Thursday, January 31, 2013

COMB - 3Q 2012 Earnings Review - BUY (Reported On Nove 2012)

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COMB’s 3Q2012 core banking profits* were LKR3.9bn (+22% YoY), with profit attributable to equity holders growing 13% YoY to LKR2.3bn due to increased loan loss provisioning  +LKR222mn from Jun 2012).

The bank’s NIMs marginally improved to 4.5% in Sep 2012 (from 4.4% in Dec 2011), while its loan
book grew 14% from Dec 2011. COMB’s 9 month earnings of LKR7.6bn are inline to meet CAL’s 2012E profit of LKR9.9bn (+22% YoY).

CAL maintains a BUY on COMB for a total 1-year return of 34% (voting) and 27% (non-voting).

Steady growth in Net Interest Income (+21% YoY) – COMB’s 3Q2012 NII grew 21% YoY to LKR5.6bn on the back of marginally improving NIMs (4.4% in Dec 2011 to 4.5% in Sep 2012) due to its higher CASA base (46% in Sep 2012 vs. industry average of c.30%) and moderate loan book growth of 14% from Jan-Sep 2012. LKR3.6bn (+38% YoY) in core banking profits excluding forex income – A 51% YoY decline in forex income (LKR277mn in Sep 2012 vs. LKR571mn in Sep 2011) was mainly due to a one-off forex translation loss resulting from the 5% LKR appreciation (from June-Sep 2012) as COMB has higher foreign assets compared to foreign liabilities. Excluding forex income, core profits grew 38% YoY to LKR3.6bn.

Effective cost management (cost-to-income ratios improved to 45% in Sep 2012 vs. 48% in Sep 2011) and rapid increase in fee based income (+34% YoY) contributed to the growth.

Profit to equity holders grew 13% YoY– COMB’s gross NPL’s increased from 3.4% in June 2012 to 3.7% in Sep 2012, leading the bank to increase its loan loss provisioning by LKR222mn (vs. a LKR231mn provision revrsal in Sep 2011). As a result, profit attributable to equity holders grew 13%YoY to LKR2.3bn. For the nine months ended Sep 2012, COMB recorded profits of LKR7.6bn, in-line to meet CAL’s 2012E LKR9.9bn (+22% YoY) profit target.

BUY for a 34% total 1-year return – CAL maintains its 2012E core banking profit at LKR15.9bn (including forex gains) and net profit at LKR9.9bn.

 BUY COMB Voting for a 1-year total return of 34% (includes a 5% dividend yield) and COMB Non-Voting for a total 1-year return of 27% (includes a 6% dividend yield).

source - CAL Research

Sri Lanka bourse slips on foreign selling, profit-taking

Jan 31 (Reuters) - Sri Lanka's shares extended falls for the second day on Thursday as retail investors booked profits in large-caps amid foreign selling, while the rupee ended firmer on inflows into government bonds.

The main share index fell 0.15 percent, or 9.01 points, to end at 5,816.89.

Foreign investors sold a net 292.3 million rupees ($2.31 million) worth of shares, extending the net foreign outflow to 1.32 billion rupees so far this year.

"The market came down on profit-taking in large-caps and many investors were on the sidelines awaiting for the direction with the foreign selling," a stockbroker said on condition of anonymity.

Shares in Ceylon Tobacco Co Plc fell 1.75 percent to 840 rupees, while Carson Cumberbatch Plc ended 3.1 percent weaker on profit-taking.

The day's turnover was 3.42 billion rupees, well above the daily average of 1.22 billion so far this year.

The rupee edged up to 126.25/40 to the dollar from Wednesday's close of 126.48/55, on dollar inflows into government securities, traders said. ($1 = 126.4500 Sri Lanka rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand Basu)

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Market Snapshot - 31 01 2013

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source - CAL Research

Mega trades in ComBank drive indices and turnover

Foreigners sell, Captains and Indra de Silva on buy side

Crossings in Commercial Bank worth Rs 1.82 billion with foreign selling and local high net worth buying dominated trading on the Colombo bourse yesterday with a turnover of Rs. 2.68 billion posted, up from the previous day’s Rs. 1.35 billion, and both indices up – the All Share by 25.15 points (0.43%) and S&P SL20 by 7.87 points (0.25%) with 103 gainers outpacing 79 losers while 130 counters closed flat.

Brokers said that the Captains and motor trader Indra de Silva were among the buyers while a foreign fund was the seller. The ComBank crossings accounted for 17.7 million shares done in three block trades at a price of Rs. 103 a share generating a business volume of Rs. 1.82 billion.

John Keells Stock Brokers summed up the market saying: ``The ASPI ended higher amid strong gains in several large cap counters, reversing a three day downtrend. Turnover crossed the Rs. 2bn mark on the back of a block trade on COMB which accounted for over 65% of turnover. The market also saw crossings on JKH and LOLC."

Foreign sales stood at Rs. 1.91 billion and purchases at Rs. 487.68 million with an outflow of Rs. 1.43 billion.

Apart from ComBank where a second interim dividend of Rs. 1 per share is pending, there was a single block trade of 145,700 JKH at Rs. 225 worth Rs. 32.8 million and two parcels of 5 million LOLC crossed at Rs. 71.50 contributing Rs. 357.5 million to turnover.

ComBank was the main business generator on the trading floor too closing 90 cents up at Rs. 105.80 on 0.9 million shares done between Rs. 104 and Rs. 106.50 contributing Rs. 92.2 million to turnover.

 Brokers said that some of the big sellers had in addition to the block trades sold on the floor as well.

JKH too saw floor trades totaling 0.2 million shares closing Rs. 4.60 up at Rs. 229.70 trading between Rs. 225.90 and Rs. 229.70 contributing Rs. 48.2 million to the day’s turnover.

LOLC closed 30 cents down at Rs. 69 on 0.2 million shares traded on the floor.

Other big contributors to business volumes on the trading floor included HNB closing flat at Rs. 144 on over 0.2 million shares, DFCC closing a rupee down at Rs. 124 on nearly 0.3 million shares and Royal Ceramics, up 20 cents to close at Rs. 99.50 on 0.3 million shares.

Sampath was up 40 cents to close at Rs. 220 on 80,812 shares done on the floor while Browns edged down 10 cents to close at Rs. 123.90 on over 0.1 million shares traded.

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JKH 9-month results better amidst tough 3Q

Premier blue chip John Keells Holdings (JKH) yesterday announced improved results for nine months, but the third quarter has been challenging.

 The cumulative profit attributable to equity holders for the nine months ended 31 December 2012 at Rs. 6.97 billion reflects an increase of 28% over the corresponding period in the previous year, while the profit attributable to equity holders for the third quarter at Rs. 2.90 billion up by only 8%.

The cumulative Group profit before tax (PBT) for the nine months ended 31 December 2012 at Rs. 8.97 billion was an increase of 27% over a year earlier.

 Group PBT at Rs. 3.58 billion in the third quarter represented an increase of 8% above the Rs. 3.33 billion recorded during the same period last year.

 The cumulative revenue for the nine months ended 31 December 2012 at Rs. 62.20 billion represented an increase of 13%. The revenue for the third quarter at Rs. 21.51 billion was a marginal increase over the Rs. 21.41 billion revenue recorded in the same period last year. The company PBT for the nine months ended 31 December 2012 of Rs. 3.93 billion was up 69%.

“The Group’s quarterly results reflect the challenges that we continue to face in a volatile macro-economic environment,” JKH Chairman Susantha Ratnayake said in a review accompanying interim results yesterday.

In the 3Q gross profit was up by only 3% to Rs. 5.56 billion whilst results from operating activities was down by 8% to Rs. 1.99 billion. Finance income of Rs. 1.08 billion in 3Q, up by 54% (71% rise in net finance income to Rs. 790 million) and 14% growth in share of results of equity accounted investees to Rs. 787 million helped JKH to improve the pre-tax performance. Net finance income in the nine months was a high Rs. 2.2 billion, up by 46%.

 Commenting on segmental results, he said the transportation industry group PBT of Rs. 844 million was in line with the third quarter PBT of the previous year [2011/12 Q3: Rs. 845 million] mainly on account of exchange losses in the bunkering business as a result of the appreciation of the rupee. The new domestic aviation associate of the Group, operating under the brand name ‘Cinnamon Air,’ completed the purchase of two Cessna amphibian aircrafts.

 Operations of the airline are scheduled to commence during the fourth quarter of the financial year 2012/13, which we believe will be an important addition to the tourism infrastructure within the country.

