Sri Lankan shares post near 3-wk closing low in dull trade

Reuters: Sri Lankan shares fell on Wednesday to their lowest close in nearly three weeks as concerns about rising interest rates continued to hurt investor sentiment.

The Colombo stock index ended down 0.21 percent at 6,121.43, its lowest close since Feb. 9.

Turnover was 382.2 million rupees ($2.53 million), around half of this year's daily average of 663.6 million rupees.

"The market is still holding grounds because of good (corporate) results in the last quarter and some dividend announcement," said Prashan Fernando, CEO at Acuity Stockbrokers.

Shares of Ceylon Cold Stores Plc fell 4.11 percent, while conglomerate John Keells Holdings Plc declined 0.21 percent.

Foreign investors were net buyers of 111.9 million rupees worth of shares, extending the year-to-date net foreign inflow to 599.6 million rupees worth of equities.

Yields on treasury bills have risen to a more than four-year high since October, while the central bank has kept key policy rates on hold. 

($1 = 151.2500 Sri Lankan rupees) 

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

Swadeshi Industrial Works to raise Rs. 149 m via Rights to retire part debt

Swadeshi Industrial Works Plc has announced a move to raise Rs. 149.32 million by way of a Rights Issue of one new share for every seven held.

The price at which new shares, amounting to 18,666, will be issued is Rs. 8,000 per share. The share last traded at Rs. 13,500. Net asset value per share as at 31.12.2016 was Rs. 5,107 and in the December quarter the share traded for Rs. 10,500.

Its stated capital is Rs. 1.3 million consisting of 130,667 shares.

The company said proceeds from the Rights Issue subject to shareholder and regulatory approval will be used for reducing the interest bearing loans and borrowings. As at 31 December 2016, the company had Rs. 376.5 million as a current portion of long-term loans.

The major shareholders of the company are A.M. Wijewardene (33.8%), Dr. T. Senthilverl (25%), Seedawatte Exports Ltd. (19.4%) and Sampath Bank Plc (10.5%).

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Adam Investments, Adam Capital go for Rs. 1.67 b Rights

Adam Investments Plc and Adam Capital Plc yesterday announced plans to raise fresh cash via Rights Issues.

Adam Investments’ Board has resolved to raise Rs.898.55 million via a Rights Issue of 1 for 1 at Re. 1 per share. Its current stated capital is Rs. 714.5 million.

Funds raised via Rights will be to invest in subsidiaries in order of priority to enhance working capital. Adam Capital will raise Rs. 756 million via its Rights Issue of 2 for 1 at Rs. 1.50 per share. Its current stated capital is Rs. 252 million. Funds raised will be used for investments into its subsidiaries and enhance working capital.

Both issues are subject to shareholder and regulatory approval.

Young business leader Ali Asger Shabbir Gulamhusein family controls 74% stake in Adam Investments, which in turn controls 53% stake in Adam Capital. 

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Sri Lanka’s C W Mackie in fruit drink JV with Denmark’s Co-Ro

ECONOMYNEXT – C W Mackie PLC, the Sri Lankan partner of Denmark’s Co-Ro A/S, has struck a joint venture deal with the Danish provider of fruit-based soft drinks, home-freeze ice-lollies and concentrates to manufacture and sell Co-Ro products.

Two firms are to be set up under the joint venture to make concentrates and ready-to-drink products marketed under the Sunquick brand, a stock exchange filing said.

The agreement “provisionally envisages an investment of Rs1.1 billion jointly,” it said.

Two firms are Sunquick Lanka (Private) Ltd in which CW Mackie will hold 49% and Co-Ro 51% and Sunquick Lanka Properties (Private) Ltd. with Co-Ro holding 49% and CW Mackie 51%.

CW Mackie now bottles and distributes Sunquick concentrated squashes in Sri Lanka under its 40-year partnership with Co-Ro.

Sri Lanka’s Vidullanka issues shares to Timex

ECONOMYNEXT - Sri Lankan mini hydro power firm Vidullanka Plc said it plans to issue new shares to Timex Garments (Pvt) Ltd. in a private placement that will partly fund the acquisition of a 6.5MW minihydro power plant in Uganda.

