Sri Lanka Stock Picks

HSBC to Tap Sri Lanka Corporate Demand for Global Debt Sales

noreply@blogger.com (SRILANKANSTOCKPICKS) — Sat, 28 Jan 2012 15:58:00 +0000

By Anusha Ondaatjie

Jan. 27 (Bloomberg) -- HSBC Holdings Plc, Europe’s biggest bank, plans to expand sales of debt issued by Sri Lankan companies to investors abroad as the island’s resurgent economy boosts demand for financing.

The lender is targeting the country’s financial firms and the tourism industry with overseas dollar bonds and syndications, according to Nick Nicolaou, who heads HSBC’s Sri Lanka operations. The London-based bank is focusing on funds of three-year tenure or more, Nicolaou said, without naming specific companies.

“Given the large amount of infrastructural development and private sector investment, the sort of financing required is difficult to raise totally in the local market,” Nicolaou said in an interview in Colombo on Jan. 26. “Investors are looking at opportunities in emerging markets and, without a doubt, there is confidence in Sri Lanka.”

The island’s economy grew 8.4 percent in the quarter to Sept. 30 as the end of a 26-year civil war in 2009 spurs infrastructure spending and encourages tourism and consumer demand. Sri Lanka’s $1 billion sale of 10-year dollar bonds in July, co-arranged by HSBC, attracted bids for more than seven times the amount on offer and the central bank has encouraged local companies to follow its lead and tap overseas funds.

Foreign inflows this year will probably include $500 million of overseas borrowings by large domestic companies and $1 billion of subordinated debt raised by commercial banks to boost regulatory capital requirements, Central Bank Governor Ajith Nivard Cabraal said earlier this month.

The island’s $50 billion economy may expand 8 percent in 2012, compared with an estimated 8.3 percent in 2011, Cabraal said.

Sri Lanka’s $500 million of 8.25 percent five-year bonds are maturing in October, according to data compiled by Bloomberg. HSBC, which helped arrange four of the island’s sovereign issues since 2007, would vie for lead manager role if the debt was to be refinanced, Nicolaou said.

--Editors: Pavel Alpeyev, Andrew Monahan

source - www.businessweek.com

Brokers smile as bourse looks up on blue chips

noreply@blogger.com (SRILANKANSTOCKPICKS) — Sat, 28 Jan 2012 02:02:00 +0000

* ComBank, JKH, Spence and banking stock attract interest

* Foreign buying helps market

The smiles came back in Colombo’s stock broking industry yesterday with the market distinctly looking up closing with turnover comfortably topping a billion rupees and both indices up sharply with many brokers and analysts attributing foreign buying into some blue chips triggering upward movement.

Turnover at Rs.1.72 billion was down from the previous day’s Rs.2.29 billion and the All Share Price Index up 133.04 points (2.38%) while the Milanka gained 163.35 points (3.43%) with 193 gainers leaving 20 losers trailing dismally behind.

"All are smiling today," a stockbroker from a leading brokerage said. "The market was helped by foreign buying which triggered interest."

Foreign buying was evident in JKH which closed Rs.4.50 up at Rs.167 on 0.7 million shares done between Rs.163.40 and Rs.169 generating a turnover of Rs.118.6 million which was number four on the turnover league.

The big business generator was Commercial Bank closing Rs.4 up at Rs.106 on nearly 3.5 million shares done between Rs.100.50 and Rs.106 contributing Rs.348.9 million to turnover.

Aitken Spence followed gaining Rs.3.50 to close at Rs.113 on two million shares done between Rs.108 and Rs.115 contributing Rs.350 million to turnover while NTB was up Rs.5 to close at Rs.62.50 on over 2.2 million shares done between Rs.55.90 and Rs.62.80.

Noting that blue chips moved on price and volume, a broker said that this was good for the market adding that institutions are still not active with state institutions yet absent.

