Monday, April 30, 2012

Results Update -Mar 2012 -30 04 2012

source - CAL Research

Market snapshot -30.04.12

sourcce - CAL Research

Sri Lanka's stock prices fall ahead Tuesday's holiday

April 30, 2012 (LBO) – Sri Lanka's tiny stockmarket continued to fall on Monday, despite few large trades in Kegalle Plantations, Capital Alliance Finance and PC House, brokers said.

 The benchmark All Share Price Index fell 21.32 points or 0.39 percent to 5,419.20, while the more liquid Milanka Price Index lost 6.16 points or 0.12 percent to close at 4,851.24, according to figures published by the Colombo Stock Exchange.

 Monday's turnover ended at 631.2 million rupees, with conglomerate John Keells Holdings dominating trading.

John Keells, with investments in ports, leisure and finance, saw its share price fall 50-cents to 203.00 rupees on 589,870 shares.

PC House, that offers IT hardware and peripheral products, saw its share price edge 10-cents to 6.90 rupees on volumes of 17.1 million shares. The firm saw two large parcel of shares worth 13.3 million changed hands at a discount of 6.00 rupees each.

Capital Alliance Finance, a small finance company, saw its share prices slip 20-cents to 34.70 rupees on trades of 1.2 million shares.

Kegalle Plantation, which has exposure to tea and rubber estates, saw its share price fall 7.40 rupees to 110.00 rupees on volumes of 253,306 shares. During late afternoon trading, a parcel of 248,543 Kegalle shares changed hands at a premium of 110.00 rupees (up 7.40 rupees).

Brokers expect the market to remain subdued in this short trading week, with capital markets close for business on Tuesday, on account of May Day.

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NSB’s entry in to TFC stirs up storm

■Rs. 50 per share paid in deal worth Rs. 400 m for Rs. 9.4b loss carrying and negative networth finance company giant was a hefty premium as per some analysts

 ■Others say given lack of liquidity, price for 13% strategic block was good; NSB eyeing future upside with likely further buying; TFC to get big boost from savings giant

Savings giant NSB’s entry in to the finance company business via the acquisition of 13% stake for Rs. 400 million in The Finance Company Plc (TFC) last week has stirred up a storm with some alleging it was an unhealthy move whilst others insisting it was a good buy.
On Friday a total of 7.982 million shares of TFC traded for Rs. 394 million, of which 7.14 million shares was done at Rs. 50 each, above Rs. 20 or 66% above the market. NSB’s broker Taprobane Securities said the savings giant bought 7.863 million shares at an average cost of Rs. 49.74 each.

 TFC began trading on Friday at Rs. 30 with several more blocks done between Rs. 31 and 33 including 9,000 shares at Rs. 31.20. However, apparently setting the stage for the big deal a block of mere 100 shares was done at Rs. 43 whilst a relatively large block of 701,761 shares was executed at Rs. 45. Thereafter the crossing of 2.9 million happened at Rs. 50 each followed by another block of 4.237 million shares at the same price. In between a block of 100 shares went at Rs. 45 and an equal number of shares at Rs. 39 each. These in between deals suggest the erratic pricing. TFC last traded at Rs. 40 with a block of 115,300 shares.

 Major sellers were ABC Broadcasting Corporation CEO and young business leader Rayynor Silva and shareholder cum non-executive director Dinal Wijemanne. Interestingly the latter is also the CEO of the NSB’s broking firm picked for the purchase.

 The NSB buy on Friday sparked lot of market talk of deals within deals given the premium paid.

Contentious talk included why TFC bought NSB when there are several other fundamentally sound and attractive shares in the market. Some also questioned whether the NSB had the sanction of its Board to go for such an investment.

 However though at Friday’s early trading price the crossing reflects a premium, Rayynor and Dinal indeed bought the original stake in late September at Rs. 48 per share, which in fact was 52-week highest until Friday. On that score NSB had paid only Rs. 2 extra for the buyers.

 Some alleged that the duo picked up the TFC stake in September last year to give stability with an understanding among a few stakeholders. The seller of that block was Dr. T. Senthilverl, also a Director at TFC and the biggest shareholder. Prior to September 2011 sale he held a stake of slightly over 27% and reduced his holding to 18.5%.

 Parties to the sale said that there weren’t large blocks and the price paid by NSB for the strategic block was attractive for the buyer. TFC sources said for NSB it was a strategic buy and “first step” towards greater synergies. They also said given the inherent potential of TFC the price paid wasn’t a premium.

 Other analysts said if NSB was keen to enter the finance company business, then with an equal amount it spent on Friday it could have started a venture under the Finance Business Act. But this notion was dismissed on the basis that TFC was an existing business and a giant in the league suggesting starting from zero would cost more for NSB.

 Industry experts said NSB’s Act restraints diversification as well as direct engagement with other segments of the financial services industry. In that context entry and possible consolidation of stake via TFC would enable savings giant to tap prospects in the finance company business.

 Following the acquisition NSB is likely to be offered two seats on the Board whilst analysts didn’t rule out it exploring prospects to enhance the stake. For TFC backing of NSB is being viewed as the next major breakthrough for its turnaround and future growth.

 A reason for allegations that the NSB paid an undue premium was due to TFC’s negative networth of Rs. 23.57 per share (or Rs. 3.8 billion) as at end 2011. The Company also has retained loss of Rs. 9.4 billion. Between March 31, 2011 and 31 December 2011, its public deposit base had shrunk by Rs. 400 million to Rs. 20.45 billion. Its assets had declined to Rs. 20.49 billion from Rs. 21.43 billion whilst liabilities amounted to Rs. 24.2 billion, down from Rs. 25.2 billion.

 However TFC sources said that the negative networth was a legacy from the past when the company ran into difficulties in tandem with the Golden Key fiasco. They said that under the new management there has been a turnaround with more progress on the cards. For example last month Rs. 1 billion in deposits had come in and TFC has a good high potential real estate portfolio.

 Whilst TFC’s fourth quarter results are pending, analysts could only go by published accounts, which doesn’t show any significant growth in the Company’s core business though pawning and hire purchase segments have improved.

 For the nine months ended on 31 December 2011, TFC made a profit of Rs. 15.8 million, as against a loss of Rs. 1.6 billion a year earlier. Net interest income was a loss Rs. 341 million, though lower in comparison to Rs. 544 million loss  but due to other income operating profit had improved considerably to Rs. 754 million as against a loss of Rs. 380 million loss in the first nine months of 2009/10 financial year. A Rs. 180 million reversal in credit losses saw TFC ending the 2010/11 9 months with a welcome profit. In the third quarter loss was Rs. 17.5 million, down from Rs. 440 million a year earlier.

 Last month in a major and widely welcomed move the TFC announced the appointment of Cherille Rosa, a former Vice President Finance and Operations at Citibank’s Asia Pacific Technology and Operations Group, as an Independent Non-Executive Director.

 NSB is not the only state entity which has interests in TFC. Others include EPF owning 8.4%, and People’s Bank (3.4%). BOC-linked Ceybank Unit Trust owns 5% whilst Seylan Bank also holds 7.4%.

 Board of Directors of The Finance Company Plc comprises Preethi Jayawardena (Chairman), V.W. Dissanayake (Executive Director), Kamal Yatawara (CEO), T.B. Ekanayake (Executive Director), Ajith Devasurendra (Independent Non-Executive Director), Anura Fernando (Independent Non-Executive Director), R. Nadarajah (Independent Non-Executive Director), Dr. T. Senthilverl (Non-Executive Director), Dinal Wijemanne (Non-Executive Director) and C. Rosa (Independent Non-Executive Director.

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PCH makes it to top 50 brands again

Forging ahead as a leading player in the ICT arena, PC House PLC (PCH) made it to the Top 50 in Sri Lanka’s Most Valuable Brands yet again, climbing two places to number 48 this year.

 In the recently-published list of Sri Lanka’s Leading Brands, conducted by Brand Finance Lanka and Media Services, PCH maintained its position as the best rated ICT company, in a league where companies are valued on performance, accountability, and transparency.

Commenting on this accomplishment, PCH Head of Group Marketing Rizwan Anise said: “We see this achievement as an endorsement of our marketing strategy implemented to spearhead the industry, which is the same platform that won us the 50th place last year. Our marketing strategy is directed towards the accomplishment of our corporate vision; to be the benchmark in ICT in Sri Lanka.”

