Sri Lankan shares rise 1.7 pct to 1-1/2 mth high; Distilleries Company leads

Reuters: Sri Lankan shares rose 1.7 percent to a one-and-a-half-month high on Tuesday, led by sharp gains in Distilleries Company of Sri Lanka PLC after the company announced reorganisation of shares and stated capital.

Shares of Distilleries Company rose as much as 18.7 percent to their highest since Nov. 6, 2015, after the company said after market hours on Monday that investors would be allotted four shares of the new parent company for each share of Distilleries after the reorganisation.

"In a 180-degree share swap, Melstacorp, which is a 100 percent-owned subsidiary of Distilleries Company, will become the holding company, while Distilleries Company will become a subsidiary of Melstacorp," the company said in a disclosure to the bourse.

"There was a lot of interest in Distilleries shares after the announcement. Most retailers believe the price of shares will be much higher than what it is now after the valuation," said Prashan Fernando, COO at Acuity Stockbrokers.

"It was an active retail investor market today."

The Sri Lankan stock index was up 1.74 percent at 6,522.51, its highest since June 15, as of 0855 GMT. Turnover was 833.5 million rupees ($5.72 million).

Meanwhile, the rupee edged up as foreign investors sold dollars to buy bonds after the central bank's policy rate hike, dealers said.

Last week, the central bank raised its main interest rates by 50 basis points each in a surprise move aimed at curbing stubbornly high credit growth that is adding to concern about inflationary pressures.

One-week rupee forwards, which have been acting as a proxy for the spot rupee, traded at 146.10/20 per dollar, up from Monday's close of 146.22/30.

The spot rupee is tightly managed by the central bank, and market participants use the forward market levels for guidance on the currency.

The spot rupee was not traded on Tuesday.

Spot-next, which are rupee forwards settled a day after the spot rupee settlement, were trading at 146.10/20 per dollar, compared with Monday's close of 146.06/08.

($1 = 145.7000 Sri Lankan rupees) 

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

Sri Lanka to allow low-tax imports for flood hit beer firm: report

ECONOMYNEXT - Sri Lanka will allow Lion Brewery franchise holder or Carlsberg in the country and Lion Beer imports at lower duty, following flood damage to its production facilities in Colombo, a report said.

Sri Lanka's The Sunday Times newspaper said customs duty for beer with alcohol of less than 5 percent has been cut to Rs129 per litre from Rs500 and for beer with over 5 percent alcohol to Rs246 from Rs500.

Lion Beer has said that it had arranged with Carlsberg group breweries to produce its stuff.

Due to high tax protection, Sri Lanka does not import a large volume of beer. Alcohol and cigarettes are also import tax protected allowing large near monopolies to emerge.

With imports going up, government import duty revenues can go up over the next few months. The newspaper said about 5 million litres of beer could be imported under the concession. The concession appeared to be exclusively given to the firm, the newspaper said.

Beer also draws high excise duties, regardless of whether it is imported or not, with beer drinkers among top taxpayers in the country, along with cigarette smokers.

Last year, customers of Ceylon Beverage Holdings group paid Rs20.2 billion in excises and the firm paid Rs938 million in income taxes. (Colombo/Aug01/2016)

Melstacorp to be holding Co, of Distilleries Company of Sri Lanka; both firms listed

ECONOMYNEXT - In a complex share swap, Distilleries Corporation of Sri Lanka is expected to be made a subsidiary of Melstacorp, which will then be a listed holding company of all former investments of the alcohol firm, a company statement said.

Distilleries will become a pure alcohol firm, which also issue shares additional shares to maintain a public float and raise cash.

Under a plan that will be subject to approval of courts, all existing shareholders of Distilleries will be made shareholders of Melstacorp in the same proportion of their current holding, of which there will be no dilution, according to a company official.

DCSL will lend money through promissory note for Melstacorp to purchase shares of Distilleries Corporation, which will then become a fully owned subsidiary. Some shares will be issued in return for an inter-company balance. .

To maintain the public float, DCSL will then sell shares to outsiders, with preferential allotments to Melstacorp stockholders (former DCSL shareholders).

As a standalone company, DCSL is expected to be a focussed play on the alcohol sector.

A full statement from the company is reproduced below:

DISTILLERIES COMPANY OF SRI LANKA PLC

NEWS RELEASE

Distilleries Company of Sri Lanka PLC (DCSL) announced a reorganization of the Shares and Stated Capital of DCSL and its fully owned subsidiary Melstacorp Limited (Melstacorp) in a Colombo Stock Exchange announcement.

According to the announcement Melstacorp limited which will become the parent company of DCSL PLC and other subsidiaries of the current DCSL Group.

In what is believed to be Sri Lanka’s first 180 degree share swap, Melstacorp which is a 100% owned subsidiary of DCSL PLC will become the holding company while DCSL PLC will become a subsidiary of Melstacorp Limited.

Upon the completion of the reorganization which requires the approval of the shareholders of DCSL PLC, Melstacorp shall become the Flagship of the Group. The shareholders of DCSL will be allotted shares in Melstacorp, in the proportion of four (4) Melstacorp shares in exchange for every one (1) share the now hold in DCSL.

