Dialog Group ups nine months profit by 138% to Rs. 3.77 b

Dialog Axiata Plc yesterday announced a Group Net Profit After Tax (NPAT) of Rs. 1.69 b for the third quarter of 2010 taking YTD 2010 NPAT for the first nine months to Rs. 3.77 b, a 138% increase YoY.

Group profit was underpinned by robust performance at Company level, with Dialog Axiata Plc featuring the Group’s mobile business, posting a Q3 and nine months profit of Rs. 1.90 b and Rs. 4.99 b respectively, up 162% YoY.

Subsidiaries DTV and DBN delivered robust growth in terms of enhanced profitability at EBITDA and NPAT levels. Enhanced profitability at subsidiary level was underpinned by significant performance improvements in the Fixed Line, Broadband, and Television businesses of the Group. On an adjacent QoQ basis EBITDA (positive) and NPAT (negative) improved by 173% and 48% for DTV and 432% and 57% for DBN respectively.

Dialog Group revenues were recorded at Rs. 30.67 b for the nine months ended 30 September 2010, up 16% YoY and 4% QoQ. Similar growth was delivered in terms of Group EBITDA which was recorded at Rs. 11,151 m, up 5% QoQ and 74% YoY.

The Group EBITDA margin improved by 12 percentage points YoY, to reach 36%. The positive growth trajectory in terms of EBITDA underpinned robust growth in Group NPAT of 138% YoY and 23% QoQ.

Driven by robust performance in the mobile market, the Company recorded revenues of Rs. 9,671 m in Q3 2010 and Rs. 28,068 m for the first nine months. Company revenue grew by 16% compared to the first nine months of 2009 and 4% relative to the previous quarter.

Dialog’s mobile subscriber base stood at 6.7 m as at end of September 2010, recording a 6% growth YoY. The third quarter of 2010 featured the transient impact of downward tariff adjustments in the mobile market, immediately following the introduction of floor rate regulations in July 2010. Accordingly, Core Mobile revenues (excluding interconnection income) which exhibited 13% growth YoY, declined marginally by 1.5% on an adjacent QoQ basis.

Notwithstanding the transient impact of tariff adjustments across the sector, total revenues were bolstered by increased consumption of mobile voice and mobile broadband services, as well by interconnection income, resulting overall in a 4% growth in revenue on an adjacent QoQ basis.

Revenue performance was complemented by stable performance in the cost domain. The Company continued to extract profitability enhancement from its re-scaled operating cost structure, with total operating costs being recorded down 10% YoY.

The third quarter of 2010 features the impact of several changes in the sector cost structure including but not limited to those accruing from the introduction of the domestic interconnection regime and the reduction in the international telecommunications levy from US$ 0.038 per minute to US$ 0.015 per minute.

Inclusive of the impact of the aforementioned transients in the cost environment, total costs (excluding depreciation) increased 7% QoQ. Total costs post normalisation for transition impacts however, remained flat on a QoQ basis.

On the backdrop of Revenue and Cost performance as described above, Company EBITDA for the first nine months of 2010 grew by 59% YoY to reach Rs. 10,851 m. The Company’s EBITDA margin was recorded at a robust level of 39% – an increase of 11 percentage points compared to the corresponding nine months of 2009. On an adjacent quarter comparison, EBITDA remained flat at Rs. 3,750 m in line with third quarter transients in revenue and cost structures described earlier.

Company NPAT for the first nine months of 2010 was recorded at Rs. 4,990 m up 347% relative to the normalised (excluding one-off network modernisation charge in 2009) NPAT of negative Rs. 2,018 m during the corresponding period in 2009. On an adjacent QoQ basis, Company NPAT grew 5% to reach Rs. 1,901 m in Q3 2010.

In addition to strong EBITDA performance, the improvement in NPAT was underpinned by a 108% YoY decrease in finance costs following the deployment of surplus operating cash for the repayment of borrowings. The nine months of 2010 also evidenced foreign exchange translation gains of Rs. 533 m in contrast with an exchange loss of Rs. 11 m recorded during the corresponding period in 2009.

DBN and DTV – Performance improves further

DBN featuring the Fixed Telephony, Fixed Broadband and Data Transmission businesses of the Dialog Group recorded revenue of Rs. 604 m in Q3 2010, up 5% QoQ and 4% relative to Q3 2009. Broadband and ISP revenues grew by 19% YoY, fuelled by the increase in usage of the corresponding services. DBN’s fixed line CDMA subscriber base increased by 4% YoY to reach 183,000. CDMA usages revenues grew by 3% YoY driven primarily by an increase in interconnection revenue.

A consistent focus on a portfolio of strategic cost rescaling programmes implemented over the past quarters continued to deliver traction as DBN recorded its second successive quarter of positive EBITDA. DBN EBITDA was recorded at Rs. 176 m in Q3 2010, up 432% relative to Q2 2010.

Strong EBITDA performance in Q3 was supplemented by a 92% QoQ reduction in finance cost underpinned by the repayment and cost based restructuring of borrowings over the past two quarters. Accordingly, DBN exhibited a significant improvement in profitability, up 57% QoQ and 77% relative to Q3 2009, recording an NPAT of negative Rs. 146 m in Q3 2010, relative to an NPAT of negative Rs. 341 m in the previous quarter.
Performance momentum was further consolidated at DTV, with Q3 EBITDA recorded at Rs. 81. m exhibiting an improvement of 173% and 157% on QoQ and YoY basis respectively. EBITDA growth was fuelled by a robust increase in usage revenues on the backdrop of reductions in operating and direct costs accruing from a continued focus on strategic cost rescaling initiatives.

DTV’s NPAT was recorded at negative Rs. 46 m in Q3 2010, a significant improvement relative to the NPAT of negative Rs. 88 m recorded in the previous quarter, signalling a robust improvement in profitability of 48% QoQ and 58% relative to Q3 2009.

Healthy free cash flows strengthen group balance sheet

Group operating cash flows totalled Rs. 10,045 m as at the end of the Q3, up 23% relative to the corresponding period in the previous year. The strength of the Group Balance sheet and positive outlook on Free Cash flows underpinned an upgrade of Dialog’s National Long Term Credit Rating to ‘AAA(lka)’ by Fitch Ratings Lanka Limited.

Strong operating cash flows combined with a prudent and strategic approach to capital expenditure, have underpinned the generation of free cash flow of Rs. 7.30 b for the first nine months of 2010, a five-fold increase relative to the negative free cash flow of Rs. 1.46 b in the previous year.
Positive free cash flows were directed towards de-leveraging the Company’s balance sheet, resulting in a reduction of the Group’s total debt outstanding by 12% YoY.
Accordingly, the Dialog Group continued to maintain a structurally robust balance sheet with the Gross Debt to EBITDA ratio being recorded at a stable level of 1.72x for the nine months of 2010.

Dialog Axiata Group

Dialog Axiata Plc, an ISO 9001 certified company, is a subsidiary of Axiata Group Berhad. Dialog is the undisputed leader in Sri Lanka’s mobile telephony sector. The company operates 2.5G and 3/3.5G Mobile Communications networks supporting the very latest in multimedia and mobile internet services.

Dialog’s domestic coverage spans all provinces of Sri Lanka, while the company’s international roaming network spans over 200 countries. DBN, a fully owned subsidiary of Dialog Axiata Plc operates CDMA WLL Fixed Telephony, and WiMAX 16d Broadband Wireless Access Networks, and is a key player in Sri Lanka’s ICT Infrastructure sector. DTV, also a fully owned subsidiary, operates Dialog TV, Sri Lanka’s leading digital satellite television service.

source - www.ft.lk

Pan Asia Bank shows significant progress in the 3rd Quarter

Upgrade in Fitch Rating to BBB (lka)

Pan Asia Bank announced a Profit after Tax of Rs. 279.9Mn for the nine months ended at 30 September 2010. The Profit after Tax for the same period last year was Rs. 368.1Mn, mainly due to the gains from government securities. The 3rd quarter showed a Profit after Tax of Rs.129.1Mn compared to Rs.150.8Mn in the first two quarters of 2010. Profit before tax for the nine months ended September 2010 was Rs.704.6Mn compared to Rs.710.0Mn last year.

Net Interest Income increased by 14.5%, from Rs.986.5Mn to Rs.1,129.9Mn, while non-funds based income decreased from Rs.595.8 Mn to Rs. 390.4 Mn, all of the decrease being attributable to gains on fixed income securities in 2009. While costs increased by 20.9% mainly due to the increased cost of running a bigger branch network and higher staff numbers and volumes of business, there was a significantly positive trend in provisions which decreased from Rs.218.6Mn last year to Rs. 25.4Mn in 2010, reflecting more structured credit and recovery policies .

During the year, Deposits increased by 15.9% from Rs. 16.3Bn to Rs. 18.9Bn, while Net Loans and Advances also grew by 53.8% to Rs.16.7 Bn. The Net Non-performing advances decreased by 17.1% from Rs.957.2Mn to Rs.793.2Mn, while the Net NPL ratio improved to 4.6% from 8.3%. The trends are very positive and it is expected that there will be further improvements in the 4th quarter.

Tier II Capital Adequacy ratio stood at 15.8%, which augers well for the Bank's expansion plans. The improved profitability and the steady progress shown by the Bank will ensure that the enhanced capital adequacy requirements for 2011 and beyond will be comfortably met from internal sources. The commendable progress shown during the year has been recognized by Fitch Sri Lanka who have upgraded the Bank's rating to BBB (lka). Mr. Claude Peiris Chief Executive Officer said that "We are pleased with the accelerated progress in the quarter as a result of the strategic initiatives implemented over the last few months.