 “We have come from humble beginnings and notched a place in this prestigious list amongst some very important brands. This just proves that our strategies have worked well and we can be proud of who we are,” he added.

 Brand Finance is an international leader in quantifying and leveraging the value of intangible assets. With 23 offices worldwide, the Sri Lankan joint venture commenced operations in 2003. The focus on the key areas and the selection process includes valuation, analytics, strategy and transactions. 

 PCH started as an IT hardware retailer, and now has consolidated to the solutions business, earning itself a reputation as a pioneer in modern ICT in Sri Lanka. Being the preferred local distributor for many global giants in ICT, PCH has proved its stability and quality in all of its business endeavors.

PCH holds partnerships with IT giants such as Microsoft, Cisco, IBM, Lenovo, Adobe, SAP and Corel.

 As the market leader, PCH has maintained aggressive financial performance during the past year, opening its second 9to9 showroom in Kandy, launched Sri Lanka’s first IT help-line launching a IT helpdesk in Sabaragamuwa University in light to serve University students and staff and their continued dedication to forging numerous partnership with both global and local IT magnates to ensure the best possible ICT experience for its clientele.

 With the country poised to take on a new era, PCH has been playing a proactive part in lifting the nations ICT literacy through programs conducted island wide. These programs are educative, inspiring and ensure a skilled future for many youth across this developing nation.

 PCH possesses a valuable product/solutions and services portfolio and has stretched their business vertically, integrating into solutions and services, focusing on corporate and domestic markets and horizontally widening the product and solutions portfolio with new segment additions and leveraging into new markets like research and BPO and KPO Solutions (through the acquisition of Infoserve private limited, a reputed BPO/KPO solutions provider). 

 PC House PLC Chairman S.H.M. Rishan, who was recently recognized for his entrepreneurship within the industry at the Asia Pacific Entrepreneurship Awards, added: “We are constantly finding ways of expanding our businesses by driving IT innovations through corporate and retail market segments. We remain focused in offering quality solutions and products, and strive to maintain a reputed customer care and after sales service.”

He added that many of the senior management have been head hunted for their specific roles and come with the experience and expertise required to keep pace with global trends and the ability to source new businesses and strengthen ties with multinationals. 

 PCH is the new corporate brand identity for PC House PLC which is listed on the Colombo Stock Exchange. The new brand identity reflects the change from a family owned business to a public company with a vision to be the benchmark for ICT in Sri Lanka.

 PC House was incorporated as a limited liability company in the year 2000, after having commenced business in 1997 and became PC House PLC. Its Board of Directors consists of S.H.M. Rishan, Mangala Boyagoda, Sarath Wikramanayake, Modarage Thilakasiri, Shanti Kumar Nadarajah, Kuvera de Zoysa and Sharmila Rishan.

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Sunday, April 29, 2012

NSB pays top price to acquire 12% of TFC

The National Savings Bank Friday acquired nearly 12 per cent of The Finance Company PLC (TFC), the country’s first established finance company, paying slightly over Rs. 357 million at a price of Rs. 50 per share – Rs. 20 a share above the prevailing market, to acquire some large blocks from four shareholders in the company’s top twenty list.

 The sellers are believed to be Dinal Wijemanne, CEO of Taprobane Securities, a Colombo stockbroking firm, Rayynor Silva, the brother of Duminda Silva, MP, of ABC Radio and two smaller shareholders, Messrs. N Perera and A.A.Y. Perera.

Wijemanne and Silva each owned 2.9 million shares ( 4.8% of TFC) while the two Pereras owned 669,700 shares each (1.11%).

According to the last published unaudited financials of the company for the period ended Dec. 31, 2011, TFC had accumulated losses Rs. 9.4 billion in its books and negative net assets per share of Rs. 23.57, a slight improvement from minus 23.65 a year earlier.

The company had posted a small profit of Rs. 15.85 million for the nine months to Dec. 31, 2011, up from a loss of Rs. 1.6 billion during the comparative period the previous year. This translated to a profit of 10 cents a share against a loss Rs. 78.78 a year earlier.

Analysts noted that TFC which took a heavy blow from the Golden Key collapse had total assets as at Dec. 31, 2011, of Rs. 21 billion and liabilities Rs. 24.23 billion.

Dr. T. Senthilverl through three accounts is the top shareholder of the company with nearly 20.7% while Ceylinco Investments held 11.04%. Mr. Lalith Kotelawela has a personal stake of 0.87% and is the 16th largest shareholder.

The state sector is also in the top twenty shareholders’ list through the EPF (8.43%) and Bank of Ceylon/Ceybank Unit Trust (5.19%).

Some analysts said that TFC owns a valuable land bank and the knock-on effect of the Golden Key collapse is wearing off. However the premium the NSB paid for the shares have raised eyebrows.

"It’s a 60% premium and the deal was struck at the Rs. 50 price when the market was at Rs. 30,’’ one analyst said.

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Colombo bourse sluggish for too long

Stockmarket Review

By Elton Ebert

The stock market has been mired under a cloud of depression for far too long a period. This is creating problems all round, for the stock brokerages, reduced income for the margin providers, and loss of revenue to the state. Paradoxically it is the retail segment who are the winners! Most of them suffered losses through forced selling earler, but since they do not invest now, they don’t lose.

There are some who were lured by the high priced IPOs but since they do not have funds they do not invest in IPOs now and therefore suffer no loss due to the IPOs trading below their issue price.

There are some retail players who have saved some money by not investing recently and could now invest their savings in fixed income securities earning good rates.

Moderate interest was evident in JKH, Commercial Bank and HNB while Keells Hotels came in for extra demand when almost four million shares were transacted. Nestle in which a massive final dividend is accruing until June 4 reached Rs.1249.80 but closed at Rs1170 on Friday. Swarnamahal Financial Services, Panasian Power and Textured Jersey were in the active slot. Shares in the plantations sector were unchanged but some prices at the auctions were interesting. However the situation in the Middle East creates an air of uncertainty which affects the prices here.

Mackwoods Energy which recently issued 25 million shares at Rs.14 through an IPO commenced trading on the Diri Savi Board on Wednesday, quickly falling into the casualty list. A mere 725,267 shares were transacted on Wednesday, closing at Rs.14.20,and continued to lose favour. It ended for the week at Rs,13.80, after dipping to Rs 13 earlier. Meanwhile Access Engineering was the other casualty closing at Rs 21.50.

There are reports that a few companies who were scheduled to come out with their IPOs are now in the process of reducing their issue prices while the others have put on hold their proposed IPOs expecting improved market sentiment. Echoing this sentiment a veteran player in the market said that if any new IPOs are to find favour with the investors it should be a company with a good track of earning good profits and at a sensible price. Further retail players say that they will not get trapped by grandiose advertising unlike earlier.

The fact that JKH and Central Finance have requested further time from the Central Bank to reduce their stake in Nations Trust Bank PLC (NTB) has drawn the curiosity of many investors. A few shareholders in NTB seem to think the bank may reduce these holdings after a share split is made.

Another investor who collects only bank shares has got information that a group from the Middle East who was interested in these blocks backed off when the Colombo market slipped into reverse gear.

LOLC states that they have issued 7-year going concern, loss absorbent unsecured Subordinated unlisted debentures to Saakya Capital (Pvt) Ltd as follows; Rs.2 billion on February 23 and Rs 1 billion on February 27, 2012, who are now the sole debenture holders.

Changes in directorates: Citrus Leisure, Kalpitiya Beach Resorts Ltd & Waskaduwa Beach Resorts Ltd -- Raynor Silva resigned as a director effective April 16 from all these companies.

Turnover for the week of Rs.2 billion was just a shade better than last week when the figure was Rs. 1.8 billion.

The All Share Price Index was 53.60 points or 1% higher than last week closing at 5429.59. while the Milanka ended 71.46 points or 1.10% lower than last week at 4853.53.

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Ceylinco Insurance posts mammoth post-tax profit of Rs.1.1 billion

Ceylinco Insurance recorded a mammoth post-tax profit of Rs 1.1 billion for the year ended 31st December 2011, reflecting its leadership in the insurance sector.