Asia Asset Finance closed flat at Rs.7 on 14.8 million shares done between Rs.6.80 and Rs.7.50 with other speculative stocks likes Swarnamahal, ERI and Ceylinco Finance also showing volume and price gain.

Commercial Bank’s non-voting shares did better than the voting shares gaining Rs.7.20 to close at Rs.86 on a million shares traded between Rs.76 and Rs.86. Brokers explained that since the dividend yield was the same for the voting and non-voting shares, many investors preferred to buy the non-voting stock.

Other than ComBank and NTB, banking stocks that were active included Sampath up Rs.8.70 to Rs.179.90 on nearly 0.2 million shares done between Rs.174 and Rs.179.90, HNB up a rupee to close at Rs.145 on nearly 0.6 million shares done between Rs.141 and Rs.145.

Pan Asia too was up Rs.1.40 to Rs.25.50 on slightly over 0.3 million shares done between Rs.23.30 and Rs.25.50.

Union Bank was up 90 cents to close at Rs.20.50 on nearly 0.4 million shares and Seylan Bank (non-voting) up Rs.1.70 to Rs.29.70 on nearly 0.3 million shares traded between Rs.27.10 and Rs.29.70.

Dividend announcements for the day were by Royal Ceramics, a tax-free interim dividend of Rs.2 per share for 2011/12 XD from Feb. 8 and payment on Feb. 17; Alliance Finance an interim dividend of Rs.25 per share for 2011/12 XD from Feb. 8 and payment on Feb. 17; and Bairaha an interim dividend of Rs.2 per share for 2011/12 XD from Feb. 8 and payment on Feb. 21.

source - www.island.lk

Sri Lanka stocks extend rally on banks, hotels

noreply@blogger.com (SRILANKANSTOCKPICKS) — Fri, 27 Jan 2012 14:32:00 +0000

* Bourse poses highest daily pct gain since Nov. 28

* Foreign investor net sellers

* Rupee flat on light trade; cbank pumps $6 mln to defend

COLOMBO, Jan 27 (Reuters) - Sri Lanka's share market extended its rally with a more than 2 percent gain on Friday as investors snapped up risky assets after market heavyweight and bellwether John Keells Holdings CM> posted strong earnings.

The main share index rose 2.38 percent or 133.04 points to 5,725.44, highest since Jan. 23. It has risen 3.04 percent in last two sessions.

Foreign investors booked profits while local institutional investors bought blue chips like Commercial Bank of Ceylon , which rose 4.00 percent to 104 rupees on foreign selling of 2.2 million shares.

The island nation's bourse returned to neutral territory with the Relative Strength Index at 41.210 from Thursday's oversold region of 27.965, in between the lower neutral range of 30 and upper neutral range of 70, Reuters data showed.

But it is still the worst performer among Asian markets with a 5.75 percent loss so far this year. It was 10th-best in 2011, after being on top in 2009 and 2010.

Net foreign sales on Friday were 157.3 million rupees, but offshore investors are net buyers of 751.2 million so far this year, after net outflows of 19.1 billion last year and a record 26.4 billion in 2010.

Conglomerate Aitken Spence PLC rose 3.2 percent to 113 rupees, a day after it said that it would realise a capital gain of 630 million rupees on the sale of its 30 percent stake in Colombo harbour container terminal joint venture.

Keells gained 2.75 percent to 167.90 rupees, a day after it posted a 56 percent gain in its December quarter earnings.

The day's turnover was 1.61 billion Sri Lanka rupees ($14.13 million), less than last year's average of 2.3 billion. Volume was 59.1 million shares. Last year's daily average was a record 102.7 million.

The rupee closed flat at 113.89/90 to the dollar for a 45th straight session since a Nov. 21 devaluation with the central bank selling around $6 million to defend it, dealers said.

