Sri Lankan stocks gain for second day on banking share

Oct 24 (Reuters) - Sri Lankan stocks gained on Friday for the second straight session as investors bought banking shares, but the turnover was moderate as the market awaited cues from 2015 budget announcement.

Sri Lanka in 2015 will trim its value added tax and reduce its budget deficit to the lowest level since 1977, President Mahinda Rajapaksa told parliament on Friday while presenting the 2015 budget.

Sri Lanka's main stock index rose 0.33 percent, or 23.97 points, to 7,213.48, further moving away from its lowest since Sept. 9 hit on Tuesday.

"Foreign activity picked up from yesterday with buying interest in large cap counters," said Dimantha Mathew, manager, research at First Capital Equities (Pvt) Ltd.

The day's turnover was 870.7 million rupees ($6.7 million), less than this year's daily average of 1.36 billion rupees.

Foreign investors bought a net 260.7 million rupees worth of shares on Thursday, extending the year-to-date net foreign inflows to 10.56 billion rupees, exchange data showed.

The gains were led by Carsons Cumberbatch Plc, which rose 1.65 percent to 443.90 rupees, while the Commercial Leasing & Finance Plc added 2.17 percent to 4.7 rupees.

Nestle Lanka Plc rose 0.98 percent to 2,099 rupees.

Stockbrokers said trading in local shares may be volatile due to the revised poll schedule and a possible bottoming out of interest rates. 

($1 = 130.8000 Sri Lankan rupee) 

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

Central Bank to end foreign exchange controls

The Central Bank of Sri Lanka (CBSL) will be completely removing its capital account foreign exchange controls for locals within the next 2-3 years to realize the government’s goal for t he country as a global business hub.“Global business means there can be no foreign exchange controls. People will deal with any currency. Next 2-3 years our country will also be a global business centre. There will not be exchange controls and we will be operating in the global economy,” CBSL Deputy Governor P. Samarasiri said at the launch of the Lanka Money Transfer service.

He said that current account transfers for any amount have been fully liberalized, while in capital account transfers, foreigners are free to invest and take out their money with no restriction, and almost liberalized capital account transfers for locals investing abroad.“If we don’t remove capacity controls on residents, of course, they will undertake the same investment approach through other channels because of the IT we have these days,” he said of informal, black market transactions.According to Samarasiri, CBSL will be removing certain documentation requirements in the immediate future as well.“In the next few months, we will take out some more reportings,” he noted.Samarasiri also called for further stimulating of capital account activities.“I don’t know why people are fearful of capital transactions, because capital transfer is the most important economic activity in the country,” he stated.Meanwhile he said that professionals such as lawyers, consultants, and even bankers still contact CBSL’s Exchange Control Department for permission on the liberalized current account transactions, and we asked them to use their own discretion and not waste the CBSL’s time.He said the only problem that could be of concern is the source of funds.“The source of money, how it comes in and goes out; KYC (know your customer) is a different subject,” he expressed.Foreign exchange controls were established during World War II to protect economies, and most Western countries removed such restrictions following its conclusion.

“Countries all over the world continued with exchange controls lovingly for whatever reason. That kept our countries out of global business. That is one of the reasons for our countries to stay low income,” Samarasiri said.The country followed provisions of the 1949 Monetary Law Act and the 1953 Exchange Control Act until 1977, when significant relaxation occurred.After accepting the IMF articles of agreement in 1994, current account transfers were almost fully liberalized.Certain relaxations in capital account transfers were made in 2010, but the greatest progress was made in June 2013 when remaining current account capacities for migrants and travellers were greatly increased, along with the lifting of most capital account restrictions for nonresidents and foreigners.
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Kanrich Finance raises Rs. 750 m from capital market to expand micro finance operations

Kanrich Finance raised Rs. 750 million to fund its micro finance operations through an issue of asset receivable backed trust certificates.

Kanrich’s micro finance portfolio of over Rs. 5 billion generates substantial amount of cash receivables on a weekly basis, enabling the company to issue asset receivable backed trust certificates.

Director/CEO Shiran Weerasinghe stated that securitising a part of the portfolio gave the company a path to broad base its funding sources and added that the objective of the transaction is to further expand the operations whilst effectively managing the portfolio balance.

First Capital Ltd. and the Bank of Ceylon acted as the Manager of the facility and the Trustee respectively to the transaction.

Weerasinghe added: “We appreciate the confidence placed on us by the managers, trustees and the pool of investors and trust that we will be able to raise further funds from the market based on our recent performances and keep expanding the company.”

