Sri Lankan shares edge down; foreign investors sell John Keells

Reuters: Sri Lankan shares ended marginally weaker on Thursday, marking their fifth straight session of losses, as foreign investors sold market heavyweight John Keells Holdings amid global worries.

Foreign investors sold shares worth a net 474.7 million rupees ($2.96 million) on Thursday, extending the foreign outflow to a net 3.24 billion rupees worth of equities so far this year.

Lacklustre corporate results also hit investor appetite for riskier assets, analysts said.

The Colombo stock index fell 0.05 percent to 6,083.59, its lowest close since July 10. It has declined about 4.5 percent so far this year.

“There was no catalyst to move the market and the recently released June quarter earnings are not that encouraging,” said Atchuthan Srirangan, assistant manager - research, First Capital Holdings Plc.

Turnover was 788.9 million rupees ($4.92 million) on Thursday, less than this year’s daily average of 832.8 million rupees.

Brokers have also said possible loose fiscal policies in the upcoming budget to woo voters ahead of next year provincial council and presidential polls also have hurt investor sentiment.

Emerging-market equities languished in bear territory on Thursday, shrugging off the prospect of new trade talks between China and the United States, while Turkey’s lira recovered.

Shares in John Keells, which accounted for 71.4 percent of the day’s turnover, fell 1.2 percent, while shares in Ceylinco Insurance slid 1.9 percent.

The central bank left its key policy rates unchanged, as expected, on Aug. 3, citing its goals of stabilising inflation and fostering sustainable economic growth.

Central bank Governor Indrajit Coomaraswamy said the economy was unlikely to grow more than 4 percent in 2018, falling short of an earlier estimate of 5 percent. 

($1 = 160.4000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Vyas Mohan)

Sri Lankan shares extend falls, foreign investors cut holdings in John Keells

Reuters: Sri Lankan shares fell for a fourth straight session on Wednesday, as foreign investors pared holdings in market heavyweight John Keells Holdings amid global worries.

Lacklustre corporate results also hit investor appetite for riskier assets, analysts said.

The Colombo stock index fell 0.43 percent to 6,086.74, its lowest close since July 10. It has declined about 4.2 percent so far this year.

Turnover was 238.2 million rupees ($1.49 million) on Wednesday, less than a third of this year’s daily average of 833.1 million rupees.

“Foreign selling in Keells dragged the index and there was no market moving news. Retail and institutional investors were not in the market and we saw very low turnover,” said Prashan Fernando, CEO at Acuity Stockbrokers.

Poor earnings in the June quarter and possible loose fiscal policies in the upcoming budget to woo voters ahead of next year provincial council and presidential polls also hurt investor sentiment, some other brokers said.

Equities in emerging markets broadly struggled after signs China’s economy was cooling further, with fixed-asset investment growth in January-July at its slowest pace since at least 1996.

Foreign investors sold shares worth a net 125.3 million rupees on Wednesday, extending the foreign outflow to a net 2.76 billion rupees worth of equities so far this year.

Shares in John Keells, which accounted for more than 50 percent of the day’s turnover, fell 0.4 percent, while BRAC Lanka Finance slumped 17.4 percent.

The central bank left its key policy rates unchanged, as expected, on Aug. 3, citing its goals of stabilising inflation and fostering sustainable economic growth.

Central bank Governor Indrajit Coomaraswamy said the economy was unlikely to grow more than 4 percent in 2018, falling short of an earlier estimate of 5 percent. 

($1 = 160.0500 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Subhranshu Sahu)

Amãna Bank 1H PBT up to Rs 400 mn

Having recently declared its inaugural dividend of seven cents per share, Amãna Bank continued to showcase strong performance in terms of profitability, as it closed the first six months of 2018 by recording a Profit Before Tax of over Rs 400 million, which almost doubled from Rs 210.8 million recorded in the first six months of 2017.

Similarly, the Bank recorded a profit after tax of Rs 288.2 million against Rs 151.7 million recorded in the corresponding period of 2017, reflecting an impressive YoY growth of 90%. Whilst the bottom line performance has been noteworthy, EPS remained at 12 cents per share, purely due to the number of shares doubling, subsequent to the successful Rights Issue in Q3 2017.

