Sri Lankan shares rise for third day ahead of budget

Sri Lankan shares rose for a third straight session on Thursday, led by blue-chips in thin volume as investors stayed on the sidelines ahead of Friday's budget.

The main stock index ended 0.55 percent, or 38.21 points, firmer at 7,020.18, its highest close since Nov. 9.

"Everybody is waiting to see the proper direction more than the taxes. It's not about taxing, but how they tax," said a stockbroker asking not to be named.

Sri Lankan Finance Minister Ravi Karunanayake will seek to boost tax revenues and rationalise spending in the new government's first full-year budget on Friday, but analysts see him showing little commitment to fiscal consolidation.

Turnover was 552.5 million rupees ($3.89 million) on Thursday, about half of this year's daily average of 1.1 billion rupees.

Market heavyweight John Keells Holdings Plc rose 0.82 percent, Ceylinco Insurance Plc gained 3.76 percent and Sri Lanka Telecom Plc added 0.42 percent.

Foreign investors were net sellers of 28.4 million rupees worth of shares on Thursday, extending the year-to-date net foreign outflow to 3.6 billion rupees worth of equities. 

($1 = 142.0000 Sri Lankan rupees) 

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

Good Hope to delist

Good Hope plc, a Carson Cumberbatch company, has announced its intention to delist from the Colombo Stock Exchange (CSE).

In its report on the second quarter quarterlies in the quarter ended 30 September, 2015; the company said that...Adducing reasons behind this move, Good Hope further said that as per the Colombo Stock Exchange (CSE) Listing Rule No. 7.13, a listed entity on the Main Board having a public holding below the specified requirement in terms of CSE rules, has to ensure that the public holding of such an entity is maintained at a minimum level of 15% of its total ordinary voting shares in the hands of a minimum number of 500 public shareholders on or before 31 December, 2015.

The majority shareholder does not have any intention of diluting its holdings nor does the Company intends to issue further shares in order to conform to the said rule, the CSE said.This would therefore entail the initiation of a delisting process, it said.

When so decided, this would be done in consultation with the regulator and with the required shareholder approval, Good Hope said.

The Carson Cumberbatch Group is controlled by the Selvanathan brothers Mano and Hari.(PGA)
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Mercantile Investments gets’BBB­(lka)’ rating

Fitch Ratings Lanka has assigned Mercantile Investments and Finance PLC (MIF) a National Long Term Rating of 'BBB­(lka)'.

The outlook is stable. The agency has also assigned the company's outstanding senior unsecured debentures a National Long-Term Rating of 'BBB­(lka)'.

MIF's rating reflects its modest franchise stemming... ... from its long operating history, satisfactory capitalisation and loan book exposure to less risky customer segments relative to peers. 

However, its ratings also capture its high risk appetite, which is evident in its substantial exposure to equity investments, low profitability metrics relative to peers and greater reliance on concentrated and short term funding.

Equity investments accounted for 16.8% of total assets at the end of the financial year to March 2015 (FYE15), much higher than the level at similarly rated peers, leaving the company vulnerable to market risk.

In addition, MIF is allegedly in breach of the regulator's rule that limits equity investments to 25% of capital funds for non ­bank financial institutions, with equity investments at 52.2% of capital funds at FYE15.

MIF's ROA has declined to 1.9% at end­ 1HFY16 from 3.2% at FYE13 largely due to weak net interest margin (NIM) and high impairment charges relative to peers. Fitch believes that a potential increase in operating costs due to branch expansion and an increase in credit costs could hamper operating profitability and internal capital generation.

Fitch views MIF's concentrated deposit base and high negative maturity mismatches as risks to its funding profile. Deposits are the main source of funding for MIF, but its deposit base is highly concentrated compared with similarly rated peers.

MIF's negative assets and liabilities mismatches of less than a year are higher than that for similarly rated peers. It amounted to 47% of equity at end­ October 2015, 50% at FYE15 and 65% at FYE14.

Unutilised credit lines covered 52% of the negative mismatches at end ­October 2015. Funding lines sourced by MIF by pledging its assets could help to reduce such mismatches.

MIFs regulatory Tier 1 capital adequacy ratio decreased to 19.6% at end­ 1HFY16 from 21.7% at FYE15 (FYE14: 22.5%). The loan book increased by 21% in FYE15 (FYE14: 17%), in line with the industry. Fitch expects a further dilution in capitalisation due to MIF's expanding operations, but believes that capitalisation should remain satisfactory for its current rating.

Fitch believes that MIF's higher exposure to less risky assets such as motor cars (40% of total advances at FYE15) has supported its asset quality. MIF's gross regulatory NPL ratio (FYE15: 4.2%) has historically remained below that of the industry.

MIF's outstanding senior debentures are rated at the same level as MIF's National Long­Term Rating, as the issue ranks equally with the obligations to the company's other senior unsecured creditors.

The company was established in 1964, and is majority owned by the Ondaatjie family, who directly hold 57% of MIF's equity. At end­June 2015, MIF accounted for 3.3% of non­bank financial institution sector assets in Sri Lanka. MIF mainly provides vehicle financing through lease and hire purchase.

