CSE fully geared to enhance investor confidence - Chairman

By Zahida Rizvi


Colombo Stock exchange's daily average turnover equity and equity market capitalization to GDP for 2015 stands at Rs 1.06 billion and Rs 2.9 Trillion respectively, CSE Chairman Vajira Kulathilake said.

Speaking at the Capital Market Conference held yesterday at the Ramada Hotel he said CSE performance in terms of corporate debt had raised the largest volume of capital accounting to Rs 81 billion in 2015. "On the other hand corporate debt has been recorded as Rs 4.5 billion for 2015", he said. He added that the key factors CSE focuses to achieve better performance is by having a better approach to risk management, new products, attracting new listings and attracting investors governance. Kulathilake said that risk management is backed by adapting to schemes such as the Broker Back Office (BBO), Introduction of Central Counter Party institution (CCP )and Capital Adequacy Ratio (CAR).

"Broker Back Office (BBO) is an Order Management Systems (OMS) which will facilitate seamless trading, clearing and settlement of securities".

"CCP is an entity that will take up the risk of transactions in the market in the event of a clearing and settlement failure" "Capital requirement applicable to a Broker Firm which compares the total

risks faced by the Broker Firm with the liquid capital it holds", he said.

The CSE Chairman said that one of the new products introduced into the CSE is a real estate investment trust (REIT). The trust is categorized into two segments. "Rental REITs which is invested in income generating real estate properties and development REITs are invested for development of constructions".

Kulathilake further added that new listings are encouraged in to the CSE to further enhance its performance by enabling issuer relations, SOE listings and adding in alternative markets such as SME, Board Dollar Denominated Board and BOI Board.

He said," Turnover is doubled by increasing foreign investor turnover through foreign Investor Forums"."Additionally, increasing domestic investor turnover by targeting retail investors and institutional investors". "Governance in the CSE is kept intact through demutualization and amendments to the SEC Act to include new provisions", he said.

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ComBank posts Rs 11.9 bn net profit for 2015

Commercial Bank of Ceylon PLC has recorded profit before tax of Rs 17.144 billion for the 12 months ended December 31, 2015, a year in which it strengthened its positions in Sri Lanka and Bangladesh.

The bank has attained solid growth across all business lines to improve pre-tax profit by a healthy 8.94% over the preceding year and achieve net profit of Rs 11.903 billion for 2015, a growth of 6.47% despite lower margins, reduced capital gains and higher tax commitments. Profit before Financial VAT and Nation Building Tax (NBT) was up 8.73% to Rs 20.033 billion.

Gross income increased by 7.03% to Rs 77.868 billion, and net interest income grew by a robust 11.47% to Rs 30.346 billion, the Bank reported in a filing with the Colombo Stock Exchange (CSE).

One of the many performance highlights of the year under review was the strong growth of the Bank's loan book, which increased by Rs 102.684 billion or 25.33% to Rs 508.115 billion. This was the first time that the Bank's loan book achieved a net growth of more than Rs 100 billion in a year.

Total assets grew by a noteworthy Rs 84.195 billion or 10.58% over the 12 months to Rs 879.805 billion at December 31, 2015. Deposits from customers increased by Rs 94.740 billion at an average of Rs 7.9 billion a month to Rs 624.102 billion at the end of 2015, reflecting Year-on-Year growth of 17.90%.

"We are pleased with these results because they reflect the ability of the Bank to grow in changing conditions, while continuing to enlarge its footprint in Sri Lanka and overseas, and consolidating its position as a catalyst in the socioeconomic progress of our country," Commercial Bank Chairman Dharma Dheerasinghe said.

The Bank's Managing Director and CEO Jegan Durairatnam said 2015 was noteworthy because a strong foundation for future growth had been set with the licenses secured to operate in Myanmar, Maldives and Italy.

"These achievements are perhaps the most significant for the year as they expand our horizons, presenting new opportunities for growth and further strengthening our position in our home market," he said.
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DFCC posts healthy growth

The DFCC Bank has posted a healthy balance sheet for the nine months for the New Financial Year ending December 31.

The performance reported is for nine months from April 2015 to December 2015 as against that of the previous full year. Net profit after tax as at December 31,2015 was Rs1,642 million (Group) and Rs 1,068 million (Bank) while that for FYE March 2015 was Rs 4,439 million and Rs 3,240 million respectively.