A stock exchange filing said Vidullanka will issues 9.1 million ordinary shares to raise Rs50 million at around Rs5.48 - the three months volume weighted average market price – with a minimum price of Rs 5 per share.

The funds are to be used as part settlement of the cost of buying Timex Bukinda Hydro (U) Ltd. which has got all approvals except a power purchase agreement for the 6.5MW Bukinda small hydro power plant.

The share issue would result in the current stated capital of Vidullanka of Rs1.27 million increasing by 3.9% and a maximum 1.34% increase in the number of shares in issue.

Sri Lanka’s eChannelling reports loss in December quarter

ECONOMYNEXT – eChannelling, Sri Lanka's first listed dotcom, reported a loss of Rs1.8 million in the December 2016 quarter compared with a profit of Rs25 million a year ago as it faced competition in its online medical appointment business.

Sales halved to Rs28 million during the period while income tax costs were sharply higher, according to interim results filed with the stock exchange.

eChannelling reported a loss per share of one cent for the December 2016 quarter. The share was last traded at Rs6.50.

The firm’s earnings per share for the nine months to 31 December 2016 were 22 cents, down from 54 cents a year ago.

September 2016 quarter net profit of eChannelling, which lists Mobitel, a unit of Sri Lanka Telecom, as its controlling shareholder, was Rs13 million, down from Rs21.8 million the year before.

The company, which pioneered online channelling of doctors, now faces competition from Doc.lk, a firm set up by Dialog, Sri Lanka's largest mobile firm, and Asiri Healthcare group.

Ceylon Tobacco unit profits up 8-pct in Dec despite volume drop

(LBO) – Profit after tax at Ceylon Tobacco, a unit of British American Tobacco, rose 8 percent to 2.0 billion rupees in the December quarter, interim accounts showed.

The firm reported earnings of 10.58 rupees per share for the fourth quarter compared to earnings of 9.79 rupees per share posted a year ago.

Gross revenue rose 4 percent in the quarter to 24.7 billion rupees and after deducting government levies, the unit reported net revenue of 7.6 billion rupees for the quarter, up 27 percent a year ago

Excise special provision tax of the government dropped 17 percent to 14.8 billion rupees while value added and other tax introduced in the quarter was 2.4 billion rupees.

Other operating expenses doubled in the quarter to 3.3 billion rupees and income tax expense closed flat at 1.4 billion rupees in the quarter.

In the 12 months to December 2016, the firm reported earnings of 67.05 rupees per share compared to earnings of 56.77 rupees per share posted a year ago on total profits of 12.6 billion rupees, up 18 percent.

Ceylon Tobacco has paid 87.4 billion rupees to the Government in the form of excise tax during the twelve months ended 31 December 2016 driven primarily by relatively stable volumes during the first 9 months of the year.

The company said the significant price hikes in the 4th quarter due to both an excise increase in October and the introduction of 15 percent VAT in November, caused volumes to halve.

“Government revenue through excise declined by 13.2 billion rupees compared to the 3rd quarter of the year,” Ceylon Tobacco said.

“It is anticipated that these price hikes will continue to impact both CTC volumes and government revenue during 2017.”

The company said as a result of the business impact, the company closed 2 leaf depots and reduced factory shifts by a third, in early 2017.

The company added that there was a significant increase in overhead expenditure in 2016 due to the obligations of key business partners and the increase in marketing investment.

“Raw material costs increased by 10 percent through the rise in imported tobacco leaf required as a consequence of continued adverse weather conditions in addition to farmers being pressured to stop cultivating tobacco.”

The Directors recommend a final dividend of 6 rupees per share for 2016 subject to shareholders approval of the AGM to be held on 25th April 2017.

The final dividend will be payable on 5th May 2017, once approved by the shareholders.

Principal operations of the Ceylon Tobacco Company are manufacturing, marketing and selling cigarettes.

The ultimate holding company of Ceylon Tobacco is British American Tobacco through British American Tobacco Holding (Sri Lanka) BV.

To align SEC’s regulatory framework with international benchmarks: New SEC Act ready in third quarter

The new Securities and Exchange Commission (SEC) Act is expected to be passed by Parliament in the third quarter of this year.

