Sri Lanka bourse gains to 6-week high on blue chips

(Reuters) - Sri Lankan stocks rose to six-week highs on Tuesday, led by blue chips, but trading was light as investors remained on the sidelines awaiting directions after the United Nations announced it would probe alleged war crimes by the island nation.

The main stock index ended 0.56 percent, or 33.52 points, firmer at 6,001.83, its highest since Feb. 19. The index also breached the psychological barrier of 6000 points.

The days turnover was 341.5 million rupees, well below this year's daily average of 897.99 million rupees.

The UN on Thursday launched an inquiry into war crimes allegedly committed by both Sri Lankan state forces and Tamil rebels during the conflict that ended in 2009, saying the government had failed to investigate properly.

Analysts said the outcome of the resolution was expected, but investors sentiment has been dented over concerns it could hurt the country's economy. Several potential buyers of risky assets are awaiting a clear direction.

The bourse suffered 2.77 billion rupees of foreign outflow on Friday, a day after the resolution was passed. But brokers said the foreign selling was not due to the resolution and the relevant foreign fund has been on the selling side since February.

On Tuesday, the bourse saw a net foreign inflow of 181.6 million rupees ($1.4 million) worth of shares, but foreign investors have been net sellers of 6.67 billion rupees so far this year.

Shares in John Keells Holdings Plc gained 2.33 percent to 232.30 rupees, while Ceylon Tobacco Co rose 1.8 percent to 1075.00 rupees. 

($1 = 130.7000 Sri Lanka rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand Basu)

Sri Lanka Hemas Holdings to sell Rs1.0bn debt rated 'A+(lka)': Fitch

Apr 01, 2014 (LBO) - Sri Lanka's Hemas Holdings will sell up to 1.0 billion rupees in senior debt which has been given a expected 'A+(lka)' investment grade rating, Fitch Ratings said.

The funds will be used to re-finance and extend the tenor of existing debt.

Hemas has interests in consumer goods, power, leisure, logistics and healthcare.

The full statement is reproduced below:-

Fitch Rates Hemas Holdings Debt at 'A+(lka)(EXP)' - Fitch

COLOMBO, March 31 (Fitch) Fitch Ratings has assigned Sri Lanka-based Hemas Holdings PLC's (HHP) proposed issue of senior unsecured redeemable debentures of up to LKR1bn an expected rating of 'A+(lka)(EXP)'.

The final rating on the debentures is subject to the receipt of transaction documents conforming to information already received.

The proceeds of the issuance are likely for refinancing existing debt, therefore lengthening HHP's debt maturity profile.

HHP is a holding company (holdco) with key wholly owned subsidiaries operating in fast-moving consumer goods, healthcare and transportation sectors. The company also has majority interests in subsidiaries across leisure and power.

KEY RATING DRIVERS 

Diversified Operations: Hemas' rating reflects the essential nature of and resilient demand for end products and services of its key operating subsidiaries, supported by its low financial risk at the Holdco and Group levels. The rating also factors in the businesses' strong brands, leading market share and moderate free cash flow generation.

Dependence on Subsidiaries Dividends: As a holding company Hemas is dependent on dividends and fees from its operating subsidiaries in order to service debt at the Holdco level. Fitch considers the structural subordination of holdco creditors to be low, because Hemas' key subsidiaries are wholly owned with low leverage. However, should leverage at the holdco and the main, wholly owned operating subsidiaries in manufacturing, pharmaceutical, and transportation increase significantly, there will be negative pressure on the rating. PPA Re-negotiation and Renewal: The power purchase agreement (PPA) of Hemas' main dividend contributing plant Heladhanavi (HD) is up for renewal in Dec 2014. HD is a 100MW plant run as a joint venture between Hemas and state-owned Lakdhanavi. In the event HD's PPA is not renewed the significant contribution to Holdco dividend is likely to reduce. However, Fitch expects this negative impact to be lessened by the fact that the holdco leverage adjusted for its wholly owned subsidiaries is low.

Low leverage and Moderate Liquidity: Fitch expects that the group is likely to maintain financial leverage (measured as gross adjusted debt / Operating EBITDAR) at less than 3.0x over the medium term (Dec-13: 1.9x, FY13: 1.6x), despite ongoing new investments and expansions across the group.