In a media statement, the company said that last year it “recorded a mammoth premium income of Rs.19.8 billion”, which amounted to a growth of 10.3%, with the General Division contributing Rs.10 billion, and the Life Division accounting for the remaining Rs.9.8 billion.

Managing Director/Chief Executive Officer of Ceylinco Insurance – General, Mr Ajith Gunawardena was quoted as saying that, “What we have achieved in 2011 was in line with our expectations. We have succeeded by adhering to sound fundamentals and we are committed to managing our business with great discipline and prudence.”

Commenting on the Life Division’s performance during 2011, Managing Director/Chief Executive Officer of Ceylinco Life, R. Renganathan noted, “Our ability to outperform the industry growth is evidence of the trust and confidence that Ceylinco Life has built up over the years. This is an invaluable asset that we intend to nurture and build on in the years ahead.”

Total investments of the company, including both the Life and General Divisions, exceeded Rs. 47 billion whilst assets grew by 24.3% and stood at Rs.61.3 billion by the end of December 2011.

During the year under review, the General Division sold over 650,308 new policies, bringing the total policies in force to 1.28 million. Net transfers to the Life Fund over the year was Rs. 6.3 billion, increasing the Life Fund to Rs.38.2 billion, recording a remarkable growth of 19.8% year on year.

The Life Division meanwhile, sold over 143,259 new policies during the year, while Life solvency stood at over eight times the required solvency ratio. The total claim benefits disbursed by the Life Division in 2011 amounted to Rs.2.9 billion.

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Friday, April 27, 2012

Market snapshot - 26 04 2012

source - CAL Research

Sri Lanka Seylan Bank March net up 69 percent

April 27, 2012 (LBO) - Sri Lanka's Seylan Bank March 2012 quarter net profit rose 69.3 percent from a year earlier to 644,047 million rupees, helped by less provisioning, accounts showed Friday.

 Group income grew 13.7 percent to 4.5 billion rupees for the March quarter over the corresponding period 2011. Net interest income grew at a slower 10.7 percent to 2.0 billion rupees.

 Seylan, which is partly state-owned, saw its share price close up 1.00 rupee to 63.00 rupees. The results were released after the market closed for business.

Non-interest income rose 9.4 percent to 2.7 billion rupees.

Profits were helped by provision of securities of 240,029 million rupees that was provided for, in the previous quarter under review.

Pretax profits rose 65.0 percent to 821,556 million rupees, but financial value added tax fell 51.4 percent to 177,509 million rupees and income tax fell 63.1 percent to 226,302 million rupees, helping the bottom line.

Seylan said group performing loans rose 8.4 percent to 105.7 billion rupees in the March quarter. Non-performing loans rose by a slower 7.0 percent to126.8 billion rupees.

Deposits grew 3.4 percent to 125.4 billion rupees.

Sri Lanka's interest rates are rising amid balance of payments pressure and the Central Bank has asked banks to limit rupee funded credit to 18.0 percent in 2012.

Seylan's group gross assets rose 4.4 percent to 174.7 billion rupees.

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Sri Lanka's The Finance Company dominates a dull bourse

April 27, 2012 (LBO) – Sri Lankan stocks closed the week on a negative note on Friday, as investors remained on the sidelines watching for some stability in the foreign exchange markets, brokers and dealers said.

 Colombo's broader All Share Price Index shed 15.42 point or 0.28 percent to 5,429.59, while the more liquid Milanka Price Index fell 7.09 points or 0.14 percent to close at 4,853.53.

 Friday’s turnover closed at 778.9 million rupees, according to Colombo Stock Exchange figures.

The day's trading activities was dominated by The Finance Company, which saw four lots totaling 7.1 million shares crossing at 50.00 rupees. The deal helped, The Finance shares close up 14.00 rupees to 39.00 rupees on volumes of 7.98 million.

Conglomerate John Keells Holdings, which has business interests in leisure, finance and transport, was the next pick of the investors closing flat at 203.00 rupees on volumes of 345,487.

Regnis PLC followed a distant third, with its share price gaining 11.60 rupees to close at 117.00 rupees on volumes of 313,718 shares.

In the foreign exchange markets, the Sri Lanka's rupee was tentatively quoted around 130.80/131.50 against the greenback, but with little firm quotes as monetary authorities used moralsuation to deter speculation, dealers said.

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CSE going through consolidation, easy for investors to enter

Bartleet Religare Securities (BRS) completed their  second workshop on Capital Markets on the 30th of March, at Chamber of Commerce Auditorium, Galle ,  targeting the ever enthusiastic  investors in the southern region. The workshop is a series of presentations that will be conducted throughout the country this year.  The work shop was conducted with the objective of creating awareness about the investing process and creating an open forum where investors could engage in healthy dialogue with BRS Analysts and Investment Advisors.  The topics covered at this discussion were; portfolio management, fundamentals of investing and technical trading.

 The participation was heartening with a full house, and the audience showed much interest through interactive participation, resulting in the workshop progressing well over the scheduled time. This signals the need for such forums in today’s investment climate and the speakers were well equipped to provide the audience with experienced and honest content on the principles of investing, BRS said in a statement.

BRS believes that the Colombo Stock Market is going through a period of consolidation, and that this is a normal cycle which would provide an opportunity for investors to enter the market.  This seminar is organized as part of the responsibility rests on the BRS to educate investors how to battle the markets and make the best of bearish times.

The next presentation will be held in Embillipiyta today (27) at Sarathchandra Restaurant, Embilipitiya 2.30 p.m. onwards.

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WTC developer riding high on positive business environment

Overseas Realty (Ceylon) PLC, the developers and managers of the iconic World Trade Centre (WTC) towers in the heart of Colombo, has reported a 32 percent increase in net profits amounting to Rs. 584 million for the year ended December 31, 2011, and the company is confident the buoyant macroeconomic environment would attract enough demand which would make it possible to achieve a higher rentals index this year.

 "The property market is the biggest business enterprise in any leading city in the world. Thus our Company is a direct beneficiary of economic stability, growth and business confidence in the country.

 Whilst we have recorded significant operational growth in 2011 the Company will explore every property related opportunity available in order to maximize shareholder value," the company’s Chairman S. P. Tao told shareholders.

"In 2011 your Company was able to position itself as the premier property development, property management and property owning company in Sri Lanka as a result both of the environment in which we operate i.e. increased investor confidence in the country, pro-business policies of the Government and economic stability arising from peace and the high standards of quality and service that we are able to consistently maintain and deliver. This is reflected in the Group’s Profit after Tax (excluding fair value gains) of Rs. 584 Mn, a 32% increase compared to the previous year.

The concomitant increase in demand for quality office space in the World Trade Center Colombo and residential apartments in Havelock City enabled the Group to record a Gross Revenue of Rs. 2,491 Mn, an increase of 47% compared to that achieved in 2010," he said.

Significant twin increases in occupancy (89% achieved in December 2011) and average rental rates in World Trade Centre Colombo contributed to a strong performance for the Company.

2011 saw strong growth in demand for commercial and office space as a result of a growing economy and positive business sentiments in the country. Revenue generated through leasing of space at the World Trade Centre (WTC) Colombo of Rs. 847 Mn saw significant growth of 21% over the previous year. Occupancy which was at 72% at the start of the year closed at 89% with committed occupancy being 95%. Additionally, the lack of quality commercial space in Colombo augurs well for the Company’s ability to demand higher rates and enhance its yields in the future, the company’s recently published annual report said.

2011 has been one of the best performing years in the Company’s history with occupancy at the WTC Colombo reaching 89% by December 2011 and committed occupancy being 95%.

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Bourse ends on a mixed note

The indices of the Colombo stock market yesterday closed on a mixed note, amidst some volatility experienced during the day.

 The ASPI closed five points up at 5,445 and Milanka remained in the red throughout the day, closing 26 points below at 4,860.

“The liquid blue chips Commercial Bank of Ceylon and John Keells Holdings led the decline of the MPI, while the gains in the illiquid dividend play counters NestlĂ© and Ceylon Tobacco kept the ASPI on positive territory,” Arrenga Capital said.

 It said the sole crossing for the day registered in Softlogic Holdings, the diversified conglomerate, was of 2.5 million shares being dealt with at Rs. 12.5 (5% premium to the previous closing price).

The rest of the trading for the counter which was on-board was weak, with only 42,000 shares changing hands as the counter closed at Rs. 11.8 (-0.9%).

