Sri Lanka may sell Samurai, Panda bond in 2018: CB Governor

ECONOMYNEXT - Sri Lanka is open to selling a Samurai (Yen) or Panda (Renminbi) bond in 2018 after a US dollar denominated international sovereign bond sale is wrapped up, Central Bank Governor Indrajit Coomaraswamy said.

Sri Lanka has already called for managers to sell up to 2.0 billion US dollars in sovereign bonds in 2018. In the past Sri Lanka has sold up to 1.5 billion US dollars in bonds in a single offering.

The sovereign bond is expected to go market early this year, before the Fed raises rates again. Sri Lanka's last issued sovereign bond is also trading around 60 basis points narrower, and rating agencies have already given an outlook upgrade.

Sri Lanka was agnostic about the denominating currency, and was open to selling a Samurai or Panda bond after the dollar sovereign bond if the cost and tenor is right, Coomaraswamy said.

Sri Lanka is expected to pass a liability management law shortly which will allow the Treasury to sell more bonds than needed for debt repayment in a given year, to build a buffer to ride out a peak coming later.

A Samurai bond would allow Sri Lanka to tap into the Japanese bond market, while a Panda bond would allow Sri Lanka to enter the Chinese capital market.

Sri Lanka operates a 'de facto' soft-peg which generally depreciates uni-directionally against the US dollar generating high inflation. The currency collapses steeply whenever the central bank resists market interest rates by printing money, when the credit cycle turns strongly positive.

Due to operating a de facto dollar peg, there is also a currency risk in borrowings denominated in a currency other than the US dollar.

The Renminbi is also partially pegged to the US dollar, but it has shown a tendency to appreciate when the US Fed generates higher levels of inflation.

The Yen has weakened against the US dollar in recent years but is a floating rate with a very low interest rates.

Market analysts say it would be possible to sell a Samurai bond with a currency swap at a lower rate than a euro dollar bond of a similar maturity.

Cold Stores Dec. net down 32% as beverage segment slows

Ceylon Cold Stores PLC, a unit of the John Keells group, which has interests in soft drinks, ice creams and supermarkets, saw a significant fall in its December quarter earnings amid higher sales costs, the interim accounts released to the Colombo bourse showed.

The firm recorded a consolidated net profit of Rs.563.2 billion for the quarter, down 32 percent year-on-year (YoY) on a sales income of Rs.12.8 billion, up 14 percent YoY.

However, the higher top line was muted by a faster increase of sales costs, which rose 19 percent YoY to Rs.11.5 billion, denting the gross profit by 19 percent YoY to Rs.1.3 billion.

The sales costs are set to even go higher in the future quarters due to key regulatory changes. The 2018 budget last November introduced a 50 cent tax on every gram of sugar contained in beverages in a bid to discourage obesity, diabetes and a number of related illnesses.

As a result, Ceylon Cold Stores had to raise the prices of most of its soft drinks quite significantly, which may have affected the sales, specially during the December festive season.

Meanwhile, during the quarter under review, the firm saw increases in selling and distribution and administrative expenses, resulting in an operating profit of Rs.774.7 million, down 30 percent YoY, despite a similar percentage gain in the other operating income.

The earnings per share for the quarter deteriorated to Rs.5.93 from Rs.8.67.

The manufacturing operations of the firm, consisting of beverages and ice cream, saw the after-tax profit falling to Rs.261.8 million during the quarter under review, from Rs.478.8 million a year ago, on revenue of Rs.3.03 billion, down from Rs.3.2 billion.

The retail segment, which includes the Keells Super operations, saw its revenue increasing to Rs.9.8 billion from Rs.8.1 billion but the after-tax profit fell to Rs.302.4 million from Rs.344.6 million.

Meanwhile, for the nine months ended December 31, 2017, Ceylon Cold Stores made a net profit of almost Rs.2 billion, down 27 percent YoY. The earnings per share for the period also fell to Rs.20.94 from Rs.28.72.

As at same date, the John Keells group held over 80 percent of the issued shares of the company.

The company has announced Rs.3.8 billion investment on a new ice cream factory, which is currently underway and Rs.2.5 billion on a new bottling plant for beverages, which is yet to take off.

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Sri Lanka’s Keells Foods Dec net up 13-pct

ECONOMYNEXT - Sri Lanka's Keells Food Products, a processed meat firm which sells under Krest and Elephant House brands, said profit for the December 2017 quarter grew 13 percent from a year earlier to 87.2 million rupees.

The group reported earnings of 3.42 rupees per share for the quarter, in interim accounts filed with the stock exchange.

In the nine months to December earning were 6.94 rupees per share on a profit of 177 million rupees, down 22 percent from a year ago. The share was traded 130 rupees on the Colombo Stock Exchange in intra-day trading on Monday.

Gross revenue increased nine percent to 864.5 million rupees and cost of sales grew seven percent to 599.4 million rupees, helping expand profit 12 percent to 265 million rupees.

Profits from manufacturing grew 14 percent to 114 million rupees and trading increased 13.8 percent to 10.7 million rupees.

Selling and distribution expenses grew 14 percent to 80.7 million rupees and administration costs grew six percent to 39.3 million rupees.

Net finance income grew 44.5 percent to 1.7 million rupees.

The group is a unit of John Keells Holdings.

Sri Lanka’s Trans Asia Hotels Dec net halves

ECONOMYNEXT - Sri Lanka's Trans Asia Hotels Plc, which owns and operates Colombo's five-star Cinnamon Lakeside Hotel, said profit for the December 2017 quarter fell 52 percent to 98.8 million rupees from a year earlierwhile revenue also fell 4 percent in the peak December season.