 There is now much greater focus in what needs to be done in growing the business and we are confident that the Bank has now started showing the momentum required to see greater results in the fourth quarter of the year."

During the quarter, Pan Asia Bank increased the branch network to 38 branches with the opening of their latest branch in Embilipitiya. Matale, Batticaloa, Ambalangoda, Kalmunai and Killinochchi will be opened in the 4th quarter, with plans to expand further in key towns and suburbs in 2011.

source - www.dailymirror.lk

Investors eye frontier markets

Charumini DE SILVA

The frontier markets such as Sri Lanka will be the current and future growth engines of the global economy Logan Rockefeller Global Principal Don LaGuardia said.

Speaking at the CEO forum organized by the Institute of Chartered Accountants of Sri Lanka (ICASL) he said the accelerated rate change combines with the de-risking that will occur in frontier markets.

This asset class is positioned to offer potentials of the highest returns.

“Sri Lanka’s economy is one of the best economies in the South Asian region. The US is now looking at frontier markets for their valuation and diversifications.

The benefits of foreign investors coming into the market are that it lowers the cost of funding, mobilize domestic savings and allocates capital funding, facilitates exchange of goods and services, greater liquidity for market participants and improved corporate governance and transparency,” he said.

“With in one and half years time of restoring peace Sri Lanka has shown tremendous progress and it is unparallel. The country has now being mapped as a frontier market with dawn of peace. It is time for Sri Lanka to seize the moment and will last for a long time,” LaGuardia said.

The Colombo Stock Exchange’s (CSE) market capitalization appreciated by 125 percent in 2009 becoming the second best performing capital market in the world.

There has been an increase in volumes from UD$ five million to US$ 20 million per day. The Initial Public Offering’s (IPO) on average was 10 percent over subscribed with a first day performance of over 65 percent.

The key drivers of the Sri Lanka’s future economy growths are the construction boom, increased tourist arrivals, increased economic activity due to expectation of ports and increase in Foreign Direct Investment (FDI) due to economic stability.

He said the public and private participation during the post war scenario was remarkable and expects that it would continue further in the coming years.

However, we cannot expect this fine environment would last long because I believe in reality and being cautious will help to remain sustainable,” he said.

The market is driven on the base of supply and demand and it all depends on these two key elements. As the market grows and demand increases there is an essential need to increase the supply of the market.

We hope that in the years to come more companies will be in the market to cater to the increasing demand from both foreign and local investors with a better choice of stocks,” he said.

The CSE has been much vibrant and if the supply could be enhanced it would greatly help to improve the economy.

Sri Lanka should look at expanding the market capitalization and its contribution towards the Gross Domestic Production (GDP).

The country’s capital market has not leveraged and there are less margin lendings, which a good indication of that there is much less probability of market over hit. “We are mainly looking at pre-IPO opportunities that are keen on entering the market and also the private equity market which has many opportunities,” LaGuardia said.

source - www.dailynews.lk

United Motors Lanka PLC goes for share split

United Motors Lanka PLC, (UML) announced a sub division of each existing issued and fully paid ordinary shares into two ordinary shares subject to shareholders approval at an EGM . Consequent to the subdivision of shares the current issued shares of the Company will increase from 33,633542 shares to 67,267,084 shares.

The United Motors Group of Companies represents a full range of commercial and passenger vehicles mainly from Mitsubishi Motor Company Japan and other brands from Malaysia, China and India.

The latest addition to their product portfolio is the TVS Three Wheeler from India. The group and has already commenced the local assembly of the Zotye Nomad SUV vehicle at its state of the art plant at Orugodawatte.

United Motors Lanka PLC has posted a Profit before Tax (PBT) of Rs. 46.78 million for the first quarter of 2010/11 which is an increase of 175 % over the loss of Rs. 61.90 million reported in the corresponding period of the previous year.

Further the Group PBT has increased by 180% from a loss of Rs. 126.83 million for the first quarter ended 30 June 2009 to a pre tax profit of Rs.101.79 million for the same period in the current year. For the year that ended 31st March 2009/10 the company made a profit after tax of Rs. 121 million and the group reported a consolidated profit of Rs.146 million.

With the reduction of import duties and taxes from June 2010, the Company’s and its Subsidiary’s vehicle sales have increased significantly.

source - www.island.lk

Haycarb embarks on rebranding in global re-positioning strategy

Sri Lanka’s globally-renowned activated carbon manufacturer Haycarb PLC has unveiled a new corporate logo and associated new marketing collaterals to support a strategic re-positioning that better articulates the company’s values, vision and personality in the context of its evolution into a world leader in eco-friendly purification solutions.

The predominantly Green new logo is a visual metaphor that represents the filtration process, symbolizes Haycarb’s global reach and embodies the company’s wide-spectrum product suite — a portfolio that encompasses all activated carbon based purification applications, the company said.

Launched in Colombo at the 7th International Distributors’ Convention of Haycarb earlier this month, the new logo will also serve as an emblematic catalyst for a new phase of growth leveraged on the company’s emphasis on striving for technical excellence, innovation and customer centricity in a greener supply chain framework and an environment of new opportunities and application requirements in the global market, Haycarb Managing Director Rajitha Kariyawasan said.

"This exercise is centered on the strong Haycarb name built over the last four decades for quality activated carbon and solutions across the globe," he added. "The company’s logo has changed several times to match the prevailing market dynamics."

A member of the Blue chip Hayleys conglomerate, Haycarb is the world’s largest producer of coconut shell-based activated carbon. The company’s manufacturing facilities in Sri Lanka, Thailand and Indonesia are supported by marketing offices in the UK, Australia and USA.

Incorporated in 1973, Haycarb is the pioneer manufacturer of activated carbon in any coconut producing country. The company’s product range covers standard, washed, and impregnated carbons in granular, pellet and powder form.

source - www.island.lk

Bull run to end, CSE growth to slowdown

Principal Partner of New York based portfolio fund management company LR Global, Don LaGuardia said Sri Lanka’s capital market has made exceptional gains since the end of the conflict almost one and a half years ago.

"You have made tremendous progress in just one and a half years and I think you cannot expect anything more than what you have achieved," he said addressing a CEO breakfast forum organised by the Institute of Chartered Accountants of Sri Lanka yesterday.

"This means the public sector and private sector are on the right path," LaGuardia said.

But, he said there was a long way to go before the capital market reached a sustained high level of development. There are concerns that the CSE was overheating. "I do not think the market is overheated, it is probably fairly valued. I do not think the high growth experienced by the market would continue for long, if at all, growth would be much slower," LaGuardia said.

He said LR Global was cautious in investing in the stock exchange. "There are probably a few good stocks that are undervalued, but overall, we would be cautious in investing in the stock exchange," he said.

LaGuardia said LR Global was keen on investing in pre-IPO companies in the energy, construction and leisure sectors, helping them lay the ground work to go public. "We are here for the long term," he said.

Deepening liquidity, enforcing regulation consistently and fair valuations were crucial to driving sustained growth in the stock market, LaGuardia pointed out.

LR Global has an office in Sri Lanka and plans to infuse US$ 20 million in its activities here. The company specialises in entering frontier markets, small, not easily accessible economies.

source - www.island.lk

Bourse edges up after sell-off for IPOs

COLOMBO  (Reuters) – Retail buyers nudged the Colombo Stock Exchange <.CSE> up on Wednesday after a two day sell-off prompted by investors marshalling funds for impending initial public offerings.

Sri Lanka’s main share index  rose 10.84 points or 0.17 percent to 6557.00. It is still Asia’s best performer in 2010 with a 93.7 percent gain as the island’s economy rebuilds after the end of a civil war in May 2009.
A power failure briefly halted trading at the bourse during on Wednesday.

It has shed 8.3 percent since hitting an all-time high of 7,207.75 on 4 October Foreign investors were net sellers of 502.9 million rupees’ worth of shares and they have sold a net 23.4 billion rupees’ worth so far this year.

The bourse is trading at the highest forward price-to-earnings ratio in Asia and global emerging markets at 19.8 times, compared with 13.6 and 12.9 respectively, Thomson Reuters data shows. The CSE’s 14-day relative strength index is at 49.05, between the neutral limits of 30 and 70.

Turnover was 1.5 billion rupees ($13.6 million), more than 2.5 times the 2009 daily average but below this year’s daily average of 2.4 billion.

The 350 million rupee IPO of Hydro Power Free Lanka was oversubscribed on its offering day, Tuesday.
The rupee edged up to 111.68/70 a dollar from Tuesday’s close of 111.70/72.

source - www.ft.lk

Sri Lanka Dialog Sept 2010 net profit Rs1.69bn

Oct 27, 2010 (LBO) - Sri Lankan mobile phone operator Dialog Axiata made a net profit of 1.69 billion rupees in the September 2010 quarter compared with a loss of 439 million rupees a year ago, a stock exchange filing said.

Sales rose 16.2 percent to 10.56 billion rupees over the period while administration costs fell 30 percent to 1.5 billion rupees owing to cost cutting.

Basic earnings per share were 0.20 rupees compared with a loss of 0.07 rupees per share in the same quarter of the previous year.

"Group profit was underpinned by robust performance at company level, with Dialog Axiata featuring the group’s mobile business, posting a third quarter and nine-months profit of 1.90 billion rupees and 4.99 billion rupees, up 162 percent year-on-year," a statement said.