 The Leisure industry group PBT of Rs. 1.34 billion was an increase of 33% over the third quarter of the previous year [2011/12 Q3: Rs. 1.00 billion]. The growth in PBT was predominantly driven by City Hotels.

“Sri Lankan Resorts was impacted by lower than expected occupancies as a result of a drop in our traditional markets, combined with aggressive marketing by competing destinations. We continue to reiterate the importance and urgency of creating greater awareness of Sri Lanka as a travel destination, to ensure that the country fully realises the substantial multiplier effects to the economy from this important industry,” JKH Chief Ratnayake said.

 The Property group PBT of Rs. 180 million for the third quarter was a decrease of 44% over the PBT recorded in the corresponding period of the previous year [2011/12 Q3: Rs. 319 million], primarily as a result of the revenue recognition cycle. The progress of ‘OnThree20’ is on schedule and construction has progressed up to the 28th floor. The 140,000 square foot ‘K Zone’ mall in Kapuwatte will commence operations in February 2013.

 JKH’s Consumer Foods and Retail industry group PBT of Rs. 186 million was a decrease of 65% over the third quarter of the previous year [2011/12 Q3: Rs. 533 million] mainly due to a non-recurring income of Rs. 120 million in the corresponding quarter of the previous year.

 Ice cream, soft drink and processed meat volumes were below expectations while overall profitability was negatively impacted by excise and duty increases and other cost escalations during the quarter under review. This was compounded by the severe floods experienced in many districts, Ratnayake added.

 The Retail sector is seeing benefits arising from the implementation of the new way forward strategy and witnessed growth in footfall and basket values. The imposition of the value added tax (VAT) of 12% with effect from 1 January 2013 on retail businesses with turnover exceeding Rs. 500 million per quarter is expected to have an impact on the margins of the Retail sector.

“Whilst we support the principle of broadening the tax base, the fact that no transitional provisions were made available to allow for the claim of input VAT on the closing stocks as at 31 December 2012 was disappointing. This will result in a significant ‘one-off’ impact on profitability in the next quarter,” JKH Chairman pointed out.

 The Financial Services industry group PBT of Rs. 734 million was an increase of 27% over the third quarter of the previous year [2011/12 Q3: Rs. 577 million]. Nations Trust Bank was the primary contributor to growth. Union Assurance raised Rs. 750 million through a rights issue to strengthen its capital base.

 The Information Technology industry group PBT of Rs. 103 million was an increase of 59% over the third quarter of the previous year [2011/12 Q3: Rs. 65 million]. The growth in PBT was driven by the improved performance of the Office Automation and Software Services businesses compared with the corresponding period last year.

 Other, comprising of Plantation Services, John Keells Capital and the Corporate Centre, recorded a PBT of Rs. 194 million as opposed to the loss of Rs. 16 million recorded for the third quarter of the financial year 2011/12, mainly as a result of higher income arising from better interest rates.

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Tea exports record marginal gain in December

Tea exports for the month of December 2012 totalled 30.9 m kgs, showing a marginal gain of 0.7m kgs vis-à-vis 30.2m kgs in 2011.

Bulk tea and tea in packets has shown a growth YOY whilst tea in bags shows a decline compared to the corresponding total of 2011. The total revenue of 17.7 b realised in December 2012 shows a gain of 2.6 b vis-à-vis 15.1 b realised in 2011.

Cumulative exports for the period January/December 2012 totalled 319.9m kgs vis-à-vis 322.6m kgs in 2011 thus showing a decrease of 2.7m kgs. Total revenue of Rs.180.4 b has shown a growth of Rs. 15.5 b vis-à-vis Rs. 164.9 b in 2011.

 The higher revenue recorded in 2012 than the previous best achieved in 2011 in spite of a lower exported volume 2012 is mainly due to the devaluation of the rupee against the US$.

 The export volume of tea in bulk and tea in packets in 2012 shows a marginal gain vis-à-vis 2011 same period whilst tea in bags shows a marginal decline. The FOB price per kg in 2012 is at Rs.563.94 a gain of Rs.52.86 vis-à-vis Rs.511.08 in 2011.

 When analysing the major importers, CIS including Russia has retained the position of No. 1 followed by Iran, Syria, Iraq, Turkey and Libya. Exports to Iran and Libya have shown a significant growth in 2012 vis-à-vis 2011 (8.94% and 9.09%) respectively. The UAE however in 2012 has shown a decline to the corresponding period of 2011 (10.65%).
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Foreign selling in COMBank triggers Rs. 1.4 outflow; locals step up buying

The Colombo stock market was yesterday boosted by strong play by foreigners and locals alike, raising turnover to a two-month high of Rs. 2.6 billion.

 With a foreign fund exiting Commercial Bank as part of profit taking, market saw a net outflow of Rs. 1.4 billion bringing the year-to-date figure to Rs. 1 billion.

Strategic interest by local investors in acquiring the Commercial Bank stake was welcomed whilst other foreign funds continued with their select buying, especially on LOLC (net inflow of Rs. 357 million on top of Rs. 254 million on Tuesday) and JKH. The Colombo Bourse overall snapped a three-day losing streak to end 0.43% higher. Commercial Bank saw a 2.2% stake or 17.7 million of its shares done at Rs. 103 each via three crossings in a deal worth Rs. 1.82 billion.

The seller was believed to be Janus, which has been shedding its stake in recent weeks to book profit.

 As at end September 2012 Janus had 33 million shares or a 4.24% stake. Some linked the sale to SBI Ven Holdings, which too has been selling in recent weeks. It had 29 million shares or a 3.7% stake by end September 2012.

 Market speculation was buyers to be Captain family and Indra Silva. The latter held 17.38 million shares or 2.2% by end September 2012, whilst for the Captains, who have stakes in HNB and Sampath, it is the first major buy in Commercial.

 Overall Commercial Bank saw 18.57 million shares traded for Rs. 1.9 billion, accounting for 71.5% of the day’s turnover.

 Whilst one foreign fund sold out, another stepped up buying. LOLC saw further foreign buying with a five million share block done at Rs. 71.50 each, marginally lower than Rs. 72.50 per share deal on 3.5 million shares on Tuesday. Foreign holding of the counter rose by 5,173,052 shares.

 Apart from these two major deals, accumulation in banking sector counters such as Hatton National Bank and DFCC was evident, while retailers were seen active in counters such as SMB Leasing, Renuka Agri Foods, Watawala Plantations, and Expolanka Holdings.

 Interest stayed in Royal Ceramics (+0.2%), having seen two blocks totalling 200,000 shares being transacted on-board at Rs. 99.1, before the counter secured a marginal gain at its close of Rs. 99.5. Interest was also evident in Piramal Glass, Lanka Orix Finance, and Brown & Company.

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Wednesday, January 30, 2013

Sri Lanka stocks edge up on large caps

Jan 30 (Reuters) - Sri Lanka's stock market recovered from a two-week low on Wednesday led by large caps including John Keells Holdings PLC Ceylon Tobacco Company PLC and Nestle Lanka PLC.

The main share index closed 0.43 percent, or 25.15 points firmer, at 5,825.9, edging up from its lowest close since Jan 16.

Commercial Bank gained 0.86 percent to 105.80 rupees, while John Keells rose 2.04 percent to 229.70 rupees before it posted 8 percent gain in its December quarter earnings.

Shares in Ceylon Tobacco rose 1.74 percent to 855 rupees while Nestle Lanka rose 2.91 percent to 1600.

Foreign outflow hit 1.43 billion rupees ($11.30 million), the highest since Nov. 19, which stockbrokers attributed to an exit of a Japan-based foreign fund selling shares in top lender Commercial Bank.

"This fund has been selling Commercial Bank shares since last week," a stockbroker said on condition of anonymity without elaborating the reason for the selling.

The day's turnover was 2.67 billion rupees, well above the daily average of 1.11 billion so far this year.

The rupee closed a tad stronger at 126.48/55 to the dollar from Tuesday's close of 126.65/70, on dollar inflows into government securities and stock market, traders said. ($1 = 126.6000 Sri Lanka rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sanjeev Miglani)

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Market Snapshot - 30 01 2013

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source -  CAL Research

Results Update - December Quarter - 2012

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source - CAL Research

Sri Lanka's Treasuries yields drop at auction

Jan 30, 2013 (LBO) - Sri Lanka's Treasuries yields dropped at Wednesday's auction with the 3-month yield dropping as much as 16 basis points to 9.47 percent, data from the state debt office showed.

 The 6-month yield dropped 13 basis points to 10.28 percent and the 12 month yield dropped 14 basis points to 11.11 percent.

 The yields are quoted net of a 10 percent withholding tax on interest.

