Market at near four-month high,indices up for second week

Equities rallied strongly last week with the benchmark All Share Price Index recording significant gains for the second consecutive week, Acuity Stockbrokers reported in their Share Market Weekly.

"The ASPI rose 231 points W-o-W, to close at a near four-month closing high on Friday helping push the Index 43 points above a key-support level of 6,250 points," the report said.

"Gains on blue chips & mid- caps such as JKH, CCS, CTC, MELS, COMB , LOLC, HHL,PLC & SPEN contributed 123 points to the Index, with average market turnover levels amounting to LKR 1.13 Bn (33% higher than YTD turnover of LKR 0.76Bn) last week as Institutional and high net worth (HNI) investors took advantage of the market’s over-sold position."

Crossings over the week consequently accounted for 36% of total market turnover, amid strong interest in mid-caps and blue-chips such as Cold Stores (38% of crossings) and JKH (33% of crossings), the report said.

Foreign investors meanwhile continued to be net buyers for the 10th consecutive week, with net foreign buying ending at LKR 1.71Bn (cf. 1.82Bn last week) bringing the total net inflows for the year to LKR 6.79Bn., it added.

Acuity expected markets in the week ahead as likely to retain the current positive momentum, although at a slower pace as the traditional new year holidays approach.

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CTC pitches its annual report on ‘Beyond the Smoke’

Ceylon Tobacco Company PLC (CTC) with a 111-year presence in Sri Lanka has pitched its just released annual report on the theme "Beyond the Smoke" to highlight its contribution to the national economy through what is now universally accepted as a highlycontroversial industry.

CTC has stressed in the report that as the country’s only legal cigarette manufacturer, it is the second larges market capitalized company quoted on the Colombo Stock Exchange and is the country’s largest individual tax contributor supporting 178,000 livelihoods through farming, manufacturing and retailing.

In 2016 CTC contributed Rs. 87.4 billion in excise taxes to the national exchequer. Its total tax contribution was a significant 7% of state revenue amounting to 76% of the value generated by the company and is one of the country’s most preferred employers.

"As an organization operating in a controversial industry, we understand the added responsibility placed on us to maintain the highest standards of corporate conduct and take pride in the sustainable and responsible way our operations are run,’’ the report said.

CTC Chairman Susantha Ratnayake said that in the face numerous challenges the company faced in the year under review when the dual impact of a hike in excise duties on cigarettes and the introduction of VAT had a significant impact on affordability of cigarettes, they had delivered strong results.

The company was also hurt by many instances of unlawful enforcement of tobacco regulations with the company’s MD/CEO Michael Koest saying that they will have to take tough decision to find "sustainable ways of operating in such a hostile environment."

Despite all the challenges which has depressed CTC’s share price sharply during the year under review, Ratnayake said that the company had delivered yet another year of strong financial performance with earnings per share up 18.1% to Rs. 67.05 during 2016 with shareholders getting a total return of Rs. 66.80 per share with a final dividend of Rs. 6 per share payable after shareholder approval at the forthcoming AGM.

"Given the health risks associated with our products, we understand that regulation is necessary although we urge the government to pursue balanced and evidenced based regulation which preserve the interests of adult consumers while ensuring the livelihoods of all those dependent on our industry including over 20,000 persons involved in tobacco cultivation," Ratnayake said.

"Tobacco is a legal industry with an undeniable positive socio-economic impact and a major source of income to almost every government in the world."

British American Tobacco Company (BAT) with 83.14% of CTC is the dominant shareholder with no Lankans among the Top 20 shareholders holding the balance. In previous years there were a few Lankans who have obviously sold out in the context of tough regulatory measures including health warnings on packaging and the price stick that had made cigarettes unaffordable persuading them to take available capital gains despite CTC being one of the highest dividend payers quoted on the CSE.