RATING SENSITIVITIES

An upgrade of MIF's rating is contingent upon the company significantly reducing its exposure to equity investments, reducing high structural maturity mismatches and deposit concentrations, improving its core profitability and maintaining its capitalisation. A continued increase in MIF's large maturity mismatches and a sustained deterioration in its capitalisation and asset quality relative to its higher ­rated peers could result in a downgrade.

The senior debt rating will move in tandem with the MIF's ' National Long­Term Rating.
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NSB nine month PBT tops Rs. 9.1 billion

The National Savins Bank (NSB) reported a profit before tax of Rs. 9.1 billion for the nine months ended September 30, 2015.

This is an impressive growth of 31% as compared to same period last year. The profitability for nine month period was mainly fuelled by the growth in traditional lines of business,the bank said yesterday.

The net interest income of the Bank increased to Rs. 20.6 billion which is an increase of 38% as compared to corresponding period of last year.

As the interest income of the Bank grew by 7% to reach Rs. 58.4 billion, while interest expenses recorded a decrease of 5% mainly due to re-pricing impact of fixed deposits and increase in normal savings base during the period under review.

The profit after tax was reported at Rs. 5.6 billion for the nine months ended September 30. These profits were recorded amidst the personal cost reflecting a revision of salaries as per the three year collective agreement and prudent provisioning for adverse impact in declining gold market prices.

The Bank’s Loans and Advances grew by 20.1% during this period with retail lending portfolio recording a growth of 12% while corporate lending increase was 37%. The total assets of the Bank stood at Rs. 818 Billion indicating a growth of 5%.

During the period under review, total deposit base of the Bank grew by 5% to reach Rs. 580 billion while normal savings recorded an impressive growth of 14% to reach deposit base of 162 billion.

The Bank’s Tier 1 capital adequacy ratio stood at 17.2% while total capital adequacy for the period under review was at 15.8%.The Bank has AAA long-term credit rating from Fitch Ratings Lanka Ltd. for the 13th consecutive year.

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Union Assurance ups profits in 3Q

Union Assurance (UA), continued its growth impetus in both turnover and profits at the end of the third quarter recording a steady growth in gross written premium (GWP) and profits as at the end of the third quarter of 2015.

GWP for the nine months upto September 30,2015 wasRs. 5 billion compared to Rs. 4.3 billion in the corresponding period, a growth of 16%.

Total net revenue excluding gains recorded from disposal of the non-life business amounted to Rs. 6.7 billion, which was a 1% increase over the previous year. Total net revenue including the gain was Rs. 7.9 billion.

Profit after tax (PAT), including the disposal gain amounted to Rs. 1.5 billion. PAT excluding the disposal gain amounted to Rs. 245 million compared with the Rs. 101 million PAT reported in 2014.

The above PAT figures do not include a surplus from the life business, as the surplus is transferred at year end following actuarial valuation.

As at September 30, 2015 UA’s life fund stood at Rs. 26 billion with a healthy solvency ratio indicating the financial strength of the business.

Asiri buys more from Actis

Asiri Hospital Holdings has purchased 20,417,874 shares of Central Hospitals Limited (CHL) (9.49%) from Actis Investment Holdings SL Limited at a price of Rs 41.42 per share for a total consideration of Rs 845,708,341.08.

Pursuant to the aforesaid transaction, the company holds a total of 166,980,749 shares in CHL, amounting to a stake of 77.62% therein. Asiri Central Hospitals Limited, a subsidiary of the Company also holds 47,559,055 shares (22.11%) in CHL.

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Hemas, Minor Group ready to open Anantara Tangalle

Hemas Holdings in partnership with Minor Hotel Group will be introducing the leading hospitality brand Anantara to Sri Lanka.

A soft opening of its first luxury property, Anantara Peace Haven Tangalle Resort is in December 2015 with the official launch in early 2016.

With a project value of around US$ 50 million, the exclusive Tangalle property has 120 rooms and 32 stand-alone private pool villas, six restaurant and bar venues, an exclusive Anantara Spa, a 25 metre swimming pool, fully equipped cardio-gym, tennis and badminton courts. Easy accessibility may be undertaken via chauffeur driven resort owned luxury vehicles, seaplane or helicopter transfers.

Hemas Holdings Group Director and Serendib Hotels Chairman Abbas Esufally said the launch of the Anantara Peace Haven Tangalle Resort in Sri Lanka, will open the doors for luxury travellers seeking authentic cultural experiences and exposure to the southern coast’s natural wonders, especially in a region that is fast developing its tourism potential.”

The Anantara brand currently has 35 properties internationally with future properties to open in Mozambique, China, Sri Lanka, Mauritius, Laos, Qatar and Oman. Anantara Siam,one of Bangkok’s most iconic hotels hosted President Maithripala Sirisena and his trade delegation at the recently held “Thailand – Sri Lanka Business Forum” whilst on his state visit to Thailand. Anantara Peace Haven Tangalle Resort is a joint venture between Hemas Holdings and Minor Hotel Group. The second Anantara branded property - the Anantara Kalutara Resort is scheduled to open in March 2016.

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