The bank has spent more than $1.07 billion keeping the exchange rate steady since Nov. 21. It spent a net $1.79 billion in the first 10 months of last year to keep depreciation at bay. ($1 = 113.9050 Sri Lanka rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Bryson Hull)

source - www.reuters.com

Snapshot for Sri Lanka Colombo Stock Exchange All Share Index (CSEALL) - By Bloomberg

Bourse basks in first-ever YTD net foreign inflow since 2009

noreply@blogger.com (SRILANKANSTOCKPICKS) — Fri, 27 Jan 2012 00:37:00 +0000

Thanks to interest in premier blue chip John Keells Holdings (JKH), the Colombo stock market for the first time since end 2009 achieved a year-to-date (YTD) net foreign inflow.

Though 2012 is only 26 days old and the value is only Rs. 908 million, the net inflow on a ‘YTD basis’ is significant as it is happening after two years and midst negative run.

Analysts said that this development will further enhance investor sentiments, which appear to have got a fresh dose of energy during the past two market days, after the Bourse lost Rs. 90 billion (largely on account of forced selling on margin calls) in value early in the week.

As reported in the Daily FT yesterday, New World Securities (NWS) said that return of foreign interest (as reflected by Rs. 179 million net inflow on Tuesday and Rs. 66 million on Wednesday) lifted the Bourse. “This positive sentiment will remain if the foreigners continue to pick value stocks,” NWS added.

This was reality yesterday as several foreign funds picked up bulk of the 8.8 million shares of JKH that traded for Rs. 1.46 billion accounting for 64% of the turnover. Yesterday’s net foreign inflow was Rs. 1.02 billion, highest recorded since 3 May 2011.

“We take this as a very positive sign, given the fact that, fresh funds have to play a vital role for the bourse to mark a turnaround,” Arrenga Capital said.

It said: “The Colombo Bourse saw the long-awaited positive signal as foreign buying returned strongly; picking on the heavyweight John Keells Holdings, which has been trading near its 52-week low over the past few weeks.”

JKH saw nine off-market negotiated deals during the last hour of trading, at a fixed price of Rs. 167 per share (4.4% premium to the previous closing price). The crossings accumulated to around 7.9 million shares, whilst the counter registered another parcel of 294, 500k shares being crossed off at Rs. 160.0 during early trading hours.

JKH closed at Rs. 163.40, up by 2.1% whilst with stellar third quarter results released yesterday after the market was closed, investors are likely to toast the premier blue chip when the market resumes today (Friday).

Arrenga said these last hour deals in the counter lifted the market from its dull sentiments as the turnover crossed the Rs. 2 billion mark first time in two months.

Indices, which were struggling searching for a direction, shot up with the renewed foreign participation as both the ASPI and MPI closed advancing by 36.1 (0.6%) and 21.5 points (0.4%) at 5,592.4 and 4,758.5 points respectively. The YTD performance of ASI however remains a negative 7.94%, though lower in comparison to Tuesday’s near 9%.

Another heavyweight, Commercial Bank also continued with interest as the counter too registered three blocks totalling to 3.6 million shares being crossed off at a set price of Rs. 100 share, which represented nearly a 2.3% stake in the counter.

Arrenga said following the deals, considerable buying interest was evident in the counter, as it closed marginally in the green.

Speculative drive continued in two finance sector players, Asia Asset Finance and Swarnamahal Financial Services, as both depicted volatile behaviour. The former, after trading between the range of Rs. 6.7 to Rs. 7.1, closed at Rs. 7.1 with a 9.2% advance. The latter saw its price climbing up further as it closed at Rs. 119.6 with a 4% gain.

Following the announcement of a proposal to effect a reduction in its stated capital, Blue Diamonds [Voting & Non-Voting], both saw their prices gliding down closing with losses of 6.3% and 8.1% respectively. Interest was also seen in Environmental Resources Investments, Ceylon Leather Products, Nation Lanka Finance and Ascot Holdings.

source - www.ft.lk

Stellar 3Q for JKH

noreply@blogger.com (SRILANKANSTOCKPICKS) — Fri, 27 Jan 2012 00:34:00 +0000

■Bottom line up 56% to Rs. 2.7 b; after tax profit tops Rs. 3 b with 49% growth; revenue higher by 35% to Rs. 21 b

■9-month after-tax profit up 2% to Rs. 6.25 b; revenue up 28% to Rs. 54.2 b

Premier blue chip John Keells Holdings (JKH) yesterday announced stellar results for its third quarter ended 31 December 2011, reflecting robust performance by all of its core sectors and continued momentum.

