Norway sovereign wealth fund buys into Sri Lanka’s Tokyo Cement

ECONOMYNEXT – Norway's Norges Bank, the world's biggest sovereign wealth fund, has bought a stake in Tokyo Cement, emerging among the Sri Lankan cement maker’s top 20 shareholders.

Norges Bank has bought 2,078,857 voting shares of Tokyo Cement, amounting to a 0.93 percent stake, and 6,269,466 non-voting shares or a 5.63 percent stake, according to the firm’s September 2015 quarter results.

Earlier Norges Bank, the world's biggest sovereign wealth fund with about a trillion dollars invested in equities, fixed income securities and real estate, bought 7.5 million shares in fabric maker Textured Jersey Lanka.

Sri Lanka’s Ceylon Hotels Corp buys Maldives resort firm

ECONOMYNEXT – Sri Lanka’s Ceylon Hotels Corporation has acquired control of a company which plans to build and operate a 27.7 million US dollar, 50-room resort on a Maldivian island.

A stock exchange filing said Ceylon Hotels Corporation’s subsidiary, United Hotels Company (Pvt) Ltd, will buy the entire shareholding of Ceylon Hotels Maldives (Pvt) Ltd (CMHL) for 700,000 rupees.

CMHL has got Sri Lankan exchange control approval for an equity investment of 11 million dollars to build a resort in the Maldives, it said.

The total cost of the project is 27.7 million dollars. The balance 16.6 million dollars will be funded through a bank loan, Ceylon Hotels Corporation said. (Colombo/November 16 2015)

Ceylon Hotel Investment (CHI), a firm 50 percent owned by Ceylon Hotels Corporation’s parent company, Ceylon Hotel Holdings (Pvt) Ltd., will make a private placement of 500 million rupees into United Hotels Company (Pvt) Ltd., the stock exchange filing said.

Ceylon Hotels Corporation will be holding 78.40 percent of UHCL after the private placement.

Sri Lankan shares fall to over 4-mth closing low amid budget uncertainty

Reuters: Sri Lankan shares fell for a fifth straight session on Monday and closed at their lowest in more than four months, led by large caps as uncertainty over the upcoming budget dented investor sentiment.

The main stock index fell below a key psychological barrier of 7,000 points, closing down 0.51 percent, or 35.83 points, at 6,965.98, its lowest close since July 9.

Brokers said trading volume was low as investors stayed on the sidelines awaiting policy direction from the annual budget scheduled later this week.

Finance Minister Ravi Karunanayake will present the 2016 budget in parliament on Friday. He has said the budget will be "capital oriented".

"Everybody is waiting for Friday's budget. The biggest catalyst is the budget, so investors are cashing out and awaiting till Friday," said Yohan Samarakkody, head of research at SC Securities (Pvt) Ltd.

But foreign investors, who have been net sellers of 3.54 billion rupees worth of equities so far this year, bought a net 63.2 million rupees ($445,384.07) on Monday.

Turnover was 677.3 million rupees ($4.77 million), lower than this year's daily average of 1.1 billion rupees.

Shares of Bukit Darah Plc fell 5.93 percent, while Sri Lanka Telecom Plc, which on Friday posted a 73 percent fall in third-quarter earnings, dropped 2.83 percent. 

($1 = 141.9000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

HDFC Bank requests govt. support to upgrade low-end housing

By Chandeepa Wettasinghe 

The only state-owned listed bank, the Housing Development Finance Corporation Bank (HDFC Bank) has submitted a proposal to the Prime Minister requesting a Rs.50-70 billion annual loan facility for the next 5 years for the urgent upgrading of low-end housing in the country. 

“There are 677,000 housing units that need upgrading, and I have made a proposal to the government to support this bank, and other banks, with some funding for the next 5 years,” HDFC Bank Chairman R. J. De Silva told Mirror Business. 

He noted that the project would, instead of burdening the Treasury, provide it with a handsome return in the 15 years of repayment, similar to how a housing project initiated during the 2002 United National Party regime is bringing returns now, setting a precedent. 

“We have designed the proposal in such a way that it won’t be a burden to the Treasury. On the contrary, we want to be a good tax payer, so that the taxes can also be used by the state to look after these very people,” de Silva said. 

He said that HDFC Bank would lend the money to customers, and provide the services of surveyors and other professionals, which would eliminate customers from borrowing more than they could afford or would require for repairs. 

“People are expecting the government to build houses for them, which I don’t think is a good thing. The government has to be a facilitator. The government will lend money to us and be the facilitator, and we the banks will do the business,” de Silva said. 

He added that HDFC Bank is flexible in providing either asset-based or cash flow-based loans depending on the individual, since the low-income segment is marginalized by commercial banks. 

De Silva said that taking into consideration an average of Rs.500, 000 to upgrade a house, customers will have to pay roughly Rs.5,000 a month for 15 years, which is affordable and attractive for most of the low-income groups. 

 “We will have a very small margin for our administration costs, and ensure that this problem is solved within these 5 years. So, it’ll be a large Gam Udawa,” he said. 

