Sri Lankan shares rise; index breaches key 6,000 mark

Reuters: Sri Lankan shares gained for a second straight session on Friday as investors bought beaten-down stocks, with the index touching its technical resistance level of 6,000 points.

However, foreign investors were net sellers for the first time in 10 sessions.

The benchmark share index ended 1.21 percent up at 6,019.95.

The index had lost 3.2 percent in the two sessions through Wednesday as a government move to hike value added tax (VAT) and reintroduce capital gains tax to break out of a debt trap and qualify for a $1.5-billion IMF loan weighed on sentiment.

With the central bank's unexpected hike in interest rates in mid-February and yields on treasury bills at two-year highs, investors prefer fixed interest rate bearing assets over risk assets, stockbrokers said.

"Very slowly buying interest is coming in from high net worth investors and short-term investors who expect short gains," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

"We expect the market to stabilise around 6,000 points."

Foreign investors were net sellers for the first time in 10 sessions, selling 16.7 million rupees ($115,371.33) worth of shares on Friday, extending the net foreign outflow so far this year to 262.8 million rupees worth of shares.

Turnover stood at 748.1 million rupees ($5.17 million), just below this year's daily average of 776.5 million rupees.

The index moved into neutral territory on Friday for the first time in the last 12 sessions after being in the oversold zone, with the 14-day relative strength index ending at 34.747 on Friday, compared with Thursday's 25.530, Thomson Reuters data showed.

A level between 70 and 30 indicates the market is neutral.

Shares in Sri Lanka Telecom Plc rose 6.57 percent while biggest listed lender Commercial Bank of Ceylon Plc rose 4.10 percent. 

($1 = 144.7500 Sri Lankan rupees) 

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

‘Seylan not in merger talks’

In a release to the CSE on 8th March 2016, Seylan Bank stated that the Bank is not engaged in merger talks with National Development Bank PLC or any other entity at present.

Seylan Bank has, over the last 5 years delivered a consistent and impressive performance ending with a remarkable 2015 and accordingly, the Board was of the view that the Bank has robust and sustainable growth potential to continue to deliver optimal stakeholder value.

Based on the audited financial statements released to the CSE on 3rd March 2016, the Bank reported a Profit after Tax of Rs. 3.83 billion (5-year CAGR of 25.53%), with a ROE of 15.62% and a ROA (after tax) of 1.4% for 2015. The Bank reported a Net Credit growth of 24.61%, with net advances growing from Rs. 154,963 Million in 2014 to Rs. 193,104 Million in 2015.

The Bank also grew its deposit base by 20.76% from Rs. 185,924 Million to Rs. 224,525 Million in 2015. The Bank’s low cost deposit base comprising current & savings accounts (CASA) stood at 36% of the total deposit base as at end December 2015.

As at 31st December 2015, the Bank network comprised of 159 Branches and 182 ATMs. The Bank?s total Capital Adequacy ratio stood at 12.87%, of which the Tier 1 ratio stood at 12.24% at the end of 2015, both well above the regulatory requirements.

In July 2015, Fitch affirmed the Bank’s rating at A-lka with a stable outlook. As a result of the impressive performance, Earnings per share was at Rs 11.11 (Group Rs. 11.18) for 2015, while the Bank?s Net Asset Value per share as at 31st December 2015 was Rs 72.63 (Group Rs 76.21).

Tax amendments to Budget 2016

Corporate Tax

• Proposed Corporate Tax Structure delayed by 1 year; Previous system to continue for 2016 only.


• Previous System to continue:

a) Tourism, construction, agriculture, exports and SME which were earlier liable at 10% and 12% will increase to 17.5 %

b) Liquor and tobacco will be at 40%

c) All other sectors will remain at 28%

• New System to apply from 2017:

a) 30% tax rate: Banking and financial services, insurance and whole sale, retail trade


b) 15% tax rate: All other sectors

Income Tax

• Proposed Income Tax Structure delayed by 1 year; Previous system to continue for 2016 only.

• Previous System to continue:

a) Previous slabs of 4%, 8%, 12% and 16% will apply


• New System to apply from 2017:

a) A flat rate of 15% was proposed; But the flat rate has increased to 17.5%

b) Individual income up to LKR 2.4Mn per annum and to tax income above the exempt limit at a flat rate of 17.5%.