Speaking at the South Asian Federation of Exchanges (SAFE), seminar held at the Colombo Stock Exchange, Securities and Exchange Commission (SEC) Chairman Tilak Karunaratne Karunaratne said the Act to be passed will align SEC’s regulatory framework with international benchmarks and will include provisions to enable the licensing and regulation of a Demutualised Exchange.

“In this process, we will focus on governance arrangements as the primary means of ensuring Stock Exchanges have robust arrangements for maintaining a proper balance between the commercial interests and its regulatory responsibilities.”

Moreover, after Demutualisation, stock exchanges evolved into profit seeking commercial enterprises which will explore arrangements to establish global alliances to remain profitable and internationally competitive, he said.

He said that for that reason, there is a need towards greater integration of markets where there are no barriers to the movement of capital and there is easy access to each other’s stock markets.

Noting that fair and efficient functioning of exchanges is of significant benefit to the public, he pointed out that failure of an Exchange to perform its regulatory functions properly can have a far reaching impact on the economy as a whole. “Regulatory functions of traditional Exchanges include rule-making in respect of members, products and trading itself. But as Exchanges move from mutual entities to for-profit enterprises, as most of you have already done, they can create a number of challenges in respect of the regulatory roles the Exchanges perform.

These concerns include the compatibility of for-profit operation of Exchanges with public interest objectives to the adequacy and efficiency of regulation.”

Commenting on regional capital markets activities, Karunaratne said the removal of controls on capital transactions within the region, harmonization of capital market infrastructure including regulations, taxation, accounting, trading systems and cross-listings of securities are necessary steps to move towards regional financial integration.

Colombo Stock Exchange (CSE) and South Asian Federation of Exchanges (SAFE), Chairman Vajira Kulatilaka speaking at the event noted that capital markets in the region are significantly evolving and at the same face the challenges of making them more viable and competitive with well developed capital markets in the world.

He also added that the SAFE event in Colombo could be better utilised to foster collaboration and to accelerate development in the regional capital markets.
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HNB posts record Group profit of Rs 15.67 bn in 2016

An outstanding performance throughout 2016 on every front culminated in the HNB Group posting the best financial results in its history. Group Profit Before VAT, NBT and Taxes grew by 41.3% to Rs 27.1 bn while Profit Before Tax (PBT) reached Rs 22.5 bn with a 39.2% growth.

Group Profit After Tax (PAT) witnessed an exceptional growth of 41.2% to be recorded at Rs 15.7 bn. Group assets grew by 19.0% to cross the Rs 900 bn mark, representing yet another historical milestone for HNB. The remarkable performance by the Bank was the main contributor towards this exceptional performance by the Group. The Profit Before VAT, NBT and corporate taxes of the Bank increased by 37.1% to Rs 24.5 bn while the PBT improved to Rs 20.1 Bn by 33.9% from Rs 15.1 Bn recorded in 2015, amidst a 54.7% increase in VAT and NBT charge due to the increase in the rate of VAT from 11% to 15%.

The PAT for the Bank also recorded an outstanding growth of 35.4% to Rs 14.1 bn for the year.

The Bank reported a net trading loss of Rs 1.8 Bn due to higher swap cost incurred during the year on swaps taken to hedge foreign currency borrowings.

The corresponding impact on on-balance sheet open positions as well as a significant growth in exchange income contributed to the other operating income of Rs 3.3 Bn recorded for the year.

Portfolio quality which has been considered a strategic imperative by the Bank, saw HNB adopting many initiatives such as the centralisation of Retail and SME credit evaluation, intense training on credit underwriting and rigorous focus on recoveries. The efforts have yielded rich dividends as the Bank’s NPA ratio has improved to 1.8%, well below the industry average of 2.6%. The ratio as at the end of 2016 represents a 63 bps improvement during the year and a quantum improvement of 186 bps over a four year period.

The Bank’s total operating expenses increased by 14.5% to Rs 18.3 Bn for the year. Containing of controllable expenses enabled through the lean transformation journey embarked upon by the Bank through initiatives such as the centralisation of credit and target operating model for branches, resulted in the cost to income ratio improving by 344 bps to 42.51% in 2016 and by more than 10 percentage points since 2012.

The Bank’s total tax allocation for the year amounted to Rs 10.4 Bn which is a significant increase of 39.5% from 2015 (excluding the one off super gains tax paid in 2015) and the highest among the private sector commercial banks.