The debt office said it sold 35 billion rupees of bills after offering 20 billion for rollover at the auction, including 30.8 billion rupees in 12-motn bills.

Also sold were 2.0 billion in 3-month bills and 3.0 billion rupees in 6-month bills.

At an auction Wednesday, bond yields also dropped.

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Sri Lanka's John Keells Holdings net up 8-pct

Jan 30, 2013 (LBO) - Sri Lanka's John Keells Holdings, which has interests in leisure, ports, consumer goods and financial services said profits in December 2012 quarter rose 8 percent to 2.89 billion rupees from a year earlier.

 Revenues were barely changed at 21.5 billion rupees from 21.4 billion a year earlier.

 The group reported earnings of 3.38 rupees per share. For the nine months to December 2012 the group reported earnings of 8.13 rupees per share on total profits of 6.9 billion rupees, which were up 28 percent from a year earlier.

Operating profits were down 8 percent to 1.99 billion rupees but the bottomline was boosted by net interest income of 790 million rupees up 71 percent from a year earlier.

Profits from transportation which includes bunkering and container terminal were 799 million rupees slightly lower than the 805 million rupees a year earlier.

Chairman Susantha Ratnayake told shareholders the bunkering unit was hit by losses from an appreciating rupee.

Profits in hotels rose to 1.2 billion rupees from 903 million a year earlier, property was down to 160 million rupees from 310 million rupees which Ratnayake said was due to cyclical income recognition.

Consumer food and retail profits were sharply lower at 185 million rupees from 533 million a year earlier.

 Ratnayake said retail will be hurt by the imposition of value added tax to super markets. There will also be a one-off hit in the first quarter due tax on stocks carried forward.

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Foreigners return to buying mode as net inflow tops Rs. 800 m

JKH continues to draw sustained interest, Sampath Bank and LOLC join foreign funds-favourite league

Year to date net inflow swung back to where it was last week thanks to heavy buying by foreigners yesterday, though quick profit taking by locals stemmed gains in indices.

Foreigners bought Rs. 866 million worth of shares yesterday and sold only Rs. 35 million, resulting in a net inflow of Rs. 830.6 million. This made year to date inflow Rs. 400 million, reversing the negative outflow of an equal amount as of Monday.

 NDB Stockbrokers said the net inflow yesterday was owing to the buying witnessed in counters such as Sampath Bank, John Keells Holdings and Lanka Orix Leasing.

 Premier blue chip JKH dominated foreign buying for the second consecutive day as it saw foreign holding in the company increase by 1.6 million shares. Overall, 1.73 million shares of JKH traded for Rs. 391 million.

 On Monday, JKH saw heavy foreign buying with 2.43 million of its shares traded for Rs. 548 million. An Aberdeen fund picked up over Rs. 300 million worth of shares whilst at least nearly 10 other foreign funds collected available JKH quantities. JKH’s share price gained by one rupee to close at Rs. 226. In value terms, Sampath Bank, the third largest private bank, yesterday saw heavy foreign buying, with its net foreign holding increasing by 0.9 million shares. Overall, 1.95 million Sampath Bank shares traded for Rs. 428 million, topping the turnover list.

 Sampath saw a block of 0.75 million shares done via a crossing at Rs. 218.50 per share. In intra-day trading, Sampath reached a 52-week high price of Rs. 221.80 before closing at Rs. 219.60, up by 2.5%.

 LOLC was also a recipient of new foreign interest with 3.5 million shares picked up for Rs. 254 million at Rs. 72.50 each.

 As exclusively reported by the Daily FT on Monday, Mathews Asia Growth Fund bought into both Sampath and LOLC last week, which saw 0.64 million shares (Rs. 137 million) and 0.83 million shares  (Rs. 58.6 million) worth of net buying. The share price of LOLC rose by Rs. 2.30 or 3.40% to close at Rs. 69.90 over Monday.

 After a considerable period of lapse, investor interest was noted in manufacturing sector counter Royal Ceramics (-2.7%), whilst interest extended in the construction sector counter Access Engineering.

 Softlogic Stockbrokers said that following heavy volatility in the bourse coupled with the slow downward trend during the last few trading days led to a sharp fall in the market indices yesterday, resulting in the benchmark index plunging by 54 points while the S&P SL20 which contains more of the steady lot too experienced a dip, though at a much slower pace, closing down by 9 points.

 Dividend play counters Ceylon Tobacco (-4.2%) and Nestle (-2.8%) were the main negative contributors to the index, Softlogic added.

“Although retail investors remained on the sidelines, continued interest from high net worth and institutional investors was seen,” NDBS said, whilst Softlogic noted, “Foreigners led the buy side of the downhill market, understanding the attractiveness of the current market valuations. We advise investors to take maximum use of this opportunity to pick the hidden gems that dip in value.”

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‘Massive’ foreign participation: Record bond issue attracts Rs. 133.32bn, yields ease

* Rupee strengthens against US dollar

The record Rs. 45 billion Treasury bond issue attracted investments amounting to Rs. 133.32 billion yesterday (29) with the Central Bank accepting bids amounting to Rs. 45.45 billion, data released by the Public Debt Department of the Central Bank showed. Foreign investor participation was ‘massive’, currency dealers said.

The rupee gained some ground against the US dollar on account of the foreign interest in the bond auction.

The rupee which opened at Rs. 127.05/10 against the greenback strengthened to as much as Rs. 126.50/60 but closed the day Rs. 126.55/65, currency dealers said.

With a coupon rate of 8.5 percent, bonds tenured for five-years-and-four-months sold to a weighted average yield of 10.74 percent. An eight-years-and-three-months bond with a coupon rate of 9 percent went for a weighted average yield of 11.44 percent while a 15-years-and-five-months bond with a coupon rate of 9 percent sold for a weighted average yield of 12.21 percent.

Like the first bond issue, foreign investor appetite was apparent with yields falling in the third bond issue this year, unlike the second issue which saw yields stay flat on limited foreign participation.

Yields stayed flat from the first issue to second issue where bonds tenured for 3 years and five months with an 8 percent coupon rate sold to a weighted average yield of 10.98 percent. An 8 years and 4 months bond with a coupon rate of 9 percent went for a weighted average yield of 11.64 percent while a 15 year and 6 months bond with a coupon rate of 9 percent sold for a weighted average yield of 12.25 percent.

Currency dealers said they usually saw foreign interest building up prior to a bond issue with the rupee showing signs of appreciating.

"We did not see this build up this time, but in turned out that foreign interest was huge on the day of the issue," a currency dealer said.

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Turnover tops Rs. 1.3 bn but All Share down sharply

Blue chips hold their ground

The Colombo bourse yesterday posted a turnover of Rs.1.35 billion, up from the previous day’s Rs.759.6 million, although the All Share Price Index saw a sharp 54.34 point (0.93%) fall while S&P SL20 lost just 1.45 points (0.05%) as a result of blue chips largely holding their ground.

Foreign purchases amounted to Rs. 865.73 million, leading to a net inflow of Rs. 830.64 million.

Brokers said that turnover was supported by crossings in JKH, Sampath and LOLC with Sampath seeing 1.4 million shares crossed in five parcels – three at Rs.218.50 and two at Rs.220 in deals worth Rs.306.9 million.

"Turnover was excellent but the market was down mainly on profit taking on speculative shares," a broker said.

"The ASPI ended sharply lower, mainly on the back of strong declines in several large cap counters. Turnover crossed the Rs. 1bn mark, supported by block trades on JKH, SAMP, and LOLC, which accounted for over 60% of turnover," John Keells Stockbrokers said.

One hundred and sixty two losers sharply outpaced 43 gainers while 47 counters closed flat with brokers saying that there were few blue chips among the losers.

JKH saw 1.2 million shares crossed, all at a price of Rs.226, contributing Rs.271.2 million to turnover while LOLC saw 3.5 million shares crossed in two parcels at Rs.72.50 in deals worth Rs.253.8 million.

Brokers said that Sampath and JKH also saw volume on the trading floor with Sampath closing Rs.5.80 up at Rs.220 on nearly 0.6 million shares done between Rs.212.50 and Rs.221.80 contributing Rs.121.2 million to turnover.

JKH closed one rupee up at Rs.226 on the floor with over 0.5 million shares traded between Rs.224.60 and Rs.226 contributing Rs.120 million to turnover.

Brokers said there was buying interest in blue chips with CT Holdings closing Rs.5.40 up at Rs.145 on 0.1 million shares done between Rs.139 and Rs.145 generating a business volume of Rs.15 million.

LOLC was another gainer among the most traded stocks closing Rs.2.30 up at Rs.69.90 on nearly 0.2 million shares done between Rs.67.70 and Rs.70.50.