The year under review saw CTC’s share price at a high of Rs. 1,140 and a low of Rs. 797 closing at Rs. 806.50. This compared to the previous year’s trading range of Rs. 1,124 to Rs. 881 closing at Rs. 992.50. The company’s market capitalization was down to Rs. 151.076 billion from Rs. 185.919 billion a year earlier.

The directors of CTC are Messrs. Susantha Ratnayake (Chairman), Michael Koest (MD/CEO), Dinesh Weerakkody, Ms. Premila Perera, Ms. Emma Ridley (Finance Director) Syed Javed Iqbal and Kenneth Allen.

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Harry J nominee quits HNB to make way for Dinesh

Mr. Damien Fernando, a non-executive director on the board of the Hatton National Bank, resigned a few days ago in a move that well informed sources said was intended to create a vacancy to bring Mr. Dinesh Weerakkody on the board.

Earlier, Harry Jayawardena controlled/ influenced companies with a substantial stake in HNB first requisitioned and then abandoned an Extraordinary General Meeting of the bank to bring Weerakkody on the board.

Analysts believe that the requisitioning of the EGM was abandoned out of a realization that that the special resolution may not succeed as reported earlier in this newspaper.

There was an attempt a few days ago to outvote Mr. Amal Cabraal, a former head of Unilever in Sri Lanka, who was up for re-election at the HNB Annual General Meeting. But this attempt also failed with no poll being taken as it was not called for in time.

Soon thereafter Mr. Damien Fernando tendered his resignation and the vacancy is expected to be filled by Weerakkody who was once chairman of the Commercial Bank of Ceylon.

Fernando who was appointed to the HNB board in 2012 was an executive director in the Sri Lanka Insurance Corporation when it was under Harry J control and also served on the boards of Distilleries, Pelwatte Sugar (under Harry J at the time), Lanka Hospitals Corporation, Melstacorp, Lanka Bell, National Asset Management and Continental Insurance (all Harry J companies) and several others.

The serving chairman of HNB is Mr. Rienzie Arseculeratne, PC.

The EPF with 9.78 percent of the voting shares is the top shareholder of HNB followed by the Life Fund of the Insurance Corporation with 9.68%. Other government controlled entities among the top 20 shareholders are the Insurance Corp. General Fund (4.96%) and NSB (2.3%).

Harry J companies in the Top 20 are Milford Exports (7.9%), Stassen Exports (6.88%) and Distilleries (3.08%) but 5.74% of their shares which enjoy dividend rights do not have voting rights as the related parties own in excess of 10% of the shares disallowed by the Banking Act. These companies together own 17.9% of HNB.

Further developments in HNB are awaited with interest.

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Arpico Insurance posts Rs. 745 mn GWP

Arpico Insurance has recorded a Gross Written Premium (GWP) of Rs.745 million for the year ended March 31, 2017.

The GWP of the company has increased 55% in the period mentioned. Arpico Insurance acting Chairman Viville Perera said the company has made remarkable progress in 2016 despite the difficult economic circumstances that prevailed in the country.

“During the first half of 2016, the company was able to record a 17% growth of the GWP. Which is a noteworthy increment from the 11.74% growth recorded in 2015,” Perera said. It was mentioned in the annual report released at the end of the financial year 2016 that the company has recorded a profit of Rs. 107 million which is a 328% growth. while the investment portfolio has increased by 27% to an admirable Rs.1160 million.

It was also recorded that Arpico Insurance recorded a 37% increase in total assets thereby gaining Rs. 25 million. The company’s life fund recorded 67% growth leading to Rs. 436 million. According to Perera the Life Insurance industry has shown a 19% growth in 2016.

“As per the latest figures published by the Insurance Board of Sri Lanka (IBSL), the life insurance industry has recorded a CAGR of 11% over the past five years up to 2015. This growth momentum is expected to continue as life insurance penetration in Sri Lanka is significantly lower compared to regional markets. For example, as per statistics published by the IBSL, only 33% of the working population have some form of insurance. This shows the potential for growth within the life insurance sector. Innovation will play a key role in driving market growth in this segment,” he said.
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