The hotel reported earnings of 0.49 cents per share for the quarter in accounts filed with the Colombo Stock Exchange. In the nine months to December it reported earnings of 1.64 rupees per share on a profit of 320 million rupees, down 31 percent from a year ago.

The share last traded at 90 rupees on the Colombo Stock Exchange.

Gross revenue fell 4 percent to 859.3 million rupees, and cost of sales declined by three percent to 353.6 million rupees, shrinking gross profits eight percent to 505.7 million rupees.

Operating expenses was up one percent to 322.7 million rupees and finance cost increased 150 percent to nearly two million rupees.

Tax expenses increased 136 percent to 78 million rupees.

Trans Asia Hotels is a unit of John Keells Holdings which has interest in ports, consumer goods and finance.

Sri Lankan shares drop in dull trade; banks top drag

Reuters: Sri Lankan shares declined on Monday, marking their eighth session of fall in nine, as investors sold banking stocks in dull trade.

The Colombo Stock index ended 0.34 percent weaker at 6,421.40. On Thursday, it closed at its lowest since Dec. 29.

The bourse has shed 2 percent in the past nine sessions, and dropped 0.47 percent last week, recording its second straight weekly fall.

“The market was quiet till late. We saw some activities in the latter part of the day,” said Hussain Gani, Deputy CEO at Softlogic Stockbrokers.

“There were some selling in banks which brought the market down,” he said, adding that investors were waiting to see clarity on the political front from a local election which will be held on Feb. 10 after a long delay.

Turnover stood at 460.7 billion rupees, half of last year’s daily average of 915.3 million rupees.

However, foreign investors bought a net 196.6 million rupees worth of shares on Monday, extending the year-to-date net foreign inflow so far this year to 2.9 billion rupees worth of shares.

They bought equities worth 18.5 billion rupees last year and 633.5 million rupees in 2016.

After market hours on Friday, diversified company Hemas Holdings Plc said it will acquire 75.1 percent of stationery manufacturer Atlas Axillia Co (Pvt) Ltd for 5.7 billion rupees. Hemas fell 5.4 percent on Monday.

Shares in Lanka ORIX Leasing Co Plc dropped 3.5 percent, while Hatton National Bank Plc declined 1.1 percent. 

($1 = 153.8500 Sri Lankan rupees) 

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

Most stocks traded are undervalued

By Duruthu Edirimuni Chandrasekera

Most stocks that are traded on the Colombo Stock Exchange (CSE) are undervalued estimated by analysts to at least 40 per cent, experts say.

“When analysing price to book value of certain shares that are trading on the CSE, their book value is higher,” an industry expert noted to the Business Times. “These are the things that investment advisors should educate retail traders on. But this isn’t happening. It’s important to point out the benefits of holding onto a stock for a longer term. Now is the time to do so,” he stressed.

Another expert acknowledged this saying that the biggest issue right now is lack of local institutional investors in the CSE. “It’s partly due to the bond scam which has put these institutions in a fix,” he said explaining that now local superannuation funds are at a bigger dilemma to invest in the CSE owing to this latest turn of events.

In addition to the probes that are ongoing, they’re hesitant to invest due to fear of being hauled in front of commissions and courts should the government change, he added. The Employee Provident Fund (EPF) and Employees’ Trust Fund (ETF) are currently being probed following the bad blood during the pump and dump in the CSE three years ago, and also owing to the recent bond scam.

The CSE has lobbied the Treasury to get the Central Bank to lure both agencies to restart their investments.

The two mandatory and state-managed superannuation funds dominate the pensions industry and about 92 per cent of these funds are invested in government securities. Only 6.5 per cent of the Rs. 3.1 trillion market capitalisation of the CSE is owned by institutional institutions such as EPF, ETF, insurance companies and unit trusts.

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CSE gears to weed out bad eggs on its boards

By Duruthu Edirimuni Chandrasekera

At least 20 per cent of Sri Lanka’s listed companies at the Colombo bourse have run afoul of regulations pertaining to the prescribed minimum percentage of shares held by the public.

Figures as at September 2017 show that 59 listed companies are non-compliant with the minimum public float rule of the Colombo Stock Exchange (CSE). Since then in the past few months, more companies have said that they are not compliant with these rules.

Of the figures as at September, between 30 to 40 firms are likely to exit the exchange through this mechanism which is meant to weed out bad eggs, officials say.

“There’re 44 main board companies and 15 on the Diri Savi Board (pertaining to violating this rule). They issued announcements with regard to their non compliance as it’s now a requirement to issue them till June this year when the enforcement rules kick in,” an official told the Business Times.

The CSE has 295 companies representing 20 business sectors as at September 30, 2017 with a market capitalization of Rs. 2,919 billion.

Earlier when a company listed on the CSE, there was a minimum stake (10 per cent) that it has to part with, but it wasn’t mandatory to maintain this amount. To maintain a certain percentage which corresponds to a certain number of minimum shareholders was introduced in 2016.

By end June, the non-compliant firms will be transferred to a ‘watch list’ according to Section 7 of the CSE’s listing rules and remain there for a further six months. In the instance they are unable to rectify the situation, they will be delisted, one official said. “This enforcement policy has been introduced following the grant of a period of over three years since the initial introduction of minimum public holding as a continuous listing requirement in 2013 and a further grace period of six months,” he said.

Some listed firms such as TAL Lanka Hotels Plc have said in their announcement that they were compelled to engage in a financial restructure due to adverse market conditions in the hospitality industry till the financial year 2001/02.

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