Dialog had 6.7 million mobile subscribers as at the end of September 2010, up six percent from a year ago.

Dialog's fixed line CDMA subscriber base increased by four percent to 183,000.

In the June 2010 quarter, Dialog Axiata made a net profit of 1.37 billion rupees compared with a loss of 7.24 billion rupees in the June quarter the year before.

The statement said that the September 2010 quarter "featured the transient impact of downward tariff adjustments in the mobile market, immediately following the introduction of floor rate regulations in July 2010.

"Accordingly, core mobile revenues (excluding interconnection income) which exhibited 13 percent growth year-on-year, declined marginally by 1.5 percent on an adjacent quarter-on-quarter basis," it said.

"Notwithstanding the transient impact of tariff adjustments across the sector, total revenues were bolstered by increased consumption of mobile voice and mobile broadband services, as well by interconnection income, resulting overall in a four percent growth in revenue on an adjacent quarter-on-quarter basis."

The Dialog group returned to profitability in the March 2010 quarter after suffering a string of losses in previous quarters owing to higher costs and a price war brought on by stiff competition.

A segmental analysis in the latest accounts showed the group's entertainment and media, transmission and infrastructure, and fixed telephony, data and ISP (internet service provider) units were still in the red although losses were lower than in the same period the year before.

Dialog has said the finances of its pay television and broadband subsidiaries were improving.

The statement said subsidiaries Dialog Television (DTV) and Dialog Broadband Networks delivered "robust growth" in terms of enhanced profitability at EBITDA (earnings before interest, tax, depreciation and amortisation) level.

"Enhanced profitability at subsidiary level was underpinned by significant performance improvements in the fixed line, broadband, and television businesses of the group."

DTV made a loss of 46 million rupees in the September 2010 quarter compared with a loss of 88 million in the previous quarter, "signalling a robust improvement in profitability" compared with the year before, the statement said.

Dialog said group costs fell in the September 2010 quarter partly because of the introduction of the domestic interconnection regime and reduction in the international telecommunications levy to 0.015 US dollars per minute from 0.038 dollars a minute.

Finance costs also fell 108 percent from a year ago as it used surplus operating cash to repay debt.

In the nine-month period ending September 2010 Dialog also made foreign exchange translation gains of 533 million rupees compared with an exchange loss of 11 million in the same period in 2009. Updated

source - www.lbo.lk

Sri Lanka Sampath Bank rated 'AA' by RAM

Oct 27, 2010 (LBO) - Sri Lanka's Sampath Bank was given an 'AA' long term rating with a 'stable' outlook and 'P1' short term rating, on better risk management which improved asset quality and capital adequacy, RAM Ratings Lanka said.

"In 2008, Sampath recruited several experienced personnel to fortify its internal systems and market position," RAM said.

"The risk-management strategies implemented since then have already begun bearing fruit."

The bank had slowed the increase of its non-performing loans (NPLs) to 5.91 percent to 7.47 billion rupees in the year ending December 2009 from 13.78 percent growth in 2008.

It's gross NPLs had contracted to 6.8 percent of loans by end June 2010 from 7.63 percent in end December 2009.

Prudent Provisioning

"The Bank’s healthier loan portfolio also reflects its expanded pawning portfolio, which entails lower default risk and is well collateralised," RAM said.

"Moreover, the management’s conservative approach is reflected in the Bank’s prudent provisioning, i.e. by providing fully for NPLs and disregarding the value of collateral.

"As a result, the Bank’s coverage levels are well above its peers".

In line with its improving asset quality, Sampath's credit costs as a percentage of total assets had fallen from 0.60 percent in December 2008 to 0.19 percent by December 2009.

Helped by a widening net interest margin (NIM) and stronger non-interest income the bank's pre-tax profits had increased to 3.98 billion rupees in 2009 from 1.41 billion rupees.

An expanding pawning portfolio (gold backed loans) which had wider margins had helped increase net margins.

Other income had increased 977.08 million after shares of an associated had been sold.

Capital

"Sampath’s funding and liquidity levels are considered healthy as its funding base is dominated by customer deposits," RAM said.

"In addition, the Bank’s loan-to-deposit ratio has historically been more conservative than the industry average.

Sampath's Tier-1 risk-weighted capital adequacy ratio was 10.4 percent in 2009 higher than the required 5.0 percent and overall capital adequacy was 13.45 percent (required 10 percent).

Incorporated in 1986, Sampath is the fifth-largest bank in the Sri Lankan banking industry, with 6.24 percent of industry assets as at end-December 2009. RAM said two largest state banks had 40.53 percent of industry assets.

source - www.lbo.lk

Sri Lanka stocks close up 0.17-pct

Oct 27, 2010 (LBO) – Sri Lanka's stocks closed up Wednesday, recovering from a dip in mid-morning trade, brokers said.

There were 93 gainers and 88 losers, today.

The Colombo All Share Index rose 0.17 percent (10.84 points) to 6,557.00 points, while the Milanka Index of more liquid stocks dipped 0.23 percent (16.05 points) to 7,097.83 according to provisional Colombo Stock Exchange data.

Turnover was 1.5 billion rupees.

“Interest was seen in Commercial Bank and John Keells Holdings by institutional and high-net-worth individuals.” Janita Silva of Bartleet Mallory Stockbrokers said.

Commercial Bank closed at 253.60 rupees, down 6.40 (2.46 percent) with 800, 000 shares traded while Hatton National Bank closed at 408.00 rupees, up 0.40 (0.10 percent).

Index heavy JKH closed at 290.20 rupees, down 5.70 (1.93 percent) with two million shares changing hands while Aitken Spence closed at 180.00 rupees, down 2.20 (1.21 percent).

Dialog Axiata closed at 12.30 rupees, up 0.10 cents (0.82) with one million shares traded.

Trading was halted owing to a power failure but resumed with back-up power, a stock exchange official said.

source - www.lbo.lk

Dr. Amunugama pitches for stock exchange

By Mario Andree

Deputy Minister Finance Dr. Sarath Amunugama said the government will not provide any sort of relief on the low returns generated by bank deposits. He said companies with extra cash should venture into new investment sources thereby helping the country activate much needed investments.

"The country is at a critical point in developing its economy. The inflation rate is low the country’s interest rate is more investor friendly. The previous high interest rates where for the banks to attract more savings in assisting the country gather more capital. However after the war the country has become one of the favourable destinations for investment and the government has taken measures to help develop investment at the Colombo Stock Exchange (CSE)," Dr. Amunugama said. He said private sector companies have been complaining that returns from their bank accounts were far below expectations after the reduction of interest rates. They request the government to provide relief for their savings.

But he said that the government cannot provide such relief to account holders.

"These companies could venture into other means of income such as investing in the CSE," he said.

Dr. Amunugama said the risk of investing in the CSE has been minimized and was an ideal place to generate more profits. At the same time, many companies have listed to raise capital for their projects.

source - www.island.lk

530,000 registered account holders, but a fraction actively trade Stock exchange must widen its reach – SEC Chairperson

Securities and Exchange Commission Chairperson Ms. Indrani Sugathadasa said the Colombo Stock Exchange has to expand its reach. "The current numbers in the registry is disappointing given the potential of the country’s capital market.

She said the CSE has nearly 530,000 CDS account holders which was less than three percent of the total population of the country. However, the number of active accounts was distressing.

"Last year only 37,000 accounts have at least performed a single transaction. This year, it is 68,000. The country has a population of more than 20 million mainly based in rural areas and the CSE was working on expansion projects to capture more investors," Ms. Sugathadasa said.

The CSE has witnessed a positive growth rate after the three decade war. The market grew by 95 percent last year and 125 percent year to date, she said.

source - www.island.lk

Power IPO oversubscribed

The Initial Public Offering (IPO) of Hydro Power Free Lanka Ltd was oversubscribed within a few hours after opening yesterday morning.

Subscriptions opened for the Rs. 350 million IPO at 9 am and by 11.38 am the Colombo Stock Exchange was notified by the registrars of the issue that the offer was oversubscribed. Subscriptions closed at 4.30 pm and the basis of allotment would be notified later.

Hydro Power Free Lanka hopes to commence construction work on three hydro power plants within the next 14 months.

source - www.island.lk

Turnover up but indices down for second day Dhammika transfers control of Royal Ceramics

The transfer of slightly under 51% of Royal Ceramics at a price of Rs.325 per share by Mr. Dhammika Perera to Vallibel One Limited, a company wholly owned by him, was the highlight of yesterday on the Colombo Stock Exchange where a turnover of Rs.11.2 billion, up from Rs. 8 billion on Tuesday, was posted although both indices were down fairly sharply continuing the previous day’s trend.

Yesterday’s Royal Ceramics deal followed a similar exercise by Perera the previous day when he transferred over 50% of LB Finance personally held by him to Vallibel One which he plans to quote on the CSE down the road.

The All Share Price Index was down 87.17 points (1.31%) yesterday while the Milanka lost 96.25 points (1.33%) with 142 decliners way ahead of 30 gainers.

Brokers said that the current decline can be attributed to a variety of factors including fund raising mainly by retailers for IPOs, the month-end settlement cycle and a credit squeeze on funds advanced for share trading.

Royal Ceramics saw nearly 28.4 million shares done between Rs.320.10 and Rs.335 closing Rs.5.10 down at Rs.324.50 generating a turnover of Rs.9.2 billion which was mostly on the Dhammika Perera deal.