The Bank’s focus to further expand its core banking activities yielded positive results, with the Bank recording a 27.1% YoY growth in Financing Income which grew to Rs 3.20 billion from Rs 2.52 billion, whilst Net Financing Income grew to Rs 1.58 billion from Rs 1.19 billion reflecting a 32.4% YoY growth. This assisted the Bank’s Financing Margin to record a healthy 4.4% compared to 4.2% at end 2017. During the period, the Bank’s Net Fee and Commission income reported a significant YoY growth of 31.8%. After providing for impairment on financing and accounting for an increase in operating expenses of 8.2%, the Bank was able to record a significant 70.8% growth in operating profit before VAT on Financial Services and NBT to close the first half at Rs 620.8 million. Commenting on its first half performance, the Bank’s Chief Executive Officer Mohamed Azmeer said “It is encouraging to see the traction the Bank has achieved during the last six month, resulting in sustained profitability for the Bank. Having commenced reciprocating our shareholders with the inaugural dividend, we are confident that this performance will lead us to greater success in line with our 5 year strategic plan.”

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Chemanex posts Rs 108mn PBT

Chemanex PLC, the leading importer and manufacturer of industrial chemicals and intermediates, recently saw the completion of a successful restructuring process. The company, with its assets reaching Rs. 2.03 billion, has consolidated its strengths holistically and is all set to meet future challenges with sheer confidence.

Despite the decline of group turnover from last year’s Rs. 181 million to this year’s Rs.108 million, the profit before tax (PBT) reflected a significant improvement recording Rs.41 million this year in comparison to Rs.8 million the previous year.

This undoubtedly signifies the company’s optimistic changes indicating focused business lines and slimmer organization. Furthermore, Chemanex was able to drop its administration expenses from Rs.31 million to Rs.12 million, whereas its distribution expenses dropped from Rs.14 million to Rs.3 million.

With an insightful approach to overcome impending obstacles, Chemanex steered its prudent restructuring process observing a number of crucial changes. The company took steps to clearly identify and terminate non-profitable or lagging operations, while fostering core competencies. It also introduced an actionable business model built on improved focus, structure and efficiency, which in turn encouraged a sustainable growth and enhanced stakeholder value.

Furthermore, by disposing unutilized lands, Chemanex was able to achieve significant funds to complement its short term investments. The company is hopeful that the steps taken will help them garner higher profits through strategic operations in due course.

Expressing his views on the matter, P.R. Saldin, Chairman of Chemanex PLC said, “With the successful completion of our restructuring process, we are more optimistic to face future challenges than ever before. Our next step is to leverage effective synergies with the CIC Group and incorporate their expertise to develop and expand our market strengths and presence. This approach will help us meet the rising demands of our local and international markets while providing them with full product requirements.”

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Lanka Ashok Leyland records Rs 3.2 bn revenue in 1Q-2018

Lanka Ashok Leyland recorded a turnover of Rs 3.2 billion in the first quarter of 2018, against Rs 3.3 billion for the first quarter of 2017.

Vehicle sales saw a marginal decline year on year to Rs 3 billion whilst revenue from other sources rose 44% to R 118.4 million against Rs 82 million for the same period last year. Prudent cost controls boosted the gross profit by 22% to Rs 308 million and saw the gross profit margin expand to 9.7% against 7.8% recorded a year ago.

Operating expenses for the quarter stood at Rs 138.9 million , a 172% increase over the first quarter of 2017 which was benefitted from a one off reversal. Net finance costs for the quarter rose 553% to Rs 67.2 million as we took on more debt to expand our stock of technologically superior BS3 compliant vehicles with latest safety standards. Inventory position grew 30% to Rs 5.7 billion cf. 4.4 billion in the first quarter of 2017 while interest bearing liabilities have risen 99% to Rs 4.1billion against Rs 2 billion a year ago.

The increase in finance resulted in a profit before tax of Rs 51.7mn versus Rs 135.5mn in 1Q 2017, signifying a 51% decline year on year.

Umesh Gautam, CEO of Lanka Ashok Leyland, relayed “that the first quarters’ sales performance has historically been sluggish over the last few years.

