Fitch rates Singer Sri Lanka's debenture 'A-(lka)(EXP)'

ECONOMYNEXT – Fitch Ratings said it has assigned Singer Sri Lanka PLC's proposed unsecured senior debenture issue of up to three billion rupees a National Long-Term Rating of 'A-(lka)(EXP)'.

The debentures are likely to have a three-year tenor with a fixed coupon, a statement said.

The proceeds of the proposed issue will be used to refinance existing debt, restructure short-term debt and for working capital requirements.

The full rating report follows:

Fitch Ratings-Colombo-15 December 2015: Fitch Ratings has assigned Singer Sri Lanka PLC's (Singer; A-(lka)/Stable) proposed unsecured senior debenture issue of up to LKR 3bn a National Long-Term Rating of 'A-(lka)(EXP)'. The debentures are likely to have a three-year tenor with a fixed coupon. The proceeds of the proposed issue will be used to refinance existing debt, restructure short-term debt and for working capital requirements.

The debentures are rated at the same level as Singer's National Long-Term Rating of 'A-(lka)' because they represent senior unsecured obligations of the company and would rank equally with the company's other senior unsecured debt. The final rating is subject to the receipt of final documents conforming to information already received.

KEY RATING DRIVERS

Leading Consumer Durables Retailer: Singer's position as a leading consumer durables retailer is supported by its extensive distribution network, multi-brand strategy, and robust after-sales service.

Improved Operating Environment: Demand for consumer durables is likely to be sustained over the medium term by increases in public-sector salaries in February 2015, lower income-tax rates for private-sector employees introduced in November 2015 and reduced pricing on essential items, including fuel and electricity.

Proposed Restructuring: Fitch believes that the proposed acquisition of domestic consumer durable manufacturers Regnis (Lanka) PLC and Singer Industries Ceylon PLC from its direct parent Singer (Sri Lanka) B.V is likely to have a neutral impact on Singer's rating, based on the finalised transaction prices.

Cyclical Demand, Currency Risk: Singer's earnings are subject to business cycles, due to the non-essential nature of the company's products and price volatility. Prices and profitability are also sensitive to foreign-exchange fluctuations as most of the inventory is imported.

KEY ASSUMPTIONS

Fitch's key assumptions within the rating case for the issuer include:

- Revenue to increase due to improved consumer purchasing power.

- EBITDAR margins to settle in the high-single digit range in the medium term due to increased contribution from low-margin IT and communication products

- Proposed acquisitions are valued at LKR 1.4bn and are likely to be completed by end-2015

RATING SENSITIVITIES

Negative: Future developments that may, individually or collectively, lead to a negative rating action include:

- A sustained increase in Singer's leverage (measured as adjusted net debt/EBITDAR excluding Singer Finance) to over 5.5x (3Q15: 4.13x)

- EBITDA margin sustained below 7% (Nine months ending September 2015: 7.4%)

- A material weakening in Singer's (company-level) liquidity profile

- A material weakening of the credit profile of Singer's 80% subsidiary, Singer Finance (Lanka) PLC (BBB(lka)/Stable), given strong linkages between the entities

Positive: Future developments that may individually or collectively lead to a positive rating action include:

- Singer's leverage falling below 4.5x on a sustained basis

- EBITDA margin sustained above 10%

LIQUIDITY

As at end-September 2015, Singer had LKR1.3bn of unrestricted cash and LKR7.0bn of committed but unutilised credit lines to meet debt obligations of LKR6.6bn falling due in the next 12 months.

Sri Lanka tea production lower in 2015

ECONOMYNEXT – Sri Lanka’s tea production this year is expected to be lower than last year as rains disrupted harvests with crops down in all other major black tea producing countries except Bangladesh, brokers said.

Sri Lanka’s crop deficit to end-October was 3.85 million kilos when compared to the same period last year, brokers John Keells said.

Production in Kenya, the world’s biggest black tea exporter, was 14.21 percent lower up to end-September 2015 compared with the year before.

“The short rains in Kenya appear to be coming to an end and with December being normally a dry month, the crop shortfall is expected to expand further,” the brokers said in a report.

“Other tea producing countries too have recorded crop deficits with the exception of Bangladesh having recorded a marginal increase.”

Unusually heavy rains this year has reduced Sri Lanka’s crop in all elevations with the total crop up to October 2015 at 279.89 million kilos.

India’s crop is also lower by about 20 million kilos this year.

John Keells said climate change induced by increasing greenhouse gases and global warming is likely to affect crops in different regions and tea will be no exception.

Sri Lanka corporate profit growth seen slowing

ECONOMYNEXT – Profit growth of Sri Lanka’s listed companies is likely to be lower than anticipated in forthcoming quarters with the depreciation of the rupee to record lows and rising interest rates, a brokerage said.

The rupee depreciation and higher interest rates will gradually slowdown consumer demand, First Capital Equities said in an earnings update.