Foreign interest was seen in HNB where over 1.3 million shares were done between Rs.405 and Rs.409 gaining 60 cents to close at Rs.406.90 with several crossings done at a price of Rs.408.

Interest in JKH continued but at a lower price with over 1.4 million shares done between Rs.295 and Rs.300 with the counter closing Rs.6.10 down at Rs.295.

"We saw quantities in Commercial Bank and Sampath where the market closed slightly lower than on the previous day but DFCC was up Rs.9.30 to Rs.458 with the announcement that the one for one bonus shares will be allotted on November 1," Prashan Fernando of Acuity Stockbrokers said. Aitken Spence too saw over 0.6 million shares done closing 50 cents down at Rs.180 with the counter trading between Rs.176.50 and Rs.190.

Among banking stock Commercial Bank lost Rs.5.10 to close at Rs.256 on 0.4 million shares and Sampath was down Rs.4.20 to close at Rs.290 on over 0.3 million shares. NTB saw a slight price gain of 30 cents to close at Rs.88 on over 0.5 million shares traded.

``Among the banks where volume was seen,DFCC and NTB were gainers,’’ a broker said.

Hydro Power Free Lanka whose IPO opened yesterday was closed at 4.30 pm heavily over-subscribed. The company said in a Stock Exchange filing that the basis of allotment would be announced "in due course."


source - www.island.lk

Sri Lanka stocks close down 1.31-pct

Oct 26, 2010 (LBO) – Sri Lanka stocks closed down, dragged down by index heavy stocks like John Keells Holdings and Aitken Spence, brokers said.

There were 33 gainers and 166 losers, today.

The Colombo All Share Index fell 1.31 percent (87.17 points) to 6,546.16 points, while the Milanka Index of more liquid stocks dipped 1.33 percent (96.25 points) to 7,113.88 according to provisional Colombo Stock Exchange data.

Turnover was 11.2 billion rupees, largely owing to the transfer of a big stake in Royal Ceramics controlled by Dhamika Perera who is transferring his stake in listed firms into a holding company.

“Yet again interest was seen in the banking and finance sector,” Thilini Yatawara of Bartleet Mallory Stockbrokers said.

Sampath Bank closed at 290.90 rupees, up 4.20 (1.42 percent) while Hatton National Bank closed at 407.60 rupees, up 0.60 (0.15 percent) with 1.3 million shares changing hands.

Royal Ceramics Lanka closed at 324.60 rupees, down 5.10 (1.55 percent) with 28.3 million shares changing hands, of which 28.2 million shares was a crossing at 325 rupees a share.

The transfer added 9.18 billion rupees to the day's trading turnover.

Controlling shareholder of Royal Ceramics Dhammika Perera owned 28.2 million shares of the firm's 55.4 million shares in issue.

Perera is transferring is stakes in listed firms to a new company, Vallibel One.

JKH closed at 295.90 rupees, down 6.10 (2.02 percent) while Aitken Spence closed at 182.20 rupees, down 0.50 (0.27 percent).

source - www.lbo.lk

Sri Lanka's stock investors increase amid boom

Oct 26, 2010 (LBO) - Sri Lanka's active stock market investors have increased to 64,000 by Septebmer 2010 from 37,000 a year earlier, Securities and Exchange Commission chairperson Indrani Sugathadasa said.
Sugathadasa said there were 530,000 accounts in the central depository system of the Colombo Stock Exchange but most of them were dormant.

She was speaking at an educational exhibition and seminar on the capital markets of Sri Lanka to market the investment day 2010.

Sri Lanka's stocks have risen steeply over 2009 and 2010 is currently going through a correction. Sri Lanka has been the first and second best performing market in the world for most of the year.

Deputy finance minister Sarath Amunugama said lower interest rates had made stocks attractive.
Capital was also flowing to emerging markets because of weak economic growth in developed countries.

source - www.lbo.lk

Sri Lanka Pan Asia Bank Sept net up 87-pct

Oct 26, 2010 (LBO) - Sri Lanka's Pan Asia Bank net profit for the September 2010 quarter rose 87 percent to 129 million rupees from a year ago as interest costs fell and non-interest income rose, a stock exchange filing said.

Interest income fell two percent in the September 2010 quarter to 776 million rupees while interest expenses fell 19 percent to 362 million rupees, resulting in net interest income rising 22 percent to 414 million rupees.

Interest expenses on deposits fell 25 percent to 312 million rupees during the period, the interim accounts filed with the stock exchange showed.

The bank's interest margin fell to 6.35 percent at the end of September 2010 from 6.42 percent at the beginning of the year.

After-tax return on assets fell to 1.57 percent from 1.94 percent and return on equity fell to 15.88 percent from 20.86 percent over the same period.

Non-interest income rose 93 percent to 200 million rupees while provision for bad loans fell 83 percent to 9.5 million rupees.

Pan Asia Bank's basic earnings per share rose to 1.02 rupees in September 2010 from 0.62 rupees the year before.

Claude Peiris, chief executive of PABC, attributed the higher quarterly profit to "strategic initiatives" implemented over the last few months.

"There is now much greater focus in what needs to be done in growing the business and we are confident that the bank has now started showing the momentum required to see greater results in the fourth quarter of the year," he said in a statement.

During the quarter, Pan Asia Bank increased the branch network to 38 branches by adding three branches.

The bank plans to open more branches in the outlying towns of Matale, Batticaloa, Ambalangoda, Kalmunai and Killinochchi in the fourth quarter, with plans to expand further in key towns and suburbs in 2011.

PABC's total performing loans and advances rose to 15.9 billion rupees as at September 30, 2010 from 9.9 billion rupees at the beginning of the year while total deposits rose to 18.9 billion rupees from 16.4 billion rupees.

However, net profit in the nine months ending September 30, 2010 fell 24 percent to 280 million rupees from the previous year when the bottom line was buoyed by gains from investments in government securities.

Net interest income increased by 14.5 percent to 1,130 million rupees in the nine months.

But non-funds based income fell to 390.4 million rupees from 596 million during the period, all of the decrease being attributable to gains on fixed income securities in 2009, the statement said.

Costs increased by 21 percent in the nine-month period mainly due to the increased cost of running a bigger branch network and higher staff numbers and volumes of business.

"There was a significantly positive trend in provisions which decreased from 218.6 million rupees last year to 25.4 million rupees in 2010, reflecting more structured credit and recovery policies," the bank said.

Tier II capital adequacy ratio stood at 15.8 percent, which "augers well for the bank’s expansion plans," the statement said.

source - www.lbo.lk

Sampath Group’s 9 month net profit tops Rs. 2 b mark

Sampath Bank Group, which consists of the bank and four subsidiary companies, continued with its growth momentum in the third quarter of 2010, by recording all-round impressive results over the corresponding period in 2009, despite many challenges faced.

Pre-tax profit of Rs. 3,212.4 m of the Group for the first three quarters of 2010 recorded a growth of Rs. 528.1 m or 19.7%, over the previous year’s pre-tax profit of Rs. 2,684.3 m, with Sampath Bank contributing the bulk (93.2%) of the profit as the main entity of the Group.  The Bank’s pre-tax profit, which rose to Rs. 2,992.5 m, reflected an increase of Rs. 422.8 m or 16.5% over the pre-tax profit of Rs. 2,569.8 m for the corresponding period in 2009. Marked improvement in the performance of all four subsidiary companies during the period under review has helped to record a higher profit growth rate at the Group level.

The post-tax profit of the Group amounted to Rs. 2,166.2 m, recording a growth of Rs. 776.3 m or 55.9%, over the post-tax profit of Rs. 1,389.9 m for the corresponding period last year. This post-tax profit during the nine month period in 2010 was higher than the post-tax profit of Rs 2,083.8 m, published for the full year period of 2009. Similarly, Sampath Bank too recorded a post-tax profit growth of 51.0% over the corresponding period last year, rising from Rs. 1,330.2 m in 2009 to Rs. 2,009.2 m in 2010.

A higher growth rate in post-tax profits, both at the Group and Bank levels than that in pre-tax profits, was made possible due to the tax free income accrued during the period, which included a capital gain of Rs. 660.7 m, realised through the sale of bonus-shares received from Lanka Bangla Finance Ltd., a recovery against a loan loss provision of Rs.331.8 m and mark to market gains totalling to Rs. 520.05 m. on the trading portfolio of the Bank. Consequently, the Bank’s tax charge for the period under review, decreased by Rs. 256.2 m, despite the increase of 16.5% in pre-tax profits.

The net return on the Bank’s entire fund-based operation, which is Net Interest Income (NII), made the single largest contribution for the increased profitability, by rising from Rs. 5,554.0 m in 2009 to Rs. 6,330.2 m in 2010, registering an impressive growth of Rs 776.2 m or 14.0%.

This growth in NII, was facilitated by the continued volume expansion in the fund based operation and success of the Bank in managing the returns thereon, as reflected by the healthy Net Interest Margin (NIM), which amounted to 5.13% in 2010 as against 5.12% in 2009.

In addition to the timely reprising measures taken by the ALCO, the Bank’s success in minimising the NPLs both in terms of absolute volumes and the NPL Ratio and improving the deposit-mix helped to maintain the NIM at these levels, at the time when the interest margins were shrinking in the market.

Other income of the Bank, bulk of which is Commission and Fee-Based income, too recorded a growth of Rs. 92.1 m or 4.4% in 2010 over 2009. However, the Group recorded a higher growth of 14.8% in other income mainly due to the increased revenue from this source by some of the subsidiaries.