This quarter witnessed larger than normal exchange rate volatility which affected pricing and influenced our customers buying decisions. Despite these constraints, our vehicle sales continued to top the Rs 3 billion benchmark. Our bottom line does not fairly reflect the progress the company has made over the quarter which witnessed margin expansion at the gross profit level and saw income from other sources like repairs, hiring and spare parts grow 44%. This restructuring of our revenue profile will reduce exposure to cyclical sales and improve our overall financial position.

On the future outlook Gautam comments that the transportation sector will see the impact of the EURO 4 standard implementation coming into play in July 2018. We commend the government in its efforts to go green however commercially, transportation business models run on very thin margins and are cost sensitive. Higher initial investment in purchase of the vehicles and use of cheaper fuels in vehicles will be replaced by super diesel as required by EURO 4 engines adversely impacting running costs and profitability of the sector.

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Fitch Revises Bimputh Finance’s Outlook to Negative

Fitch Ratings Lanka has revised the Outlook on the National Long-Term Rating of Bimputh Finance PLC (Bimputh) to Negative from Stable. At the same time, the agency has affirmed the National Long-Term Rating at ‘BB(lka)’.

The Outlook revision reflects the finance company’s high capital-impairment risk arising from declining pre-impairment operating profit buffers amid a weakening in asset quality, reducing its capacity to absorb credit-cost shocks.

The revision also captures potential pressure on Bimputh’s financial profile from increasing exposure to the non-microfinance business as the company is still developing risk controls in this segment.

Bimputh’s rating reflects its high-risk appetite stemming from its substantial exposure to microfinance, which accounted for 50% of total lending at end-June 2018. The higher-yielding microfinance segment tends to be more vulnerable to economic changes. Fitch expects microfinance to remain a dominant product for Bimputh although lending to this segment has declined.

The rating also captures the company’s heavy reliance on borrowings and potential capitalisation drag from weakening credit quality and strong loan growth aspirations.

Bimputh’s asset quality is likely to continue to be pressured by Sri Lanka’s challenging operating environment. The company’s reported non-performing loan (reported on a six-months-in-arrears basis) ratio rose to 6.4% by end-March 2018 from 3.0% a year earlier. This was despite a 5.7% net charge-off of average gross loans for the financial year ended March 2018 (FY18).

We expect Bimputh’s medium-term profitability to remain weak, weighed down by high credit and operating cost burdens and a lower share of high-yielding microfinance. The company’s pretax profit to average assets declined to 3.0% in FY18 from 9.7% in FY17.

Bimputh’s weak deposit franchise means it remains reliant on wholesale borrowings. The company’s deposit base is highly concentrated and stayed small at 26.9% of total funding at end-March 2018.

Bimputh is a small finance company accounting for 0.7% of licensed finance-company and specialised leasing-company sector assets at end-March 2018 (March 2017: 0.9%).

Weakening in its capitalisation metrics due to aggressive loan growth and deterioration in credit quality may trigger a negative rating action. An upgrade is contingent on a sustained improvement in credit metrics - in particular capitalisation - and a moderation of its risk appetite.

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Sri Lanka's Central Finance June quarter profits up 23.4-pct

ECONOMYNEXT - Profits at Sri Lanka's Central Finance Company, a non-bank lender, grew 23.4 percent from a year earlier to 1.4 billion in the June 2018 quarter helped by higher net interest income, interim results showed.

The company reported earnings of 6.35 rupees a share in the June quarter, interim accounts filed with the Colombo Stock Exchange showed. The share closed 1 rupee higher on Monday at 97 rupees.

Net interest income rose 12.21 percent in the quarter to 2.9 billion rupees, with interest income growing 12.70 percent to 4.3 billion rupees and interest expenses growing at a faster 13.76 percent to 1.4 billion rupees.

Leases and hire purchase loans grew to 63.7 billion rupees from 61.3 billion rupees. Bad loans provisioning increased to 36.96 percent to 312.8 million rupees.

Other operating income grew 36 percent to 245 million rupees.

Income from related companies in healthcare, power generation, manufacturing, insurance broking and real estate, rose 37 percent to 312.2 million rupees.

The finance company's deposit base increased to 41.4 billion rupees at end June 2018, up 2 percent from three months earlier.

Group gross assets grew to 95.8 billion rupees by end June 2018 from 92.68 billion rupees in March and net assets grew to 29.2 billion rupees from 27.84 billion rupees.