Group revenues of Rs. 21.14 billion and Rs. 54.27 billion in the 3Q and the first nine months of 2011/2012 were 35% and 28% above the corresponding periods in the previous year.

Group gross profits of Rs. 5.45 billion and Rs. 12.40 billion in the third quarter and the first nine months of 2011/2012 were 32% and 33% above the Rs. 4.12 billion and Rs. 9.35 billion recorded in the corresponding periods in the previous year.

The recurring Group profit before tax of Rs. 3.39 billion for the quarter and Rs. 7.39 billion for the first nine months of the financial year 2011/2012 grew by 44% and 33% respectively compared to Rs. 2.36 billion and Rs. 5.54 billion in the corresponding periods in the previous year, excluding the gains of Rs.1.79 billion from the sale of stakes in Asian Hotels and Properties PLC (AHPL) and John Keells Hotels PLC (KHL), JKH Chairman Susantha Ratnayake said in his review accompanying interim results.

Group PBT was Rs. 3.39 billion for the quarter and Rs. 7.39 billion for the first nine months of the financial year 2011/2012, compared to the PBT of Rs. 2.36 billion and Rs. 7.33 billion in the corresponding periods in the previous year. As stated above the previous year’s PBT for the first nine months included capital gains of Rs. 1.79 billion.

While the recurring profits attributable to equity holders grew by 55% for the quarter and 46% for the first nine months, the profits attributable to equity holders for the quarter and first nine months of the financial year 2011/2012 were Rs. 2.73 billion and Rs. 5.68 billion respectively as against Rs. 1.76 billion and Rs. 3.9 billion recorded in the corresponding periods in the previous year.

The Company PBT was Rs. 919 million for the quarter and Rs. 2.42 billion for the first nine months of 2011/2012 compared with the PBT of Rs. 1.12 billion and Rs. 4.44 billion in the corresponding periods in the previous year which included the capital gains.

Transportation PBT for the quarter increased by 44% to Rs. 879 million [2010/11 Q3: Rs. 611 million] on the back of improved performance in all segments.

Leisure recorded a PBT of Rs. 1,002 million for the quarter compared to a PBT of Rs. 632 million recorded in the same period last year, reflecting a growth of 59%. This growth was achieved despite the closure of two resort hotels for a part of the period. Both city hotels contributed significantly to the improved performance with Cinnamon Lakeside operating at full capacity from 1 October following refurbishment of some rooms.

JKH has partnered Sanken Construction Ltd. to build and manage a 240-room business hotel in Colombo and construction is progressing as planned. Chaaya Tranz, Hikkaduwa, which was closed from May 2010 for refurbishment, and Chaaya Wild, Yala, which was closed from May 2011 for refurbishment, were reopened on schedule in November 2011.

The construction of the Rs. 2.63 billion Chaaya Bey, Beruwala, is progressing as planned and will be the latest addition to the resort portfolio in the second half of 2012.

Property recorded a PBT of Rs. 319 million for the quarter, compared to a PBT of Rs. 222 million recorded in the same period last year, reflecting a growth of 44%. The revenue recognition from the ‘Emperor’ project and the ‘OnThree20’ project were the main contributors to the sector’s performance this quarter. The construction of the Rs. 8 billion ‘OnThree20’ project is progressing as planned.

Consumer Foods and Retail PBT of Rs. 532 million for the quarter was an increase of 241% over the same quarter last year [2010/11 Q3: Rs. 156 million]. The soft drinks and ice creams businesses continued to perform exceptionally with higher volumes. The retail business also witnessed an improved performance driven by higher basket values, footfalls and better margins.