Kanrich’s monthly lending that was under Rs. 50 million at the beginning of 2012 and increased to Rs. 1 billion a month within three years, which resulted in its interest income increasing to Rs. 1,296 million in FY 2013/14 from Rs. 175 million in FY2011/12. The total income increased from Rs. 204 million in FY2011/12 to Rs. 1,441 million by FY 2013/14 recording a growth of 604% in two years.
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Renuka Shaw Wallace rebrands as Renuka Foods

Renuka Shaw Wallace Plc, a subsidiary of diversified conglomerate Renuka Holdings Plc, rebranded itself as Renuka Foods Plc to better reflect the food and beverage category it operates in locally and internationally.

Renuka Foods Plc is the parent company for the group’s food and beverage entities, namely Renuka Agri Foods Plc, Renuka Organics Ltd., Renuka Teas Ceylon Ltd., Richlife Dairies Ltd., Shaw Wallace Ceylon Ltd. and Kandy Plantations Ltd.

“Our new name focuses and conveys the complete spectrum of the businesses we are in and are known for. Renuka Foods brings together a portfolio of food and beverage companies which are respective leaders in their segments, especially coconut, dairy, fish and snacks.

“Our progressive and sustained path coupled with aggressive expansion of production capacity and product portfolio, unlocking synergies and further controlling the value chain over the last two years has shown dividends in our overall performance both locally and internationally,” Renuka Foods Executive Director Shamindra Rajiyah said.

The corporate rebranding strategy brings together the company’s many household brands in Sri Lanka such as Captain Jack Mackerel, Captain Soya Meat, Renuka Coconut products, Richlife Dairy products, Plaza Mackerel and Mr. Pop snacks.

It also aims to enhance the overall identity for its foreign clientele which includes reputed distributors, supermarket chains and international brand owners, as they see the organisation as a one-stop shop for a range of quality, locally value added products especially in the coconut category.

Renuka Foods operates seven state-of-the-art factories and warehouses, eight collection and processing centres and two plantations, all catering towards servicing the wants and needs of clients spread across 61 countries worldwide and over 65,000 outlets throughout Sri Lanka.

Furthermore, Renuka Foods has an out-grower network of 7,000 farmer families and contributes Rs 1.4 billion to the rural economy annually. The organisation also directly employs 1,227 people.

Speaking further Rajiyah said: “With our current product portfolio and production capabilities we certainly do have the right platform to service the needs and wants of our customers. The plans for the next level of growth of Renuka Foods will focus on consolidating direction and taking all its home grown brands to the global marketplace, while adding value to the country’s agriculture and marine resources.
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Sri Lankan stocks up ahead of 2015 budget; block deals push turnover

(Reuters) - Sri Lankan stocks gained on Thursday, recovering from a six-week low in the previous session as investors bought into blue-chips and banks a day ahead of the 2015 budget announcement, while block deals helped boost the day's turnover, dealers said.

Analysts said investors were waiting for cues from the budget scheduled for Friday and a raft of quarterly earnings expected next week.

Sri Lanka's main stock index rose 0.4 percent, or 28.35 points, to 7,189.51, edging up from its lowest since Sept. 9 hit on Tuesday. Markets were closed on Wednesday for a holiday.

"It was a dull day, but block deals pushed the turnover. Many investors who have cash and shares are awaiting to see the outcome of the budget," said Dimantha Mathew, manager, research at First Capital Equities (pvt) Ltd.

"We don't expect much to happen tomorrow also."

Sri Lankan President Mahinda Rajapaksa is expected to present on Friday a populist election budget for 2015 that manages to contain borrowing thanks to an expected pick-up in the pace of economic growth.

The day's turnover was 2.29 billion rupees ($17.5 million), the highest since Oct. 10 and well above this year's daily average of 1.36 billion rupees.

Stockbrokers said block deals in National Development Bank , which rose 1.04 percent to 242.50 rupees, accounted for 54.2 percent of the day's turnover.

Foreign investors bought a net 260.7 million rupees worth of shares on Thursday, extending the year-to-date net foreign inflows to 10.56 billion rupees, exchange data showed.

The country's top conglomerate John Keells Holdings Plc , which led the overall gain of the index, rose 1.34 percent to 249.80 rupees.

Hatton National Bank Plc rose 1.6 percent to 190 rupees.

Stockbrokers said trading in local shares may be volatile due to the revised poll schedule and a possible bottoming out of interest rates. 

($1 = 130.7500 Sri Lankan rupee) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Prateek Chatterjee)

LRA reaffirms Trade Finance & Investments at BB+/NP

Lanka Rating Agency (LRA) has reaffirmed Trade Finance & Investments PLC’s (TFI) long-and short-term financial institution ratings at BB+ and NP.Concurrently, the ratings have been placed on a Rating Watch Positive. Meanwhile, the ratings are upheld by TFI’s above average asset quality, strong capitalisation and healthy performance.