The growth of PAT in excess of 35% to Rs 14.1 Bn enabled to record a Return on Assets (ROA) of 1.79% and Return on Equity (ROE) of 19.91% which is a significant improvement from 1.61% and 16.59% posted during 2015.

Growth of 18.4% in the Bank’s Balance Sheet to Rs 859.8 Bn easily eclipsed the industry growth of 12%. The instilling of a service culture universally while strengthening sales teams allowed HNB to rebound strongly from a subdued first few months to reach Rs 584.4 Bn in advances which is a growth of 17.3% yoy. HNB during the year has played a key role in driving the economy’s engine of growth through disbursing over Rs 105 Bn to SME and micro finance customers in addition to serving the grass-root micro customers through its subsidiary HNB Grameen. HNB Grameen yet again performed well to contribute strongly to Group results along with HNB Assurance and the Joint Venture Investment Bank, Acuity Partners, also reporting results far superior to those recorded in the previous year. Group ROA and ROE were recorded at 1.89% and 17.69% respectively and similar to the Bank represented a marked increase from the levels of 1.64% in ROA and 14.71% in ROE achieved in 2015.

HNB Managing Director and CEO Jonathan Alles said the adoption of dynamic strategies, focusing on delivering an unparalleled customer experience, relentless focus on operational excellence and commitment to a high level of asset quality woven around a robust business model has been pivotal to HNB’s remarkable performance in 2016.

“Our digital drive towards becoming the most future ready bank also contributed immensely towards this great success”.

The Bank declared a final dividend of Rs 7.00 per both ordinary voting share and ordinary non-voting share consisting of a cash dividend of Rs 3.50 per share and a scrip dividend of Rs 3.50 per share in addition to the interim dividend of Rs 1.50 per share declared in December 2016. Accordingly the total Dividends for the year 2016 amounted to Rs 3.5 bn.
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Car registrations down by 40%, three wheelers by 50%

Motor car registrations have come down by 40% on a month and month basis mainly due to drop in financing share of motor cars. The three wheeler segment came down by nearly 50%,according to the JB Securities monthly review.

Implementation of the budget proposal to restrict credit to new cars (50% LTV) and three wheelers (25% LTV) is the primary factor accounting for a plunge in registrations.The full impact of the directive will only be felt this month, the report said. However there have been a surge in Hyundai Eon cars (100% increase)According to JB Securities monthly review in contrast there have been an in increase of used cars, especially Toyota’s and also electric cars are picking up.

There was also a big jump in Hybrid used cars where Axio witnessed a large increase (200+) while there was also an increase in Mini Vans(268% increase) with the biggest mover being Suzuki Every.

“Three wheelers may be a menace on the road but it has been a huge contributor in creating inclusive growth both in terms of being a production asset (taxi) and/or personal vehicle providing mobility to the owner which in turn increases his radius of employment opportunities,ability to work flexible work hours due to not being reliant on public transport, access to markets.

The segment also saw Bajaj losing market share to TVS,” the J. B. Securities said.

The report also says that mini trucks have come down by 20% while the registration for Buses have gone up by 40%.
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Lee Hedges PLC - Scaled down project in place of Collpetty Mills

Lee Hedges PLC, said that they are planning a scaled down operation in place of the proposed multi storied residential service apartment building on Lot D of the land called Collpetty Mills.

The Board of Directors having considered the status of the company’s present investment portfolio and having further assessed the present economic climate are of the view that it is the best interest of the company that the company invests its time and expertise on maximising the

returns to the Company with its existing investments and accordingly and will not to proceed to invest the Rs. 2.8 bn in Lot D of No 353, Galle Road,Colombo 3.

An official from Lee Hedges said that their current BOI approved ongoing Mixed development Project on the former Cashew Corporation premises facing Galle road will be ready by end July this year.

This project is being built on a land leased from the Urban Development Authority (UDA) on a 99 year lease. The project consists of 100,000 sq.ft. on a total of 15 floors.The second floor to eighth floor is designed for corporate offices and the upper floors for service apartments.