 The Diversified sector emerged as the highest contributor to the market turnover (due to Carsons Cumberbatch, Softlogic Holdings and John Keells Holdings) and the sector index declined by 0.09%.

The share price of Carsons Cumberbatch appreciated by Rs. 14.90 (3.24%), to close at Rs. 475.

 Interest in the John Keells Group companies was observed, with Keells Hotels recording the top turnover in the market. The counter recorded four large blocks ranging from 600,000 to 1.2 million shares changing hands on-board at a similar price of Rs. 13. The counter recorded a marginal gain as it closed at Rs. 13.1 (+4.0%).

 John Keells Holdings maintained investor interest, though on a lower note, with 141,000 shares trading. The counter has been witnessing some selling pressure in the last few days as it has been gradually losing ground this week with a -0.9% decline to Rs. 203.5.

 With dividends round the corner, interest in NestlĂ© and Ceylon Tobacco has been strong. Due to the sharp price appreciations the counters are currently trading at high valuations, although the price hikes have been on low volumes. The former hit another 52-week high yesterday at Rs. 1,296 as both closed with gains of 5.4% and 2.3% respectively.

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Turnover up slightly, indices point in opposite directions

The All Share Price Index on the Colombo bourse gained slightly yesterday while the Milanka was down on a turnover of Rs.391.4 million, up from the previous day’s Rs.288.6 million, with Carsons, JKH, Nestle and Commercial Bank being the main business generators.

 The All Share Price Index closed 5 points (0.09) up while the Milanka was down 26.8 points (0.54%) with 77 gainers comfortably outpaced by 105 losers.

Brokers said that although there were some strategic movements in high value stocks like Carsons, JKH and Nestle, the market was relatively dull as it has been for the past several days.

Carsons which closed Rs.14.90 up at Rs.475 with 71,012 shares trading between Rs.460.10 and Rs.475 generated the day’s top turnover of Rs.33.4 million followed by JKH, down Rs.1.80 to Rs.203.50 on over 0.1 million shares traded between Rs.203 and Rs.204.50, and Nestle up Rs.64.60 to Rs.1,259 on 20,321 shares traded between Rs.1,200 and Rs.1,210.

Commercial Bank was down 10 cents to Rs.105 on slightly over 0.2 million shares trading at Rs.105 while Seylan was up a rupee to close t Rs.62 on over 0.1 million shares traded at Rs.62.

JKH generated a turnover of Rs. 289.9 million, Nestle Rs. 25.4 million and Commercial Bank Rs. 22.1 million.

Swarnamahal Financial Services continued to show volume closing 40 cents up at Rs.8.70 on over 1.3 million shares traded between Rs.8.20 and Rs.8.80.

Printcare announced a final dividend of 40 cents per share for 2011/12 XD from May 9 and with payment on May 17.

Pegasus Hotels of Ceylon PLC said it has raised Rs. 110.9 million via a rights issue.

The Carsons Group managed hotel, issued 3.04 million shares to existing shareholders at a proportion of one share for every nine shares at Rs. 36.50 each, a stock exchange filing said. Funds from the rights issue will be used to settle borrowings made to buy 685,469 shares (or a 99.98 percent stake) in Equity Hotels Limited.

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Thursday, April 26, 2012

Mackwoods Energy high on debut

Mackwoods Energy Limited (MEL) made an excellent debut yesterday on the Colombo Stock Exchange being the second IPO for the year that ended in an upward trend, challenging the trend of the recently traded IPOs.  MEL finished the debut up 70 cents to close at Rs. 14.70 with a market capitalisation of Rs. 1.47 billion. The debut saw 725,267 shares of MEL traded between a high of Rs. 16 and a low of Rs. 14.

MEL has positioned itself to take the benefit of the potential growth in the Power and Energy sector recognizing the sector as an essential driver of socio-economic development of the country. 

The company expects to harness the available sources of energy particularly renewable energy, and contribute to meet the fast growing energy need of the country through the provision of cost effective energy solutions.

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Bourse continues losing streak

Turnover remains low, indices marginally down

The Colombo bourse yesterday continued its losing streak with both indices edging down marginally – the All Share Price Index by 3.97 points (0.07%) and the Milanka by 4.89 points (0.10%) on a turnover of Rs.312.75 million, up from the previous day’s Rs.288.6 million, with 56 gainers trailing 109 losers.

"It was another quiet day with turnover thin and the indices virtually flat," a broker said. "JKH continued to be the biggest turnover generator while CIC in which state institutions are showing an interest contributed a useful Rs.31.6 million.’’

JKH closed 90 cents down at Rs.205.10 on over 0.2 million shares done between Rs.205 and Rs.206.40 generating the day’s top turnover of Rs.50.7 million followed by CIC which closed flat at Rs.100 on 0.3 million shares done between Rs.99.90 and Rs.101.

DFCC too continued to generate some interest gaining 80 cents to close at Rs.120 on over 0.1 million shares traded between Rs.119 and Rs.121 while Commercial Bank (non-voting) gained 30 cents to close at Rs.85 on nearly 0.2 million shares done between Rs.84 and Rs.86.

Mackwoods Energy opened trading yesterday at a high of Rs.16 against an issue price of Rs.14 but closed at Rs.14.90 trading between a low of Rs.14 and a high of Rs.16 when the first parcel of 200 shares was transacted at this price.

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Wednesday, April 25, 2012

Market snapshot - 25 04 2012

source - CAL Research

Sri Lankan stocks flat, rupee hits new intra-day low

April 25, 2012 (LBO) – Stock prices in Sri Lanka, continued to head south, as investors remained on the sidelines, while the rupee slid to a new record low before recovering Wednesday, brokers and dealers said.

 Colombo's All Share Price Index fell 1.52 points or 0.02 percent to 5,440.01, while the liquid Milanka Price Index lost 4.60 points of 0.09 percent to close trading on Wednesday at 4,886.80, according to Colombo Stock Exchange figures.

 The day's turnover of 312.8 million rupees was largely driven by bluechips and financial services stocks, brokers said.

Conglomerate John Keells Holdings PLC, with interest spanning leisure to transport, fell 70 cents to close at 205.10 on volumes of 246,340.

CIC Holdings PLC, which has interest from fresh farm produce to paints, was flat at 100.00 rupees on volumes of 315,552.

The day's other notable trade came from DFCC Bank, which gained 90 cents to 120.00 rupees on volumes of 120,141 shares.

Brokers said investors were looking for some direction to invest at a time the foreign exchange market was showing signs of weakness.

In the foreign exchange market, the rupee recovered to 133.00 levels against the US dollar from a low of 133.50/134.00 in intra-day trading after a state bank sold dollars.

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Mackwoods Energy shares debut today

One hundred million ordinary voting shares of Mackwoods Energy Limited (MEL) will be listed today (25) on the Dirisavi Board of the CSE with the security Code MEL.N000. The company will be classified under the power and energy sector.

MEL raised Rs. 350 million through the issue of 25 million shares to the public at Rs. 14 each, amounting to a 25% stake of the company, post IPO. The IPO was oversubscribed by 1.14 times drawing 512 applications for 28,476,100 shares.

 With a view to maximise investor participation, all retail investors and investors who applied up to and inclusive of 3,571,400 under nonretail investor category were allotted 100% of the shares applied for. Investors who applied for more than 3,571,400 shares were allotted minimum of 3,571,400 plus 24.67% of the shares applied for over and above 3,571,400 shares.

 Mackwoods Energy, positioned as a total energy solutions provider, has been a leader in thermal energy solutions for well over a decade. This IPO will enable the company to broad-base its present operations into power plants, marine power generators and marine engines, and expand its activities in the renewable energy sector through several small hydro power projects, whilst undertaking in the future other non conventional renewable energy projects in wind and solar energy.

 The proceeds of the IPO will be utilised to finance the working capital requirements of the core business of providing thermal power solutions, as well as to finance the diversification into small hydro projects through construction, rehabilitation and upgrading of the SHPs and to finance the future expansion plans by way of new products and services.

 Mackwoods Energy Ltd., a member of the Mackwoods Group with a 170-year-old business heritage, was awarded ISO certificate for excellence in quality management systems and environmental management systems. It has  powered the Sri Lankan economy for over a decade through its activities in key sectors including telecommunications, banking and finance, defence, relief and rehabilitation , disaster management leisure, plantations, construction and infrastructure, healthcare, marine, SME ,education, State utilities and industry, whilst expanding into international markets such as the Maldives.