Financial Services PBT for the quarter was Rs. 606 million as against Rs. 528 million recorded in the corresponding period in the previous year, reflecting a growth of 15 percent. While Union Assurance and Nations Trust Bank performed to expectations, John Keells Stockbrokers continued to be impacted by the lower market turnover witnessed in the CSE.

Information Technology recorded a PBT of Rs. 65 million for the quarter, which was an improvement of 364% over the same period last year [2010/11 Q3: PBT Rs. 14 million]. The BPO business, which has acquired new customers, saw higher revenues while the Office Automation business continues to perform strongly.

Others comprising Plantation Services, John Keells Capital and the Corporate Centre recorded a PBT of 167 million for the first nine months while recording a marginal loss of Rs. 15 million for the quarter, as against Rs. 2.17 billion and Rs. 192 million recorded in the corresponding periods last year.

The previous year’s PBT for the first nine months included capital gains of Rs. 1.79 billion.

source - www.ft.lk

Sri Lanka bourse up on big foreign buy in Keells

noreply@blogger.com (SRILANKANSTOCKPICKS) — Thu, 26 Jan 2012 16:35:00 +0000

* Foreign inflow at 1.03 bln rupees

* First year-to-date net inflow since 2009

* Keells posts Dec. quarter gain of 56 pct

COLOMBO, Jan 26 (Reuters) - Sri Lanka's share market gained on Thursday in improved volume led by a big foreign buy of market heavyweight John Keells Holdings, helping it record a net offshore inflow for the first time since mid-2009.

The main share index rose 0.65 percent or 36.11 points to 5,592.40, recovering from its lowest level since Aug. 18, 2010, which it touched on Tuesday.

The island nation's bourse saw net foreign buying of 1.03 billion rupees, the highest since May 8, after a Singapore-based fund bought around 7.7 million Keells shares.

After the market closed, Keells posted a 56 percent gain in its December quarter earnings. The conglomerate, which is a favourite of foreign buyers because it is one of the few profitable Sri Lankan shares with a large free float, rose 2.13 percent to 163.40 rupees at the close.

The $18 billion bourse has seen a net offshore inflow of 908.43 million so far this year, after net outflows of 19.1 billion last year and a record 26.4 billion in 2010.

The index was still in the oversold region on Thursday with the Relative Strength Index at 27.965 up from Wednesday's 26.078, slightly below the lower neutral range of 30, Reuters data showed.

It is still the worst performer among Asian markets with a 7.94 percent loss so far this year. It was 10th-best in 2011, after being on top in 2009-2010.

Top lender Commercial Bank of Ceylon rose 0.4 percent to 100 rupees on foreign selling of 2.7 million shares. Retail favourite Asia Asset Finance Ltd rose 9.23 percent to 7.10 rupees.

Conglomerate Aitken Spence PLC after the market closed said in a filing to the bourse that it would realise a capital gain of 630 million rupees on the sale of its 30 percent stake in Colombo harbour container terminal joint venture.

Shares of Spence fell 0.45 percent to 109.50 rupees.

The day's turnover was 2.29 billion Sri Lanka rupees ($20.11 million), highest since Dec. 1 and in line last year's average of 2.3 billion. Volume was 51.9 million shares. Last year's daily average was a record 102.7 million.

The index lost 8.5 percent in 2011 and was Asia's 10th-best performer after being top in the region until June. It was Asia's best in 2009 and 2010.

The rupee closed flat at 113.89/90 to the dollar for a 44th straight session since a Nov. 21 devaluation with the central bank selling around $20 million to defend it, dealers said.

The bank has spent more than $1.07 billion keeping the exchange rate steady since Nov. 21. It spent a net $1.79 billion in the first 10 months of last year to keep depreciation at bay.

