Sri Lanka CT Holdings suspends Kotahena condo project

ECONOMYNEXT - C T Holdings PLC has said it has suspended its joint venture property development project to build high-end condominiums in the Kotahena suburb of the Sri Lankan capital Colombo which has been subject to lengthy delays.

The drop in the group’s turnover and profitability of its real estate business in the September 2015 quarter has been attributed partly to “the deferment of the joint venture property development project undertaken with foreign collaboration,” it said.

The other reason for reduced profits from its real estate business in the quarter was the completion of on-going development projects.

CT Holdings is “presently in the process of discussing the project in order to arrive at a satisfactory conclusion,” according to a note accompanying group September quarter interim results filed with the stock exchange.

The company had earlier said its joint venture property development project with Singapore’s Keppel Land, the property arm of Keppel Corporation, had been hit by delays and that the re-commencement and completion dates could not be realistically estimated.

It made a provision for impairment in the value of this investment amounting to 181 million rupees in the 2015 financial year.

The Kotahena property project was started about three years ago with project planning and clearances obtained and piling work completed.

JKH warrant conversion to infuse Rs. 8 bn. zero cost cash into company

JKH’s 2015 warrant conversion into shares concluded last week was expected to be nearly fully taken up infusing approximately eight billion rupees to the company keeping cash flows into the ongoing mega Waterfront development project going smoothly.

"We’re still counting with cheque realizations to be accounted for," company sources said. 

"Unlike in a rights issue, there was no opening for application for additional shares so what won’t be taken up will be warrants of dead people or those tied up in testamentary cases or a few who may have forgotten or not filled the forms."

"Given that the warrants had value, those who didn’t want to convert to shares could have sold the warrants," an analyst explained. "Those who kept them would have converted. Though the warrant price came down on the last lap they traded at over Rs. 50 each some months ago and there is a nice difference between the conversion price of Rs. 161.80 and the prevailing share price of Rs. 184."

There is significant foreign shareholding in JKH whose largest shareholder is Mr. S.E. Captain who held 10.5 percent of the company with a further 8% held by Paints and General Industries which he controls according to the company’s September financials.

JKH’s Chairman Susantha Ratnayake, Deputy Chairman Ajith Gunawardene and Finance Director Ronnie Pieris are substantial shareholders although not on the top twenty list.

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Union Bank to get Rs. 500 M Capital Injection

By IsharaGamage

Ceylon Finance Today: UB Finance Co Ltd, a subsidiary of Union Bank will be having an extraordinary general meeting (EGM) during this week to get approval for its Colombo Stock Exchange listing process, a senior official said.

Simultaneous to this stock market listing, UB is also planning to inject an additional Rs 500 million to Rs one billion in capital via a private placement, he said.

"New capital will be through new investor. It may be a large foreign institutional or high networth investor," the source said.

"They are even willing to invest up to two billion rupees and negotiations are currently under way", the official said.

"Actually, TPG Capital, USA (the largest shareholder of Union Bank) is also willing to invest in UB, but pooling knowledge vis-à-vis the participation of this new investor is of a greater advantage to us, where we can have access to fresh expertise", he said. UB Finance Company was formed by Union Bank (UBC), by the latter's acquisition of The Finance and Guarantee Company Ltd. (TF&G), a licenced finance company under the Ceylinco Group which got in to difficulties after the collapse of its now defunct Golden Key Credit company, an unlicenced finance company.

UBC together with an International foreign investment fund Shore Cap II Ltd of USA, acquired over 98% of the voting shares of TF&G subsequently at an investment of over Rs. 1.1. billion. UB Finance, licensed by the Central Bank of Sri Lanka, is currently providing a range of financial...... services that include fixed deposits, savings, real estate, leasing, hire purchase, loans, factoring and pawning. Their services are mostly catering to small and medium enterprises.

TF&G, after its collapse, was earlier managed by Merchant Bank of Sri Lanka. The company has around 3,000 depositors with a total deposit base of Rs. 3.3 billion Over 50% of the company's deposits have been converted to non voting shares with the consent of depositors.

The Board of Directors of UB Finance is led by Chairman Alexis Lovell (Chairman, Union Bank), Ananda Atukorala (Deputy Chairman), Jit Warnakulasuriya, Daman Panditharatne, Davis Golding, Malinda Samaratunga, Ajith Wijeyesekera, Upali Wijeyesekera, Rohendra Wijeyesekera and Nalin Fernand.

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Aitken Spence posts Rs. 1.5bn PBT in first half

Diversified group Aitken Spence posted a pre-tax profit of Rs. 1.5 bn for six months ended 30th September 2015, while reporting a post-tax profit of Rs. 1.15 bn.

The blue chip’s half-year revenue was recorded as Rs. 11.9 bn, results released to the Colombo Stock Exchange revealed. Profit attributable to equity holders was Rs.781 mn for the six months while earnings per share was Rs. 1.92 for the same period.

The conglomerate posted Rs. 773 mn as pre-tax profits and Rs. 567 mn as post-tax profits for the second quarter while recording Rs. 6 bn as revenue. Earnings per share for the quarter stood at Rs. 0.89.

The corresponding results for the previous year included the profits from the operation of the Embilipitiya power plant and insurance proceeds received for the damaged water villas at one of its resorts in the Maldives. If these items were excluded from results of the previous year it would have resultedin a favourable increase in the consolidated profit before tax by 24%.