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Indices down on thin trades in dull day

Both indices were down on the Colombo bourse yesterday in a dull day’s trading with only worthwhile activity seen in JKH and Commercial Bank with CIC and Overseas Realty also making some contribution to turnover, brokers said.

A turnover of Rs.288.6 million, up from the previous day’s Rs.246.9 million, was posted with the All Share Price Index down 13.28 points (0.26%) and the Milanka down 16.94 points (0.35%) with 50 gainers trailing 124 losers.

Brokers said that there were no crossings during the day.

``The indices co tinued to decline for a third consecutive day amid low activity levels dominnated by trades on banking and diversified stocks,’’ John Keells Stock Brokers said in a market report.

JKH, trading between Rs.205 and Rs.206.50, closed flat at Rs.206 with nearly 0.3 million shares changing hands generating the day’s top turnover of Rs.59.7 million.

Commercial Bank followed gaining 30 cents to close at Rs.105.30 on over 0.3 million shares traded between Rs.104.70 and Rs.105.30 contributing Rs.34.8 million to turnover.

CIC closed flat at Rs.100 with nearly 0.2 million shares traded between Rs.95 and Rs.100 generating Rs.16.9 million turnover while Overseas Realty gained 50 cents to close at Rs.14 on nearly 1.2 million shares done between Rs.13.80 and Rs.14.20 contributing Rs.16.2 million to the day’s business volume.

There was some activity in Sampath bank which closed 10 cents up at Rs.179.10 on 60,341 shares with Commercial Bank (non-voting) up 20 cents to close at Rs.85 on slightly over 0.1 million shares.

Access Engineering announced that its mandatory offer for Sathosa Motors had closed on April 20 with approximately 4.44% of Sathosa acquired by Access which already held 77.05% of the company.

Additionally, a small quantity of 0.05% (3,174 shares) had been acquired on the trading floor of the CSE during the offer period.

Nestle Lanka announced a final dividend of Rs.47.50 per share subject to shareholder approval at an AGM on June 1. The share will trade XD from June 5 with payment on June 12.

Analysts said this will be among the highest dividend paid by a quoted company. Nestle has already paid an interim dividend for 2011.

Mr. Rayynor Silva has resigned from the boards of the Citrus Leisure, Kalpitiya Beach Resorts and Waskaduwa Beach Resorts according to Stock Exchange filings with the respective companies.

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Tuesday, April 24, 2012

Market snapshot - 24 04 2012

source - CAL Research

Sri Lanka rupee hits new record low on importer dlr demand

(Reuters) - Sri Lanka's rupee fell to a record 132.20 against the dollar on Tuesday as importers bought the U.S. currency on expectations of further weakening after the central bank decided to stop supplying dollars to meet oil bills from May.

"The highest trade was done at 132.20 a dollar though there is only thin volume of importer dollar demand," a currency dealer said on condition of anonymity.

"Many importers are trying to buy dollars before it depreciates further. Once the oil bills are financed from the market, we expect the rupee to depreciate more. Exporters are also not converting their dollars due to this uncertainty."

Four more dealers confirmed the rupee trading at 132.20, breaking the previous record of 131.60 reached on March 19.

On Friday, Central Bank Governor Ajith Nivard Cabraal said there was no need to intervene in the market, despite heavy depreciation pressure on the rupee, as the country would see $574 million of inflows within a month.

The central bank, which is building up its depleted reserves, has said it may stop supplying dollars to pay for oil imports from May, its latest move to allow more rupee flexibility after it refrained from intervening in foreign exchange markets in February.

The currency has depreciated 13.5 percent since the central bank stopped intervening to defend a specific price on Feb. 9 and 16.6 percent from Nov. 21, when the government allowed 3 percent devaluation. (Reporting by Shihar Aneez; Editing by Ramya Venugopal)

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Sri Lanka shares end down 0.2-pct

April 24, 2012 (LBO) - Sri Lankan shares closed weaker Tuesday in lacklustre trading with turnover remaining low and interest mainly on low value speculative stocks, brokers said.

 The main All Share Price Index fell 0.24 percent (13.28 points) to 5,441.78, while the more liquid Milanka index fell 0.35 percent (16.94) to close at 4,888.85.

 Turnover fell to 289 million rupees, according to stock exchange provisional figures.

Index heavyweight John Keells Holdings closed flat at 206 rupees.

Environmental Resources Investments was the most actively traded stock, closing at 16 rupees, down 10 cents, followed by Citrus Leisure W0018 warrants which ended at 1.80 rupees, down 30 cents.

Swarnamahal Financial Services which was also heavily traded ended flat at 8.50 rupees.

 In the forex market, the rupee was quoted at 132.00/30 levels at 4.00 pm after hitting a historic low of 132.20 in intra day trade.

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Ceylinco Insurance posts Rs. 1.1bn net profit

* Consolidated profit stands at Rs.1,393 million – growing by 39%

* Assets grow by 24.3% to reach Rs.61.3 billion

*Premium Income growth of 10.3%

Ceylinco Insurance recorded a profit after tax of Rs.1,129 million (Rs 1.1 billion) for the year ended 31st December 2011. During the year under review, Ceylinco Insurance PLC made an operational profit of Rs.1,301 million ( Rs 1.3 billion ). The after tax profit of the group stood at Rs.1,393 million, signifying a growth of 39% year on year, the insurers announced recenctly.

In 2011, Ceylinco Insurance PLC recorded a mammoth premium income of Rs.19.8 billion, which amounted to a growth of 10.3%, with the General Division contributing Rs.10 billion, and the Life Division accounting for the remaining Rs.9.8 billion.

Announcing the profit, Managing Director/Chief Executive Officer of Ceylinco Insurance – General, Ajith Gunawardena, said: "What we have achieved in 2011 was in line with our expectations. We have succeeded by adhering to sound fundamentals and we are committed to managing our business with great discipline and prudence. Our main focus, as always, remains the central figure that drives our business: the customer, and accordingly, during the year under review, Rs.4.9 billion was paid out by Ceylinco Insurance – General, as claims."

Commenting on the Life Division’s performance during 2011, Managing Director/Chief Executive Officer of Ceylinco Life, R. Renganathan said: "Our ability to outperform the industry growth is evidence of the trust and confidence that Ceylinco Life has built up over the years. This is an invaluable asset that we intend to nurture and build on in the years ahead. It is noteworthy that Ceylinco Life planned and executed several spectacular promotions in the year reviewed, and paid Rs 1.8 billion in bonuses and cash bonuses, far exceeding policyholder expectations."

Meanwhile, the total investments of the company, including both the Life and General Divisions, exceeded Rs.46,988 million( Rs 47 billion) , whilst assets grew by 24.3% and stood at Rs.61.3 billion by the end of December 2011.

During the year under scrutiny, the General Division sold over 650,308 new policies, bringing the total policies in force to 1,284,621.

Furthermore, net transfers to the Life Fund over the year was Rs. 6.3 billion, increasing the Life Fund to Rs.38.2 billion, recording a remarkable growth of 19.8% year on year.

The Life Division meanwhile, sold over 143,259 new policies during the year, while Life solvency stood at over eight times the required solvency ratio. The total claim benefits disbursed by the Life Division in 2011 amounted to Rs.2,946 million.

Ceylinco Insurance, the undisputed market leader in Sri Lanka for eight consecutive years, enjoys a market share of 24.8 % in the sphere of insurance, and remains poised for exponential growth in 2012.

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Colombo bourse in the red

Indices closed in the red on Monday on thin volumes.

 The All Share Price Index fell 0.04 percent down 2.07 points to close at 5,455.06 while the Milanka Price Index of more liquid stocks fell 0.36 percent, down 17.78 points to close at 4,905.79.

Turnover reached Rs. 247 million on a volume of almost 25.8 million shares.

Forty four counters closed in positive territory against 139 counters that closed in the red.

The Colombo Stock Exchange has fallen 10.20 percent so far this year.

The net foreign inflow yesterday amounted to Rs. 39.68 million.

The highest contributor to turnover was Commercial Bank with 231,782 shares changing hands during the day, the counter gained 0.96 percent to close at Rs. 105.