The Positive Rating Watch is premised on the expected merger between TFI and Commercial Credit & Finance PLC (CCF) (rated BBB-/P3/Positive by LRA).In line with the Central Bank of Sri Lanka (CBSL) sector consolidation road map, CCF acquired 96.89 percent ownership of TFI in August 2014 from the previous owners. Subsequent to the acquisition, in accordance with the CBSL road map, TFI’s assets and liabilities are expected to be merged with CCF, where CCF will be the surviving entity. Following the amalgamation of assets and liabilities of TFI with CCF, the credit profile of the liabilities of TFI would be enhanced to the higher rated parent’s credit profile.

TFI’s asset quality is viewed to be above average, owing to asset quality indicators that compares better than licensed finance company (LFC) sector peers’. TFI’s asset base expanded at a robust 40.25 percent year-on-year (YoY) in the FY March 2014 spurred by credit growth.The company’s credit assets are largely dominated by motorcycle and three-wheeler financing, both of which account for around 85 percent of total credit assets as at end-June 2014.

Meanwhile, TFI’s absolute gross non-performing loans (NPLs) increased 67.37 percent YoY in fiscal 2014, growing a further 56.73 percent in 1Q fiscal 2015 to Rs.50.53 million as at end-June 2014.Subsequently, TFI’s gross NPL ratio moderated to 4.20 percent as at end-June 2014 (end-March 2013: 2.72 percent). Despite the deterioration, TFI’s gross NPL ratio continues to compare better than that of its LFC industry peers.TFI’s performance is viewed to be healthy, upheld by performance indicators that compare better than LFC industry peers’. Mirroring robust credit expansion, net interest income expanded at a rapid 49.20 percent YoY in FY March 2014 to Rs.293.16 million (FY March 2013: Rs.196.49 million).In line with TFI’s focus on high-yielding segments such as three-wheeler and motorcycle financing, the company yields have consistently compared betterthan similar rated peers. As such, supported by its high-yielding loan portfolio coupled with its relatively lower cost of funding owing to a funding structure dominated by shareholders funds, TFI’s NIM have consistently compared better than similar rated peers’.

Reflective of the expansion in top-line, TFI’s pre-tax expanded at a robust 30.73 percent YoY in FY March 2014 to Rs.191.78 million (FY March 2013: Rs.146.70 million).Supported by its focus on high-yielding segments and its low-cost operating model, the company’s ROA has also consistently compared better than similar rated peers over the years. As such, the company’s ROA stood at 13.41 percent in FY March 2014 comparing well above its LFC industry peers’.

TFI’s liquidity position is deemed adequate. Its liquid asset ratio improved to 23.80 percent as at end-June 2014 (end-March 2013:20.06percent).Nevertheless, the company’s liquidity position is viewed with caution, given the significant liquidity risk faced by TFI in view of high depositconcentration, especially due to high amount customer deposits from related parties of the previous owners of TFI. However, if a liquidity need arises, support for TFI is expected to be forthcoming from its parent company CCF (BBB-/P3/Positive).TFI’s capital adequacy levels are viewed as strong. Its Tier I and Overall RWCAR stood at a good 56.73 percent as at end-June 2014, comparing well above other LFC industry peers’.
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Sri Lanka stocks close up 0.4-pct

Oct 23, 2014 (LBO) - Sri Lanka's stocks higher with index heavy John Keells Holdings gaining amid net foreign buying ahead of the 2015 budget, brokers said.

The Colombo benchmark All Share Price Index closed 28.35 points higher at 7,189.51, up 0.40 percent. The S&P SL20 closed 12.94 points higher at 3,991.59, up 0.33 percent.

Turnover was 2.29 billion rupees, up from 898.24 million rupees a day earlier with 131 stocks closed positive against 59 negative.

National Development Bank closed 2.50 rupees higher at 242.50 rupees with four off market transactions of 1.22 billion rupees changing hands at 240.00 rupees per share contributing 53 percent of the turnover.

Asia Capital closed 1.30 rupees higher at 12.50 rupees, attracting most number of trades during the day.

Foreign investors bought 487.39 million rupees worth shares while selling 226.67 million rupees worth shares.

John Keells Holdings closed 3.30 rupees higher at 249.80 rupees, contributing most to the index gain.

JKH’s W0022 warrants closed flat at 72.00 rupees and its W0023 warrants closed 1.50 rupees higher at 77.10 rupees.