The only source of core-banking income, which recorded a negative growth (37.9%) in 2010 was exchange income, largely due to the revaluation loss of Rs. 126.14 m, incurred in 2010, as against the revaluation profit of Rs. 80.74 m recorded in 2009.This was solely due to the appreciation of the Sri Lankan rupee against the US dollar, from Rs. 114.80 as at 30 September 2009 to Rs. 111.95 as at 30 September 2010.

Increase in the Bank’s operating expenses over the previous year was managed at Rs. 730.4 m or 18.3%, despite the additional expenditure incurred on account of the ambitious branch expansion programme (36 new branches), 273 new recruitments and annual wage increases given effect during the nine month period under review.
The Specific Provision for Loan Losses of the Bank for the period under review amounted Rs. 1,182.9 m, as against Rs. 647 m for the corresponding period last year. The resultant increase of Rs. 535.9 m in specific loan loss provisions was mainly due to the Bank’s decision to make additional loan loss provisions as a prudential measure against certain identified NPLs, over and above the prevailing time-based provisioning requirements, ignoring the collateral held.

This move also helped the Bank to increase its Provision Cover (excluding the General Provisions) against the NPLs from 48.59 % as at 30 September 2009 to 64.64 % as at 30 September 2010. In addition, full provision of Rs. 255.0 m was made on account of the investment in the ordinary shares of Union Bank Colombo, as instructed by CBSL.

However, the increased recoveries against previous loan loss provisions, which rose from Rs. 360.7 m in 2009 to Rs. 1,034.6 m in 2010, helped to off-set the effect of these additional provisions on the bottom line.
The improved profits paved the way for almost all the key financial ratios of the Bank to record significant improvements over the previous year. Good lending practices which included the cartelized credit model introduced recently, effective post-sanctioning monitoring systems and intensified recovery efforts against the existing NPLs, resulted in reducing the Bank’s NPLs both in absolute and percentage terms.

The NPL volumes net of IIS which stood at Rs. 8,515.9 m as at 30 September 2009 was reduced to Rs. 6,384.7 m by Rs. 2,131.2 m or 25.0%. Similarly the NPL Ratio of the Bank was reduced to 5.47 % as at 30 September 2010, from 8.86 % one year ago.

In addition to the improvement made in the Provision Cover referred to above, Bank’s Net NPL/Equity Ratio (Open Credit Exposure Ratio) too was reduced to 16.43% from 42.45% as at 30 September 2009. In addition, almost all profit-based ratios of the Bank such as ROA, ROE and EPS recorded significant improvements.

Sampath also remained as one of the well capitalised banks, with the Tier I Capital Adequacy Ratio at 9.81% and the Total Capital Adequacy Ratio at 12.26% as at 30 September 2010.

Total deposit base and the total assets of the Bank grew by 13.6% and 12.8% respectively in the first nine month of 2010. Going by the latest industry data available up to August 2010, Sampath Bank had maintained much higher growth rates in total deposits and total assets, thereby increasing the market share. In addition, the Bank continued with its growth momentum in customer advances, recording a significant growth of 19.1 % over 31 December 2009.

The recently-announced major capital restructuring programme, which entailed a scrip dividend of Rs. 3 per share and a share split, that increased the number of shares by 100%, was successfully concluded. After the share-split, Sampath share is currently traded at around Rs. 250 and this price is well above the re-stated net assets value of Rs. 87.42 per share, after the share-split. In terms of market capitalisation, Sampath Bank’s ranking on the CSE has now improved to the 15th position, as against the 19th position held on 31 December 2009.

Currently Sampath Bank operates with a network of 163 branches and 217 Automated Teller Machines. The Bank opened 28 new branches up to 30 September 2010 and plans are underway to accelerate the branch expansion programme and open more than 40 new branches in 2010.

Last year, the Bank won many accolades on its superior performance and notably the ‘Bank of the Year’ award by the ‘Banker Magazine,’ London and the ‘Best Corporate Citizen of the Year’ award by the Ceylon Chamber of Commerce. This process continued in 2010, with the Bank being ranked as No. 10 in the list of ‘Top Ten Companies’ by the ‘Business Today’ Magazine.

At the recently-concluded rating assessments, considering the healthy asset quality and the capital adequacy of the Bank, the overall credit rating of the Bank’s has been improved from “AA-”lka (stable) to “AA-”lka (positive) by Fitch Rating Lanka. However, RAM Ratings Lanka has assigned AA (stable) rating for Sampath Bank, in its initial rating assessment concluded recently.

Sampath share price peaks to Rs. 303

SAMPATH Bank’s share price peaked to a high of Rs. 302.90 before closing at Rs. 295.10, up by Rs. 3.20 on the back of a Rs. 42.40 gain last week.

Deals on 2.2 million shares of Sampath accounted for the second highest turnover of Rs. 659 million yesterday. Of the total traded were seven crossings of 1.5 million shares (573,300 at Rs. 295; 760,000 at Rs. 300 and 183,224 at Rs. 278). Speculation was that Indra Silva figured on the buying side whilst foreign holding in Sampath declined by 628,800 shares. Silva held around 4.4% stake in Sampath Bank and a further 2% via Indra Traders as at 30 September, 2010.  Post scrip dividend and share split, Sampath Bank is trading at its highest levels.

source - www.ft.lk

PABC rating upgraded to BBB(lka), outlook stable

The upgrade of PABC’s rating reflects the bank’s improving asset quality and capitalisation, as well as ongoing structural improvements, which Fitch believes should enable the bank to further strengthen its capital position as well as to further diversify and improve the quality of its loan book over the next two to three years. "The Stable Outlook reflects Fitch’s view that PABC’s financial profile will continue to improve over the medium-term, underpinned by ongoing changes within the bank. However, further upgrades would require considerable improvements in terms of loan quality, growth potential and a larger capital buffer to absorb potential losses on bad loans," the ratings agency said.

Increased recovery efforts further supported by the ongoing economic recovery, as well as improvements to underwriting and risk standards has helped PABC improve the quality of its loan book in 2010. Its nominal NPLs fell by 19% at end-September 2010 from its peak in June 2009; this, together with the bank’s increased exposure to low-risk gold-backed lending, helped improve its gross NPL ratio to 7.7% at end-September 2010 (end-June 2009: 13.4%). Fitch notes that while PABC’s rapid loan growth in 2010 (50% in the nine months ending 30 September 2010 (9M10)) is a concern, growth has been on a small base, and credit risk is mitigated to some extent by its increased exposure to gold-backed loans (16% of advances at end-September 2010 versus 5% at end-2008), as well as improved underwriting standards and closer monitoring.

PABC’s loan/deposits ratio increased to 91% at end September 2010 (average of 79% in 2009), as deposit growth was unable to keep pace with the bank’s rapid loan expansion. However, PABC stepped up deposit mobilisation efforts in Q410 with a view to increase the size and granularity of its deposit base, which should result in a higher deposit growth over the next 12 months.


source - www.island.lk

HNB rating affirmed at AA-(lka), outlook stable FCY loan book vulnerable to some credit exposures to Maldivian resort projects, but expected to ease

Fitch Ratings Lanka has affirmed Sri Lanka’s Hatton National Bank Plc’s (HNB) National Long-term rating at ‘AA-(lka)’. The agency has also affirmed HNB’s subordinated debentures at ‘A+(lka)’. The Outlook remains Stable. The ratings reflect HNB’s sound financial profile supported by good profitability, asset quality and capitalisation among local commercial banks, the ratings agency announced.

At end-June 2010 (H110), approximately 40% of HNB’s loan book was corporate loans, with retail/consumer loans and small and medium enterprises loans accounting for 35% and 25%, respectively. The bank’s pawning loans (classified under consumer loans) accounted for 13% of loans.

HNB’s net interest margin was 6.0% in FY09 (FY08: 5.7%) - well above the local licensed commercial banks (LCB) sector average of 5.3%; its pre-tax return on assets (ROA) increased to 3.0% in FY09 (FY08: 2.5%) due to non-recurring items (NRI), which pertain to recoveries from a large NPL, an investment, and value-added tax. After adjusting for these NRI, HNB’s adjusted pre-tax ROA was 2.8% in FY09 - still comparatively good in the local context.

HNB’s loan book shrank by 5% in FY09 (FY08: 13%) similar to other banks, but has steadily increased in Q310 registering loan growth of 7% yoy as the post-war domestic economy improved (actual GDP growth in H110 was 8.5%, 2009: 3.5%). Nonetheless, credit concentrations notably in HNB’s corporate book remained high at FYE09, as the five-largest total exposures accounted for 10% of loans and 67% of equity, including related party exposures to the Stassens group at 4% of loans and 29% of equity.

The bank’s asset quality compared well with its peers. Its overall NPL/gross loan ratio declined to 5.95% at Q310 (FYE09: 6.25%) largely driven by improvements in the domestic business unit (DBU) side of the loan book. DBU NPL/gross loans reduced to 5.2% at Q310 (FY09: 5.6%) largely due to concerted recoveries. However, HNB’s foreign currency loan book in 2010 has been vulnerable to some credit exposures to Maldivian resort projects. HNB’s overall NPL ratio at Q310 would have increased by 0.73% if the credits were factored. In addition, these credits account for 5.7% of equity at Q310.

HNB’s management expects that the cash-flow pressures on these credits should ease for these projects when they are fully constructed and operational in early 2011. HNB’s core and total capital adequacy ratios were 10.1% and 12.0%, respectively at Q210. Its equity/assets held at 9.4% at Q210 (9.3% at FYE09). These ratios compared well with peers.

