Asia Asset Finance plans to double profit by 2017

Asia Asset Finance PLC (AAF) is looking to almost double their profits (PAT) by next financial year.

The company posted Rs. 175 million PAT in and now has set up a Rs. 300 million target for 2017 March 31.

Muthoot Finance Ltd. (MFL) which acquired 51% equity shares of Asia Asset Finance PLC (AAF), and later increased it to 60% is also aggressively pursuing this goal and are jointly looking to introduce more financial tools.

The 128 year old Indian family owned company is India’s largest gold financing company.”We will certainly look at the Gold loan segment more aggressively and also look at more SME and Micro financing,”MFL Chief General Manager K.R. Benjamin told the Daily News Business. “We are also keen to enter the insurance segment in Sri Lanka.”

Asia Asset Finance [formerly known as the Finance and Land Sales Ltd], has been serving the Sri Lankan community since 1970 and with their strong presence we are also looking at introducing some of our other 15 fields to Sri Lanka.”

“The tie up with Muthoot Finance has enabled AAF to secure low cost diversified funding lines on top of the increasing customer deposit portfolio. It has also transferred technology and ‘business know how’ especially in the Gold Loan product which was hitherto not in the product offers of AAF. The strength in the treasury has enabled AAF to be more creative with the products being offered and also make products more flexible to cater to a bigger demographic,” said Chairman Asset Managemnt Manohan Nanayakkara. (SS)

www.dailynews.lk

Vehicle registrations drop sharply

Motor car registrations recorded 3,618 units in April up from 3,326 units a month ago and significantly down from 5,116 units 12 months ago.

According to J. B. Securities the precipitous fall in registrations recorded in January and February may not entirely be explained by a fall in demand but by a go slow from the Registrar of Motor Vehicles (RMV) that resulted in a reduction in the number of registrations. In a similar vein part of the pickup in numbers in the subsequent month’s maybe clearing of the previous months’ backlog.

Brand new segment registrations recorded 1,709 units in April significantly up from 1,186 units the previous month but significantly down from 2,926 units recorded 12 months ago. Maruti recorded 1,142 units in April significantly recovering from 639 units the previous month and the extremely low 255 units in Jan but yet significantly down from 2,239 units 12 months ago.

Micro recorded 141 units up from 108 units the previous month and Hyundai recorded 125 units gaining on 112 units recorded the previous month.

Re-owned car registrations recorded 1,909 units in April marginally down from 2,140 units a month ago and also marginally down from 2,190 units 12 month ago. Toyota recorded 798 units in April marginally down from 906 units in March and Suzuki recorded 624 units in the month marginally down from 675 units the previous month. The taxes have increased by around 80% and the CIF value of vehicles in Rs have also increased doubling their value. Financing share was 66.3% significantly up 55.9% the previous month.

Electric cars recorded 85 units in April significantly down from 160 units the previous months and 152 units 12 months ago. Nissan Leaf accounted for 85 of the units down from 185 units the previous month.

SUV registrations recorded 706 units in Apr up from 610 units the previous month and marginally up from 704 units 12 months ago. Hybrid registrations recorded 2,253 units in Apr up from 2,328 units the previous month and 2,300 units 12 months ago.

The 3-wheeler registrations recorded 4,151 units in Apr up from 3,978 units the previous month but significantly down from 10,839 units 12-month ago. At the peak in Nov 2015 registrations hit 13,668 and in Feb registrations at 2,939 units was a 60-month low. The two -wheeler registrations recorded 23,956 units in April down from 28,619 units the previous month but 27,669 units 12 months ago. Bajaj claimed a segment share of 33.3% followed by Honda with 24.6%, Hero with 19.8%, TVS with 12.3% and others accounted for 10%.

Van registrations recorded 295 units in Apr down from 429 units the previous month and down 68% from 12 months ago. Financing share was 72.9%.

Pickup truck registrations recorded 236 units in Apr marginally up from 228 units the previous month but significantly down from 403 units 12 months ago. Tata is the market leader with 66.9% followed by Toyota with 17.8% and Mahindra with 5.5%. Mini truck registrations were 788 units in Apr down from 840 units in Mar and significantly down from 1,357 units recorded 12 months ago.

Lite truck registrations recorded 541 units in April up from 595 units the previous month and 504 units 12 months ago. Medium trucks registrations were 107 units in Apr down from 163 units the previous month and 167 units 12 months ago. Heavy trucks registrations were 81 units in Apr down from 132 units the previous month and significantly down from 284 units 12 months ago. Ashok Leyland unseated Tata to claim segment leadership with a share of 47.5% followed by Tata with a segment share of 41.3%. Financing share was 53.8% institutional purchase.

Buses recorded 144 units in Apr down from 182 units the previous month but up from 122 units recorded 12 months ago. Ashok Leyland is the market leader with a share of 41.3%. Financing share was 85.7%.

www.dailynews.lk

Sri Lanka nation-wide inflation surges to 4.3-pct in April 2016

ECONOMYNEXT – Sri Lanka’s consumer prices nation-wide rose 4.3 percent in April 2016 from a year ago, accelerating from 2.2 percent in March, its third straight monthly rise, the statistics department said.