Nation Building Tax

• NBT current rate of 2% will continue. Proposed 4% will not apply

• Threshold lowered to LKR 3mn per quarter from 3.75mn per quarter of turnover

• Exemptions for Electricity, Lubricants and Telecommunication Services removed

Value Added Tax

• VAT increased to 15% from the current 11%. Proposed 2 tier structure of 8% and 12.5% will not apply

• Exemptions for Telecommunication Services, Private Education and Private Healthcare removed

• VAT to be imposed on retail and wholesale sector excluding essential items

Capital Gains Tax

• Proposed to reintroduce Capital Gains Tax on listed shares and real estate.

• Tax on capital gains from sale of shares quoted in the CSE was abolished in 1987 and tax on capital gains arising on other assets were abolished in 2002.

• During the previous system before 1987 capital gains were calculated on the basis of realized increases in value at the time the gain is in fact realized.

www.island.lk

Ceylinco Insurance posts a consolidated After Tax Profit of Rs. 3.8 billion

Marking another remarkable year, the Ceylinco Insurance sector recorded a mammoth after tax profit of Rs.3.1 billion, for the year ended 31st December 2015. Contributing to this remarkable performance, Ceylinco General Insurance and Ceylinco Life Insurance recorded profits after tax of Rs.1 billion and Rs.2.1 billion, respectively. Moreover, the consolidated results recorded an imposing expansion, with the profit before tax reaching an exceptional Rs.4.2 billion, and the after tax profit standing at Rs.3.8 billion.

As the clear market dominator, and consolidating its leadership position further for the 12th consecutive year, Ceylinco Insurance, in 2015, remained far ahead of the competition. Thus, the Company managed to return an impressive premium income of Rs.27 billion in 2015, with Ceylinco General Insurance recording Rs.13.5 billion, marking a growth of 11.4%;an increase of nearly Rs.1.4 billion year on year, just as Ceylinco Life Insurance registered a premium income of Rs.13.45,marking a growth of 12.1%;an increase of Rs.1.4 billion. Meanwhile, the premium of the flagship brand Ceylinco VIP alone stood at a staggering Rs.8.1 billion, with Non Motor Insurance contributing an impressive Rs.5.4billion, allowing the total premium income of Ceylinco General Insurance to record yet another fantastic year.

Referring to its performance, Ceylinco Life Insurance Managing Director/ Chief Executive Officer, R. Renganathan, opined: "The year 2015 marks a twelve year period of unbroken market leadership for Ceylinco Life Insurance in the long term insurance segment. This is an incredible achievement, given the context of ever-increasing competition and the short - sighted tactics employed by smaller players in the market, in a bid to achieve short-term growth. The prime focus of Ceylinco Life has always been on the principal basis for Life Insurance - to provide assurance of the best possible protection to policyholders and their loved ones." - Ceylinco Insurance

www.island.lk

Chevron concerned with budget proposal despite robust earnings

Chevron Lubricants Lanka (CLL)surpassed the Rs. 3 billion mark to post its best-ever financial performance beating previous year's achievement of net earnings Rs 2.7 billion .

However Chevron Lanka Chief Executive Officer Kishu Gomes said they have concerns about the 2016 budget proposals in respect of the lubricant industry.

Commenting in their annual review he states that the government's proposal to open the lubricant market and remove lubricants from the BOI negative list will affect all existing players."

"Market may be at risk of further fragmentation with 13 players and possibly more competing for a share of the 54mn liter market in a backdrop of sluggish industry growth." In 2015, the company recorded a drop in institutional sales from the power generation sector as the source of energy mix to the national grid varied with less lubricant intensive coal power and hydro power as opposed to lubricant intensive thermal power. The construction industry, another key source of revenue for the company, also received a setback due to the phasing out of many large scale public infrastructure projects pending reassessment.

The company was able to aggressively drive growth in the export markets of Bangladesh and the Maldives, especially in the power generation sector. CLL replicated some of their local promotional campaigns in Bangladesh while competitive pricing also helped us grow volumes. The volumes from Maldives too witnessed sizeable growth and over the year we further strengthened our customer base in the island.

The gross profit margin augmented to 45% from 40% in 2014 stemming from focused pricing strategies vis-à-vis value-selling, leveraging on strong brand equity, whilst capitalizing on softening base oil prices which partly trended with global crude oil prices .