However, as reported on Mirror Business recently, the government intends to provide banks with funding to allow the building of 500,000 new houses in Colombo for the middle class, who are said to be marginalized due to a build up of luxury housing and government projects to relocate slums. 

De Silva said that there is an excess of 540,000 houses in the country—mainly upper and upper middle class centred on the Western Province—while around 1 percent of the population is homeless, and just 50,000 new houses are needed each year to support the population growth. 

“We’re looking at the low-income sector which requires support, because this is where problems start in the country. The housing inadequacy and village level will see that these people get involved in other illegal activities... and we’ve already had 3 insurrections and a war,” de Silva said. 

He said that even though most people in the plantation areas the North and the East, and the outskirts of the Western Province have houses, they are not adequate, and better houses are not affordable, which forms the rationale for the proposal. 

De Silva noted that without upgraded housing, most children in the segment would have to study and sleep in the same room which is also used as the kitchen and the living room, which disturbs the wholesome growth of the future minds of Sri Lanka. 

“Then, the toilet facilities are outside, so I don’t know how they go to the toilet these days when it rains and floods,” he added. 

HDFC Bank evolved into a specialized bank from a building society established in 1983. De Silva said that HDFC Bank even funds luxury housing projects exceeding Rs. 10 billion, which allows it to maintain profitability and stay attractive on the stock exchange. 

Around 95 percent of HDFC Bank’s assets are in housing, while it also engages in all activities of a commercial bank except for current accounts. The state owns 51 percent of the bank.
www.dailymirror.lk

Sampath Group’s pre-tax profit up by 42% to Rs. 7.5 b

Sampath Group recorded an outstanding financial performance with a pre-tax profit of Rs. 7.5 billion, for the nine months ended 30 September, achieving a growth of 42% over the previous year’s corresponding period’s pre-tax profit of Rs. 5.3 billion. 

The profit after tax for the first nine months in 2015 crossed the Rs. 5.0 billion mark and stood at Rs. 5.1 billion, which reflected an increase of 29.4% over the first nine months in 2014.

The bank too recorded a pre-tax profit of Rs. 7.0 billion during the first nine months of 2015, compared to Rs. 4.9 billion recorded in the corresponding period of 2014, achieving a growth of 41.3%. The post–tax profit for the nine months ended 30 September of the bank also improved by 27.8%, from Rs. 3.7 billion in 2014 to Rs. 4.7 billion in 2015.

The Group and the bank posted a lower growth rate in post-tax profits compared to the respective pre-tax profits due to reversal of certain tax over provisions of the previous years in 2014, upon finalisation of the relevant tax returns.

Core banking income
Net Interest Income (NII), which is the main source of income from the fund based operations and representing over 67% of the total operating income of the bank increased by Rs. 1.3 billion during the first nine months of 2015, as compared to the corresponding period in 2014. This amounted to a challenging growth of 11.1% in NII, despite the drop of Net Interest Margin (NIM) by 0.29%during the period, from 4.04% to 3.75% in 2015 and the low credit demand that prevailed in early parts of the year. 

The drop in NIM in 2015 was due to the falling market interest rates and drop in the higher yielding pawning portfolio in the bank’s asset-mix, which was done as a risk management measure. Despite these challenges, the Bank managed to achieve this growth in NII due to the significant growth in the fund base and effective fund management and reprising strategies adopted. In addition, the bank’s success in mobilising low cost funds and the improvement of the CASA up to 48.7% by 3Q2015 also contributed to this growth in NII.

Non fund based income
Net fee and Commission income of the bank for the nine months ended 30 September 2015 increased to Rs. 4.4 billion as opposed to Rs. 3.4 billion earned in the corresponding period in 2014 indicating a steady growth of 28.8%. This growth was achieved through leveraging on non-fund based income sources such as credit and debit card operations, trade related services and other banking services.

Mark to market losses incurred on foreign currency (FCY) forward contract revaluation due to rupee depreciation against US dollar, mark to market losses sustained on the existing portfolio of Treasury Bills due to the increase in market interest rates and drop in share prices in the Colombo Stock Exchange during the latter part of the quarter, were the main reasons for the negative figure of Rs. 381.2 million, reported under the Net Trading Income.

On the other hand, a significant growth of 139% was recorded in other operating income for the period under review, compared to the corresponding period in 2014. The bank managed to post an increase in other operating income exceeding Rs. 1.4 billion from Rs. 1.0 billion up to Q3 2014 to Rs. 2.4 billion in the first nine months of this year. Realised exchange income and exchange gains on revaluation of FCY reserves as a result of the depreciation of the local currency against the US Dollar were the main contributory factors for the improvement in other operating income. Further, increase of exchange income on currency note operations also contributed positively towards the growth of this income.

Impairment loss on loan and receivables
Reduction in impairment provision against pawning advances was the main reason for the reduction in collective impairment charges by Rs. 0.9 billion during the period under review. The bank’s total pawning advances as at 30 September represented only 4.2% of the total advances portfolio. Further, success of the credit risk mitigation efforts taken in the past contributed to improve the quality of the loan book and reduce the impairment provision.