On a month-on-month basis, the new National Consumer Price Index (NCPI), compiled using prices collected from all nine provinces with a base year of 2013, in April rose 1.5 percent after having fallen 0.7 percent in March.

Consumer prices in the Sri Lankan capital Colombo, measured by the Colombo Consumer Price Index, had risen 2.0 percent in March 2016 from a year ago.

The statistics department said on an year-on-year basis, contribution of food commodities to NCPI was 2.14 percent in April 2016 and that of Non food items was also 2.14 percent.

FinanceAsia names Commercial Bank ‘Best Bank’ in Sri Lanka

ECONOMYNEXT - FinanceAsia magazine has declared Commercial Bank of Ceylon as the ‘Best Bank’ in Sri Lanka in 2016 in its latest awards.

“This is the sixth ‘FinanceAsia Country Banking Achievement Award’ presented to Commercial Bank in the eight years since the Bank became the first entity in Sri Lanka to receive this coveted tribute in 2009,” a statement said.

As FinanceAsia celebrates 20 years covering Asia’s financial markets this year, the magazine chose Commercial Bank for a one-off Platinum Award presented to banks and corporations that have consistently excelled over the past two decades.

The FinanceAsia Country Award is based on the banks’ financial performance.

It considers profits, bad loan ratios, provisioning, return on equity, capital adequacy ratios, totalassets, loans, deposits, branch network, vision and long-term strategy, market position versus the nearest competitor, principal sources of profit, and feedback of stock market analysts.

“There are no subjective assessments for the FinanceAsia awards, which are based strictly on hard facts and figures,” Commercial Bank’s Managing Director/CEO Jegan Durairatnam said.

“They are, therefore, an excellent benchmark not only to reaffirm the Bank’s position in the market, but to compare its performance with other top banks in the region.”

Sri Lanka Grand Hyatt opens for 2017 winter season

ECONOMYNEXT – Grand Hyatt Colombo, owned by Sri Lanka’s biggest insurance and pension funds, is set to open in the December season next year targeting high-end business, official and leisure travellers to Sri Lanka.

The project promoters, Sino Lanka Hotels and Spa Private Ltd., said Colombo’s city hotel market has seen a healthy growth during last five years with average annual occupancy above 70%.

“Even with expected additions (currently on-going projects), Colombo will experience significant shortage of hotel rooms,” said a statement from Sino Lanka, a subsidiary of Canwill Holdings, whose main shareholders are Sri Lanka Insurance Corporation (SLIC), Litro Gas and the Employees’ Provident Fund (EPF).

“Estimated shortage of room capacity by 2026 is around 12,500 rooms unless new projects are started within next five years.”

The project was taken over from the troubled Ceylinco Group under which it was known as the Ceylinco Celestial Tower.

Sino Lanka Hotels and Spa Private Ltd., said the US$ 240 million Grand Hyatt Colombo property consists of 1.1 million square feet built up area spread across 49 levels with 397 rooms, 61 suites and 100 serviced apartments, ranging from 1 to 3 bed rooms.

The hotel will have 10 restaurants including 3 restaurants located at the 43/44 levels with spectacular views of the city and Indian Ocean, it said.

“Unlike other major hotel developments, Grand Hyatt is a standalone hotel (i.e, not part of crowded integrated developments).”

The statement said SLIC has a “successful track record of investing in hotels - both public and privately held.

“These include SLIC’s investment in Club Robinson (now known as Club Bentota) which was exited in 2002. EPF has also turned positive on the tourism sector, and has invested into many hotels. Other projects it has invested in recently include Marriot Weligama.”

Hyatt Hotels Corporation is a leading American hospitality company and manages hotels under several brands and categories with the “Grand Hyatt” the flagship brand reserved for large properties in major cities and major holiday destinations.

Fitch confirms Sri Lanka's Dialog Axiata at 'AAA(lka)'

ECONOMYNEXT – Fitch Ratings has confirmed Sri Lankan telecoms company Dialog Axiata PLC's 'AAA (lka)' National Long-Term Rating with a stable outlook, saying sales and profit margins that will contract owing to higher taxes this year will recover in 2017.

The rating agency upgraded Dialog's standalone credit profile to 'AAA(lka)' from 'AA+(lka)', based on its improving financial profile backed by its continued market leadership in Sri Lanka's growing mobile and pay-TV segments.

“We believe resilience to foreseeable risks puts Dialog in the top-tier of Sri Lankan corporates for credit quality,” a statement said.

Fitch forecast Dialog's revenue and profit margins to decline slightly as voice and data usage could ease off after the tax hike.

But Dialog has improving margin on data revenue and savings from its new Bay of Bengal undersea cable.

The full rating report follows:

Fitch Ratings-Singapore/Colombo/Sydney-23 May 2016: 

Fitch Ratings has affirmed Sri Lanka-based telecoms company Dialog Axiata PLC's (Dialog) 'AAA(lka)' National Long-Term Rating. The Outlook is Stable.