This building is owned by the Lee Hedges Investment Limited, a subsidiary of Lee Hedges, the Company will rent the building for the long term tenants. “This will be an eye mark building in Colombo 3,and we hope to launch pre sales soon,”a company official said.
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Ceylinco Insurance posts record Rs 4.7 bn after tax profit

Ceylinco Insurance, the holding company recorded a consolidated after tax profit of Rs. 4.7 billion, for the year ended December 31, 2016.The profit before tax stood at an exceptional Rs . 5.9 billion.

Contributing to this remarkable performance, Ceylinco General Insurance and Ceylinco Life Insurance recorded profits after tax of Rs. 1.3 billion and Rs. 2.9 billion, respectively.

Ceylinco Insurance Managing Director and Chief Executive Officer Ajith Gunawardena said Ceylinco Insurance sector, in 2016, remained far ahead of competition. Thus, the Insurance sector managed to return an impressive premium income of Rs. 31.1 billion in 2016, with Ceylinco General Insurance recording Rs.16.1 billion, marking a growth of 18.9 % ; an increase of over Rs.2.5 billion year on year, just as Ceylinco Life Insurance registered a premium income of Rs. 15 billion, marking a growth of 11.7 % ; an increase of Rs. 1.5 billion.

Ceylinco Life Insurance Managing Director and Chief Executive Officer, R. Renganathan said in 2016 they embarked on a huge market expansion programme once again. Not only Ceylinco Life but the entire life insurance industry benefited through this.

The year 2016 marks a thirteen 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”

Ceylinco General Insurance Managing Director Patrick Alwis commenting on the remarkable performance of Ceylinco General Insurance said “ the premium income of our flagship brand ‘Ceylinco VIP’ alone stood at a staggering Rs.9.9 billion, with Non Motor Insurance contributing an impressive Rs.6.2 billion, allowing the total premium income of Ceylinco General Insurance to record yet another fantastic year. Ceylinco General Insurance has maintained its unassailable lead. This is in the midst of stiff competition. What we have achieved in 2016, is all the more important, as the industry is not a level playing field, with government entities still enjoying distinct advantages. Despite such challenges, we have worked hard and worked together, and we have exceeded expectations, once again. Ceylinco General Insurance paid claims amounting to Rs. 10.4 billion during 2016. The sharp increase in claim settlement is a result of the large number of claims we paid, during the floods in May 2016. Claims were paid within a period of 14 days, enabling our customers to return to normalcy in the fastest possible time. Some customers had only insured their vehicles, but not their homes, while some had insured their shops, but not their houses. However, Ceylinco General Insurance, looking at the situation from a humane angle, decided to pay a percentage to compensate the damages to their homes as well.”
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Amana Bank records Rs.102 mn PBT in 2016

Amana Bank continued its positive growth momentum in core banking, leveraging on its strategic focus of being primarily an SME and Retail Bank in 2016.

Financing Income crossed the Rs 4 billion mark by end of 2016, corresponding to YoY growth of 40% whilst Net Finance Income during the same period grew by 30% to Rs 1.9 billion.

The Bank continued to gain from Net Fee and Commission Income which recorded a growth of 46.3% in 2016 to reach Rs 246.5 million. Total Operating Income during the year under review grew by 17.7% to reach Rs 2.4 billion. Despite the impressive growth in Core Banking, the Bank was able to record only a Profit Before Tax of Rs 102.8 million for the year, owing to the loss on impairment of Rs 149.1 million from non-core banking activities. This is attributed to recognizing the impact of underperforming capital market investments which were prevalent in the portfolio.

The Bank’s Total Assets crossed the Rs 50 billion milestone during the year and closed at Rs 54.3 billion, a growth of 13.8%. Owing to the strong demand for its multitude of products and services, the Bank’s Deposits and Advances grew by 22% and 16.3% to read at Rs 46.9 billion and Rs 38.4 billion respectively in 2016. Chairman Osman Kassim said “Amana Bank has been growing significantly with overwhelming customer acceptance of its unique banking model and we look forward to further acceleration in our growth journey strengthened by the forthcoming capital infusion.” Chief Executive Officer Mohamed Azmeer said although the one-off impairment has had an impact to profits,the Net Assets were not affected as a result, due to such losses being captured in the Bank’s reserves previously, and set off against profits in the fourth quarter.
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