Sri Lanka shares snap 5-day winning streak on tax woes

Reuters: Sri Lankan shares ended weaker on Wednesday, snapping five straight sessions of gains, as worries about tax hikes dented sentiment.

Brokers said investors were worried over a tax hike, which takes effect from Monday, as it could hit the bottomlines of companies. However, a loan deal with the International Monetary Fund last week limited the fall.

The benchmark stock index fell 0.22 percent to 6,568.85, slipping from its highest close since Jan. 11 hit on Tuesday.

"We saw some selling pressure come in as the outlook does not seem that great as the VAT (value-added tax) revision is going to impact," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

The finance minister on Sunday said the government is seeking to raise 100 billion rupees in revenue in 2016 by increasing the value-added tax (VAT) and from new taxes, effective Monday.

The rise in market interest rates also weighed on sentiment with yields on short-term government securities climbing 7-10 basis points to a more-than-two-year high at a weekly auction on Wednesday.

Foreign investors were net sellers of 105.1 million rupees worth of shares on Wednesday, extending the year-to-date net foreign outflow to 3.07 billion rupees worth of shares.

Turnover stood at 1.03 billion rupees ($7.06 million), more than this year's daily average of around 779 million rupees.

The IMF said on Friday it reached an agreement with the Sri Lankan government for a $1.5 billion bailout to help the island nation avert a balance of payments crisis.

The three-year loan will require IMF board approval in June, the global lender said, and is subject to Sri Lanka implementing reforms, including streamlining the tax code and reducing a bloated deficit.

Shares in Ceylinco Insurance Plc dropped 0.34 percent while Ceylon Cold Stores Plc fell 3.6 percent and conglomerate John Keells Holdings eased 0.51 percent. 

($1 = 145.9000 Sri Lankan rupees) 

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

Pan Asia Bank’s 1Q ’16 PAT up to Rs. 304 mn

Pan Asia Banking Corporation PLC has posted a profit after tax (PAT) of Rs. 304 million for the quarter ended March 31, 2016 (1Q’16) recording a 72% growth from the same quarter last year.

In FY 2015, the bank crossed Rs.100 billion asset bases while ending the year in a high note by surpassing the elusive Rs.1 billion profit after tax.

The earnings per share for the quarter rose to Rs. 4.13 from Rs. 2.43 a year ago.

The bank’s performance is especially commendable given the challenging market conditions which set in from the beginning of 2016. The performance largely demonstrates the bank’s robust ability to adapt in to different interest rates scenarios and still keep its profitability unhindered.

Director and Chief Executive Officer, Dimantha Seneviratne said this stellar performance is a clear testament to the Pan Asia Bank’s ability to perform consistently irrespective of the market conditions.

“The fact that our bank performed exceptionally well under these trying market conditions demonstrates our proactive strategies and forward looking decisions which put us well ahead of the peers”. In the backdrop of a 36% growth in our loan book last year, our ability to continue our growth momentum through 2016 also demonstrates that Pan Asia Bank is well poised to effectively manage the risks posed in an uncertain market conditions and capitalize on the opportunities offered,” said Seneviratne said while commending his staff who made this performance possible.

Meanwhile the profit before tax rose at an even higher rate of 79 percent year-on-year (yoy) to Rs.484.5 million in the March quarter.

The quarter saw the bank’s gross loans and receivables expanding by 3.3 percent to Rs. 90.1 billion in line with the slowdown in the private credit growth in the economy as a result of the monetary and fiscal tightening measures in place.

The performance stemmed from the proactive assets and liabilities management, rising asset quality and efficient cost management.

“We had a good start in 2016 on the back of a successful 2015 and this performance demonstrates our ability to sustain the momentum and capacity to touch new heights,” Seneviratne added.

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Fitch affirms Singer (Sri Lanka) at ‘A-(lka)

Fitch Ratings has affirmed Singer (Sri Lanka) PLC’s (Singer) National Long-Term Rating at ‘A-(lka)’. The Outlook is Stable. A full list of rating actions is at the end of this commentary.

Singer’s rating is supported by our expectations that the company will be able to weather weakening demand because of its strong market leadership, extensive product and brand portfolio across different price points and well-managed hire purchase (HP) business, which makes consumer durables more affordable during a downturn. We believe Singer will maintain leverage at levels commensurate with its current rating level despite debt-funded acquisitions and continued expansion.

We expect demand for consumer durables to be sluggish in the next six-12 months due to tightening of monetary and fiscal policies by the government. The government has increased the value-added tax and the central bank has raised benchmark interest rates.

The depreciating Sri Lanka rupee also raises the cost of imported goods, which make up the majority of products sold by retailers.

However, we believe long-term fundamentals driving demand, including a continued rise in per capita income and a growing middle class, are intact.

Fitch expects operating challenges to be mitigated by Singer’s strong market leadership, which is supported by a wide retail presence, its portfolio of well-known brands and extensive local manufacturing capabilities compared with peers.

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CSE revises calculating methodology

The Colombo Stock Exchange said they will be revising the methodology of calculating price multiples (Price Earnings (PE), Price to Book Value (P/BV) and Dividend Yield (DY) from yesterday (May 3).

Research and New Products Head Nishantha Hewavithana said that they will be calculating the P/E and D taking into consideration “Rolling four quarterly earnings”.

This will be implemented over the previous practice of sourcing earnings from annual results. He also stated that the new method will be calculating the Price to Book Value based on the quarterly results rather than the annual results.

The disclosure explained that the newly introduced method will portray the current earning trend in a more effective and timely manner as it will be taking into consideration the latest financial services available. It was mentioned that this method of calculating is used for calculation of price multiples around the world. (V.W)
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Sri Lanka shares post near 4-mth closing high; John Keells leads

Reuters: Sri Lankan shares posted their highest close in nearly four months on Tuesday, led by market heavyweight John Keells Holdings Plc, while a loan agreement with the International Monetary Fund last week also boosted sentiment.

The benchmark stock index rose for the fifth straight session and ended 1.03 percent, or 66.84 points, firmer at 6,583.10, its highest close since Jan. 11.

"Market was bullish with some buying interest coming into blue chips and mid caps. The main reason was due to the positive sentiment with the IMF announcement," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

"Still some investors are waiting to see the direction," he said, referring to the uncertainty over market interest rates.

Market interest rates had been rising until last week as the central bank allowed them to rise in a bid to ease the downward pressure on the rupee.

The IMF said on Friday it reached agreement with the Sri Lankan government for a $1.5 billion bailout to help the island nation avert a balance of payments crisis.

The three-year loan will require IMF board approval in June, the global lender said, and is subject to Sri Lanka implementing reforms, including streamlining the tax code and reducing a bloated deficit.

The central bank last week kept benchmark rates unchanged as expected while the yields on short-term government securities were also steady at a weekly auction on Wednesday.

The central bank's measures signalled that market interest rates may not rise as was earlier expected.

Turnover was 621.5 million rupees ($4.3 million) on Tuesday, less than this year's daily average of around 775.8 million rupees.

Foreign investors, who have been net sellers of 2.96 billion rupees worth of shares so far this year, were net buyers of 29.6 million rupees worth of equities.

John Keells Holdings shares jumped 1.74 percent, while Ceylon Tobacco Company Plc rose 1.08 percent. 

($1 = 145.4000 Sri Lankan rupees) 

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