CEO Arjun Fernando said:"While 2015 was a transformative year for DFCC, the amalgamation with Vardhana has laid the foundation for the Bank to take on the competition.We are therefore confident of resuming our normal growth trajectory in 2016 and beyond."

However, there were several exceptional items in both periods which distort the comparison. FYE 31 March 2015 included substantial one-off capital gains and impairment reversals, while the period ended 31 December 2015 entailed significant non-recurrent expenses incurred during the amalgamation for items such as systems integration and data migration.

The change of the financial year meant that the Bank incurred an additional taxation charge based on the full year, even though results were for nine months. Also, substantial dividend income, which accrues in the first quarter of the calendar year, could not be included.

Meanwhile, total assets grew by 17% to LKR 247,109 million as at 31 December 2015 from LKR 210,610 million as at 31 March 2015. This included a robust credit portfolio growth of 18% to LKR 171,111 million from LKR 144,896 million. At the same time credit quality was not compromised.

The ratio of impaired loans to total loans for 31 December 2015 was 5.1% compared to 6.1% for 31 March 2015, indicating a credit quality improvement. Close monitoring drove down the Bank's ratio of impaired loans to total loans as well as its regulatory non-performing loan ratio, with the latter improving to 3.7% as at 31 December 2015 from 4.3% as at 31 March 2015.

Its balance sheet strength is demonstrated by a Group Tier 1 Capital Adequacy Ratio of 15.4% and a total Capital Adequacy Ratio of 15.3% making DFCC Bank one of the highest capitalised banks in the industry.
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Singer (SL) B,V, sells control interest of Regnis (Lanka)

Singer (Sri Lanka) B,V, the immediate parent of Regnis (Lanka) PLC and Singer (Sri Lanka) PLC, has sold its controlling interest in Regnis (Lanka) in terms of Section 8 of the Listing Rule of Colombo Stock Exchange.

Singer (Sri Lanka) PLC has purchased 6,568,461 shares in Regnis (Lanka) PLC at a price of Rs: 110 per share, amounting to a total of Rs. 722,530,710.

Singer (Sri Lanka) holds 58.295/0 shares subsequent to this transaction. Accordingly, Singer (Sri Lanka) PLC will be the immediate parent of the company with effect from February 23 2016 Singer ( Sri Lanka) BV will continue to be an intermediate Parent Company.
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Namal Acuity Value Fund declines

The Namal Acuity Value Fund (NAVF) for the quarter ended December 31, 2015 has generated a return of 3.01% for the six month period ended December 2015, outperforming the benchmark All Share Price Index (ASPI) and the S&P Sri Lanka 20 Index (S&P SL20).

For the third quarter of FY16, the Fund recorded a 61.2% YoY growth in dividend and interest

income to Rs. 5.54m, which was offset by unrealized losses on financial asset held for trading.

As a result, the fund reported a total investment loss of Rs 22.80m compared to an investment income of 79.26m the perious year.

This resulted in a net loss of Rs. 27.56 m compared to a net profit of Rs. 73.24m in 3QFY15.

Net asset value of the fund declined 5.8% YoY to Rs. 1,366m. During 2015, the ASPI decreased 5.54% while the S&P SL20 declined 11.33%.

The average daily turnover during the year dropped to Rs 1,058m from Rs 1,411m in the comparative year.

Sri Lankan equity market witnessed a net outflow of Rs. 4.4bn (Jan-Dec 2015) as foreign investors exited emerging markets on the fear of economic slowdown and the US rate hike.

Foreign participation stood at 34.6% of turnover for the year 2015.

Benchmark 12 month Treasury bill auction yields increased by 111 basis points to 7.11% over the year under review.

CBSL raised the Statutory Reserve Ratio by 1.5ppt to 7.50% in December 2015 in order to control the demand side pressure on inflation, which was caused by the excess liquidity in the market.

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Sri Lanka HNB group December net flat

ECONOMYNEXT - Profits at Sri Lanka's HNB group, which is in commercial banking and insurance edged 2 percent lower to 3.5 billion rupees, dragged down by a higher tax charge, despite a provision reversal.

The group reported earnings of 9.41 rupees per share for the quarter.

In the 12-month to December the HNB group reported earnings of 25.8 rupee per share on total profits of 10.4 billion which were up 16 percent.