Commercial Bank which had announced a second interim dividend of Re.1 per voting and non-voting share for 2012 closed 20 cents down at Rs.104.80 on 68,209 shares. The stock will trade XD from Feb. 7 with payment on Feb. 18.

Most traded losers included Royal Ceramics, down Rs.2.90 to close at Rs.99.10 on nearly 0.2 million shares, ERI down 40 cents to close at Rs.17.60 on over 0.8 million shares, Colombo Fort Land and Buildings down Rs.1.60 to close at Rs.32.40 on 0.3 million shares and Expolanka down 10 cents to close at Rs.6.80 on nearly 1.2 million shares. Lanka Hospitals also lost 20 cents to close at Rs.38.40 on nearly 0.2 million shares.

Vallibel Power Erathna announced an interim tax-free dividend of 25 cents per share for 2012/13, XD from Feb. 8 and with payment on Feb. 19.

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Tuesday, January 29, 2013

Sri Lanka bourse at 2-wk low on profit taking; foreigners buy

Jan 29 (Reuters) - Sri Lanka's stock market fell for the third straight session on Tuesday to reach a two-week low as retail investors booked profits in large cap companies.

The main share index closed 0.93 percent, or 54.34 points weaker, at 5,800.75, its lowest close since Jan 16.

"Foreigners are on the buying side and the market's fall was due to some large caps, which were sold in thin volume," a stockbroker said on condition of anonymity.

Foreign investors were net buyers of 830.6 million rupees ($6.53 million) worth of shares, mainly acquiring shares in conglomerate John Keells Holdings, which gained 0.44 percent to 226 rupees.

That helped to reverse the year to date net foreign flow to a net inflow of 399.2 million rupees. Sri Lanka enjoyed a record foreign inflow of 38.63 billion rupees last year.

The day's turnover was 1.35 billion rupees, well above the daily average of 1.02 billion so far this year.

The rupee closed a tad stronger at 126.65/70 to the dollar from Monday's close of 127.10/15, on dollar inflows into government securities, traders said.

($1 = 127.1500 Sri Lanka rupees) (Reporting by Ranga Sirilal and Shihar Aneez)

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Results Update - December Quarter - 2012

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source - CAL Research

Market Snapshot - 29 01 2013

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Sri Lanka stocks close down 0.9-pct, rupee stronger

Jan 29, 2013 (LBO) - Sri Lanka stocks closed down 0.9 percent Tuesday with retailers and foreign investors taking profits, while the rupee gained with foreign inflows, brokers and dealers said.

 The Colombo All Share Index closed at 5,800 points down 54 points and the S&P SL20 Index close down 8.9 points at 3,185.76 down 0.28 percent. Turnover was 1.35 billion rupees.
 In forex markets the rupee strengthened to as much as 126.50/60 levels against the US dollar in the spot market from 127.10/15 levels with foreign inflows coming into government bonds, dealers said. In late trading the rupee was quoted around 127.65/70 rupees to the dollar.

Colombo's stocks had gained around 5 percent over the past months and is taking a breather with some uncertainty also creeping in with possible US action at the United Nations over rights violations and rule of law, brokers said.

"Market went through a decent rally and some retailers and foreign investors are taking profits," Abhishek Kalupathirana, an analyst at Lanka Securities, a Colombo brokerage said.

"But even today we saw foreign interest in some stocks like Sampath and JKH."

Sampath gained 5.40 to close at 219.60 rupees. JKH closed at 225.10 rupees up 10 cents.

Kalupathirana says investors should look at value stocks instead of going by herd instinct.

For example investors can look at industries as a whole such as dairy, construction and tourism which there has been recognized by the government for rapid expansion, which have potential to grow.

"The dairy industry for example, the government wants the country to be self-sufficient in dairy production by 2016," he says.

"However, we should remember that all businesses have risks attached to it."

Over the past few months, companies such as Nestle have seen steep gains, with foreign investor interest also seen, but once prices have risen even well-managed company may be less attractive than another firm which has better value, he says.

 Ceylon Tobacco Company, a firm with a near monopoly and high cash dividends which made steep gains over the past year fell 38.40 rupees to 840.40.

DFCC Bank closed flat at 125 rupees, Distilleries fell 2.00 rupees to close at 183.00 and Commercial Bank closed down 10 cents at 104.90 rupees

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Rupee, bond yields down

Secondary market Treasury bond yields eased further on Monday (28) before profit taking brought up yields ahead of a record Rs.45 billion bond auction on Tuesday, currency dealers said.

The five year bond yield edged lower to 10.90/95 on early trading from an opening position of 11.05/10 but profit taking pushed up yields to around 11.02/05 at the close. Last Thursday, yields fell after an eight day up-rise on account of today’s (29) Treasury bond auction.

"We are yet to see signs of foreign participation for the bond issue or the rupee would have appreciated by now," one currency dealer said. Foreign participation at today’s auction could drive down yields further.

The rupee closed at Rs. 127.10/15 against the US dollar on Monday, slightly down from an opening position of Rs. 127.05/10.

Dealers said moral suasion by the Central Bank was preventing the rupee from falling further against the greenback on persistent importer demand.

source -

Bourse slips on retail profit taking

(Reuters) – Sri Lanka’s stock market slipped from a three-month high on Monday as retail investors booked profits, offsetting the gains due to foreign buying in market heavyweight John Keells Holdings. The main share index closed 0.39 percent, or 23.10 points weaker, at 5,855.09, slipping from its highest close since Oct 3.

Shares in John Keells Holdings rose 0.22 percent to 225 rupees a share.

 Foreign investors were net buyers for the first time in the last six sessions. They bought 21.9 million rupees ($172,200) worth of shares, but they have been net sellers of 912.6 million rupees over six sessions, bringing the year-to-date foreign outflow of 431.4 million rupees.

Sri Lanka enjoyed a record foreign inflow of 38.63 billion rupees last year.

 The rupee closed a tad weaker at 127.10/15 to the dollar from Thursday’s close of 127.00/20, on importer dollar demand, traders said.

source -

Monday, January 28, 2013

Sri Lanka' Lankem Ceylon commissions soap plant

Jan 28, 2013 (LBO) - Sri Lanka's Lankem Consumer Products Ltd, a unit of listed Lankem Ceylon Plc group said it had commissioned a 70 million rupee soap plant that has a capacity of 70 metric tonnes per shift.

 The plant in Sapugaskande will make fragrant laundry soap with germicidal properties, which the firm says is a first in the product segment.

 "Laundry soap is the single largest category in the laundry business in Sri Lanka and this state-of-the-plant is capable of producing high quality laundry soap tablets," director Lankem Ceylon Plc, Ruwan T Weerasinghe said in a statement.

"It also gives Lankem total control of all the inputs which will help us deliver a superior product to the Sri Lankan consumer."

Lankem sells 'Teepol' branded liquid detergent, 'Bubble' detergent powder washing machine.
source -

Weekly Foriegn Holding Update - 24 01 2013

                                                    (click image to enlarge )

source - CAL Research

Market Snapshot - 28 01 2013

                                              (click image to enlarge)

source - CAL Research

People’s Bank buys more into PLC

Peoples Bank is estimated to have bought a further stake in its subsidiary People’s Leasing Plc last week.

 The biggest leasing company saw 9.7 million of its shares or mere 0.5% stake traded for Rs. 163 million.

Of the quantity, the parent had bought majority for around Rs. 100 million including the biggest block of five million shares, with the seller being Ceylon Guardian. As at September 2012, People’s Bank held a 75% stake in PLC.

source -

Krrish, Shangri-La, and JKH’s ‘City within City’ surpassing US$ 1bn - Rishad

* New hotel projects to sustain 30%+ tourism growth

* Projects under SDA not for short term cash

As Sri Lanka reports a huge 30% growth in tourism, many new mega-projects are now slated to back this crucial sector by the government, and the large scale projects under the Strategic Development Projects Act are not for short term cash gain, the Ministry of Industry and Commerce said yesterday (27)

"During 2011 to 2013, many strategic development projects of large scale have been approved by the Parliament. During 2011-‘13, the government successfully commenced the Krrish Transworks Colombo at US$ 450 million, Shangri-La hotels project at US$ 240 million, and the mixed utility complex with luxury hotel at US$ 140 million," Bathiudeen, Minister of Industry and Commerce of Sri Lanka told parliament last week. Bathiudeen was taking part in the debate on the order under the Strategic Development Projects Act No 14 of 2008.