JKH closed flat at 206 after 96,418 shares were traded.

Colombo Fort Land and Building fell 0.59 percent to Rs. 33.50 with 343,695 shares changing hands.

Nestle Lanka yesterday announced a final dividend of Rs. 47.50 per share.

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Monday, April 23, 2012

Sri Lanka shares end down

April 23, 2012 (LBO) - Sri Lankan shares closed lower Monday and turnover fell back to low levels despite some enthusiasm seen last week after regulators lifted price restrictions that triggered a knee-jerk rally, brokers said.

 The main All Share Price Index fell 0.04 percent (2.07 points) to 5,455.06, while the more liquid Milanka index fell 0.36 percent (17.78) to close at 4,905.79.

 Turnover fell to 247 million rupees, according to stock exchange figures.

Index heavyweight John Keells Holdings closed flat at 206 rupees.

Commercial Bank was the most actively traded stock, closing at 105 rupees, up one rupee.

Citrus Leisure W0018 warrants were also actively traded, ending at 2.10 rupees, down 1.70 while Environmental Resources Investments close at 16.10 rupees, down 40 cents.

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Mackwoods debuting on Wednesday but on Diri Savi Board

Mackwoods Energy Ltd., (MEL) will debut on the Colombo Stock Exchange on Wednesday 25 April but on the Diri Savi Board and not on Main Board.

 The reason for the change is MEL not fulfilling the requirements for Main Board listing following the Initial Public Offering (IPO).

Main Board listing requires minimum public holding of 25% and minimum of 1,000 shareholders holding not less than 100 shares as per rule 2.1.2 of the Colombo Stock Exchange (CSE).

 Howeer MEL had informed that the company has fulfilled the criteria for a Diri Savi Board listing as per rule 2.1.2 of the CSE.

 The probable listing on Diri Savi Board was disclosed in MEL’s Prospectus.

 Requirements for listing on Diri Savi Board 10% of the total number of shares for which a listing is sought, should be in the hands of a minimum number of 100 public shareholders holding not less than 100 shares each.

 The security code assigned for Mackwoods Energy is MEL-N-0000 and will be classified under the Power and Energy Sector. 100 million shares will be listed.

 The Rs. 350 million IPO of MEL last month was oversubscribed by 1.14 times. It received 523 applications worth Rs. 399 million.

 The IPO made available 25 million shares at Rs. 14 each.

 Applications made via bank draft and cheques had amounted to 521 requesting for 21.3 million shares worth Rs. 298.16 million.

 There had been two applications with payment by bank guarantee requesting for 7.2 million shares worth Rs. 100.8 million. Mackwoods Energy was the second IPO for 2012 and joins the rank of oversubscribed initial offerings.

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Sunday, April 22, 2012

Profit taking swallows up some price band removal gains

Profit-taking on the Colombo’s Stock Exchange last Friday overshadowed the previous day’s rally following the removal of the price band, Acuity Stockbrokers said in a market report.

 Noting that the market commenced last week after the New Year holidays on a lackluster note with average turnover levels at Rs.0.3 billion by mid-week, the SEC’s removal of the 10% price band imposed to curb price volatility revived markets on Thursday, the report said.

However, the 111 point rally of the All Share Price Index on Thursday following invigorated retail investor confidence was swallowed up by profit taking on Friday that pushed the ASPI down 61 points with the day’s turnover of Rs.0.6 million being the highest for the week.

"We expect market activity in the week ahead to show moderate improvement given the end of the recent spate of holidays," Acuity said.

"Markets are also likely to respond positively to the upgrades in the trading system expected this week."

Acuity also reported that the rupee depreciated 1.4% against the dollar amidst significant importer dollar demand as the currency market braces itself for the possibility of the Central Bank stopping its supply of dollars to meet oil import bills.

Last week saw market indices closing higher against the previous holiday-shortened week with the ASPI up 14.27 points (0.29%).

Acuity said that JKH led turnover value contributing Rs.457.9 million or 24.37% of total market turnover.

NDB with Commercial Bank too made significant contributions of 7.67% and 4.19% respectively.

Total weekly turnover at Rs.1.88 billion averaged Rs.375.88 million a day against the previous week’s daily average of Rs.163.21 million – a gain of over 100%.

Market capitalization too recorded a week-on-week gain of over 0.58% to close the week at Rs.2,029.61 billion, Acuity said.

Foreign participation posted net inflow of Rs.142.83 million, averaging Rs.28.57 a day against the previous week’s net buying position of Rs.9.11million.

The Acuity report said that average foreign daily purchases amounted to Rs.150.05 million against the previous week’s average of Rs.27.75 million while the daily average foreign sales amounted to Rs.121.49 million with Dialog and Swarnamahal Finance leading foreign sales in value terms.

Ceylon Tobacco and Commercial Bank led foreign purchase transactions during the week.

John Keells Stockbrokers said in its weekly report that the market had rebounded during the week on the back of gains on large caps including Ceylon Tobacco, Commercial Bank and HNB.

"The week’s activity was mainly driven by institutional and foreign participation on diversified and banking counters," the report said.

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Price band removal good for market

Sri Lanka's stock market regulator on Thursday removed the 10 % price band rule which had been imposed last year after the market showed a lot of volatility, with the move expected to bring some long term stability in the Colombo bourse. "This should stimulate the market in the long term. Regulation is good but to a point," one broker said, adding however that this may not restore retail interest since fixed income instruments are giving better returns.

He said foreign funds are seen active that this could see bigger interest from this sector while noting that liquidity could improve. The Securities & Exchange Commission (SEC) said in a statement that the Colombo Stock Exchange which runs the country's only stock exchange was directed to lift the price band imposed on certain stocks owing to high volatility and volumes.

It said these stocks would continue to be monitored and the price band re-imposed if necessary.

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Saturday, April 21, 2012

Rupee, Bourse down

The rupee edged down on Friday due to importer dollar demand despite the Central Bank saying $ 574 million inflows are expected within a month.

 The rupee ended at 120.20/30 against the dollar, weaker than Thursday’s close of 129.70/90. It fell to 130.60 intraday, but a State-owned bank sold dollars at 130.40, helping the currency to recover.

The Central Bank said on Friday that there was no need to intervene in the market as the country would see $ 574 million of inflows within a month.

However, many dealers said the market would react only when the inflows come in and they still believe the currency warranted further depreciation.

 The currency has depreciated 12.2 per cent since the Central Bank stopped defending it on 9 February after repeatedly saying there would not be any depreciation in 2012 followed by a three per cent devaluation on 21 November.

“Intervention will not help now as we still see heavy importer demand,” said a currency dealer on condition of anonymity.

 Sri Lanka’s stock market fell 1.1 per cent or 61.59 points to 5,457.13 on profit taking after a more than two per cent jump in the previous session as the Securities and Exchange Commission (SEC) suspended a 10 per cent price band on price movements.

The market has been declining recently due weakness in the rupee, rising market interest rates, and the Government raising fuel prices by up to 40 per cent.

 The day’s turnover was Rs. 622 million ($ 4.79 million), well below this year’s daily average of 1.31 billion rupees.

The market, however, saw a net foreign inflow of 52 million rupees, extending the net foreign buying to 21.3 billion rupees so far in 2012.

 The Colombo Bourse is one of the worst performing Asian markets this year, losing 10.2 per cent.

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Friday, April 20, 2012

Weekly foreign holding update - 20 04 2012

source - CAL Research

Market snapshot - 20 04 2012

source - CAL Research

Sri Lanka shares end down 0.6-pct

April 20, 2012 (LBO) - Sri Lankan shares slumped Friday after a short-lived rally the day before in a knee-jerk reaction to the lifting of price restrictions by regulators, brokers said.

 The main All Share Price Index fell 0.64 percent (35.11 points) to 5,483.61, while the more liquid Milanka index fell 0.30 percent (14.81) to close at 4,924.99.

 Turnover improved to 622 million rupees, according to stock exchange provisional figures.

The market lost steam in the afternoon after a morning rally that followed a two percent gain Thursday, when the regulator said it had removed 'price bands' imposed to curb stock price volatility caused by speculation.

Index heavyweight John Keells Holdings closed at 206 rupes, down 50 cents.

