Sri Lankan shares slip from 10-week high on profit-taking

Reuters: Sri Lankan shares on Thursday slipped from its more-than-10-week high, hit in the previous session, as foreign outflow dented investor sentiment while some investors booked profits in thin trade.

The benchmark Colombo stock index ended down 0.44 percent, 28.98 points, at 6,514.77.

"Foreign selling was seen in some large caps, and that led to profit-taking," said Jaliya Wijeratne, CEO, First Capital Equities.

Foreign investors were net sellers for the first time in 12 sessions. They have sold shares worth 13.08 million rupees on Thursday, extending the year-to-date net foreign outflow to 3.48 billion rupees worth of shares.

However, they have bought a net 1.35 billion rupees worth of equities in the past 11 sessions through Wednesday.

Turnover stood at 523.6 million rupees, less than this year's daily average of around 731.7 million rupees.

Shares have risen to a more-than-10-week high on Wednesday on hopes that economic fundamentals would improve after the central bank on July 28 raised its main interest rates by 50 basis points each in a surprise move aimed at curbing stubbornly high credit growth.

Shares in Ceylon Cold Stores Plc slipped 1.44 percent while the biggest-listed lender Commercial Bank of Ceylon Plc skid 0.66 percent.

Analysts said investors also shrugged off a Supreme Court order asking the parliament to stop considering a bill to raise the value-added tax as the draft had not followed due process.

The move could put in jeopardy the government's ambitious fiscal consolidation plan to reduce the budget deficit to 5.4 percent of gross domestic product from last year's 7.4 percent.

($1 = 145.6000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sherry Jacob-Phillips)

SEC, CSE noticed for delays in approving mandatory offer in Agalawatte Plantations

The Court of Appeal yesterday issued notice on the Securities and Exchange Commission, the Colombo Stock Exchange, Director General of CSE, the Central Depository Systems Ltd., Agalawatte Plantations PLC, Dr. Chris Nonis, and Mackwoods Plantations Ltd. in a writ application made by Browns Power Holdings Ltd. challenging the delay by the SEC in approving the announcement for a mandatory offer by Browns Power Holdings following the recent purchase by the company of 60% of the shares in Agalawatte Plantations on the Colombo Stock Exchange. Browns Power Holding has stated in the Petition that the company is obliged under the Takeover and Mergers Code to make a mandatory offer to Agalawatte Plantations after it purchased 60% of the shares in the plantations company on 14 July and has submitted its announcement to the SEC on 15 July for its approval.

Rule 18 of the Takeover and Mergers Code requires copies of all statements and announcements required to be issued or made under the Code and copies of all documents in relation to take-over or merger transaction to be forwarded to the SEC for its approval before such statement, announcement or document is issued, made or dispatched.

Browns Power Holdings claims however, that the SEC has to date unreasonably and arbitrarily failed to grant approval to the announcement and Browns is therefore, unable, under the TOM Code, to appoint its nominees to the Board of Agalawatte Plantations.

Browns Power Holdings complains that it has a legitimate expectation and a right to take control and manage its assets after purchasing a controlling stake of Agalawatte Plantations by paying the due purchase consideration by way of a substantial investment.

The Court of Appeal was presided by Justice Malalgoda and the application was supported by Nihal Fernando PC appearing with Harshula Seneviratne. 

www.ft.lk

Hemas ups 1Q earnings by 68% to Rs. 696 m

Hemas Holdings Plc yesterday announced that its operating profit in the first quarter of FY16/17 had increased by 35% to Rs. 907 million.

“Through continued focus on our strategic priorities, profitable growth, improved organisational structure and innovation, we delivered strong revenues and earnings growth for the first quarter of financial year 2016/17,” said Hemas CEO Steven Enderby.

Hemas Holdings and its subsidiaries achieved consolidated revenues of Rs.9.9 b,year-on-year (YoY) growth of 12.1% for the period, and earnings grew by 67.8% to Rs.696 m.

Enderby said despite external pressures due to flooding, VAT uncertainty, and increasing inflation resulting in weaker demand, Hemas continued to generate solid performance with FMCG Bangladesh, Pharmaceutical Distribution, and new shipping agency Evergreen all contributing well.

The Consumer business recorded a topline of Rs. 4.2 b for the first three months, a 10.2% YoY increase over the previous financial year. Operating profits were Rs.636 m, 59.2% YoY growth, whilst earnings grew at 62.6% to stand at Rs. 509 m. It continued to expand its position in key categories with the introduction of its new range of Baby Cheramy diapers. Bangladesh Consumer performed well contributing to overall Consumer business growth, driven by extended reach attained through own distribution channels and strong marketing activities.

Consolidated Healthcare sector revenue for the first quarter stood at Rs. 4.3 b, a YoY increase of 17.6% whilst earnings grew at 13.5%. Hemas Pharmaceutical distribution registered strong growth maintaining its market leadership position. Its pharmaceutical sales growth continues to be driven by its strong presence in growing therapeutic segments and due to the recovery in the overall pharmaceutical market over the last year. It launched its latest addition to the pharma portfolio, Jenburkt Pharma, in May this year.

Hospitals performance showed mixed results during the quarter due to the introduction, and subsequent removal, of VAT for healthcare services, and different approaches to VAT introduction by various private healthcare operators, creating market confusion.