Operating profit grew by 16% in 2015 primarily due to the robust gross margin performance, despite an increase in operational expenditure and a decline in other income compared to 2014. Profit before tax increased to Rs.4,319 mn in 2015 from Rs. 3,700 mn in 2014.

www.dailynews.lk

Bank of Ceylon scores Rs. 1 trillion deposits

Becomes first and only bank to reach milestone; passed same target for assets in 2012

The Bank of Ceylon, the Sri Lankan banking giant, has scored its second trillion by its deposit base reaching over Rs. 1 trillion. With this achievement the bank has created history by being the first and the only bank in Sri Lanka to pass this milestone.

The bank’s historic first trillion was achieved in 2012 by earning a Rs. 1 trillion asset base, which was the first time any corporate entity had achieved a Rs. 1 trillion balance sheet in Sri Lanka.

Despite the many challenges faced by the bank due to volatility in socio-economic conditions and in the banking and financial industry, BOC has made steadfast growth, strategically aligning its resources to achieve these targets whilst being the largest contributor to the national economy. With this record breaking achievement BOC has set a benchmark in the banking industry uplifting the country’s whole economic profile.

Along with this achievement the bank made another headline by earning the highest-ever profit made by a single Sri Lankan business entity which is Rs. 25.3 billion PBT, bettering its own record set by its 2014 profit before tax of Rs. 20.3 billion. This was a 25% growth over the previous year. BOC owns a strong balance sheet comprising robust savings deposits in both local and foreign currencies. BOC currently holds the largest foreign currency deposit base to its credit.

Being the prime State-owned bank in the country BOC plays a pivotal role not only as a financial intermediary but also as a key role player in managing the financial mechanism of the country in aiding the Government to achieve its socio-economic development goals.

“Our strategic objectives have always been in line with the Government’s economic development initiatives. The country is in a progressive path for a refined and long-term economic and social development. In this ambitious journey the bank is connected with each one of the economic and social areas directly or indirectly and we are bound to ensure that we maintain our performance at the highest level to fulfil our duty towards the country,” stated the bank’s Chairman Ronald C.Perera.

“The Bank of Ceylon did not achieve this target singlehandedly. Therefore we are thankful for the support and trust it received from its main stakeholder the Government of Sri Lanka and its loyal customers ranging from individuals to corporate entities from all walks of life. Most importantly the dedication and the hard work that was rendered by the staff of the Bank was yet another key pillar in achieving this target,” stated General Manager D.M. Gunsekera. “Whilst thanking all our stakeholders who have joined hands with us in this journey, I wish to announce that we are now planning towards our third trillion in near future,” he further added.

During its 76-year journey, the Bank of Ceylon has been able grow enormously in scale and sophistication in both operations and products and services offered over the years. True to its title ‘Bankers to the Nation,’ the Bank of Ceylon offers banking products to a broader spectrum of customers, from individuals, SMEs to corporate businesses.

BOC has over 1000 customer touch points including, 625 branch network across the country, SME centres, its own 522 island-wide ATM network and newest cash deposit machines. The first Sri Lankan bank to operate its branch overseas, BOC’s London branch was established in 1949 and later converted into a fully owned banking subsidiary. Since then the bank’s overseas branch network has been expanded to Male, Chennai and Seychelles.

Making a fundamental shift with digital transformation which is very much needed in today’s context, BOC has developed a dynamic business focus with a solid customer centric approach which comes along with a comprehensive digital touch. It has also improved its operational versatility by improvising strategic direction overtime to adapt to the industry environment. It has made itself available to all its customers 24X7 online, Facebook and through a few selected branches.

The bank has been recognised by a number of reputed international and local institutions. The most recent was winning the Overall Gold Award and becoming the winner at the National Business Excellence Awards 2015 organised by the National Chamber of Commerce, in the categories of Banking Sector, Excellence in CSR, Excellence in Local Market Reach and Extra-Large Category and the Runner-Up of Excellence in Capacity Building.

BOC was also named as the ‘Strongest Bank in the Country’ by ‘The Asian Banker,’ making it stand with other banking giants in Asia Pacific region. The bank has been ranked among the ‘Top 1000 Banks’ in the world with the country rank No. 1 by the prestigious UK-based magazine ‘The Banker’. These fortify not only the image of the bank but also that of the country’s economic profile by uplifting the Sri Lankan banking industry in the international arena.
www.ft.lk

Singer Rs. 2 b debenture issue through

Singer Sri Lanka Plc’s Rs. 2 billion debenture issue has been oversubscribed on its official opening day, which was yesterday.

The company offered one million rated unsecured senior redeemable debentures at Rs. 100 each with an option to issue an equal amount of debentures in the event of an oversubscription of the original figure.