Brokers said the market is awaiting the views of the International Monetary Fund (IMF) on the rupee. A team from the global lender is in Sri Lanka to review its $2.6 billion loan. ($1 = 113.8900 Sri Lanka rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Bryson Hull)

source - www.reuters.com

Sri Lanka JKH net up 56-pct in Dec quarter

noreply@blogger.com (SRILANKANSTOCKPICKS) — Thu, 26 Jan 2012 16:30:00 +0000

Jan 26, 2012 (LBO) - Sri Lanka's John Keells Holdings said profits rose 56 percent to 2.73 billion rupees in the December 2011 quarter from a year earlier, with revenues up 35 percent to 21.1 billion rupees.

The firm reported earnings of 3.21 rupees for the quarter and 6.6.7 rupees for the nine months ending December on profits of 5.6 billion rupees, which were flat.

Segmented results showed transportation which is mainly a container terminal bringing in 842 million rupees (up from 554 million rupees, leisure 756 million (up from 523 million), property 275 million (up from 174 million), consumer foods 372 million (up from 47 million).

Financial service brought in 531 million rupees in profits (up from 338 million) and information technology 48 million rupees, reversing a loss of 9.3 million rupees a year earlier.

source - www.lbo.lk

SEC to remove price bands after trading system upgrade

noreply@blogger.com (SRILANKANSTOCKPICKS) — Sun, 22 Jan 2012 06:11:00 +0000

The Securities and Exchange Commission (SEC) will remove price bands once the Colombo Stock Exchange (CSE) goes online with its Automated Trading System (ATS) upgrade with ATS Version 7 next month, SEC officials said.

"We will replace this with circuit breakers," an SEC official said. The CSE postponed the ATS upgrade amidst some resistance from the stock brokers, early this month.

"This has to be done as the hardware in our system is outdated. We cannot afford another system crash like last year," a CSE source said, adding that last year on September 19 the system went out of control and was not reflecting the actual prices of some shares after it started functioning.

He said the regulator cannot remove price bands (which was also a recent request from the brokers till the Colombo stock Exchange's (CSE) trading platform is upgraded.

source - www.sundaytimes.lk

President’s sons in Ascot’s Top Twenty lis

noreply@blogger.com (SRILANKANSTOCKPICKS) — Sun, 22 Jan 2012 01:39:00 +0000

By Ravi Laduwahetty

The president’s two elder sons, Namal and Yoshitha, are listed among the top 20 shareholders of Ascot Holdings PLC according to the company’s interim financial statements.

According to this list, Mr. Y.K. (Yoshitha) Rajapaksa owns 100,000 shares and Mr. L.N. Rajapaksa (Namal) 92,000 shares as at Sept. 30, 2011.

Although in the top 20 list, in percentage terms their shareholding is a modest 1.25% and 1.15% though they are the 12th and 13th largest shareholders in the company which is fairly closely held.

Previously Asian Cotton Mills Ltd., the Jayewardene family had interests in the company founded in the middle sixties to spin cotton yarn. It had extensive property at Ratmalana but was in difficulty for many years due to a number of factors, many of them outside the company’s control.

Mr. A.Y.S. Gnanam, the well known tycoon, ran Ascot for a number of years but could not turn it around. Later control passed to the Kuwaiti investor, Al Nakib. Thereafter a group led by Mr. Rohan Iriyagolle took control, sold off machinery and land and invested the proceeds in a Colombo property development project at T.B. Jayah Mawatha (Darley Road).

The company now operates mainly on the rental income of this property.

Mr. Nimal Perera, financial advisor to Mr. Dhammika Perera and on the boards of companies controlled by him, is also in Ascot’s Top Twenty list with 269,200 (3.37%)and is ranked the sixth largest shareholder.

Axis Financial Services (Pvt) Ltd. with 3 million shares (37.57%) and Boston Capital Pvt. Ltd with 649,500 shares (8.13%) are the two largest shareholders of Ascot with these shares held through two banks. Their individual accounts follow with Axis having a further 358,092 shares (4.48%) and Boston 314,864 shares (3.94%).

Some directors of Ascot are believed to have beneficial interests in shares held by holding companies.