 Providing more details to the House, Bathiudeen revealed: "The Mixed development project by John Keells Holdings has a project value of $ 500 Mn and I am happy to say that it is the first ever new concept of City within City in our capital Colombo. And the Mixed Development by Welcome Hotels Lanka will bring in $ 140 Mn. Its investor, India’s ITC Company is also joined by world renowned Sheraton Hotels. India’s ITC hotel has annual turnover of $ seven Bn with 29000 employed across 60 locations in India. It is among the top ten corporates of India."

 Revealing details on the Krrish Project, Minister Bathiudeen said: "Next let us look at the Krrish Project. Krrish Transworks project is a mixed  development project of $ 450 Mn. The agreement between UDA and Krrish is for 99 year lease period at a (lease) value of Rs 4.9 Billion. The project implementation period is 60 months. The Investor is Krrish group of India. We are pleased to say that the complex will have four towers of 70 stories each. Three towers will have high end residential apartments."

 In his respons to arguments raised by the opposition that these hotel project investors are ‘poor investors’, Minister Bathiudeen said:  "Certain members of the Opposition are of the belief that these are poor investors. However Sir, we believe that we should not be unusually concerned about the initial investment value or how much (cash) the investors are bringing at the start. In fact, we cannot expect investors to bring high amounts cash dollars initially. They are not overnight investors who want to bring (and dump) some cash at start and then leave. They are here to stay for the long term. We should not forego long term prospects for short term revenues."

source -

Franklin Templeton buys Rs. 1 b worth of COMBank shares

Locals step into equities as most foreign funds take profit

By Nisthar Cassim

 JP Morgan Franklin Templeton Investment Funds is estimated to have invested Rs. 1 billion in buying into private sector industry giant, Commercial Bank shares by last week.

 Commercial Bank last week saw nearly 15 million of its shares or 2% stake traded for Rs. 1.5 billion and Daily FT learns Franklin Templeton figured as the biggest foreign buyer as several other relatively older foreign funds exited from the stock booking profit.

On Tuesday it bought slightly over Rs. 400 million worth of Commercial Bank shares whilst Wednesday it collected a further Rs. 381 million shares. 

 In recent times, Franklin Templeton has been collecting Commercial Bank shares including a block worth Rs. 217 million in the previous week.

 Interest by Franklin Templeton is being viewed as a major boost to the Colombo Bourse, as it joins a set of foreign funds which have renewed interest on Lankan equities. Others include Deutsche Bank AG London and more recently Citigroup.

 Buying by Franklin Templeton also resulted in net reduction in foreign holding at Commercial Bank being limited to 6.5 million shares, though the bulk of the selling was by foreign funds such as SBI Ven Holdings and Janus.

 Several local institutions as well as high net worth investors too were zeroing on Commercial Bank last week.

 For example, Ravi Thambiayah-fame Renuka Hotels and connected parties bought Rs. 200 million worth of Commercial Bank shares, whilst the biggest player in the equity market, the Captains, were on the buying side too.

 Savings giant NSB too has been collecting Commercial Bank shares in addition to a host of insurance and investment funds.

 The market, which has provided 4% return so far in 2013, last week saw net foreign outflow of nearly Rs. 1 billion as foreign funds were either booking profit or reallocating their Sri Lankan portfolio.

 Nevertheless, several new funds are active on select stocks. For example, Mathews Asia Growth Fund was believed to have been the major buyer of Sampath Bank and LOLC, two stocks which saw net increase in foreign holdings according to Acuity Stockbrokers. Sampath saw a 0.64 million share-increase in net foreign holdings worth Rs. 137 million whilst LOLC saw 0.83 million shares worth Rs. 58.6 million.

 In both counters locals were the sellers. Nestlé, which is a favourite of foreigners, drew Rs. 116 million worth net buying last week. Premier blue chip JKH, the most popular among foreigners, was relatively subdued with only 0.15 million shares of net buying. Other stocks which saw an increase in net foreign holding were Distilleries, Chevron, Dockyard, Hotel Sigiriya, and Dialog.

 A host of local insurance and investment funds including unit trust were also active on banking sector stocks and their basket comprised Commercial Bank, DFCC Bank, and NDB. Insurance funds were also active collecting available quantities of Carson Cumberbatch and Aitken Spence Hotels.
 Nippon Coke and Engineering of Japan sold Rs. 30 million shares of Tokyo Cement with major local shareholder Gnanam-family linked South Asian Investments buying the block, as the case has been in recent weeks.

source -

Saturday, January 26, 2013

Market Snapshot - 24 01 2013

                                     ( click image to enlarge)

source - CAL Research

Friday, January 25, 2013

Weekly Foreign Holding Update - 24 01 2013

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source - acuity research

Thursday, January 24, 2013

CAL Securities Technical Analysis - 1Q2013 CSE Technical Outlook


On a longer term perspective, CAL’s technical interpretation of the market is positive as long as the December low of 5323 is not broken. A downtrend line dating back from September 2011 high has been broken and this is a positive development. We would like to see a close above 6000 to confirm a new wave up and further bullish momentum.

In the short term, CAL Securities' technical analysis suggests that the market has been consolidating during the past week and is trading in a tight range (5895-5860). We are currently neutral from a short term perspective.

 If the market closes below 5860, then you should see selling accelerate and find the market heading down towards support at 5800/5750. Trend line support exist at 5750/5800 levels.

 Conversely, if the market closes above 5900 then a target of 6000 (October highs) looks likely.

 The target price for the inverted head & shoulders breakout was achieved last week at 5890.

In order for us to recommend more buying, we are waiting for the 6000 levels to be taken out. In the medium term, if the market breaks below the January 8th low of 5719, the bias will shift to the bearish side and we should see 5600 levels tested.

CAL Research's fundamental view on the CSE is also positive, with total one year returns of 20% expected in 2013 based on 17% EPS growth and a dividend yield of 3%.

Technical analysis is not fool-proof; no method is. For that reason, one of the most important parts of this method is its ability to let you know when the forecast may be wrong, so you can act quickly and limit your exposure risk.


On the monthly time frame we can see that the ALL SHARE PRICE INDEX encountered a correction from February 2011 to June 2012. The market had rallied 6379 points from the December 2008 low to the February 2011 high. The correction ended at 4725 (June 2012) with an pproximately 50% retracement of the entire bull market.

After rallying to 6000 in October 2012 from 4725, the market had corrected 50% yet again to make a low of 5323 in December 2012. From a long term point of view, as depicted on the graph below, the market will stay bullish as long as ASPI does not close below 5323.

                                            (click image to enlarge)


Please note that we have broken a descending trend line (black line on the chart). This is evidence of a bullish development taking place. We would like to see the market close above 6000 to confirm bullish sentiment and bias.


The ASPI took support at the 50 month moving average in June 2012 (4725 levels). Until the ASPI breaks below the 50 month moving average the long term bullish nature of the ASPI will not change.


On the daily charts we see a breakout through an inverted head & shoulders formation. After the breakout, which occurred during the last week of December, the Index has rallied to 5895. The target price for this breakout is 5850/5900 and we have successfully achieved this target. This target has been calculated by measuring the distance between the head and the neckline. It is annotated on the chart below.

                                          (click image to enlarge)

We are currently seeing a shallow correction at this level, but the October 1st high of 6000 will be a larger barrier and the index needs to move above that level for the next move to begin.

If the market was to close below the January 8th low of 5719, then that will shift momentum to the bearish side and the market will probably test the 5600 level (yellow line annotated on the chart below). Until that happens, the market is still looking to move higher. You will also notice that the 200 day moving average is located at 5550 levels and this will also be a major support zone.


Please observe the 60 Minute Chart (intraday) of the ASPI below.

                                       (click image to enlarge)

After witnessing a “Santa Clause rally” between 20 December 2012 and 7 January 2013, the market consolidated its gains. Thereafter, the ASPI rallied approximately 160 points between 15 January and 18 January 2013 (5895). Any close below 5860 (pivot low shown on graph) will shift SHORT TERM momentum to the downside where the market will see support at 5750-5800 levels. Until that happens, signs point to further upside movement with a target of between 5950-6000.

Please note that RSI has not fallen below 50 since early December. That was the time when the market started rallying from 5323. If the market RSI breaks below 50, then you could see more selling pressure.

 source - CAL Research

Sri Lanka bourse down from 3-mth high on foreign, retail selling

Jan 24 (Reuters) - Sri Lanka's stock market closed marginally down from a three-month high on Thursday in thin trade on retail profit taking and foreign outflow ahead of a long weekend, while the rupee ended steady.

The main share index closed 0.09 percent, or 5.47 points weaker, at 5,878.19, from its highest close since Oct 3.

"Retail profit taking brought down the market," a stockbroker said on condition of anonymity. "But still we see a bullish market due to lower interest rates."