RATING SENSITIVITIES
Negative: Future developments that may individually, or collectively, lead to a negative rating action include: -Financial leverage being sustained above 3.0x at the consolidated level -Increase of financial leverage at the Holdco, manufacturing, pharmaceutical and transportation subsidiaries -Any unforeseen pressures on the credit profile of the subsidiaries or Holdco due to new investments.

Positive: Positive rating action is anticipated in the near term in view of the group's significant investment and expansion plans.

Krishan Balendra appointed chairman of NTB

Apr 01, 2014 (LBO) - Krishan Balendra, has been appointed chairman of Sri Lanka's Nations Trust Bank.

NTB said in a stock exchange filing that Arjuna Gunaratne, who had been on the board of the bank from 2005 is stepping down to comply with a regulatory direction limiting a director's tenure to nine years.

Balendra will take-over from May 01, 2014.

Related News:

http://www.cse.lk/cmt/upload_cse_announcements/6621396332517_.pdf

Sri Lanka stocks close up 0.5-pct

Apr 01, 2014 (LBO) - Sri Lanka's stocks close up crossing the 6,000 mark Tuesday with diversified and tobacco stocks gaining amid net foreign buying on the board, brokers said.

The Colombo benchmark All Share Price Index closed 33.52 points higher at 6,001.83 up 0.56 percent. The S&P SL20 closed 19.98 points higher at 3,299.90, up 0.61 percent.

Turnover was 341.54 million rupees, down from 464.39 million rupees a day earlier with 92 stocks close positive against 66 negative.

Oil palm firm Shalimar closed 150.00 rupees higher at 1,400.00 rupees with an off market transaction of 115.55 million rupees contributing to 34 percent of the daily turnover.

Foreign investors bought 198.47 million rupees worth shares while selling 16.86 million rupees worth shares.

John Keells Holdings closed 5.30 rupees higher at 232.30 rupees and Ceylon Tobacco Company closed 2.00 rupees higher at 227.00 rupees, contributing most to the index gain.

JKH’s W0022 warrants closed 90 cents higher at 69.50 rupees and its W0023 warrants closed 1.10 rupees higher at 73.00 rupees, attracting most number of trades.

Sampath Bank closed 6.80 rupees lower at 175.30 rupees also attracting trades and Commercial Bank closed 1.00 rupee lower at 120.10 rupees.

DFCC Bank closed 5.20 rupees higher at 149.10 rupees and NDB closed 1.40 rupees higher at 180.00 rupees.

Seylan Bank closed 2.30 rupees lower at 61.40 rupees and Nations Trust Bank closed 1.40 rupees lower at 63.50 rupees amid the appointment of a new chairman.

Bukit Darah closed 8.90 rupees higher at 599.80 rupees and Nestle Lanka closed 4.60 rupees lower at 1,993.30 rupees.

Sri Lanka Telecom closed 70 cents lower at 45.40 rupees and Dialog Axiata closed 10 cents higher at 9.10 rupees.

Some Sri Lanka bank mergers, strategic investors given nod: Central Bank

Apr 01, 2013 (LBO) - Sri Lanka's central bank said it had approved in principle mergers among a few banks and non-bank lenders, in a regulator driven bid to build a financial sector made up of fewer, larger firms.

More firms have also shortlisted merger and acquisition partners and are evaluating potential partners, the Central Bank said.

Sri Lanka's National Development Bank and DFCC Bank have signed a memorandum of understanding to proceed with a merger.

The regulator said it had also approved several strategic investments to inject capital into banks and non-bank lenders which will allow them to strengthen their balance sheets.

"Several audit firms who were appointed by the Central Bank to carry out due diligence and valuation of the companies are in the process of finalising their reports," the statement said.

"The Central Bank has continuously liaised with the selected audit firms to deal with any issues arising in connection with the due diligence and valuation processes, in order to ensure timely completion of these assignments."

The regulator said banks and other lenders have given broad plans on consolidation by the deadline of March 31.

"These plans are to be reviewed by the Central Bank within the coming week, and suitable responses due to be sent thereafter," the regulator said.

The regulator is trying to reduce the total number of operating banks and non-bank lenders which will make the sector easier to regulate. Larger entities are also expected to be more stable and resistant to shocks.

Several non-bank lenders have seen bad loans rise over the past few years amid tighter economic conditions as well as weak credit practices.