Fitch expects HNB’s NPL/loans ratio to operate within the band of 6%-6.5% at end-2010. A sustained deterioration in HNB’s credit profile relative to ‘AA(lka)’-rated peers would add downward pressure to its rating.

source - www.island.lk

Dhammika reinvents himself

* Floats investment holding company Vallibel One Ltd., to consolidate personal holdings in select  companies

* Starts with Rs. 5.3 b transfer of 51% control in LB Finance

* 51% stake in Royal Ceramics and 15% stake in Sampath Bank together worth Rs.  15  b to follow

* Eventual public listing of mega entity planned to broad base ownership and raise capital to build two five star resorts with 1,000 rooms by 2014

One of Sri Lanka’s top investors and entrepreneurs the young business leader Dhammika Perera appears to be reinventing himself with the floatation of an investment holding company named Vallibel One Ltd., to consolidate a few of his many personal holdings in listed companies.

The exercise was kicked off yesterday when he transferred 51% stake in one of the fastest growing finance companies LB Finance for Rs. 5.3 billion to Vallibel One Ltd. The deal amounting to 17.66 million shares was executed at Rs. 300 each. This transfer was the most significant event in an otherwise depressed stock market and accounted for 67% of the day’s turnover. In total 17.75 million shares of LB Finance traded between a high of Rs. 297 and a low of Rs. 285 before closing at Rs. 293.50, down by 90 cents.

Sources said that Dhammika is keen to institutionalise his personal holdings in a range of companies and has started it off with Vallibel One Ltd., at present 100% owned by him. This venture is expected to acquire 51% stake in Royal Ceramics Plc, the biggest player in the tiles market and 15% stake in Sampath Bank., the third largest privately owned commercial bank.

At yesterday’s closing price of Rs. 329.70, the stake in RCL amounting to 28.35 million shares is worth Rs. 9.3 billion. On the strength of impressive earnings with RCL upping net profit by 114% to Rs. 606.5 million in the first half, its share price peaked to a high of Rs. 336 before closing at Rs. 329.70, up by  Rs. 5.80.

Apart from a 5% stake under his personal name Dhammika also controls a further 5% each in Sampath Bank via Vallibel Investments and Vallibel Leisure.  This stake (around 21 million shares) at yesterday’s closing price is worth Rs. 6.3 billion and the transfer will be done following regulatory approval.

These three listed stakes are worth around Rs. 21 billion in terms of current market prices. Vallibel One also has two subsidiaries one to focus on leisure sector and another specialising in wind power, a renewable energy source. The leisure sector aims to command around 1000 five star class rooms by 2014 via two hotels, blueprints of which have been finalised. One hotel in Negombo to have 380 rooms and the other in South will have 620 rooms. The wind energy venture will be producing 160 KW of wind energy.

Dhammika plans to take Vallibel One public to broadbase ownership as well raise capital to build the two hotels to better harness the post-war rebound in tourism. The two resorts will be outside the properties owned by Amaya Leisure Plc, which is also controlled by Dhammika.

Among his several listed holdings personally and via connected parties apart from Amaya include control in Hayleys Plc., PABC Bank, Vallibel Finance, Vallibel Power Erathna, Fortress Resorts, Lanka Alumnium Industries. The listed portfolio includes seven companies outside Vallibel One.

source - www.ft.lk

Investors zoom on banking stocks

Apart from the mega transfer of LB Finance stake for Rs. 5.3 billion, the stock market saw investors zooming on banking sector stocks whilst overall sentiments remain fragile. Excluding LB Finance, investors traded on around Rs. 1.7 billion worth of banking and finance sector stocks yesterday though its index dipped by 1%.

Whilst trade on 2.2 million shares of Sampath Bank generated Rs. 659 million, NTB saw 4.2 million of its shares trading for Rs. 373 million and HNB accounting for Rs. 300.5 million on trade of 0.7 million shares. Commercial Bank also saw 0.8 million shares traded. Among trades were two major crossings for 3,960,600 shares of Nations Trust Bank at Rs. 88 and 675,000 shares of Hatton National Bank at Rs. 408.

 “Banking sector counters continued to attract investor attention with Sampath Bank seeing institutional play whilst high net worth interest was evident in Hatton National Bank and Nations Trust Bank,” Asia Securities said.

NDB Stockbrokers said “Indices continued to decline while the market turnover was boosted by an internal transaction related to the controlling stake of LB Finance. Bearish sentiment may continue this week.”
ASPI and MPI were down by 0.8% whilst the number of trades was relatively low at 9,290. Foreign investors were active with a total turnover of Rs. 1.9 billion though there were net sellers to the tune of Rs. 83 million.

source - www.ft.lk

Stock broker’s call for elimination of disruptive elements of economic miracle condemned

A call by a leading stock broker’s research analyst to immediately identify and eliminate disruptive elements in the country’s progress to economic miracle of Asia has been roundly condemned.

In the routine “Technical Analytical and Economic/Political Outlook” provided on market days by Capital Trust Research yesterday had the deadly call. It stated "We must never forget the fact that the war against the deadly terrorists was won in early 2009 but the war against saboteurs, traitors and subversive elements is continuing. The Government’s noble goal of making our motherland the ‘Financial Hub of South Asia’ and the ‘Economic Miracle of Asia’ will remain as empty slogans unless these disruptive elements who are ‘perched comfortably on the horns and devouring up the ears’ are identified immediately and eliminated early.

Some of the recipients of the email who are mostly clients of Capital Trust and other stakeholders were furious over the call for the elimination of so called “traitors” who criticise the Government’s economic management in general.

Incidentally yesterday’s remark by Capital Trust coincided with a centre spread in the Daily FT based on an interview with UNP MP and Consultant Economist Dr. Harsha de Silva. The report titled “Chinthanaya has moved to Hinsanaya and Vindanaya” featured a critique on a range of issues of governance and economics by Dr. de Silva.

Analysts said that in a true democracy people should have the right to hold divergent views and critique policies if necessary and drumming up for elimination of those who do so was unbecoming of a professional broking firm.

Mahinda and Harsha pow-wow in P’ment
PRESIDENT Mahinda Rajapaksa and UNP MP and consultant economist Dr. Harsha de Silva had an absorbing yet friendly discussion yesterday at the formers’ office in Parliament.

This was post Finance Ministry Consultative Committee meeting which the President chaired.
The meeting between Mahinda and de Silva was midst a widely read report in yesterday’s Daily FT titled “Chinthanaya has moved to Hinsanaya and Vindanaya” based on an interview with Harsha. In the interview Harsha critiqued a range of issues of governance and economics under Mahinda Chinathanaya.

Whilst Harsha had been late for the Consultative Committee meeting having missed the original notice on account of having been abroad, he and the President along with a few senior Ministers and officials had a chat for over an hour.

Harsha told the Daily FT that the discussion with the President was friendly and was in the best spirit of democracy. “We discussed many matters of importance to the economy and the President took today's critical interview in the spirit of me being critical within a democratic framework,” Harsha said.
The UNP MP said that President himself had welcomed the critique and had recommended bringing forth pertinent economic issues. The President had also said that the Budget debate has been extended to give the Opposition to critique and highlight issues if necessary.

In response to a call by the stockbroker for elimination of elements allegedly disruptive to economic growth of the country, Harsha said that it was “disgusting.” “The President can criticise me and vice versa on matters of policy etc. but we don’t call for each other’s elimination. Exchange of divergent views is an integral part of democracy,” Harsha added.

source - www.ft.lk

Lanka gears for tourism boom - Sri Lanka Tourism to fast track projects

Indunil Hewage

The public sector needs to play a major role in facilitating private sector investments in the tourism industry owing to their tremendous participation in the sector in the country, Sri Lanka Tourism Development Authority Director General S Kalaiselvam said. “The tourism sector is driven by the private sector and facilitating private sector in the country will generate more revenue for the Government in terms of tax and employment opportunities for the locals,” he said.

The country needs to facilitate the private sector to attract more visitors to the country next year. New segments and areas of interest need to be explored in this regard. Tourists at the Baker’s Fall in Horton Plains. Picture by Saliya Rupasinghe

Proposals have been made to establish a one-stop-shop at the Sri Lanka Tourism Head Office to process all tourism related projects. The unit will consist senior Government officials representing various Government agencies to assist investors with the approval process.

In addition to that, Sri Lanka Tourism have stabilized comfort centres to facilitate domestic travel and these comfort centres are located at Bentota, Pasikudah, Buduruwagala, Avukana and Hasthikuchiya. The Narabamu Sri Lanka program was also initiated to encourage domestic tourists to travel more regularly within the country and discover numerous places in the country.

The Government also entered into bi-lateral agreements for air services with the relevant countries to increase the availability of air seat capacity and country has full potential and facilities to promote MICE tourism in the country.

The BMICH is being renovated to have modern facilities and it is also proposed to build convention centres in Hambantota and Jaffna. Sri Lanka Tourism operates its own office in United Kingdom and marketing representatives in the main tourist generating countries to promote Sri Lanka as a tourist destination. It is also engaged in providing opportunities for the private sector to participate in tourism fairs at discounted rates.

“The Government policy is to subsidize the cost by fifty percent. A further reduction of fifty percent is given for SME sector of tourism,” Kalaiselvam said.

“The Government and Sri Lanka Tourism have also taken measures to attract local and foreign tourists. It is planned to formulate the Third Tourism Master Plan from 2012 to 2020 in addition to first and second tourism master plans in the country. The project formulation study on the plan has been completed.