The Ascot share traded at a high of Rs. 207.70 and a low of Rs. 99 in the Sept. quarter 2011 against Rs. 80 and Rs. 47 a year earlier. It closed at Rs. 151.80 on the CSE last Friday.

Total assets as at Sept. were Rs. 1.25 billion and liabilities approx. Rs. 600 million.

The group posted a small loss of Rs. 5.9 million in the period ended Sept. 30, 2011, translating to a loss of Rs. 0.73 per share.

The directors of the company are Messrs. V.P. Malalasekera, Chairman, Rohan Iriyagolle, N.D. Gunaratne, N.A. de Mel, Chanaka de Silva and D.J. Gunaratne.

source - http://www.island.lk/

HNB beats private banks with largest branch network

noreply@blogger.com (SRILANKANSTOCKPICKS) — Fri, 20 Jan 2012 00:30:00 +0000

Hatton National Bank (HNB) said yesterday that it now has the largest branch network among private players in the industry.

It said in keeping with its extensive branch opening strategy pursued in 2011, the bank reached the milestone of 240 Customer Centres with the opening of the Customer Centre in Bandaragama.

“Through this branch expansion strategy pursued in 2011, the bank was able to maintain its position as the private sector commercial bank with the largest network of Customer Centres with the widest reach,” a spokesman for HNB said.

During the past two months HNB opened eight Customer Centres in Kilinochchi, Dehiattakandiya, Galaha, Hakmana, Urubokka, Kalawana, Hikkaduwa and Bandaragama.

“These Customer Centres are bound to add more convenience and banking opportunity to the people in these areas. The bank is steadfast in its focus to have greater financial inclusion among people in Sri Lanka by bringing a comprehensive range of financial services,” he added.

The spokesman said HNB stands tall as one of the largest private sector commercial banks in the country with a focus on corporate banking, trade finance, international banking, treasury, project financing and financing for large infrastructure development projects in the country. The bank is a leader in retail banking and has been awarded the Best Retail Bank in Sri Lanka Award for its performance in 2007, 2008, 2009 and 2010 by the Asian Banker Magazine.

source - www.ft.lk

BETTING ON OUTSIDERS

noreply@blogger.com (SRILANKANSTOCKPICKS) — Wed, 18 Jan 2012 00:31:00 +0000

Fears of a Western financial meltdown are giving frontier markets a new lease of life

By Lucy Fitzgeorge-Parker

Putting together a well-balanced portfolio has never been easy, but until recently there were at least some certainties investors could rely on. If you wanted a sensible, low- risk investment with a reasonable rate of return, you bought developed-world government bonds or blue-chip stocks; if on the other hand you were prepared to lose your shirt in pursuit of stratospheric profits, you opted for equities from Africa or other exotic destinations.

In the three years since the collapse of Lehman Brothers, however, all that has changed. Not only have many so-called ‘frontier markets’ made giant strides in economic development, but – with contagion from countries such as Ireland and Greece threatening core European markets and the US suffering a sovereign downgrade – the concept of ‘risk-free’ investments has had to be consigned to the dustbin of history.

“Risk-free assets don’t exist and never did, so if you have 90% of your net worth in Europe and the US you’re actually taking a massive gamble,” says Jerome Booth, head of research at specialist emerging markets fund manager Ashmore. “All countries are risky – the difference is that in frontier markets the risk is priced in.”

What is more, frontier markets currently offer something even more valuable for investors and almost non-existent in the developed world – growth. Since the financial crisis, Western economies have been struggling to break free from recession and this has been reflected in near-zero interest rates and wildly volatile stock markets. By contrast, frontier markets such as Sri Lanka, Nigeria and Iraq were barely affected by the global downturn and should post annual GDP growth of more than 6% for the next five years, according to IMF forecasts.

Yet while the risk-reward profile of frontier markets may be looking ever more appealing, gaining exposure to them can still prove frustratingly hard for Western investors and money managers. Indeed, lack of access – whether for reasons of size, liquidity or regulation – is one of the key characteristics that make a market frontier, as opposed to emerging.