Aitken Spence PLC is among Sri Lanka’s most dynamic and respected corporate entities with operations in South Asia, the Middle East, Africa and the South Pacific. Listed in the CSE since 1983, it has major interests in hotels, travel, maritime services, logistic solutions and power generation. The group also has a significant presence in plantations, printing, garments, financial services, insurance and information technology.

Tourism sector recorded a pre-tax profit of Rs. 900 mn with revenues of Rs. 5.76 bn for the six months. Maritime and Logistics sector performed well with Rs. 527 mn as profit before tax and Rs. 3.42 bn as revenue for the same period.

The Strategic Investments sector, which includes the power generation segment, recorded loss of Rs. 32 mn with revenue of Rs. 2.3 bn for the first half of the financial year. The Services sector recorded an improved performance with pre-tax profits of Rs. 109 mn, whilst revenue stood at Rs. 426mn, for the six-month period under review.

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CWE falls into debt trap

The Cooperative Wholesale Establishment (CWE) which operates 310 retail outlets countrywide is on the verge of bankruptcy with debts of Rs. 10 billion to two state banks the Bank of Ceylon and the Peoples Bank and Rs. 3 billion to suppliers.The Treasury has turned down a request by Minister of Industry and Commerce Rishad Bathiudeen for Rs.8.5 billion to bailout the CWE. The retail chain is making losses continuously with many of the suppliers already halting supplies due to nonpayment of their dues.

Big suppliers will also curtail their supplies as the CWE has held up payments for 60 to 70 days, a leading fast moving consumer product supplier told the Business Times.Several suppliers were not getting any payment since March this year, following the decision taken by the former CWE Chairman Kiran Atapattu to close the central ware house in Colombo and direct all the supplies to be sent directly to outlets countrywide, a medium scale supplier who wished to remain anonymous said.

CWE took almost five months to pay for the purchases made by them during the months of March and April 2015, he said adding that the confidence of the suppliers had on CWE was lost due to this and some of them halted their supplies and others reluctant to issue goods as per the CWE requirement.The institution is operating without a chairman at present and the ministry official appointed to oversee the functions is not getting involved in operational matters, he disclosed.

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Errant broker licences hang in the balance

By Duruthu Edirimuni Chandrasekera

Sri Lanka’s Securities and Exchange Commission (SEC) will ‘critically’ re-look at licences of some market intermediaries who have stepped out of line, a top official said. SEC Chairman Thilak Karunaratne told the Business Times that the regulator has many ‘issues’ but only with ‘very few’ market intermediaries. “We will have to evaluate their licences when they come up for renewal at year end,” he said. He added that the SEC is working on six major cases as part of probes that will be done by a ‘totally’ revamped investigations division.

The SEC reorganisation was completed this month. “We revamped the whole investigation division. We changed staff,” he said, adding that SEC had advertised for staff, including management trainees for certain divisions at SEC. “We also called for new staff for the Investigations Division.”Mr. Karunaratne added that as part of the restructure the SEC has also internally shifted staff from certain divisions to the Investigations Division. “I have no confidence in the Investigations Division,” he stressed, noting that contrary to popular belief no probes have been shelved.

He added that most cases from 2010-2012 periods have been reopened and that three more are also being probed. When asked that despite probing, the SEC is not armed with enough teeth to prosecute the offenders, Mr. Karunaratne said, “We’ll bite with the teeth we have”.
Mr. Karunaratne was first appointed to the SEC in December 2011 but later resigned accusing the government of interference in 17 ongoing cases. When asked why he changed his mind after declaring to ‘never’ take up political appointments, he said that the PM wanted him to complete some unfinished business at the SEC and that he couldnt say ‘no’ to that request.

He resumed his role as chairman in January this year, an honorary position and he’s not on the SEC payroll. He said that the first draft of the SEC Act was completed last week and that the new Act will be civil and administrative compliant. When asked about the charge of ‘not market friendly’ being levelled at him, he said, “Regulations don’t go behind stockbrokers. The brokers must request for meetings, etc which the new President of the Stockbroker Association did and we met them recently. It was more of an ice breaker and we decided to meet as and when required”.

When asked why SEC had advertised for Capital Market Development staff when he had reiterated that the regulator’s mandate isn’t in this area, Mr. Karunaratne responded saying that Capital Market Development entails educating, improving rules, better supervision of market intermediaries.“We spend a lot of money on these aspects. We will give all our support to the Colombo Stock Exchange in order to do their investment promotion.”
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Top SEC official sent on compulsory leave

Dhammika Perera, Deputy Director General (DDG) at the Securities and Exchange Commission (SEC), who has had several controversial issues, was served with compulsory leave orders by the SEC on Wednesday.

This came on the back of the Commissioners conducting a thorough study of Mr. Perera’s activities. “After this they decided to send him on compulsory leave pending inquiry,” a source told the Business Times.

A former SEC Director, Investigations, Mr. Perera was appointed as the DDG in 2012 during the tenure of Nalaka Godahewa as the SEC chairman.
In the meantime the SEC’s Surveillance Division has been strict with errant stockbrokers and investors in a crackdown on malpractices. “When they detect some suspicious transaction, the offenders are warned”.

While high growth in the Colombo stock market was seen in 2009, 2010 and in the first quarter of 2011, it also caused a high degree of price volatility and created many regulatory and supervisory issues plus accusations of fraud and malpractices.
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