Sri Lankan shares at 18-month high on foreign buying

Reuters: Sri Lankan stocks rose to an 18-month high on Friday led by blue-chips as foreign buying continued, brokers said.

Analysts said concerns over a proposed tax bill weighed on overall investor sentiment.

The Colombo stock index ended up 0.66 percent at 6,747.07, its highest close since Jan. 7. The bourse rose 0.47 percent during the week.

Foreign investors net bought 432.9 million rupees ($2.82 million) worth of shares on Friday, extending their year-to-date net inflow to 22.2 billion rupees worth of equities.

"Market is up with the continued foreign buying in big-cap shares," said Dimantha Mathew, head of research, First Capital Holdings PLC.

Brokers said local investors have been waiting for some clarity on the proposed inland revenue legislation, which some companies expect will result in higher cost of production.

The IMF, which has long urged Sri Lanka to boost tax revenue through modernisation and simplification of its fiscal system, has urged the government to submit to parliament a new Inland Revenue Act.

Turnover was 1.2 billion rupees, well below this year's daily average of 928.8 million rupees.

Shares of Ceylon Tobacco Company Plc rose 3.07 percent, while Dialog Axiata Plc ended 3.45 percent higher and Hemas Holdings Plc rose 2.82 percent. 

($1 = 153.4500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

Sri Lanka Treasuries yields steady across the board

ECONOMYNEXT – Yields on Sri Lankan Treasury Bills remained unchanged across maturities at Wednesday’s auction, the public debt department of the Central Bank said in a statement.

The yield on the 03-month bill was unchanged at 9.60 percent, that on the 06-month bill remained at 10.29 percent and the 01-year bill yield was also steady at 10.47 percent.

The debt office said it got bids worth Rs46 billion and accepted bids of Rs5.4 billion.

Sri Lankan banks lead in March quarter profits

ECONOMYNEXT – Sri Lanka’s banking sector remained the largest contributor to earnings of firms listed on the Colombo stock exchange in the March 2017 quarter, helped by interest rates spreads, First Capital Equities said in a research report.

Earnings were up by 7.1% in the quarter to Rs 65.5 billion from a year ago and 0.2% from the previous quarter, for 278 companies analysed by the brokerage, excluding a large one-off gain made by the LOLC group.

March quarter earnings grew 16.1% from a year ago to Rs 75.9 billion, including the one-off gain from LOLC amounting to about Rs 10.4 billion.

Earnings were dominated by healthy performance in the banks sector (+21%YoY) and diversified financial sector (+194%YoY) with higher margins and one-off gains from LOLC Group, the report said.

The interest rates spreads boosted the banking and diversified financials earnings, First Capital Equities said.

The banks sector made a profit of Rs 14.36 billion, up 21% from a year ago, and the diversified financial sector Rs 17.42 billion, up 194% from the year before, primarily led by expansion in margins and one-off gains from LOLC Group.

Big banks led by Sampath, whose earnings grew 30%, Commercial Bank of Ceylon, whose profits rose 17% and HNB with a 16% YoY growth in profit, jointly represented 70% of the sector earnings.

The Food Beverages & Tobacco Sector grew 28%YoY and Capital Goods Sector 42% YoY which was positively affected by healthy consumer spending, First Capital Equities said.

“Improved consumer demand, increased volumes and commodity price volatility led to a boost in profitability in Food, Beverage & Tobacco and Staple Food Sectors by 28% year-on-year,” First Capital Equities said.

“However, the earnings growth was partially offset by Telecommunication Sector, which fell 32% YoY, mainly owing to foreign exchange losses, and Real Estate Sector which dropped 59% YoY, mainly because of RIL reported a lower profit than the previous year when earnings were boosted by a fair value adjustment.

Sri Lanka vehicle registrations weak, tipper truck imports up

ECONOMYNEXT - Sri Lanka's vehicle registrations recovered in May but remained weak compared with last year owing to high taxes and interest rates and loan limits but tipper trucks imports rose to meet demand from revived construction projects, an equities research house said.

“The vehicle market experienced a rebound in May from a slow April due to the extensive New Year holiday, JB Securities said.

“Nevertheless, on a seasonally adjusted basis on most categories, demand remains weak due to high taxes, restrictions on LTV and high interest rates.”

The brokerage had noted a sharp fall in imports in February from the previous month with mini-trucks and three-wheelers used by small businesses among the worst hit by highly iniquitous and distortionary taxes and import restrictions

Total motor car registrations were 2,811 units in May up from 2,632 in April but significantly down from 3,664 units 12 months ago, JB Securities said.

Imports of mini-trucks and three-wheelers, used by small businesses, remained significantly lower in May 2017 than last year.

JB Securities said 3-wheeler registrations were 1,665 units in May up from 1,452 units in April but significantly down from 5,747 units 12 months ago.

