Sri Lankan stocks end lower on rising rates, economic worries

Reuters: Sri Lankan shares edged down for the sixth straight session on Monday to close at a more-than-three-week low, as rising domestic interest rates forced investors to stay off risky assets while concerns over global worries also weighed.

Sri Lanka's main stock index ended down 0.27 percent at 6,266.17, its lowest close since Jan. 20. It fell 1.9 percent last week.

Foreign investors were net sellers of 169.6 million rupees worth of shares on Monday, extending the year-to-date net foreign outflow to 345.7 million rupees worth of equities.

"Investors expect the market to come further down as the selling side remains high with no match for the buyers. Even buyers are waiting for prices to ease further," said Dimantha Mathew, research manager at First Capital Equities (Pvt) Ltd.

"If this continues we may see a round of margin calls which will speed up the fall."

The key index has fallen 9.1 percent this year through Monday, amid a rise in market interest rates.

Yields on t-bills rose between 8 and 17 basis points at a weekly auction on Wednesday, with the 182-day and the 364-day t-bill yields climbing to more-than-two-year highs, signalling a further rise in market interest rates.

Some investors are shifting to fixed interest rate-bearing assets due to a gradual rise in interest rates, analysts said.

Turnover was 491.7 million rupees, less than this year's daily average of 733.5 million rupees.

Shares of Nestle Lanka Plc fell 1.23 percent while Lanka ORIX Leasing Company Plc eased 0.26 percent and Dialog Axiata Plc lost 0.99 percent. 

($1 = 143.9500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

Bharti Airtel in talks to merge Sri Lanka unit with Dialog Axiata

(LBO) – Bharti Airtel is believed to be in talks to merge its wholly-owned Sri Lanka unit with Dialog Axiata in a likely share-swap deal, two people familiar with the matter said.

A potential Airtel Lanka-Dialog-Axiata merger is likely to be along the lines of the recent merger of Bharti Airtel and Axiata’s telecom units in Bangladesh, a report by The Economic Times of India said.

In this scenario, Axiata will be the dominant shareholder and Airtel a strategic minority holder in the combined entity, sources said.

Indications are Dialog Axiata may issue ordinary shares to Bharti Singapore, a wholly-owned Bharti Airtel offshore arm, akin to the model followed by Bharti and Axiata group in the ongoing merger exercise of their Bangladesh subsidiaries, one of the persons cited said. “The negotiations are still on.”

Sources say one key hurdle is that the Competition Commission of Sri Lanka may have some issues with a potential Airtel Lanka-Dialog merger since Dialog Axiata already controls over half the country’s mobile market.

Axiata Group has an 83.32 percent controlling stake in the Colombo Stock Exchange-listed Dialog Axiata Plc while the balance shares are with the public. “There is no development for us to report at this stage,” said a Bharti spokesperson in a written response to ET’s queries.

The stakes are big for the Sunil Mittal-founded mobile carrier, the largest in India and among the top four globally by subscriber base.

A merger with market leader Dialog Axiata would catapult Airtel Lanka from the fourth-largest carrier spot to becoming a part of an entity which is the No 1 mobile operator in Sri Lanka. Airtel Lanka has a shade over 2 million customers, and currently trails Dialog, Mobitel and Etisalat, which are the top-three mobile operators in the island nation. Dialog has some 10 million customers.

Sri Lanka is also among the few countries in the world where the government has pegged a floor price mobile tariff, which market leader Dialog has matched. Accordingly, rivals cannot drop their tariffs any further. According to sources, this is a key reason why Airtel Lanka hasn’t been able to effectively compete with Dialog and boost market share in Sri Lanka, The Economic Times reported.

Hemas Holdings posts Rs 2.8 bn profit in nine months

Hemas Holdings PLC (HHL) and its subsidiaries achieved consolidated revenues of Rs.28.3 bn, with a year-on-year (YoY) growth of 19.7% for the nine months ended December 31, 2015.

During this period operating profit reached Rs.2.8 bn and earnings Rs.1.9 bn, growth of 25.6% and 65.2% respectively. Eliminating the one off transactions in the preceding year and the additional interest income of Rs.196 mn earned from investing the proceeds of the rights issue, underlying operating profit and earnings maintained a healthy growth of 30.8% and 30.2% respectively,Group CEO Steven Enderby said.

The FMCG sector achieved total revenues of Rs.11.2 bn for the nine months, a 24.4% YoY increase over the previous financial year. Operating profits were Rs.1.4 bn, 54.4% YoY growth, whilst earnings grew at 32.9% to stand at Rs.1.1 bn. Excluding the one-off capital gains recorded previous year, underlying earnings growth was 49.3%. This performance has been driven by our Bangladesh operation maintaining excellent revenue and profit growth, strong sales across all our major brands in the domestic market and relatively weak commodity prices for key raw material inputs,Enderby said.

Overall healthcare sector revenue for the nine months under review stood at Rs.11.9 bn, a YoY increase of 18.3% whilst earnings grew at 25.8%. During the quarter, Hemas Hospitals opened its first wellness centre at Orion City responding to a call to provide top quality healthcare services to the 6,000 plus employee strength, at Colombo’s premier IT park.

This marks another novel concept by Hemas Hospitals in the development of the Sri Lankan healthcare industry. Our hospitals growth in revenue contributed 31.0% of the overall segments revenue growth. Hemas pharmaceutical distribution operation registered a YoY topline growth of 12.1% maintaining its market leadership position. Our pharmaceutical sales growth continues to be driven by our strong presence in growing therapeutic segments.

J. L. Morison posted a YoY growth of 28.6% and earnings growth of 71.7% for the nine months ended December 31, 2015. Revenue growth was largely driven by the increase in sales from the buyback arrangement with Government of Sri Lanka and sales growth in key diagnostics agencies. Transportation sector reported a revenue of Rs.1.3 bn, a 15.2% YoY topline growth. The increase in revenue resulted from growth in our domestic logistics and maritime operations with warehouses operating at high levels of capacity, new customers for our distribution operation and higher

levels of container handling and repair activity. Aviation businesses continued to experience challenges due to lower yields of ticketing income despite increases in volumes.

Triggered by limited revenue growth from the aviation segment, transportation sector registered an operating profit of Rs.271 mn indicating a de - growth of 6.1%.

The leisure segment recorded a total revenue of Rs.2.2 bn, reflecting a 9.2% YoY growth for the nine months under consideration. Serendib Hotels posted a revenue growth of 11%, driven by strong performances from AVANI Bentota and Hotel Sigiriya with an overall occupancy of 78%.

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