Analysts said a U.S.-based foreign fund had been selling top lender Commercial Bank of Ceylon, which closed flat at 104.10 rupees.

That resulted in a net foreign outflow of 99.3 million rupees, extending the net offshore selling to 1.09 billion rupees over five sessions and bringing the year-to-date foreign outflow to 453.4 million rupees.

Sri Lanka enjoyed a record foreign inflow of 38.63 billion rupees last year.

A continuous fall in the yields of government securities has boosted local buying since early December.

Turnover on Thursday was 569.2 million rupees ($4.48 million).

The rupee closed steady at 127.00/20 to the dollar.

Stock and foreign exchange markets will be closed on Friday for a holiday to mark the Holy Prophet's Birthday. Normal trading will resume on Monday. ($1 = 127.0500 Sri Lanka rupees) (Reporting by Shihar Aneez and Ranga Sirilal; Editing by Ron Popeski)

source -

Four Taprobane Holdings nominees join ERI Board

Taprobane Holdings Plc (TAP), which recently acquired a 29% stake in Environment Resources Investment Plc, has appointed four nominees to the company’s Board.

 They are Ajith Devasurendra (Non-Executive Director), Kamantha Amarasekera (Independent Non-Executive Director), A.G. Weerasinghe (Non-Executive Director), and Ruwan Sugathadasa (Non-Executive Director).

 ERI said that its Board of Directors at a meeting held on l6 January 2013 resolved to make the new appointments.

Davasurendra is a veteran in the financial services industry in Sri Lanka and counts more than 28 years of work experience, both in Sri Lanka and overseas. As one of the pioneers in money broking and government securities markets, he was able to bring new dimensions to the local money market industry. He is a past President of Sri Lanka Money Brokers Association and also the first President of Sri Lanka Primary Dealers Association. Apart from the above, he acted as consultant to Price Waterhouse Coopers, Bombay, India on a USAID project.

 At present he is a Director of Seylan Bank PLC, Deputy Chairman of Brown and Company PLC, and Deputy Chairman of Taprobane Holdings Ltd. and participates in the boards of many renowned companies. He is also in many committees that focus on the development of the financial markets in Sri Lanka. Weerasinghe is a fellow of the Institute of Bankers, Sri Lanka, and also holds a B. A. in Economics from the University of Ceylon, Peradeniya. He is an experienced Senior Banker who served the Board of Pan Asia Banking Corporation PLC as a Director from 2005 and he is the immediate past Chairman of Pan Asia Banking Corporation PLC. Weerasinghe served as an Assistant Lecturer in Economics, University of Ceylon Peradeniya.

 Weerasinghe was a former Deputy General Manager Corporate Banking at Bank of Ceylon. He has served as the Country Manager of Bank of Ceylon, London, and Deputy General Manager International at Seylan Bank. He was also a former President of Sri Lanka FOREX Association.

Currently he serves on the Board of Taprobane Holdings Ltd.Amarasekera is a member of the Institute of Chartered Accountants of Sri Lanka and is an Attorney-at-law of the Supreme Court of Sri Lanka. He also holds a degree in Business Administration from the University of Sri Jayawardenapura and began his career in the year 1998. Amarasekera is an eminent Tax Consultant and the Senior Tax and Legal Partner of Amarasekera & Company, a leading tax consultancy firm in the country. Sugathadasa possesses over 16 years of experience in government and corporate debt market including over 10 years in senior management capacity at First Capital Treasuries Ltd., a Central Bank appointed Primary Dealer. He was also involved in money brokering, corporate debt placement and asset management. He currently he serves as a General Manager of Taprobane Holdings Ltd. At present he is a Director of Browns Investments PLC, Free Lanka Capital Ltd., and Samudra Beach Resorts Ltd.

source -

Bourse at 3-month high despite continued foreign outflow

Reuters: Sri Lanka’s stock market edged up to a three-month high on Wednesday, led by banking and hotel shares, but foreign selling continued for the fourth day running.

 The main share index closed 0.22%, or 12.73 points firmer, at 5,883.66, its highest close since Oct 3.

Foreign investors sold a net 239.15 million rupees ($1.89 million) worth of shares, extending the net outflow of foreign funds to 989.2 million rupees over four sessions and bringing the year-to-date foreign outflow of 354.1 million rupees.

 Sri Lanka enjoyed a record foreign inflow of 38.63 billion rupees last year.

“The good thing is there is no panic in the market, though the foreign selling is continuing,” a stockbroker said on condition of anonymity.

 Foreign investors mainly sold top lender Commercial Bank of Ceylon, which ended 0.19% weaker at 104 rupees.

 A fall in the yields of government securities boosted local buying after the 91-day t-bill yield fell to an 11-month low at a weekly auction on Tuesday.

 Turnover on Wednesday was 1.27 billion rupees ($10.02 million).

 The rupee closed weaker at 127.00/20 to the dollar from Tuesday’s close of 126.75/85.

source -

Local deals and buying boost Bourse as foreigners turn YTD net sellers

Local institutional and individual investors took positions boosting the Colombo Bourse yesterday, whilst selling by foreigners in the past few days has resulted in them being net sellers year-to-date.

The ASI gained by nine points and the S&P SL 20 index improved by over 10 points on a day turnover crossed the Rs. 2 billion mark. Lanka Securities said cash map was 51% with foreign participation at a lower 35% of turnover with a buying of Rs. 629 million and selling of Rs. 854 million.

“Buying interest in the Colombo Bourse was retained with active participation being observed among all types of investors,” noted Softlogic Stockbrokers, whilst Lanka Securities said the market returned to positive territory with investors denoting interest on selected stocks. Asia Wealth Management said the turnover was largely driven by institutional and investors through nine crossings.

 NDB Stockbrokers said foreign investors remained active with a net outflow of Rs. 225 million mainly owing to Commercial Bank.

 Softlogic estimated foreigners to have turned to net sellers, bringing the year-to-date figure to Rs. 100 million for the first time in 2013. Foreigners accounted for net inflow of Rs. 38 billion last year. The Bourse however so far is up 4%.

 Though NDBS noted retail activity remained lacklustre, Lanka Securities said retail activity remained strong on few mid capped counters. It also said yields on all three maturing Treasury bills falling further yesterday would positively impact the performance of the equity market. It also added that the market rebounded with the help of blue chips such as Nestlé, People’s Leasing and Finance, Distilleries, and a few banking sector shares.

 Softlogic also said the drop in interest rates had reactivated the market with the retail investors who were on the sidelines now slowly but surely entering the market.

“However, currently the market has gained about 1,000 points from its bottom in 2011. The growing earnings and the dip in the index have maintained the Colombo Bourse at attractive valuations. Despite the 1,000 point gain, the attractiveness of market still remains intact as it trades at 10x FY14E earnings,” Softlogic added.

 Whilst related party deals on Browns Investments accounted for 35% of the day’s turnover, interest among large foreign and local investors in Commercial Bank continued to be highlighted as the counter recorded six crossings accounting for 6.4 million shares at Rs. 104 each. The counter further registered an on-board block of 172,000 shares at the same price before it finally closed the day with a marginal dip of 0.6% at Rs. 104.2.

 Other banking sector counters Hatton National Bank and National Development Bank gained investor attention. Investor attention continued to focus on the finance company segment with keen interest particularly being recorded in Lanka Orix Leasing, People’s Leasing, People’s Finance, and Central Finance.

 Speculative counter Environmental Resources Investment witnessed both on-board and off-board interest while its warrants W0003 and W0006 too generated retail interest.
source -

Taprobane exits Browns Investments

Taprobane Holdings Plc (TAP) yesterday exited completely from Browns Investments Plc (BIL), selling the remaining 9% stake to the latter’s related party Brown and Company for Rs. 730.4 million.

The stake amounting to 162.3 million shares was done at Rs. 4.50 each. In November TAP sold a 20% stake in BIL at Rs. 5.50 per share to Environmental Resources Investment Plc (ERI) in a deal worth Rs. 2 billion.

  In return TAP acquired a 29% stake in ERI for Rs. 1.7 billion.

 Previously Browns held a direct 26.5% stake in BIL and related party LOLC Investments held 13%, whilst a further stake of over 2% is held by Browns and LOLC Deputy Chairman Ishara Nanayakkara and LOLC. Though Browns has treated BIL as a subsidiary, yesterday’s purchase has given it extra control.

source -

Bourse gains 0.22 percent

Retail, institutional  participation picking up

The Colombo Bourse closed 0.22 percent higher on positive market sentiments driven by retail and institutional participation on Wednesday (23) with turnover exceeding Rs. 1.27 billion.