Related News:
http://www.cbsl.gov.lk/pics_n_docs/latest_news/press_20140331ea.pdf

Sri Lanka's state banks hit by Rs20bn credit loss; gold loans slashed

Apr 01, 2014 (LBO) - Sri Lanka's two largest state banks have taken a 20 billion rupee hit on credit losses in 2013 and had slashed their troubled gold-backed loan portfolios as the precious metal's price slumped, interim accounts show.

State-run People's Bank set aside 11.7 billion rupees as general provisions in 2013 up from 3.2 billion rupees a year earlier.

With specific provisions of 1.9 billion rupees, total provisions rose to 13.7 billion rupees, up from 3.8 billion rupees a year earlier.

State-run Bank of Ceylon, made 7.7 billion rupees of general provisions up from 2.6 billion rupees a year earlier, but reversed 898 million rupees of specific provisions made earlier. Last year there was also a 1.7 billion rupees unspecified write down.

The two banks together saw credit loss provisions double to 20.5 billion rupees in 2013 from 9.2 billion in 2014.

Sri Lanka's private banks which were also exposed to pawning or gold-backed loans had to take in credit losses and cut their portfolios. Some were also converting a part of their gold-backed loans to ordinary loans, bankers said.

Provisioning allows early recognition of losses and cleans up the balance sheet.

Accounts of People's Bank showed that gold backed loans fell from 250 billion rupees to 197 billion rupees.

Term loans went up from 180 to 276 billion rupees, with total loans growing only 1.4 percent to 619 billion rupees during the year.

At Bank of Ceylon, pawning loans fell to 131 billion rupees by end December from 146 billion rupees a year earlier. Total loans grew 4 percent to 725 billion rupees.

Gross rupee denominated loans fell 530 billion rupees from 547 billion rupees.

Profits at People's Bank slumped 31 percent to 7.48 billion rupees in 2013. At Bank of Ceylon, profits fell 16.3 percent to 12.0 billion rupees.

Sri Lanka's banks have also seen rise bad loans across the board, as economic conditions tightened in the wake of a balance of payments triggered by a credit bubble in 2011.

Typically in Sri Lanka state banks play a key role in triggering balance of payments trouble by giving credit to state enterprises to subsidize energy, analysts say.

In the aftermath of the balance of payments crisis, there is usually de-leveraging as state enterprises repay loans taken during balance of payments trouble.

In the wake of past BOP crises state banks balance sheets have shrunk nominally despite Treasuries portfolios expanding.

But when interest rates fall, the risk free Treasuries portfolio helps boost profits as well as risk-weighted capital.

At People's Bank gross non-performing loans rose to 5.3 percent of loans by end 2013 from 2.8 percent a year earlier. Capital adequacy rose to 15 percent from 14 percent.

At Bank of Ceylon gross non performing loans rose to 4.3 percent of loans by end 2013 from 2.76 percent a year earlier. Capital adequacy was stable at 11.14 percent only slightly down from 11.38 percent.

Axiata Group commits US$ 115 m more

Sri Lanka's largest foreign direct investor, Dialog Axiata, enhanced its commitment to the development of the nation's ICT Infrastructure, penning agreements with the Board of Investment to invest a further US$115 million (Rs 15 billion) to expand its nationwide telecommunications networks and digital satellite television services.

A member of the Axiata Group Berhad, Dialog Axiata PLC and its fully-owned subsidiary, Dialog Television (Private) Limited will invest US$ 115 million to facilitate the expansion of the multi-faceted ICT infrastructures of the Dialog Group, including, but not limited to, 4G and 3G High-Speed Broadband, Disaster Recovery, Technology Modernisation and Upgrades,

The Axiata Group is Asia's second largest telecommunications group with over 230 million subscribers spanning seven markets in Asia.

Axiata has been a committed and consistent investor in Sri Lanka since 1994 and has invested a total of USD 1.6 billion (Rs 208 billion) in the country to-date, driving Sri Lanka's ICT infrastructure to a level on par with the developed world, and making it the largest foreign direct investor operating under the aegis of the BOI.

The most recent investment of USD115 million will drive the value of the total investment of the Dialog Group to a cumulative figure in excess of USD 1.7 billion (Rs 223 billion). http://www.dailynews.lk