For 3-wheelers the LTV (loan-to-value ratio) is 25% which is significantly below the normal rate of 50% imposed on motor cars. Financing share was 59.5% significantly down from the normal figure of 90%, JB Securities said.

Mini truck registrations recorded 272 units in May rebounding from the low figure of 187 units in April but significantly down from 1,123 units 12 months ago.

“This category was majorly impacted by the imposition of a minimum duty of LKR 1 million which was an almost 3x increase,” JB Securities said.

“The retail price of a Tata Ace truck increased by around 65% - this killed the market. Financing share was 82.7% down from the normal 90%. Permitted LTV is 90%, thus it cannot be an explanatory variable for the drop.”

Heavy trucks with a capacity of over 5MT recorded 122 units in May, marginally up from 116 units in April and also noticeably up from 76 units 12 months ago, JB Securities said.

“A noticeable trend is evident in pickup registrations of tipper trucks indicative of demand coming from the large construction projects like the Colombo Port City and highway projects,” it said.

Somap International to buy 51-pct stake in Sri Lanka’s Anilana Hotels

ECONOMYNEXT – Singapore’s Somap International Pte Ltd. is buy a 51% stake in Sri Lanka’s Anilana Hotels & Properties through an issue of new shares, a stock exchange filing said.

Anilana Hotels & Properties said it was in talks with Indian Ocean Group Pte Ltd. on behalf of their advisory client partner Somap International to invest up to 51% in the firm.

Somap International is to make a total investment of Rs667 million for 513 million shares at Rs1.30 each in Anilana Hotels & Properties subject to regulatory and shareholder approvals.

Anilana Hotels & Properties said it had sought fresh capital to reduce borrowings and complete existing projects.

Indian Ocean Group was now doing a due diligence of Anilana Hotels & Properties, the statement said.

Somap International started as shipping and trading company, particularly in ship reyling, but has diversified in to hospitality and real estate among other businesses like commodity trading, ecommerce, dairy and retail.

Ube buys 10-pct stake in Sri Lanka’s Tokyo Cement Company

ECONOMYNEXT – Ube Singapore Holdings Pte Ltd. has acquired a 10% stake in Sri Lanka’s Tokyo Cement Company (Lanka) in a deal worth Rs769.8 million, a stock exchange filing said.

Tokyo Cement Company said Ube Singapore Holdings Pte Ltd. bought 10,692,000 ordinary voting shares at Rs72 each.

Ube is a diversified Japanese group with the Singapore unit involved in sales of chemicals and building materials in Southeast Asia as well as materials purchasing.

Sri Lanka’s LAUGFS group to expand offshore gas trading

ECONOMYNEXT – Sri Lanka’s LAUGFS Gas group has begun hiring traders for its new energy trading unit in Dubai, aiming to extend its offshore presence beyond the existing downstream business to serve regional markets and being a maritime logistics provider.

Group Chairman and Chief Executive W K H Wegapitiya said SLOGAL Energy DMCC in Dubai Multi Commodity Center will be used with a liquid petroleum gas storage terminal being built at Hambanttota port and a growing fleet of gas carriers to expand its overseas business.

The construction of LAUGFS LPG Terminal at Hambantota, by China Huanqiu Contracting & Construction Corporation, will deliver storage capacity of 30,000 MT of LPG, most of which will be used to serve regional markets, he told shareholders in the firm’s annual report.

The company aims to “disrupt the current value chain to provide cost-effective solutions for other countries in the region,” Wegapitiya said.

Construction has been progressing on schedule; it's now over 25 percent complete, with phase I scheduled to be operational in the second half of 2018.

The group also invested $3.3 million in buying a new LPG vessel named Gas Courage, increasing its fleet to three vessels, which are mainly used for transporting the group’s LPG requirement to Bangladesh and Sri Lanka.

“The increased capacity enables us to transform SLOGAL Energy DMCC operations as we seek new markets for transporting LPG, expanding our business lines and footprint,” Wegapitiya said.

The report said LAUGFS group plans for SLOGAL “extend to exploiting trading opportunities outside the group's existing downstream businesses". “As such, we are in the process of appointing experienced traders to cater to regions such as, Africa, Latin America and European continents,” it said. “The vision of SLOGAL is to extend its services beyond being a sole LPG supplier to be an efficient and effective maritime logistics provider leveraging on the growth in maritime transportation globally.”

LAUGFS Managing Director U K Thilak De Silva said its LPG trading operations in the UAE, strengthened its position, procure about 10 percent of its requirements from Sri Lanka.

“This strategic positioning will enable us to realise our aspirations, expanding our offshore businesses to lucrative markets in the region and beyond. Capacity was expanded during the year supported by the Transportation & Logistics Sector of the Group, which is pivotal to growth and profitability in this sector,” he said.