Ceylon Tea Brokers, which had been the top gainer Thursday, fell 30 cents to close at 5.40 rupees with over 1.2 million shares traded.

Environmental Resources Investments was also actively traded, closing at 16.50 rupees, down 10 cents, as was HVA Foods which ended at 13.60 rupees, down 40 cents.

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Market snapshot - 19 04 2012

source - CAL Research

Likely shortfall in global tea crop good omen for prices – John Keells

Commodity broker John Keells Plc said yesterday that the global production of black tea was heading towards a shortfall in the first half of 2012 due to the prevailing dry weather in major tea producing countries and this will help stabilise prices at remunerative levels.

It said worst ever drought in fifteen years in North India has impacted on crop intakes with an estimated drop of 50 – 60% to end March 2011.  It is reported that Assam and West Bengal together will record approximately 20 Mkgs to end March 2012 as against 46 Mkgs recorded for the corresponding year of 2011. It is also reported that shortage of tea in India and a robust domestic demand will push up prices in the country. 

 Abnormal weather conditions in Kenya too have reduced tea production. Kenyan tea crop dropped 12.9% in the first two months of the year compared to the corresponding period of 2011 and is likely to end the first quarter at a 15% deficit once again due to hot and dry weather coupled with repeated frost attacks in February.  Although rains have come in late, it will be difficult to re-coup the crop loss, with Kenyan tea board projecting a drop of 5% by the end of the year.

 Sri Lanka tea production appears to be heading in a similar wane though not to the same degree as North India and Kenya. 

“Tea production at the end of the first quarter is also likely to show a negative variance compared to 2011,” John Keells said.

 Extremely dry conditions that prevailed in the first quarter of the year have given way to inter monsoonal showers. Bright mornings followed by afternoon showers will prevail until the onset of the south west monsoon in June. These are welcome rains and together with applications of fertiliser are ideal for growth of tea. Despite better weather for cropping intakes are still low due to stoppage of work for New Year and workers mostly on estates up country celebrating their annual religious festivals, but is expected to increase significantly in the month of May.

 It is hoped, that the shortfall in crop in key black tea producing countries will help stabilise prices at remunerative levels. 

“We are already witnessing prices of Sri Lanka’s Low Grown teas continuing to rise and are now above last year’s levels. Low Grown accounts for bulk of Sri Lanka’s production,” John Keells added.

 In the absence of a sale last week, on account of the Sinhala/Tamil New Year, the 1.2 Mkgs of Ex Estate teas on offer met with fair demand.  Western High Grown BOPs declined following quality.

 Below best types shed Rs. 5 to 10 with the plainer types declining further. BOPFs on offer at the top-end declined Rs. 10 and more. However there was better demand for the below best and plainer types.

 Nuwara Eliya BOP/BOPFs gained Rs. 10. Uva /Udapusselllawa BOPs were barely steady with BOPFs advancing Rs. 10. Select Best Low Grown PF1s were firm, whilst others declined substantially with a fair weight remaining unsold.  High and Medium types shed Rs.10/- on average.

Brokens also declined by a similar margin and more for the Low Grown types.

 The 3.4 Mkg of Low Growns that were on offer this week, met with improved demand. 

Prices for most categories on offer advanced further by Rs. 10 to Rs. 15 and more for the Pekoe varieties. The highest Low Grown average on record was at the sale of 16 September 2009 at Rs. 456.23 when the US Dollar to rupee conversion was at Rs. 115/61.  With the current trend in prices and with the US Dollar to the rupee fluctuating between Rs. 126 and Rs. 130, it is expected that the Low Grown average will reach a record level in the near future. There was excellent demand from Russia, Iraq, Syria and most other Middle Eastern markets, John Keells said.

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Equities vs. rising interest rates: Gains exist

DNH Financial said yesterday that while investors may perceive rising domestic interest rates as stealing the appeal for equities, it does not expect this to happen in the short term given the relative asset allocation disconnect between equities and interest rates.

“We believe that the next few months will offer an attractive opportunity for risk savvy investors to be able to proactively position themselves to capitalise on the market notwithstanding the possibility of a further rise in interest rates which could dent the pace of corporate earnings growth for those companies that are highly leveraged,” DNH said.

“While the general lull in the market is certainly uninspiring, we believe that this is a temporary dislocation. We also believe that for international fund managers squaring off their books in other emerging markets, Sri Lanka offers a relatively attractive investment opportunity diversifying away from the general nervousness in the global markets,” the broker added.

 Arrenga Capital advised investors not to get excited on the sudden rallies which are likely to be short lived amidst the rising interest rates.

“We believe value seekers should give priority to higher dividend yielding counters as the rising interest rates may dim the prospects of capital gains in the short term,” it added.

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Band lifted, Bourse booms

The Colombo stock market yesterday produced a late rally following the removal of the 10% price band by the Securities and Exchange Commission (SEC).

 The market’s value swelled by Rs. 41 billion whilst main All Share Index gained by 2% or 111 points as sentiments of investors and brokers got a boost following the regulatory action for the better.

Marking the end of what had been a thorn in the eye of the market for one and half years, the SEC said its Commissioners at their meeting on Wednesday decided in favour of the lifting of the five-market-day 10% price band on certain securities based on an agreed formula which takes into account volatility and volumes, with immediate effect.

 Despite the removal the SEC said it will continue to monitor the behaviour of the market and the price band may be re-imposed in future if the situation so warrants. Most brokers made it a point to welcome the removal of the price band in addition to linking it to the market’s revival yesterday whilst some cautioned investors from being carried away.

 DNH Financial said “In a welcome move, the ASPI changed course rising by 2.1% to close the session at 5519 as the 10% price ceiling on stocks was lifted.”

 “The Colombo Bourse received a boost on the news of the lifting of the price band rule by the SEC,” added Arrenga Capital whilst Asia Wealth Management chipped in saying, “Activities at the bourse showed a positive turnabout with the SEC’s decision to direct the Colombo Stock Exchange to lift the 10% price band with immediate effect.” Lanka Securities also said Colombo bourse recovered strongly with the price appreciations in index heavy high dividend payers and due to the lifting of 10% price band regulation.

 The 2% gain yesterday brought the year to date negative return back to below double digit levels.
 Some analysts viewed the removal of price band as “too late” since the market had got a prolonged beating.

 The true test of investor reaction can only be measured if the Bourse remains positive today as well.
 The surge in the ASPI yesterday was the largest gain since 17 February. The rise in the more liquid Milanka, however, was a modest 32 points to close at 4,939.

 Turnover yesterday was Rs. 359 million driven by active play on blue chips as well as speculative stocks.

 Trading in John Keells Holdings, Commercial Bank and Hatton National Bank(X) accounted for 40% of the day’s turnover. JKH saw trading worth Rs. 61.6 million followed by Commercial Bank (Rs. 56.1m), Hatton National Bank – non voting (Rs. 12.6m) and Commercial Bank non-voting (Rs. 12.0m). Both Commercial and HNB closed up by Rs. 4.10 and Rs. 5 respectively whilst JKH dipped.

 DNH said gainers modestly outpaced losers with SMB Leasing (X), Ceylon Tea Brokers and Nation Lanka Finance (W0021) rising by 25.0%, 18.4% and 16.7% offsetting losses in Bimputh Lanka , Samson International and Shalimar which declined by 25.1%, 12.2% and 11.3% respectively.

“Even though the low volumes were recorded, strong price appreciations in high dividend payers such as Ceylon Tobacco (by Rs. 93.50) and Nestle Lanka (by Rs. 30.00) contributed positively to the market performances,” Lanka Securities said.

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Dhammika-Nimal duo’s 12th acquisition brews a perfect cuppa!

■Royal Ceramics sees prospects and related party synergies in 51% buy of Asia Siyaka Commodities for Rs. 363 m

 ■New Chairman Nimal says broking, credit and warehouse biz will be expanded

 ■Listing via introduction coming up

The famous duo Dhammika Perera and Nimal Perera last week effected the 12th acquisition, reaffirming their prowess of growing via strategic buys spanning a decade.

This time around via the acquisition of a 51% stake in Asia Siyaka Commodities Ltd. by Royal Ceramics Plc (RCL), the duo hopes to brew a perfect cuppa though times are challenging for the tea industry.