The All Share Price Index gained 12.73 points to close 0.22 percent higher at 5,883.66 while the S&P SL20 closed 0.23 percent higher, gaining 7.23 points to 3,191.80.

Foreign selling, amounting to Rs. 664.26 million, outweighed purchases, resulting in a net outflow of Rs. 239.14 million.

A little more than six million Com Bank shares changed hands during the day with the share closing 10 percent lower at Rs. 104.10.

Environment Resources Investments (GREG) closed at Rs. 19.10, up 4.95 percent after more than 5.3 million shares were traded during the day.

PLC saw nearly 5.57 shares change hands, closing 0.62 percent lower at Rs. 16.10.

"The ASPI ended higher for a second consecutive day amid gains in some large caps. Turnover crossed the Rs. 1bn mark, mainly on the back of a block trade on COMB, which accounted for over 40% of total turnover. The market also saw crossings on PLC and CARS," John Keells Stockbrokers said.

"Market sentiment continued to remain positive with relatively strong retail and institutional participation. Turnover remained high at LKR1.3 bn, with parcels of Commercial Bank and Environmental Resources Investments changing hands that accounted for 58% of the day’s total. Gainers outpaced losers with Pegasus, Royal Ceramics and Kahawatte Plantations rising by 10.4%, 9.4% and 8.5% offsetting losses in Environmental Resources Investments (W0003), Environmental Resources Investments (W0006) and Lanka Floortiles which declined by 9.5%, 8.3% and 6.5% respectively," DNH Financial said.

"We expect the market to remain buoyant over the next couple of weeks with positive investor sentiment providing a healthy backdrop and consequently advise investors to be appropriately positioned to take advantage of the rerating in the market. In this respect we emphasize the need to focus on quality stocks that will outperform on a sustainable basis while avoiding counters that may generate short term gains without fundamental support. Consequently, a flight to quality strategy is strongly recommended in order to benefit fully from the market’s re-rating," it said.

Meanwhile, Senkadagala Finance PLC announced second interim dividend of 79 cents per share.

source -

Wednesday, January 23, 2013

Sri Lanka China venture to make specialty tea

Jan 23, 2013 (LBO) - Sri Lanka's Elpitiya Plantations Plc has formed a joint venture with China's Yunnan Dianhong Group to produce 'Chinese Specialty Tea' for export, the island's investment promotion agency said.

 "This high quality Chinese Specialty Tea is expected to cater to the high end market segment in Greater China," Sri Lanka's Board of Investment said in a statement.

 "The project will pave the way for more foreign investment of this nature to the country with modern technology & machinery, which will expose more Sri Lankan tea products to the Chinese market."

Elpitiya Plantations is managed by Aitken Spence Plantation Managements Ltd, a unit of Sri Lanka's Aitken Spence group.

The joint venture firm Elpitiya Dianhong Jin Ya Tea Company (Private) Limited has been formed with Dianhong International Limited, Hongkong, the BOI said.

source -

Market Snapshot - 23 01 2012

                                              (click image to enlarge )
source  - CAL Research

Sri Lanka stocks close up 0.2-pct, rupee weaker

Jan 23, 2013 (LBO) - Sri Lanka's stocks closed up 0.2 percent Wednesday with banking sector stocks seeing interest, while the rupee weakened in forex markets, brokers and dealers said.

 The Colombo All Share Index rose 0.22 percent to close at 5,883.66 points up 12.73 points and the S&P SL 20 Index rose 7.23 point to close at 3,191.80 points up 0.23 percent.
 Turnover was 1.2 billion rupees.

Commercial Bank of Ceylon closed at 104.10 rupees down 10 cents with a 5.1 million share off-market deal also contributing. The stock contributed 631 million rupees to turnover.

Environmental Resources Holdings saw 5.3 million shares traded at 19.10 rupees up 90 cents.

Carsons Cumberbatch closed at 449.80 up 5.80 rupees contributing most to the index followed by LOLC which closed at 71.50 up 1.50 cents.

Dialog Axiata closed at 8.50 down 10 cents.

In forex markets the rupee weakened as much as 127.10/15 in late trading Wednesday donw from Tuesday's close of around 126.75/85 rupees.

 Liquidity has surged in Sri Lanka's forex markets putting pressure on the dollar peg. Excess liquidity rose to 41 billion rupees on January 22.

Analysts say the Central Bank could kill some liquidity by selling down its reserves (unsterilized sales) to prevent the rupee weakening.

source -

Turnover tops Rs. 2 bn, both indices up

Block trades drive volumes, retailers returning

The Colombo bourse yesterday notched a turnover of Rs.2.1 billion, up from the previous day’s Rs.899.9 million, with both indices gaining – the All Share by 8.91 points (0.15%) and S&P SL20 by 10.46 points (0.33%) with 108 gainers outpacing 93 losers while 55 counters closed flat.

Foreign purchases, which amounted to Rs. 629.23 million, were outweighed by sales resulting in a net outflow of Rs. 225.09 million.

Brokers said that block trades in ERI, Commercial Bank (voting), HNB (voting) and Browns Investments contributed nearly Rs.1.5 billion of the day’s business volumes with big trades in ERI, Browns Investments and Commercial Bank.

"The ASPI ended marginally higher amid strong gains in some large caps, including the listed telco operators. Turnover crossed the Rs. 2bn mark, supported by block trades on BIL, COMB, GREG, and HNB, which collectively accounted for around 70% of turnover," John Keells Stockbrokers said.

ERI saw 4 million shares crossed in a single trade at a price of Rs.17 up 50 cents from the previous close while Browns Investments saw over 162.3 million shares done, also in a single parcel, at a price of Rs.4.50, down a rupee from the previous close.

The ERI deal was worth Rs.68 million while that of Browns Investments was worth Rs.730.4 million.

Brokers said that there appears to be synergic transactions between the two companies but no Stock Exchange filings explaining these transactions had been made at the time of writing.

Commercial Bank (voting) saw nearly 6.4 million crossed in six transactions at a price of Rs.104 generating Rs.663.4 million while HNB, with nearly 0.2 million shares crossed in one parcel, posted block trades worth Rs.23.3 million.

Apart from the crossings, ERI closed Rs.1.50 up at Rs.18.40 on 3.9 million shares done on the floor between Rs.17 and Rs.18.80 generating a business volume of Rs.73.2 million.

Nestle was the biggest turnover generator on the trading floor with 77,375 shares traded closing Rs.10.50 up at Rs.1,600 on a trading range of Rs.1,589.50 and Rs.1,600 contributing Rs.123.7 million to the day’s business volume.

Brokers noted that Nestle has been gaining very sharply recently and is now near its one year high of Rs.1,700 per share.

Commercial Bank (voting) also saw 0.3 million shares done closing 70 cents down at Rs.104.10 trading between Rs.104 and Rs.105.10 and contributing Rs.51.6 million to the day’s business volume while LOLC closed flat at Rs.70 on nearly 0.5 million shares done between Rs.66.70 and Rs.70.50 turning over Rs.32.6 million.

Distilleries also continued its upward trend closing Rs.3 up at Rs.187 on over 0.1 million shares as did NDB up Rs.3.50 to close at Rs.147.10 on 79,902 shares and Central Finance up Rs.4.90 to close at Rs.182.10 on 46,985 shares.

Brokers said that retailers participated in ERI, LOLC, Dialog (where over 3.5 million shares were traded) and People’s Leasing which closed flat at Rs.16.10 on nearly 1.5 million shares.

source -

Colombo Stock Exchange announcements

Taprobane Holdings PLC, sold 162,318,000 ordinary shares of Browns Investments PLC to Brown and Company PLC at a price of Rs 4.50 per share.

Capital TRUST Partners (Pvt) Ltd bought 26,000,000 ordinary shares of Environmental Resources Investments PLC (GREG-N-0000) at prices 16.50 on January 21, 2013 and 4,106,298 ordinary shares of GREG-N-0000 at prices from Rs 17.00 to 17.30 on January 22, 2013.Capital TRUST partners (Pvt) Ltd is a wholly owned subsidiary of Capital TRUST Holdings (Pvt) Ltd, which also owns 8,417,481 ordinary shares of GREG-N-0000.

Therefore, Capital TRUST Holdings (Pvt) Ltd and Capital TRUST Partners (Pvt)Ltd have acquired 40,136,253 ordinary shares (11.5% of the ordinary shares in issue) of GREG-N-0000.

source -

Two companies managing one brokering company?

H.D.H Senewiratne

A legal issue is on the cards with regard to two stock brokering companies, Taprobane Holdings Plc (THL) and Capital Trust, purchasing shares of Environment Resources Investment (ERI) known as Walker & Greg.