J. L. Morison posted a YoY growth of 4.3% and earnings growth of 28.2% for the three months ended 30 June 2016. Its Rx Pharma portfolio continued to do well, benefiting from new product launches. OTC and Consumer also contributed significantly towards overall revenue growth while the Agro division registered a decline in growth, limiting overall company revenue growth.

Leisure, Travel and Aviation segment recorded a total revenue of Rs.775 m, reflecting an 8.2% YoY growth for the three months under consideration. During this usual low season for the Leisure industry and despite a decrease in occupancy at Avani Bentota and Club Hotel Dolphin, Serendib Hotels posted a revenue growth of 4.8% with traditional markets performing slightly below expectations.

Travel and Aviation segment also showed mixed results with some GSAs showing improvements in both yields and number of passengers handled, while others faced competitive operating environments. As a result, the segment recorded a decline in revenues of 4.3%.

In April 2016 Hemas Maritime was appointed the exclusive shipping line agent of Evergreen Lines. Hemas believes this will enable it to consolidate its position in the logistics and maritime sector. Growth continued in its domestic Logistics operations with warehouses operating at high levels of capacity underpinned by new customers for its distribution operation and higher levels of container handling activity. As a result, Logistics and Maritime revenues grew by 63.2% whilst earnings registered a growth of 118.6% over last year.

“FY 2016/17 has got off to a good start for HHL with our major businesses growing well. We continue to be watchful of tightening economic conditions for the year ahead. Our teams are working hard to sustain our growth momentum in the coming quarters of the financial year,” Hemas CEO Enderby added.

www.ft.lk

HNB Group PBT tops Rs. 10 b

HNB Group continued its outstanding performance with Group PBT improving to Rs. 10 b in 1H 2016. The bank’s PBT for the period improved to Rs. 9.1 b by 50% while the bank’s PAT grew to Rs. 6.4 b by 48.6% yoy.

The bank’s interest income grew by 34.5% yoy to Rs. 33.5 b, driven primarily by the 23% yoy growth in the loan book. The bank also grew its deposits by 20.8% over the last 12 months and maintained a rupee CASA ratio of over 40% amidst the industry-wide shift witnessed towards higher yielding deposits in the backdrop of rising interest rates. Accordingly the bank grew its net interest income by 23.5% to Rs. 15.9 b.

The net fee and commission income recorded an increase of Rs. 691 m, which is a growth of 26% yoy. The improvement in card business, trade finance as well as loan administration fees contributed towards this impressive growth in net fee income.

HNB’s relentless efforts in recoveries and continuous improvement in underwriting standards has enabled the bank to improve its NPA ratio quarter on quarter. As at end of 1H 2016, the NPA ratio improved to 2.25% compared to 3.24% recorded in 1H 2015 and from 2.41% in 1Q 2016.

The bank’s operating expenses increased by 11.9% largely owing to revisions effected through the collective agreements. However our continuous focus on cost optimisation enabled to record a cost to income ratio of 45.2% for 1H 2016, which is nearly 300 bps lower than the corresponding period last year.

The bank’s operating profit before VAT, NBT and corporate taxes increased to Rs. 10.8 b, by 48.3% yoy, while the total tax charge for 1H 2016 was Rs. 4.4 b. Accordingly, the bank recorded a PAT of Rs. 6.4 b, resulting in a ROA of 1.7% and a ROE of 19.4% for 1H 2016. The asset base of the bank grew by 24.8% yoy and 9.4% during the first six months of the year to reach Rs. 793.1 b.

Commenting on HNB’s performance, HNB MD/CEO Jonathan Alles stated: “We are delighted with our remarkable 1H performance which was driven by robust growth in core banking. This exceptional performance is attributed to the unwavering commitment of my high performance team and I am truly grateful to each and every member of Team HNB for espousing transformational change. Our continuous investments in developing world class talent, adopting state of the art technology, best in class systems and processes as well as our focus on building lasting bonds with our customers will enable us to reach greater heights in the near future.”

Alles further stated: “While thanking our loyal customers for their continued patronage of HNB business, we hope that the envisioned fiscal reforms and enactment of sound monetary policy will lead to strong economic growth and stability. We at HNB remain focused and well positioned to be a key partner in the development of the nation through our strategic direction.”

The HNB Group also recorded outstanding performance with Group PAT growing by 54% yoy to reach Rs. 7 b. All group companies contributed to the performance with HNB Grameen leading the way. Group assets grew by 25.3% yoy to reach Rs. 828.9 b by end of 1H 2016.

During the first six months, HNB has been recognised by many renowned international and local institutions for excellence in diverse business and support functions. In early 2016 HNB was recognised by the prestigious ‘Asian Banker Magazine’ as the ‘Best Retail Bank in Sri Lanka’ for the eighth time. The bank’s Islamic Finance arm was bestowed upon the ‘Deal of the Year’ Silver Award and the ‘Entity of the Year’ Bronze Award at the Islamic Finance Forum of South Asia organized by UTO EDU Consult.

HNB also won the ‘Asia’s Best Employer Brand Award for Best HR Strategy in line with Business 2016’ and the ‘Asia Excellence in Training & Development Award 2016’ for the fifth consecutive year. Recently the bank was recognised as the ‘Silver Award’ winner at the CFA Sri Lanka Capital Market Awards 2016 for ‘Best Investor Relations’.

HNB is also the first local bank in Sri Lanka to receive an international rating on par with the sovereign from Moody’s Investor Services while maintaining a National Long-Term Rating of AA- (lka) from Fitch Ratings Lanka Ltd.

www.ft.lk