Consumer demand rose sharply this year after the government reduced fuel prices and lowered prices of other goods with reduced taxes.

“We expect consumer demand to remain high though on a marginal decelerating trend during 1H2016 amidst higher disposable income among consumers,” First Capital Equities said.

“The rupee depreciation and rising interest rate environment may affect the economy predominantly during the 2H2016 while the effect will be partially felt during the latter part of 2Q2016 as well,” the report said.

“Amidst significant forex losses wiping out the high growth rates produced via consumer demand, we would like to downgrade our earnings forecast to December 2015E /March 2016E at 9%-11% year-on-year from the previous 11%-13%,” First Capital Equities said.

With the slowdown in economic conditions the brokerage said it continues to maintain its earnings forecast for December 2016E / March 2017E at 4%-5% year-on-year.

Colombo Stock Exchange revamps S&P Sri Lanka 20 Index

ECONOMYNEXT – The Colombo Stock Exchange (CSE) announced changes in its S&P Sri Lanka 20 index, which tracks the top 20 largest and most liquid stocks, in an annual review by S&P Dow Jones Indices.

Bukit Darah PLC, Carson Cumberbatch PLC, Lion Brewery Ceylon PLC, and Sri Lanka Telecom PLC will be removed from the S&P Sri Lanka 20 index as they no longer qualify for index inclusion from December 21, 2015.

Replacements will be Asiri Hospital Holdings PLC, Ceylinco Insurance PLC, Ceylon Cold Stores PLC and Hemas Holdings PLC, a statement said.

The index includes the largest 20 stocks, by total market capitalization, listed on the CSE that meet minimum size, liquidity and financial viability thresholds, it said.

The constituents are weighted by float-adjusted market capitalization, subject to a single stock cap of 15%, which is employed to reduce single stock concentration.

The S&P Sri Lanka 20 stocks are classified according to the Global Industry Classification Standard, which was co-developed by S&P Dow Jones Indices and MCSI and is widely used by market participants throughout the world.

To be eligible for inclusion, a stock must have a minimum float-adjusted market capitalization of 500 million rupees, a six-month average daily value traded of a million rupees, have been traded at least 10 days of each month for the three months prior to the rebalancing reference date, and have positive net income over the 12 months prior to the rebalancing reference date.


The new S&P Sri Lanka 20 in alphabetical order are as follows:

1. Access Engineering Ltd
2. Aitken Spence PLC
3. Asiri Hospital Holdings PLC
4. Cargills (Ceylon) PLC
5. Ceylinco Insurance PLC
6. Ceylon Cold Stores PLC
7. Ceylon Tobacco Company PLC
8. Chevron Lubricants Lanka PLC
9. Commercial Bank of Ceylon PLC
10. DFCC Bank PLC
11. Dialog Axiata PLC
12. Distilleries Company of Sri Lanka PLC
13. Hatton National Bank PLC
14. Hemas Holdings PLC
15. John Keells Holdings PLC
16. Lanka Orix Leasing Company PLC
17. National Development Bank PLC
18. Nestle Lanka PLC
19. People’s Leasing & Finance PLC
20. Sampath Bank PLC

Sri Lanka's People's Insurance Rs750mn IPO oversubscribed

ECONOMYNEXT - An initial public offer by Sri Lanka's People's Insurance Plc, a unit of listed People's Leasing, of 50 million shares at 15 rupees each to raise 750 million rupees was oversubscribed on the opening day itself.

There was “strong individual and institutional investor interest” in the IPO, a statement said.

“Healthy demand was witnessed across all investor categories with a strong institutional order book,” it said.

People's Insurance Plc gets captive motor business from its parent, People's Leasing, which is Sri Lanka's largest non-bank lender.

People’s Insurance raised the funds with the objective of strengthening its capital base to support its medium to long term growth strategy, the statement said.

The company is the first general insurer to list on the Colombo Stock Exchange among those companies required to list on the exchange as required by the Insurance Board of Sri Lanka and new industry legislation.

“People’s Insurance will be the first pure-play general insurance company to be listed on the CSE,” the statement said.

“The company intends to further penetrate its bancassurance channels and non-captive retail business in the future,” said Jehan Amaratunga, Chairman of People’s Insurance.

NDB Investment Bank, Acuity Partners and People’s Bank – Investment Banking Unit were the Joint Financial Advisors and Managers to the IPO.

Sri Lanka Treasuries yields up sharply

ECONOMYNEXT - Sri Lanka Treasuries yields rose across maturities at Wednesday's auction with the 3-month yield rising 18 basis points to 6.28 percent, data from the state debt office showed. 

The 6-month yield rose 19 basis points to 6.54 percent and the 12-month yield rose 09 basis points to 7.01 percent. 

The debt office offered 20 billion rupees of bills and accepted 15.8 billion rupees of bids. There is an estimated 28 billion rupees of maturing bills this week, but it is not clear whether there are any central bank held bills. 