THL bought a 28% stake in ERI from Lionhart Investments for Rs. 1.68 billion sometime ago, while Capital Trust acquired 10% shares of ERI.

According to stock brokers, these transactions could result in an issue as to whether two companies could legally be possible to manage one brokering firm.

Many stock brokers are questioning the legality of managing two stock brokering companies and managing or holding major shares. The Colombo Stock Exchange (CSE), also endorses this and they also question its legality. CSE sources said that they need some time to study the matter.

During an Extra Ordinary General Meeting held recently, THL obtained shareholder approval.

ERI also owns a stock brokering company although they obtained 95% of the shareholding consent for the deal.

The sale of the 20% stake (372 million shares) in BIL is at Rs. 5.50 each and includes 353 million shares held by THL and a further 19 million held by related party Lexinton Holdings Plc.

The purchase of a 28.9% stake (101 million shares) in ERI by THL from
Lionhart is at Rs. 16.70 per share.

Lionhart is the single largest shareholder in ERI, though it had reduced its stake considerably.

Analysts estimate Lionhart's current stake in ERI to be around 45% from an original 95%.

Caledonian Securities Ltd, had picked up the bulk of the ERI stake and is estimated to own around 25%. Brokers to Caledonian Capital Trust Securities in October last year, disclosed that its client was holding a 13% stake.

ERI said the purchase of a 20% stake in BIL is being made as a "strategic investment" though THL didn't specify any particular reason about this deal.
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The road ahead for Sri Lankan capital markets

By Shabiya Ali Ahlam

  The Securities and Exchange Commission (SEC) showcased its 10-point road map to boost capital markets in the country yesterday, at a forum organised on the subject by UTO EduConsult Ltd.

SEC’s Acting Director General Professor Hareendra Dissa Bandara presented the development of the capital markets industry over the years and the plan for future development.

To establish the proposed link between capital markets to economic development link, Prof. Bandara
listed the 10 point capital market road map as enunciated by the SEC. The road map comprises of:

 ■Expedite SEC Act amendments

 ■Demutualisation of the CSE

 ■List large private and public companies

 ■Attract new foreign and local funds

 ■Develop infrastructure in terms of back office systems, interne trading and etc.

 ■Develop corporate debt marke

 ■nIntensify awareness, education and training

 ■Develop unit trusts

 ■Strengthen risk management systems

 ■Develop new products, derivatives, ETF, commodities

Outlining the backdrop of the Sri Lankan stock exchange, Professor Bandara shed light on the capital market scenario in Sri Lanka. Looking at the All Share Price Index (ASPI) performance from 1985 to 2012, it was noted that the ASPI gained only 1,400 points for the period of 24 years and soon after the war ended, the points considerably shot 4,000 more in just three and half years.

 Focusing on the index growth at three year periods, 2000-2003 showed 137% growth, 2003-2006 showed 156% growth, 2006-2009 showed 24% growth and 2009-2012 showed a growth of 66.7% from which no significant negative aspects could be attributed.

 Equity risk premium estimates for Sri Lanka for 2002-2012 show that the stock market has given 20.81% higher returns than Treasury bills which stood at 12.01%. Post war capital market recognised economic prospects leading to private and public investment in economic development process. Fall in interest rates, inflation brought to 7%, unemployment dropping to 4.2% and the GDP standing at 8% sets the surroundings as best for investments to take place. A key highlight of the post war capital market was market capitalisation amounting to Rs. 2.16 trillion by end 2012 from Rs. 1.09 trillion by end 2009.

 Linking capital markets to economic development in the post war era, the Government’s economic policy and its outlook on the capital market included political will and clearly defined vision, continuity to maintain 8-9% economic growth annually, and a strategic naval link-five hub model for economic development have been planned out.

 In this context, the professor noted the need for a consistent flow of local and foreign investments.

“A vibrant capital market can facilitate the projected 8% economic growth by converting savings to investments and assisting of companies to raise funds,” he said.

 Four crucial pillars of capital market were identified by professor which is listed companies – do they have the fund raising ability? Investors – do they have confidence? Market intermediaries – do they have performance and facilitation? Market institutions – do they have the infrastructure and involvement?

 He said that the number of listed companies was low, as from the total 39,187 registered companies all together, only 288 companies are listed which amounts to a percentage of only 0.73%. Reasons for the low listing remain unknown. It indicates low levels of awareness in capital formation, poor confidence in the CSE, issue with IPO pricing and lack of IPO assessment by analysts, and fear or myths in family owned and public entities.

 To overcome this, the dire need for conducting programs for registered companies prevail. Within the 288 listed companies, less that 1% of listed companies have only very basic produces equity and debt, low public float, insider dealings, disclosure issues, poor governance practices and poor knowledge on regulatory requirements.

 Looking at lower investor confidence, comparing 2009 -2012’s active number of CDS accounts, there are 99% non-operating CDS accounts. This indicates low levels on capital awareness of the capital market, bank dominance is very powerful, there has to be a shift from savings to investments methods if comfortable in the bank service only, investments will not take place, and reluctance to move or change due to inadequate financial literacy.

 Therefore, there is a great need of conducting systemic comprehensive investor education programs.

With 94,807 investors in the current market, investors have little familiarity with only very basic products. Unit trusts are not popular amongst investors, and lack of information pertaining to poor investor relations and research reports prevails. Speculative trading amounts to a significant portion of market turnover.

 Focusing on problems relating to market intermediaries of inadequate turnover, issues include lack of readiness to enhance market efficiency, reluctance to shift from existing retail mentality, lack of risk management and proper research based recommendations.

 Concerns relating ethical behaviour, attitude to change the behaviour towards global standards also prevail, while activity level of investment banks in debt and equity, inappropriate investment advice and issues pertaining to loss of investor confidence and inadequate capital structure were more factors identified.

 Issues at market institution levels include lack of proper risk management system, frequently changed regulatory measures in terms of broker credit and price brands, introduction of new products, capacity issues on developed markets and regulatory exposures.

 The professor advised the gathering present to take into account the view presented and stressed that the cause of issues in the current capital market were not the causes analysed thus far. “We need to extend our horizons as there is a mountain of opportunity in this sector to focus on,” Prof. Dissa Bandara emphasised.

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Tuesday, January 22, 2013

Sri Lanka stocks edge up on low rates; Foreign outflow continues

Jan 22 (Reuters) - Sri Lanka's stock market edged up marginally on Tuesday, led by telecom shares on declining yields in government securities, but foreign outflows continued for a third day running as offshore investors sold banks.

The main share index closed 0.15 percent, or 8.91 points firmer, at 5,870.93 as yields in government securities fell on Tuesday at a weekly auction for a seventh straight week, with the 91-day t-bill yield falling to an 11-month low.

Foreign investors sold a net 225.1 million rupees worth of shares on Tuesday, extending the net outflow of foreign funds to 750 million rupees ($5.92 million) in the last three sessions.

That turned the year-to-date foreign flow to a net outflow of 114.94 million rupees. Sri Lanka enjoyed a record foreign inflow of 38.63 billion rupees last year.

"Foreign selling is continuing and it's a bit of a worrying sign," a stockbroker said on condition of anonymity.

Foreign investors mainly sold top lender Commercial Bank of Ceylon, which ended 0.57 percent weaker at 104.20 rupees.

Top mobile phone operator Dialog Axiata gained 3.57 percent and No.1 fixed-line phone operator Sri Lanka Telecom rose 2.35 percent in thin trading.

Turnover on Tuesday was 2.1 billion rupees ($16.58 million).

The rupee closed weaker at 126.75/85 to the dollar from Monday's close of 126.62/66. ($1 = 126.6750 Sri Lanka rupees) (Reporting by Ranga Sirilal and Shihar Aneez)

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Sri Lanka Treasuries yields fall

Jan 22, 2013 (LBO) - Sri Lanka's Treasuries yields fell across maturities at Wednesday's auction with the 6-month yield falling as much as 17 basis points to 10.41 percent, data from the state debt office showed.

 The 3-month yield fell 12-basis points to 9.63 percent and the 12-month yield fell 01 basis point to 11.25 percent.

 The debt office said 20 billion rupees of maturing bills were offered to the market and 18.55 billion rupees worth bids were accepted.

Meanwhile in money markets excess liquidity has built up partly due to dollar inflows bought by the monetary authority.

However in January the Central Bank also gives a provisional advance of printed money to the finance ministry, which if not sterilized weakens the currency or triggers foreign reserve losses.

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Market Snapshot - 22 01 2013


                                 (click image to enlarge)

source - CAL Research