energy to 20% of the total energy requirement by 2020. 

LAUGFS’s investment in solar power aims to further strengthen its expansion plans in the power and energy sector with renewable and sustainable energy solutions.

“We believe that there is tremendous potential to develop renewable energy sources in taking the country towards a sustainable energy future. With so many resources freely available to us, it is time to make the most of these for the betterment of our nation,” LAUGFS Holdings Group Chairman W.K.H. Wegapitiya said.


“Our commitment to sustainability has always been a part of our business strategy. It is at the core of how we operate and extends beyond our businesses as a firm commitment made towards our environment, our people, our industries and our country. Therefore we are constantly looking to develop and integrate sustainable ways of doing business, as we believe it is our responsibility to ensure that the future of our country remains secure for the next generations,” added Group Managing Director U.K. Thilak De Silva.

Since inception, LAUGFS has had a strong focus on exploring and developing sustainable and environmentally friendly energy solutions. The pioneering auto gas conversion business, which marked the inception of LAUGFS 20 years ago, rapidly became popular among Sri Lankan motorists as a cost effective and a more environmentally sound approach to automotive energy. In 2001, LAUGFS entered the LPG industry offering an alternative, cleaner energy solution for both domestic and commercial markets.

LAUGFS today engages in hydro power generation and supplying to the national grid, with several more hydro power plants under construction. The company has further extended its focus on renewable energy sources towards its other business operations. Anantaya Resorts & Spa, for example, generates part of the hotel’s energy requirement through on-site wind and solar power sources.

LAUGFS also plans to further expand into larger scale generation of wind and hydro energy with long term plans to extend beyond national borders, into the South and South Eastern regions of Asia. As it celebrates its 20 year journey, LAUGFS continues to strengthen its position as a leader and pioneer in the power and energy sector with a firm focus on sustainable energy solutions, determined to place Sri Lanka on the global map for renewable energy.
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