 In a deal worth Rs. 336.6 million, RCL bought the 51% stake amounting to 132.6 million shares at Rs. 2.54 each.

 For Asia Siyaka, the fourth largest tea broker, few notches down from where it was originally, the acquisition marks another phase of coming under a new set of shareholders.

 Set up in 1998 under the Asia Capital Group along with a team of professional brokers, Asia Siyaka saw in July 2011 the exit of its co-founder selling 40% stake for Rs. 175 million to Asia Siyake Pvt Ltd., which is an entity formed by directors and staff. 

 At least by the sale price the enterprise was valued at Rs. 437.5 million. A few months later, Ishara Nanayakkara of LOLC Group and Dinal Wijemanne bought a 35% stake for Rs. 228 million putting the value at Rs. 651 million which is almost equal to the price at which RCL based its acquisition.

Asia Siyaka’s revenue is estimated at over Rs. 400 million whilst it had made a net profit of Rs. 50 million last year. 

 RCL Managing Director Nimal Perera who will shortly assume duties as Chairman of Asia Siyaka told the Daily FT yesterday that the acquisition was strategic with a long term perspective.

 Asia Siyaka will also be listed via an introduction with the application submitted before 31 March being processed by the Colombo Stock Exchange.RCL bought stake from Dinal Wijemanne (15%) and some staff holdings whilst Ishara reduced his stake from 20% to 17.5%. Co-founder Anil Cooke will remain the CEO at Asia Siyaka.

 The acquisition also signals that RCL, the market leader in tiles and bath ware, is keen to pursue select diversification.

 The acquisition of Asia Siyaka’s control comes hot on the heels of RCL consolidating LB Finance Plc as an associate, having increased the stake to 25% recently. Last year it acquired Ever Paint and Chemical Industries Ltd., mostly as a Research and Development venture.

 Given its financial muscle (RCL Group’s retained earnings were at Rs. 4.8 billion and Rs. 2.6 billion at company level as at end 2011) and expertise from LB Finance, the fastest growing in its league, Asia Siyaka is likely to enhance its credit offerings to smaller tea factories.

 The warehouse business operated via a subsidiary will be expanded as well harnessing the three acre land space available according to Nimal.

 Apart from its own customer base, Asia Siyaka is also expected to benefit from the synergies from Hayleys Plc’s plantation business. Dhammika directly and indirectly controls both RCL and Hayleys.

 Hayleys two plantation companies Talawakelle and Kelani Valley have a combined tea crop of 13 million kilos (2011) accounting for 4% of national production.

 Talawakella Plantation Plc was ranked No. 1at the Colombo Tea Auctions for prices amongst the Regional Plantation Companies for the eight and fifth year in succession for high and low grown elevations respectively. Its average price registered was well above the national averages.

 Last year tea prices declined for the first time since 2000 at the Colombo tea auctions. The national average price declined by Rs. 10.72 per kilo to Rs. 359.89 per kilo.

 Colombo auction centre however continued to receive the highest price at US $ 3.29 per kilo.

 Forbes and Walker Tea Brokers however said yesterday that weekly auction average of sale No.14 of Rs.396.54 (US$3.06) for the second consecutive week was higher than the corresponding sale average of 2011 of Rs.373.27 (US$3.35).

 Medium Growns totalling Rs.358.36 (US$2.27) for sale No.14 of 2012 show a gain of Rs.4.72 vis-a-vis Rs.353.64 (US$3.18)of 2011. Low Growns too totalling Rs.418.72 (US$3.23) show a significant gain of Rs.37.78 vis-a-vis Rs.380.94(US$3.42) of 2011.

 High Grown’s however totalling Rs.357.70 (US$2.76) show a decrease of Rs.8.42 vis-a-vis Rs.366.12 (US$3.79).

 Forbes said it was evident that Medium/Low Grown’s have shown a growth YoY in Rupee terms. High Grown prices remain below the corresponding sale prices of 2011. You will also observe that although we have seen a growth YoY in Rupee terms, we remain below the corresponding prices of 2011 in US$ terms.

 Whilst the Dhammika and Nimal duo see prospects in Asia Siyaka’s under RCL banner, Hayleys and Talawakelle Plantations Chairman Mohan Pandithage in the latter’s 2011 Annual Report noted that the tea industry was at cross roads; requiring a breakthrough in productivity to remain viable.

“It is important that all stakeholders including policy makers, recognise that international competitiveness is a prerequisite for the stability of the industry. Hence, industry wage structure, work practices and government policy should soon move to mirror the required flexibilities,” he added.

“We look to 2012 with cautious optimism expecting at least some of our key export markets returning to normalcy before long. Possible tight supply situation from rising domestic demand in India and China too could help prices to improve. We on the other hand are concerned with the on-going embargo on Iran, increase in domestic interest costs and liquidity constraints,” said Pandithage whose comments more or less echoed sentiments from rest of the regional plantation companies.

 Industry analysts said that commodity broking business survives on volume and price garnered by clients for their produce in auctions. Whilst better times for the overall plantation industry could boost prospects for brokers, entities such as Asia Siyaka could also maximise earnings from their other services such as credit and warehousing facilities.

 RCL in the first nine months of 2011/12 financial year saw its bottom line grow by 45% to Rs. 1.48 billion whilst in the third quarter the Company produced a net profit of Rs. 752.5 million.

 This performance was emphasised by analysts as outstanding given the fact that RCL is only dealing with a single product sector. Group revenue rose by 23% to Rs. 5.8 billion in the nine months whilst for the quarter it rose to Rs. 2.4 billion from Rs. 1.8 billion a year earlier.

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Indices moves up sharply as price bands are removed

Turnover remains disappointing

The Colombo bourse moved up sharply yesterday although brokers were reluctant to attribute the upward movement totally to the removal of the price band announced yesterday by the Securities and Exchange Commission.

"The market was up about 40 points even before the announcement was made," a broker said. "It went up further thereafter and would certainly have helped retail sentiment."

Despite the sharp movement of both indices – the All Share up 111.25 points (2.06%) and the Milanka up 43.79 points (0.29%), turnover was a disappointing Rs.359.4 million, up from the previous day’s Rs.249.9 million, with 143 gainers strongly outpacing 41 losers.

JKH was the most traded stock with nearly 0.3 million shares done between Rs.207.50 and Rs.209 with the counter closing Rs.3.50 down at Rs.206.50 generating the day’s highest turnover of Rs.61.6 million.

Brokers said that there was renewed interest in Commercial Bank which gained Rs.4.10 to close at Rs.105.90 with over 0.5 million voting shares done between Rs.102.80 and Rs.106 contributing Rs.56.1 million to turnover.

HNB (non-voting) was number three on the turnover league losing 10 cents to close at Rs.96.50 trading between Rs.95.40 and Rs.96.50 generating a business volume of Rs.12.6 million.

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Market welcomes lifting of 10 percent price band

By Hiran H. Senewiratne

 The Securities Exchange Commission (SEC) yesterday (19) lifted the 10 percent price band imposed on all listed securities, Acting Director General SEC Prof. Hareendra Dissabandara said.

"The SEC will continue to evaluate the behavior of the market and the price band will be re-imposed in future if the situation so warrants," Prof Dissabandara said in a short statement.

Stock brokering firms as well as investors welcomed the move because it would make a positive impact on the market which has been experiencing a lull.

Director/ General Manager Ceylinco Stock Brokers Sriyan Gurusinghe told the Island Financial Review that it was a very good move, which they had been asking for some time from the SEC.

"This would positively impact the market," he said.

Managing Director/CEO Capital Trust Securities (Pvt) Ltd Tushan Wickramasinghe said that the removal of the 10 percent price band was welcomed by all stockbrokers and investors even though it was long overdue.

He said it would give a fillip to the market without outside interference, because over time, each share’s market price was settled at its intrinsic value.

Head of Sales and Market Lanka Securities (Pvt) Limited Eardley Kern said that it was a good move as market manipulators took the advantage over the 10 percent threshold.

He also said if the SEC consults all stakeholders prior to implementing new regulations as it would help the market to flourish.

The price bands were imposed to curb speculative trading in junk stocks.

A market analyst said the SEC should tighten its surveillance and name and shame market manipulators without fear and favour.

One of the worst performing stock exchanges this year, the Colombo Stock Exchange has fallen 9.15 percent year-to-date.

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