At stand-alone bank level interest income rose 16 percent to 14.4 billion rupees and interest expenses rose at a faster 26 percent to 7.5 billion rupees, and net interest income grew at a lower 6 percent to 6.9 billion rupees.

Fee and commission income rose 27 percent to 1.65 billion rupees.

There were trading losses of 444 million rupees and 1.2 billion rupees of other income up from 262 million a year earlier.

In the year to December the bank grew loans 26 percent to 507 billion rupees.

The bank reversed 1.1 billion rupees in general provisions, up from a reversal of 576 million a year earlier.

New specific provisions of 299 million rupees were made, down from 494 million a year earlier.

The bank had sharply higher income tax charge of 1.9 billion rupees, up from just 579 million a year earlier.

Available for sale assets - which usually includes bonds - rose 15 percent to 79 billion rupees.

In the year to December the bank took a 2.4 billion fair value loss as interest rates rose, which is not taken in to the profit and loss account.

Group gross assets rose 27 percent to 757 billion rupees and net assets rose 12 percent to 77 billion rupees.

Fitch rates Singer Sri Lanka's debt 'A-(lka)'

ECONOMYNEXT - Fitch Ratings said it has assigned Singer Sri Lanka PLC's proposed senior debentures of up to two billion rupees a final National Long-Term Rating of 'A-(lka)'.

The debentures will have a tenor of three years with a mix of fixed and floating coupon payments, a statement said.

Singer expects to use the proceeds to refinance existing debt, restructure short-term debt and for working capital requirements.

The full rating report follows:

Fitch Ratings-Colombo-23 February 2016: Fitch Ratings has assigned Singer Sri Lanka PLC's (Singer, A-(lka)/Stable) proposed senior debentures of up to LKR2bn a final National Long-Term Rating of 'A-(lka)'.

The assignment of the final rating follows the receipt of documents conforming to information already received, and the final rating is the same as the expected rating assigned on 15 December 2015.

The issue will have a tenor of three years with a mix of fixed and floating coupon payments. Singer expects to use the proceeds to refinance existing debt, restructure short-term debt and for working capital requirements.

The debentures are rated at the same level as Singer's National Long-Term Rating of 'A-(lka)' because they represent senior unsecured obligations of the company and would rank equally with the company's other senior unsecured debt.

KEY RATING DRIVERS

Leading Consumer Durables Retailer: Singer's position as a leading consumer durables retailer is supported by its extensive distribution network, multi-brand strategy, and robust after-sales service.

Improved Operating Environment: Demand for consumer durables is likely to be sustained over the medium term by increases in public-sector salaries in February 2015, lower income-tax rates for private-sector employees introduced in November 2015 and reduced pricing on essential items, including fuel and electricity.

Recent Acquisitions: Singer's recent acquisitions of Singer Industries Ceylon PLC and Regnis (Lanka) PLC - both from its direct parent Singer (Sri Lanka) B.V - have a neutral impact on Singer's rating.

Cyclical Demand, Currency Risk: Singer's earnings are subject to business cycles, due to the non-essential nature of the company's products and price volatility. Prices and profitability are also sensitive to foreign-exchange fluctuations as most of the inventory is imported.

KEY ASSUMPTIONS

Fitch's key assumptions within the rating case for the issuer include:

- Revenue to increase due to improved consumer purchasing power.

- EBITDAR margins to settle in the high-single digit range in the medium term due to increased contribution from low-margin IT and communication products

RATING SENSITIVITIES

Negative: Future developments that may, individually or collectively, lead to a negative rating action include:

- A sustained increase in Singer's leverage (measured as adjusted net debt/EBITDAR excluding Singer Finance) to over 5.5x (3Q15: 4.13x)

- EBITDA margin sustained below 7% (Nine months ending September 2015: 7.4%)

- A material weakening in Singer's (company-level) liquidity profile

- A material weakening of the credit profile of Singer's 80% subsidiary, Singer Finance (Lanka) PLC (BBB(lka)/Stable), given strong linkages between the entities

Positive: Future developments that may individually or collectively lead to a positive rating action include:

- Singer's leverage falling below 4.5x on a sustained basis

- EBITDA margin sustained above 10%

LIQUIDITY

As at end-September 2015, Singer had LKR1.3bn of unrestricted cash and LKR7.0bn of committed but unutilised credit lines to meet debt obligations of LKR6.6bn falling due in the next 12 months.