Earlier in the day, the central bank absorbed 11 billion rupees of excess cash overnight at 6.09 percent. 

The central bank had progressively brought down excess liquidity in display of monetary tightening and at least over recent weeks seem to have halted large scale monetizing of debt, analysts say.

Sri Lankan shares edge up; Browns Investments boosts turnover

Reuters: The Sri Lankan share index ended slightly firmer on Wednesday with trading dominated by Browns Investments PLC, but the market activity was lacklustre ahead of the U.S. Federal Reserve's decision on interest rates due later in the day.

The main stock index ended 0.19 percent firmer at 6,833.51, moving further away from Monday's more-than-eight-month closing low.

Browns Investments PLC, which jumped 7.14 percent, accounted for 61 percent of the day's turnover and 96 percent of the day's traded share volume.

Turnover stood at 602.9 million rupees ($4.20 million), just above half of this year's daily average of 1.1 billion rupees.

Foreign investors bought a net 16.6 million rupees worth of equities on Wednesday, but they have sold a net 4.03 billion rupees worth of shares so far this year.

Globally, investors readied for what is expected to be the first rise in U.S. interest rates in almost a decade.

The market is expected to be lacklustre with low turnover due to year-end holidays starting next week due to Christmas, stockbrokers said.

Shares in diversified conglomerate Hemas Holdings gained 2.87 percent, while Ceylon Theatres gained 3.7 percent, helping the overall index gain.

($1 = 143.6000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Biju Dwarakanath)

Plan to lure MNCs to Colombo

By Ravi Ladduwahetty

Ceylon Finance Today:The Western Region Megapolis Planning Project will have 10 industrial zones and will be unveiled by Prime Minister Ranil Wickremesinghe on 8 January, coinciding with the first anniversary of the government.

This is a continuation of the strategic plan for the Western Province which was evinced by the abridged Ranil Wickreme-singhe Government in 2001-2004 and when it is fully commissioned, will be completed in 2030, Western Region Megapolis Planning Project Chairman Ajitha de Costa told Ceylon FT.

He said that the plan prepared by the Consultants- CESMA of Singapore would be ready by the month end (December) and the papers for the setting up of the Western Region Megapolis Authority are now with Minister Champika Ranawaka.There will be 10 Industrial Zones which will revolve round an aero city zone round the Katunayake Airport, a logistics and freight zone which will stretch from the Colombo Port to Katunayake, and a central business district from Colombo Fort to Ratmalana and Sri Jayawardenapura to Kelaniya.

He said that a survey is being conducted on government owned lands and assured that there would be no acquisitions of private lands for these mega projects.

There will be a "Strategic Environment Assessment" so that the projects thrown up from the Plan will have a small gestation period which means that only the impact of a particular project needs to be studied, de Costa said.

"We are establishing this to lure multi national companies (MNCs) to establish their regional headquarters in Sri Lanka", he said.

Within this plan will be a coastal and marine Zone which will be stretching from Beruwela to Negombo and a science and technology zone which will include Kaduwela, Malabe and Homagama and which will be interconnected.

A plantation city will be established at Avissawella while there will be a plantation and forestry city in Badureliya, Agalawatta and Mathugama.

A tourism zone will be established from Panadura toBeruwela in the southern belt while there would be another tourism zone from Negombo to Kochchikade in the Northern belt. There would be industrial zones/ townships at Mirigama and Horana. There would also be spiritual and religious sites at Kelaniya,Kalutara,Dharga Town and Tewatte, Ragama.

www.island.lk

Rights issues by Dankotuwa Porcelain and Ceylon Printers

By Hiran H.Senewiratne

Dankotuwa Porcelain PLC is to raise additional funds through a rights issue of 90,307,178 shares in proportion of five (05) new ordinary shares for every four shares at Rs. 08 per share.

The current stated capital of Dankotuwa Porcelain PLC is Rs. 679,644,223 represented by 72,245,742 shares.

The funds thus raised would be utilized for plant modernization and to settle short term loans.

Meanwhile,Ceylon Printers Plc is to raise Rs 30,008,400 from a rights issue of 25,007 shares. The shares will be allotted in proportion five of new ordinary shares for every seven shares at Rs 1200 per share.

An employees’ share option scheme was announced for three companies, namely, Commercial Bank of Ceylon Plc, Hatton, National Bank Plc and John Keels Holdings Plc. This applies to those companies whose shares have been listed during the period 1st of November to 30th November 2015, consequent to the exercising of options under the employees share option scheme, Colombo Stock Exchange sources said.

At the Commercial Bank, the number of voting shares issued were 96, 810 with a stated capital of Rs 23, 237,036, 069, while Hatton National Bank Plc’s issued number of listing and non listing shares were 87, 570 and 21,555 respectively for a stated capital as at 30th November of Rs 13,596,680,000 and John Keels Holdings number of shares listed were 10,681 for a stated capital of Rs 58,696,606, 123.

www.island.lk