DCSL PLC shall become a fully owned subsidiary of Melstacorp and Current shareholders of DCSL shall own shares in Melstacorp and through Melstacorp, all the subsidiaries in the Group including that of DCSL.
The Company will hence apply to the Securities and Exchange Commission of Sri Lanka / Colombo Stock Exchange for the transfer of the DCSL shares to Melstacorp in exchange of the issue of shares in Melstacorp to DCSL shareholders. Melstacorp will also make an application to be listed.

Subsequent to the swap 100% DCSL PLC will be held by Melstacorp Limited. Hence the group will issue fresh DCSL PLC shares to the public with a preferential allotment to the shareholders of Melstacorp over third party applicants. This will restore the public float of the Company. Upon such issue major share holder of DCSL PLC will continue to be Melstacorp Limited.

The rationale of the re-organization

Until 1995 DCSL PLC was a liquor producing company listed in the CSE. Since 1995 DCSL PLC had made several investments in various diversified sectors of Sri Lankan economy such as in Insurance, Telecommunication, Logistics, Leasing, Fabric Manufacture, Leisure, Information Technology, Hydro Power and BPO Services.

Although the nature of the business of DCSL changed from a ‘liquor’ company in to a diversified holding company, the name of the holding company remained unchanged.

The Company however could not extend the name “distilleries” to such investee companies as it is descriptive of the ‘liquor’ industry.

With the introduction of the National Authority on Tobacco and Alcohol Act No.27 of 2006, using DCSL as a corporate brand became illegal although it was the abbreviated form of the holding company’s name.

As such, the DCSL PLC decided to introduce a Group brand name that it can use amongst the group companies without violating the said National Authority on Tobacco and Alcohol Act. Consequently, the Management decided to rebrand the group under a new common brand, namely, ‘MELSTA’. With a Group brand in mind, a holding company named Melstacorp Limited was formed as a 100% owned subsidiary of DCSL and all investments of DCSL are now owned through Melstacorp Limited.

In view of the forgoing, in order that the investee companies benefit from an established and a common Group brand, the Board has decided to recommend to the shareholders to make Melstacorp Limited the ultimate holding company of the Group and to be the flagship of the Group and to obtain a listing for its shares on the Trading Floor of the Colombo Stock Exchange, subject to the relevant approvals from the Securities and Exchange Commission of Sri Lanka and the Colombo Stock Exchange.

Additional information

Current Market Capitalization of DCSL PLC is Rs. 72 billion.

The Chairman of Melstacorp Limited is Mr. Harry Jayawardena

The Managing Director of Melstacorp is Mr. Amitha Gooneratne.

Subsidiaries of Melstacorp:

Lanka Bell Limited, Continental Insurance Lanka Limited, Melsta Regal Finance Limited,

Continental Insurance Lanka Limited, Periceyl (Pvt) Limited, Melsta Logistics Limited,

Bellvantage Limited, Balangoda Plantations PLC, 41.88% of Browns Beach Hotels PLC

Significant holdings: 43.96% of Aitken Spence PLC, 45.91% of Madulsima Plantations

Lanka Hospitals promotes medical tourism in Seychelles

Lanka Hospitals, which recorded its highest ever profits in 2015, now looks to medical tourism to further enhance its profitability while consolidating its leadership in the local healthcare industry. Lanka Hospitals which has pursued strategic partnerships within the region, is working with the Government of Seychelles to further strengthen its presence in that market.

The Management of Lanka Hospitals has made prudent investments in expertise, technology, quality and cost controls to bring its services and facilities on par with the best in the world. This foresight on the part of the Board of Directors and the Management is now reaping rich dividends; and Lanka Hospitals is increasingly asserting itself as the healthcare provider of choice for patients in Sri Lanka and as well as within the region.

Dr. Paranavitane said “My meeting with the President of Seychelles reflects the increasing confidence that the international community places on the Lanka Hospitals brand. Our competitive edge lies in our consistent pursuit to provide the most up-to-date medical treatment and care for all our patients.

In 2014 September we were awarded the very prestigious JCT accreditation.

The extremely stringent criteria prescribed by the accreditation are the reason that less than 500 hospitals around the world have managed to achieve it, and we are very proud to be included in that exclusive group.

Lanka Hospitals also boasts consistent success rates in complicated break through medical procedures as well regular treatments. All of this contributes to the high equity we enjoy among our patients and partners.”
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Revised corporate tax eats into Access Engineering profits

Access Engineering has posted growth its interim financial statements for the first quarter ended June 30, 2016, recently.

As per the results the Company has concluded the first quarter with solid performance creating more value to its multifaceted stakeholders.

At a Group level cumulative revenue for the quarter was recorded at Rs. 4.6 billion, a growth of approximately 10.5% over the previous corresponding period. At a Company level this was recorded at Rs. 2.9 bn, a marginal growth of 0.2% over the corresponding period.

The production of construction related material generated a revenue of Rs. 417 mn, up by 109.8% over the previous period after the elimination of inter-segment revenue.

Gross profit margin for the quarter was 23.8% and 25.5% respectively at Group and Company level. Net profit attributable to owners of the Company was Rs. 524 mn and 425 mn respectively at Group and Company level, a decline of 12.6% and 13.9%.

Income tax expenses of the Company rose by 232.3% to record at Rs. 200.9 mn mainly on account of the revised corporate tax rate of 17.5% on construction activities and a one-off tax adjustment.

Total Comprehensive Income After Tax for the Group and the Company for the first quarter recorded at Rs. 532.9 mn and Rs. 425.8 mnn is a decline of 16.6% & 14.1% respectively.
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