“Regional tourism plans have also been prepared. A three year action plan from 2010 to 2012, for the development of Eastern province was prepared in 2009 and it is proposed to formulate a similar plan for the Northern province before the end of 2010,” he said. The objective of formulating these plans is to enhance the benefits to the Sri Lankan economy and to guide private sector investors in widening tourist resorts.

Airport surveys are conducted on a regular basis to find out tourist products areas that can be expanded to enhance yield while recognizing the requirements of potential visitor segments and identify which segments would be most approachable to Sri Lanka’s products and yields.

source - www.dailynews.lk

Sri Lanka Aitken Spence proposes city hotel on state land: minister

Oct 25, 2010 (LBO) - Sri Lanka's listed Aitken Spence group has proposed to build a luxury city hotel on excess land owned by a state-run firm in the island's capital Colombo, fisheries minister Rajitha Senaratna said.

The land belongs to Ceynor Foundation, a state-run boat builder. The firm has offices in Colombo's D R Wijewardene Mawatha.

The area had been zoned for leisure and entertainment development by Sri Lanka's Urban Development Authority.

Ceynor chairman Sarath Kumar de Silva said a 15-floor hotel project, which is the maximum allowed under UDA rules was estimated to cost around 30 million US dollars to build.

"But the UDA may relax this rule," he said. If the rule is relaxed a hotel of up to 40 floors could be built, he said.

Senaratne said he hoped to have talks with Aitken Spence on the project which could be in the 'seven star' class.

Aitken Spence is one of Sri Lanka's largest leisure groups, but it has no city hotel. It also operates resorts in the Maldives.

A media report said yesterday that the cabinet of ministers had approved a proposal by the economic development ministry to give land from a military sports ground in Colombo to Hong Kong-based Shangri-La group for a 75 million US dollar hotel and apartment project.

source - www.lbo.lk

Sri Lanka stx edge down ahead of IPOs; rupee up

 * Bourse slips as investors cash in for IPOs

 * Foreign investors sell over 1 bln rupees in shares

 * Rupee up as cenbank lowers trading band by 10 cents

 COLOMBO, Oct 25 (Reuters) - Sri Lanka's benchmark share index edged down 0.8 percent on Monday, as investors cashed in to raise money for upcoming initial public offerings and foreign investors sold over 1 billion rupees' worth of shares,
analysts said.

 Sri Lanka's main share index .CSE fell 52.66 points or 0.79 percent to 6633.33. It is still Asia's best performer in 2010 with a 95.9 percent gain as the island's economy rebuilds after the end of a civil war in May 2009.

 It has shed 7.2 percent since hitting an all-time high of 7,207.75 on Oct 4.

 Despite the performance, foreign investors have so far this year sold a net 23 billion rupees' worth of shares and sold 1 billion on Monday.

 The bourse is trading at the highest forward price-to-earnings ratio in Asia and global emerging markets at
20.3 times, compared with 13.5 and 12.7 respectively, Thomson Reuters data shows.  The CSE's 14-day relative strength index is at 53.3, between the neutral limits of 30 and 70.

 The banking sector index led the fall with top listed lender Commercial Bank COMB.CM shedding 2.18 percent to 265.10 rupees and Sampath Bank SAMP.CM losing 1.1 percent to
close at 295.10.

 Turnover was 8 billion rupees ($71.6 million), more than 13 times the 2009 daily average and well above this year's daily average of 2.4 billion.

 The rupee LKR= closed firmer at 111.70/72 a dollar from Thursday's 111.76/78 as central bank lowered the trading band by 10 cents to 111.30/70. The markets were closed on Friday for a Buddhist religious holiday.

 FACTORS TO WATCH:

• Whether commercial banks will cut lending rates as the central bank kept policy rates steady at multi-year  lows
•  Whether state funds will continue pushing up the index
•  Performance shown in September quarter earnings

source - www.reuters.com

Sri Lanka stocks close down 0.79-pct

Oct 25, 2010 (LBO) - Sri Lanka stocks closed down Monday, dragged down by index heavy stocks like John Keells Holdings (JKH) and Aitken Spence, brokers said.

There were 53 gainers and 148 losers.

The Colombo All Share Index fell 0.79 percent (52. 67) to 6,633.33 points, while the Milanka Index of more liquid stocks dipped 0.83 percent (60.67 points) to 7,210.13 according to provisional Colombo Stock Exchange data.

Turnover was 7.9 billion rupees.

JKH closed at 302.00 rupees, down 1.70 (0.67 percent) while Aitken Spence closed at 182.70 rupees, down 5.50 (2.92 percent).

“A lot of interest was also shown in the banking sector.” Premali Fernando at Bartleet Mallory Stockbrokers said.

 

Sampth bank closed at 295.10 rupees, up 21.50 (7.86 percent) while HNB, closed at 407.00 rupees, up 6.70 (1.67 percent). 

 

source - www.lbo.lk

Sri Lanka LB Finance slice transferred to investment firm

Oct 25, 2010 (LBO) - A 51 percent stake in Sri Lanka's LB Finance was transferred to Vallibel One, investment holding company, the firm's main shareholder Dhammika Perera said.

Perera owned 71 percent of the firm in his own name before the transfer via two accounts.

"It was an internal transfer," Perera told LBO.

Royal Ceramics, which is also a part of Perera's Vallibel group owned another 3.39 percent stake in LB Finance.

Monday's trade, at 300 rupees a share, pushed up turnover by 5.3 billion rupee

source - www.lbo.lk

Sri Lanka Fitch confirms HNB 'AA-(lka)' rating

Oct 25, 2010 (LBO) - Fitch Ratings Lanka has confirmed the national long-term rating of Sri Lanka's Hatton National Bank (HNB) at 'AA-(lka)' and its subordinated debentures at 'A+(lka)' with a stable outlook, a statement said.

"The ratings reflect HNB's sound financial profile supported by good profitability, asset quality and capitalisation among local commercial banks," it said.

"A sustained deterioration in HNB's credit profile relative to 'AA(lka)'-rated peers would add downward pressure to its rating."

HNB's net interest margin was 6.0 percent in the 2009 financial year - well above the local licensed commercial banks (LCB) sector average of 5.3 percent, the rating agency said.

HNB's pre-tax return on assets (ROA) increased to 3.0 percent in 2009 from 2.5 percent the year before due to non-recurring items (NRI), which pertain to recoveries from a large NPL (non-performing loan), an investment, and value-added tax.

After adjusting for these NRI, HNB's adjusted pre-tax ROA was 2.8 percent in FY09 - still comparatively good in the local context, Fitch said.

At end-June 2010 (H110), about 40 percent of HNB's loan book was corporate loans, with retail and consumer loans and small and medium enterprises loans accounting for 35 percent and 25 percent.

The bank's pawning loans, classified under consumer loans, accounted for 13 percent of loans.

HNB's loan book shrank by five percent in FY09 similar to other banks, but has steadily increased in the third quarter of 2010 with loan growth of 07 percent from a year ago as the post-war domestic economy improved.

"Nonetheless, credit concentrations notably in HNB's corporate book, remained high at the end of the 2009 financial year, as the five-largest total exposures accounted for 10 percent of loans and 67 percent of equity," Fitch said.

These included related party exposures to the Stassens group at four percent of loans and 29 percent of equity.

"The bank's asset quality compared well with its peers," the rating agency said.

HNB's overall NPL/gross loan ratio declined to 5.95 percent at the third quarter of 2010 from 6.25 percent a year ago largely driven by improvements in the domestic business unit (DBU) side of the loan book.

DBU NPL/gross loans reduced to 5.2 percent at Q310 largely due to concerted recoveries.

"However, HNB's foreign currency loan book in 2010 has been vulnerable to some credit exposures to Maldivian resort projects," Fitch said.

"HNB's overall NPL ratio at Q310 would have increased by 0.73 percent if the credits were factored."

In addition, these credits account for 5.7 percent of equity at the third quarter of 2010.

HNB's management expects that the cash-flow pressures on these credits should ease for these projects when they are fully constructed and operational in early 2011, Fitch said.

HNB's core and total capital adequacy ratios were 10.1 percent and 12.0 percent at the second quarter of 2010.

Its equity/assets held at 9.4 percent at the second quarter of 2010.

"These ratios compared well with peers," Fitch said.

Fitch expects HNB's NPL/loans ratio to operate within the band of 6-6.5 percent at end-2010.

source - www.lbo.lk

If one Googles Sri Lanka….

By Rohantha N.A. Athukorala

Last week I was on route on UL 227 to address a Global Forum on Tea that was staged in Dubai. As soon as the aircraft was airborne and was gaining height I could see the contour of Sri Lanka taking shape. My mind went back to the time when I had to travel almost on a weekly routine to Jaffna on military aircrafts to develop the private sector businesses in Jaffna during the height of the final battle. From a 34 companies that were operating in Jaffna in the 1990’s, we were able to harness the real potential of the peninsula where by the end mid 2009 there over one hundred and fifty private sector companies operation either directly or through indirect methods of distribution. But even with all this work amidst a war with one of the most ruthless terrorist organization in the world, if one googled brand Sri Lanka, the reports were not that encouraging.

Googling in March-2009

The googled information that surfaced were the bombings in the Vanni and the alleged civilian casualties, the human shields that were been used by the LTTE, Political instability in the country, the down turn of business in the private sector, the continous fall of the stock market, the ballooning budget deficit that was at double degit and the fear psychosis that was gripping the city that resulted in the low tourist arrival into the country. Things were pretty negative at that time.