Singer said as at 4:30 p.m. it had received applications for over Rs. 2 billion and the issue was closed thereafter. 

www.ft.lk

Dhammika returns to market; buys 24% Nawaloka Hospitals stake for Rs. 1.35 b

The return of business leader and market mover Dhammika Perera yesterday for a new acquisition was good enough to boost an otherwise-negative Colombo Bourse, which also got a fillip from positive vibes over the imminent strengthening of China-Sri Lanka ties.

With the market having lost over Rs. 450 billion in value since start of 2016 and 14% negative return until yesterday, Dhammika Perera stepped in and bought a 22% stake in Nawaloka Hospitals Plc for Rs. 1.2 billion. He paid Rs. 4 per share, around 30% above Nawaloka’s Net Asset per share of Rs. 2.84 given the size of the stake. Its highest price in the quarter ended 31 December 2015 was Rs. 3.70 and the lowest was Rs. 3 before closing at Rs. 3.30. Prior to yesterday’s purchase, Dhammika had held a 1.76% stake in Nawaloka.

Sellers of Nawaloka Hospitals yesterday were longstanding shareholder and low profile high net worth investor Dr. T. Senthilverl, who as at 31 December 2015 held 309.5 million shares or a 21.96% stake. Additionally NSB which had 17.8 million shares or 1.26% sold out too. Last week Dhammika had entered Nawaloka by buying EPF’s stake of 1.76%.

Nawaloka Hospitals’ controlling stake is held by Jayantha Dharmadasa with 32.83% and Nawaloka Construction Company owns 31.34%.

Overall Nawaloka saw 306.1 million of its shares changing hands via 50 trades for Rs. 1.224 billion. It closed the day up 13% or 40 cents to Rs. 3.50.

Dhammika told the Daily FT the investment under his personal name was on value and not aimed at a takeover. “Healthcare along with food and education are some of the high growth sectors and Nawaloka has been a good healthcare provider including for my family,” he added.

For the nine months of FY16, Nawaloka Group revenue has increased to Rs. 4.38 billion from Rs. 3.38 billion a year earlier. Gross profit was Rs. 2.2 billion from Rs. 1.6 billion.

Operating profit improved from Rs. 304 million to Rs. 553 million. Pretax doubled to Rs. 300 million from Rs. 128 million a year earlier and after tax profit was Rs. 218 million up from Rs. 120 million.

It was the first major acquisition of Dhammika after more than a year. The previous Dhammika-linked acquisition was in October 2014 via his mainstay Hayleys when it acquired control of Alufab Plc consolidating the position in the aluminium market along with Alumex Ltd.

The deal on Nawaloka helped to boost turnover at CSE to Rs. 2.5 billion as well as pushed the benchmark All Share Index by 1.46% or 86 points, reversing the declines suffered for the past seven market days.

Positive vibes on stronger Sino-Lanka ties also boosted investor sentiment.

The Daily FT yesterday reported Strategic Development and International Trade Minister Malik Samarawickrama stating that the Government has ironed out its issues with Beijing, would resume the $ 1.5 billion Colombo Port City project and had agreed to allow all Chinese projects to continue including the Hambantota Port and Airport under a joint venture with the Government.

SC Securities said the rebound in the market was mainly due to price gains in counters such as SLTL.N (Rs. 35.00, +5.42%), JKH.N (Rs. 152.90, +1.39%), HNB.N (Rs. 194.50, +3.24%), AHUN.N (Rs. 54.90, +9.80%) and HHL.N (Rs. 76.00, +3.40%). The Blue Chip Index S&PSL20 also advanced by 40.64 points or +1.31% to close at 3,133.56.

Foreigners took the position of net buyers for the day, recording a net foreign inflow of Rs. 76 million for the day. Shares of 216 companies were traded today. Of these, 23 companies declined while 147 closed higher, SC Securities added.

Whilst yesterday’s rebound was welcomed by brokers and analysts, larger concerns over the outlook remains on account of re-imposition of capital gains, upward revisions in corporate and personal tax as well as Value Added Tax by the Government to shore up revenue to pay for higher debt and previously unaccounted payments of Rs. 1 trillion by the former President Mahinda Rajapaksa regime.

Though fiscal management is likely to improve and weigh positively to fundamentals of the market, the upward pressure on interest rates was another concern in addition to dimmer prospects for corporate earnings in the new financial year. - See more at: www.ft.lk