Operating expenses
Operating expenses of the bank which stood at Rs. 8.8 billion for the nine months ended 30 September 2014 increased to Rs. 10.0 billion in the corresponding period of 2015, reflecting an increase of 13.3%. This variance was mainly due to the salary increments given to staff members, increase in credit card acquiring charges and increase in business promotional expenses. 

Business growth
Total deposits recorded a growth of 12.1% from Rs. 342 billion as at the end of 2014 to Rs. 383 billion as at 30 September. The bank’s total gross advances which stood at Rs. 311 billion as at 31 December 2014, increased to Rs. 354 billion as at 30 September 2015, reflecting a growth of13.8%. This growth was achieved despite the drop in pawning advances by Rs. 9.8 billion during the period. As at 30 September 2015, the bank’s total asset base reached Rs. 489 billion, achieving a growth of 13.3% compared to the total asset base of 31 December 2014, which amounted to Rs. 432 billion.

As at the reporting date, the bank’s network comprised of 224 branches (including 12 super branches) and 356 ATMs. The bank opened four new branches and 30 new ATMs during the period under review. Further, Sampath Vishwa, the virtual banking product made further inroads in to the IT savvy customer segments.

Performance ratios
ROE (after tax) improved to 19.4% in 2015 as compared to 16.35% recorded in 31 December 2014, while ROA (before tax) stood at 2.02% as at 30 September 2015 improving from 1.69% recorded as at 31 December 2014.Earnings per share for the nine months ended 30 September 2015 improved to Rs. 27.55, compared to Rs. 21.56 for the corresponding period of 2014, which was a growth of 27.8%. Statuary liquid asset ratio stood at 21.4% which was above the mandatory requirement of 20%. The Gross Non-Performing Advances Ratio (Net of interest in suspense) which remained at 1.93% as at 31 December 2014 was further improved to 1.7% as of 30 September 2015.

Capital adequacy ratios
The Core Capital (Tier I) and Total capital (Tier I+ Tier II ) adequacy ratios as at 30 September 2015 have dropped by 0.88% and 1.5% respectively compared to 31 December 2014, mainly due to the credit growth and resultant increase of risk weighted assets, as result in the drop in pawning portfolio in the lending-mix. The Core Capital and Total Capital adequacy ratios as of 30th September 2015 were 7.95% and 12.12% respectively, well above the required levels. In addition, the recently announced Debenture issue, amounting to Rs. 7.0 billion which was oversubscribed on the opening day itself will further enhance the Tier II and the total capital of the bank. 

The bank continued to adopt a policy of leveraging its capital to an optimum level, but will ensure to maintain a capital buffer adequate enough to support its future business expansion and risk profile.
www.ft.lk

Hemas Holdings records solid first half performance

Hemas Holdings PLC (HHL) recorded a solid first half performance with consolidated Group revenue of Rs. 18.4 billion for the six months ended September 30, 2015, reflecting a Year-on-Year (YoY) growth of 19.6%.

This led to an operating profit of Rs. 1.6 billion and earnings of Rs. 1.1Bn, a growth of 11.6% and 18.4% respectively.

However, last year's corresponding period includes a one-off capital gain of Rs. 89 million from the sale of the Nimex Brand and excluding the same, the underlying earnings growth of the Group stood at 31.6% over last year, said Steven Enderby, Chief Executive Officer, HHL.

During the second quarter of FY15/16, the Group recorded a revenue growth of 16.7% compared with the same quarter last year. Good growth was recorded by the FMCG and Healthcare sectors of 16.3% each.

However, both operating profit and earnings shows a negative growth of 1.2% and 0.7% respectively, due to exchange losses from our new hotel and the one-off capital gain and profit from discontinued operations recorded in the previous year. Excluding these, operating profit and earnings recorded an underlying growth of 9.0% and 16.6% respectively.

The FMCG sector reported revenues of Rs. 7.4 billion for the six months under consideration, a 24.5% YoY increase on the previous financial year.

"Our Bangladesh operation maintained its high revenue growth almost doubling last year's performance with the extended market reach through our recently established sales team starting to deliver."

Fuelled by 16.7% growth in our pharmaceutical distribution business top line, the healthcare segment of the Group achieved sales of Rs.7.7 billion for the six months ended September 30, 2015.

Spurred by increased demand for healthcare in the country and the growing diagnostic network of the Group, all three hospitals recorded a YoY growth in revenue of 29.9%.

JL Morison posted a significant top-line growth of 35.7% and an earnings growth of 77.6%.

Transportation sector revenue of Rs. 828.7 million reflects a YoY growth of 14.6%, stemming from strong performance of our logistics business.

The growth of the logistics business was mainly due to the securing of new projects, warehouses operating with full capacity and haulage business growing with the car carrier operation performing well.

The leisure segment recorded total revenue of Rs. 1.3 billion for the six months under consideration, registering a 7.5% increase over that of the first half of financial year 2014/15. The increase was primarily driven by the healthy overall occupancy rate of 74%.
www.dailynews.lk