October-2010


Today if one googled Sri Lanka, the data we see on our computer screen is quite different. The ratification of the Free Trade Agreement with Asia Pacific, A bid to host the 2018 common wealth games, Indian star Vivek Oberoi doing a film in Sri Lanka, The stock market ranked as the best in the world, American business delegation discussing business, Weekly conferences by almost all chartered Association attracting the cream of talent like the great Sally Darwie of the British Olympic bid team, over subscribed bond issue of the Central Bank, Many companies wanting to launch IPO’s and to cap it Private sector profits growing by 284% whilst the tourism arrivals booming to an all time high.

Whist these can be the positive reports emanating just like any country in the world be it China, India, Thailand, South Africa, Vietnam or Russia there is bound to be some negative reports. In case of Sri Lanka the googled information pieces are the Army General in prison, agitation by University students, opposition crying out on the emerging dictatorial rule, the fall in trade pacts such as GSP+ due to Human Rights issues. In my view this is what adds colour to brand Sri Lanka even though it can be unpleasant in reality.

Googling in December- 2011

On the other hand if one were to google Sri Lanka on the 31st of December 2011(end of next year) what will we like to see. The following can be some of that data that should be show cased.

1. Doing business –top 50 country

We must see reports where Sri Lanka is ranked as a top 50 country on the ‘Doing Business Index’ from the current 105th position. We must get strong ranking on attributes like Paying Taxes from the current 62 payments per year to just 1payment just like Malaysia. The total tax as a percentage of the revenue from the current staggering 64% to a equtable level that is acceptable to an investor.The ranking on Enforcing of contracts from the current 1318 days to around 321 as it is in Luxemburg, Time taken to register a property from 83days to 2 days like in Saudi Arabia. Getting construction permits from the current 214 days to 67 days that is taken in China.

If these strategic reforms are not done and announced to the world we not be able to attract the global companies to invest in Sri Lanka even after the hard earned war from the LTTE is my view.

2. Lending rates-hotels biase

The cost of finance must be at a competitive rate to the Hospitality industry so that even with a Average Room Rate(ARR) at 150 dollars from the current 82, so that a typical investment can be financially attractive. As at now constructing a five star room ranges around 18-20 million rupees and unless the ARR are at around two hundred and fifty dollars the return will not be attractive on a time scale of 8-10 years. The logic being by 2015 we must target fifteen percent of the countries employment levels to be consumed by this industry. This will enable the country to achieve a zero poverty level. This is the kind of data that I would like to see by end December 2011 when I google Sri Lanka.

3. Exports-10 billion

There must be a report that Sri Lanka’s Exports industry to have crossed a ten billion dollar barrier. The focused industries that may be featured might be the soft ware sector, Tea, Apparel and Rubber just to name a few. Whilst focusing on the SME sector, for a quick win large organizations will have to be targeted for support so that we cross the magical mark. Which means that the googled data will have interviews of the industry captains to give credibility to brand Sri Lanka.

4. Atchuweli –a reality

By end of December 2011 there has to be something very significant from an economic sense in Jaffna. Atchuweli Industrial Zone being featured will propel the overall attitude to business in the conflict driven marginalized business sector of Jaffna for a typical viewer. This must not be confined to the four Apparel companies but also targeting the 43 SME’s who wants to enter the main stream business of Sri Lanka. This will give a positive rub off to the diaspora that keeps attacking Sri Lanka.

5. PPP –infrastructure

It will do a world of good if we can have some large conglomerates being featured on the news reports on a successful partnership with the government on infrastructure development. This could be the Kalpitya tourism development project on Waste managemnent, Kuchchaveli or the Pasikudah hotel development projects where water systems are required to just name a few.

6. People ownership

We have to accept that governments around the world have not been successful in driving business. We must ensure that at least the key industries such as LPG gas, Sri Lankan Airlines are up and running by end December 2011 so that we give the give the correct vibes globally when Sri Lanka is googled.

7. Tea –Lease
The first privatization asset of the country was the Plantations sector. A colossal 1.5 billion loss making industry has been made viable by the strong leadership of the private sector. One of the key recommendation of the ten man committee appointed by the President in 2008 was to increasing of the lease period to cover two cycles of bush life and hence to 66 years. By 2011 December this recommendation must have hit the market place and it must be on all web sites around the world so that Sri Lanka is featured as a country that is serious on developing the agricultural sector which is linked to lower earning households of Sri Lanka.

8. SME’s –new policy

Lets accept it the backbone of Sri Lanka’s economy is the Small and Medium Enterprises(SME’s). It is paramount that we have the new SME policy activated by the end of 2011 so that we can unleash the true potential of the country. The good news is that the white paper is ready and if this can be firmed up and linked to developmental agenda of the Industrial Estates so that Sri Lanka will be seen as a model country in the development drive of the SME sector. This will further strengthen the Mahinda Chintanaya Ediri Dekma is my view.

9. Hubs

In the recent past, many of us have been involved on forums in sketching out the ‘Hub status’ on different sectors. At least by end of next year it’s important that one of them takes shape in form or structure so that we visually demonstrate a key identity for a Sri Lanka. May be it can be the Naval hub with the development of the Hambanthota harbor.

10. APTA-link to the world

Operationalizing the Asia Pacific Trade Agreement(APTA) by end of next year must be a high priority task so that it becomes the vehicle that tells the world that Sri Lanka is seen to bridging the linkages to the rest of the world. This can be a demonstratable action so that the rest such as EU can follow suit which will hit the global websites of the world.

Conclusion

Above are only some of the initiatives that I am personally exposed to that I believe must be on the computer screen when Sri Lanka is googled but in a macro sense, there can be many more relevant than the above. The idea is that we need now see real actions hitting the global market place than just press releases so that googling Sri Lanka becomes a experience that a chore.

From the vibes I got from a cross section of countries at the ‘Dubai Conference’ it was very clear that Sri Lanka is taken seriously now. In fact I was proud to be Sri Lankan. Now the challenge is how we make this benefit the common man on the streets of Sri Lanka.

The thoughts expressed by the author are purely his own views and is not reflective of the office he holds in the Public, Private or the International civil service.

source - www.island.lk

Bourse boost for Treasury

(State coffers get Rs. 2 b windfall year to date from share transaction levy in tandem with boom in stock market activity)

Apart from constant global spotlight, the Government is also directly benefiting from the booming and bustling Colombo bourse with Treasury getting a windfall revenue of Rs. 2 billion this year so far from the levy imposed on each transaction.

As at last week the year to date total turnover at the Colombo stock market was a staggering  Rs. 450.3 billion and the amount earned by the Government by way of the 0.4% share transaction levy (0.2% on each side – seller and buyer) is over Rs. 1.8 billion.

In comparison, last year Treasury received only Rs. 569 million based on a Rs. 142.4 billion full year turnover. The 2010 January to October last week reflect a staggering 216% rise from 2009 full year collection. Analysts said that with one more week to go for October and two more months for record breaking 2010 to end, the Treasury’s windfall from the share transaction levy will be much higher for the year.
They said that the levy is most effective as it applies to both seller and buyer and is immediately charged upon a transaction irrespective of whether the trade yields a capital gain or not.

Unlike in capital gains where the individual has to declare and collection has time lag as well as administrative cost, the share transaction levy is directly remitted to the Inland Revenue by the Colombo Stock Exchange. In that context there is almost zero administrative cost for the Treasury.

Apart from Government levy of 0.2% on each transaction, a 0.072% is also charged as a SEC Cess. SEC is estimated to have collected around Rs. 300 million whilst as at end 2009, the balance lying to the credit of Cess Fund was Rs. 1.2 billion.  This is in addition to Rs. 253 million balance in the Settlement Guarantee Fund.
The transaction cost at Colombo bourse is 1.02% for deals up to Rs. 50 million. For deals above Rs. 50 million is negotiable but has a minimum floor.

The breakdown of cost for deals below Rs. 50 million is as follows. Brokerage Fees – 0.640%
CSE Fees – 0.084%, CDS Fees – 0.024%, SEC Cess – 0.072% and Share Transaction Levy – 0.200%.
For deals above Rs. 50 million is Minimum brokerage (floor) – 0.200%, CSE Fees – 0.0525%
 CDS Fees – 0.0150%, SEC Fees – 0.0450% and Share Transaction Levy – 0.200%.

More attractive valuations in the stock market now

Post correction in recent weeks, the Colombo stock market this week offers more attractive valuations for investors, Acuity Stockbrokers said.

“The bourse seems to have steadied its course with investor interest in blue chip stocks driving market activity. The market correction has made valuations more attractive for strategic investments and bargain hunters to pick up stocks backed by sound fundamentals,” it said.

Acuity pointed out that the upcoming IPOs should give impetus to investor sentiment, while corporate earnings for the quarter ended September 2010 have started flowing in and is expected to have a positive impact on the market, given the positive macro economic outlook.

The week ended on a positive note as the ASPI gained 59.13 points to close at 6685.99 up by 0.9%. Milanka closed at 7270.80, rise by 1.7% with a gain of 121.54 points.

Despite marginal addition to indices the market turnover was at peak midweek at Rs.5.2 billion. The accumulated turnover at the end of the week was Rs.13.5 billion down by 28% week on week. Market Capitalisation gained by 0.90% to record at Rs.2211.46 billion in comparison to Rs.2191.84 billion during the previous week.

source - www.ft.lk