KEY RATING DRIVERS

Standalone Rating Upgraded: We upgraded Dialog's standalone credit profile to 'AAA(lka)' from 'AA+(lka)', based on its improving financial profile backed by its continued market leadership in Sri Lanka's growing mobile and pay-TV segments. We believe resilience to foreseeable risks puts Dialog in the top-tier of Sri Lankan corporates for credit quality.

High Ratings Headroom: Dialog would receive potential support from its 83%-parent, Axiata Group Berhad (Axiata) of Malaysia, if its standalone credit profile were to weaken. Dialog and its parent continue to have strong operational and strategic linkages which include sharing key management personnel, a common brand name and common creditors, which could result in reputational risk to Axiata should Dialog fail.

Rising Regulatory Risks: The regulatory risks have risen for telcos since the new government assumed office in 2015. The government has increased taxes on telcos in an effort to shore up revenue. Effective from May 2016, the government imposed a value-added tax (VAT) of 15% and nation building tax (NBT) of 2% on telecom services which will increase tax on voice and data services to 50% and 32%, respectively (earlier: 28% and 12%).

The government had abandoned an earlier tax proposal which could have diluted the industry's EBITDA margin by an average of 6%-7%. We revised the outlook on Sri Lanka's telco sector to stable from negative on 18 January 2016 following the new government budget.

Stagnant Revenue; Lower Profitability: We forecast Dialog's revenue to decline by the low-single-digits as voice and data usage could ease off following the tax increase. Its 2016 operating EBITDAR margin could narrow by 100bp to 33% (2015: 34%) due to lower usage and decline in profitable international voice business. This would more than offset the improving margin on data segment revenue and savings from its new Bay of Bengal undersea cable.

However, we expect Dialog's revenue to grow by the mid-single-digits during 2017-2019, driven mainly by higher data revenue and a gradual recovery in usage. Dialog's mobile data revenue grew by 64% in 2015, and accounted for around 15% of mobile revenue.

Negative FCF; Higher Leverage: We expect negative FCF during 2016-2018 as cash flow from operations will be insufficient to fund its large capex requirements and dividend commitments. As a result, FFO-adjusted net leverage will deteriorate marginally to 1.5x (2015: 1.2x) during 2016-2017. Dialog would be likely to increase its 2016-2017 capex to 30% of revenue (2015: 23%) to expand 3G/4G networks and fibre infrastructure. Dividends are likely to be around LKR2bn-2.5bn in 2016 and 2017.

Industry to Consolidate: The tax increases might accelerate industry consolidation to reduce the number of telcos to three from five. Two smaller, unprofitable operators - Hutchison Lanka and Bharti Airtel Limited's (BBB-/Stable) Sri Lanka subsidiary, Airtel Lanka - may exit the industry.

We believe that Dialog and Sri Lanka Telecom PLC (B+/Negative) could acquire smaller telcos to strengthen their market position and consolidate spectrum. Dialog's ratings have sufficient headroom for a debt-funded acquisition of a smaller telco for around LKR10bn-12bn.

Adequate Liquidity: Dialog's cash balance of LKR9.7bn and committed undrawn facilities of LKR7bn were sufficient at end-March 2016 to meet its short-term debt maturities of LKR8bn. The company has solid access to local banks, given that it is one of the largest corporates in Sri Lanka. Its debt consists of a USD149m syndicated facility and LKR10bn bank loan. We expect Dialog's future borrowings to be in Sri Lankan rupees to mitigate forex risk.

KEY ASSUMPTIONS

- Revenue to contract by 1%-2% in 2016 as usage declines due to higher taxes. Revenue growth will recover to the high-single-digit percentages during 2017-2019.

- Operating EBITDAR margin to be diluted by about 100bp in 2016, but to recover in 2017.

- Capex/revenue to increase to around 30% on account of fibre and 3G/4G network expansion.

- FCF deficit during 2016-2018 resulting in a gradual increase in FFO-adjusted net leverage.

RATING SENSITIVITIES

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

- A significant dilution in Axiata's ownership or board control in Dialog, removal of the common brand name, or a weakening of the current strategic and operational ties between the companies.

- A narrowing in operating EBITDAR margin to below 20%, along with FFO-adjusted net leverage above 3.5x on a sustained basis, could weaken its standalone credit profile.

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

- There is no scope for an upgrade as Dialog is at the highest rating on the Sri Lankan National Ratings scale.

Sri Lanka to sell Rs45bn in bonds on May 26

ECONOMYNEXT - Sri Lanka is offering to sell Rs45 billion of 2 to 10 year bonds, on May 26, through an auction, the state debt office said.

The debt office is offering Rs10 billion of 2-year 4-month bonds, Rs15 billion of 5 year 4 month bonds, Rs12 billion of 7-year 7-month bonds and Rs8.0 billion of 10-year bonds.

Two year five month bonds were auctioned on May 19 for 1175 percent, 7 year 7 month bonds at 12.40 percent, and 10-year bonds at 12.82 percent.

The debt office may accept higher than the offered amounts or lower volumes.