Thus the most widely used frame of reference for this equity space, the MSCI Frontier Markets Index, includes tiny EU member Estonia and ultra-wealthy Gulf states such as Qatar that restrict foreign ownership of assets, as well as more obvious choices such as Lebanon, Pakistan and Ukraine. And in the broader frontier universe – usually defined as any of the 100 or so countries that are neither emerging nor developed – a much-hyped new market such as Mongolia can have a daily stock-market turnover of less than $60,000.

This lack of liquidity limits the extent to which larger funds can get involved in frontier markets, partly because of the lack of stocks to buy and partly because purchases of any size will tend to move the market. Yet as veteran asset manager Mark Mobius – who oversees $50bn of emerging and frontier-market investments for Franklin Templeton – explains, the biggest hurdle for funds is often something as simple as the lack of reliable custodian banking. “Unless we’re able to safekeep our securities with a really good custodian, then there’s no way of getting in,” he says.

This limitation means larger firms such as Franklin Templeton are unable to get direct access to many frontier markets – although, as Mobius points out, scale can have its advantages. “As we’re a pretty big money manager, the custodians make a lot of money on our regular funds and we can twist their arm a little bit,” he says. “We can say, ‘Look, we realise that you’re not going to make a ton of money in Laos or Cambodia but we need that, and if they can do it they will accommodate us.”

And there are alternatives to direct investment. In Mongolia, for example, many of the companies that stand to benefit most from its mineral wealth are based in – or listed on the stock markets of – the UK, Canada or Australia. Thus investors can gain exposure to frontier markets’ most lucrative sectors while enjoying the protection of developed- world regulation and corporate governance – not to mention much lower transaction costs. “If we had two companies, one listed in London and one listed in Cambodia, but the London one was more liquid, we would probably favour that one, all things being equal,” says Mobius.

Yet as Arild Johansen, chief analyst at boutique frontier specialist FMG, points out, there are disadvantages to investing indirectly. “The problem with the offshore listings is that they follow the sentiment of the West,” he says, “so if you have a massive correction going on there, these stocks will obviously go down with it because people don’t really care what the underlying drives are. When you invest locally you are cushioned from all that.”

For this reason, he argues, when it comes to frontier markets, “small is beautiful”. Iraq’s nascent stock market, for example, has shown impressive returns over the past two years but is still off-limits to large firms such as Franklin Templeton because of the lack of liquidity and a global custodian – whereas smaller player FMG was able to move into the market as early as May 2010.

“It gives the boutiques a way to go into exciting areas before the big funds consider them,” Johansen adds. “And it gives us time to build a nice position and be there with real money and a good chunk of the money by the time they find it interesting so they can take it up to the next level.

To us it’s important to get started early in these markets as most returns are made in the initial part of the curve.”

Slim Feriani, CEO of boutique manager Advanced Emerging Capital, agrees that first-mover advantage is a key attraction. “The commonality across all the frontier markets is that they are probably the most under-researched and underinvested countries globally. That’s where the opportunity is because that can only change,” he says. “You’ll have more people investing in them, and if you have moved in before the crowds, then typically all the boats will get lifted at one point in time.”

There are, of course, downsides to going down the boutique route, as investors in several smaller Africa funds found in 2008 – when the credit crunch hit, ‘hot money’ deserted the frontier space, forcing funds to sell out at a loss and ultimately close. For this reason, managers of open-ended funds are at pains to stress that frontier should be seen as a long-term investment. “We try to make sure investors understand that when you buy into, say, Iraq, that you should have at least a five-year horizon on your money and look at it as a liquid private- equity investment,” says Johansen.

And events of the past year suggest investors have taken this message on board. As Ashmore’s Booth points out, when political turmoil engulfed the Middle East and North Africa (MENA) in the spring, emerging-market equity funds saw substantial withdrawals by the US retail- investor base but, for the most part, frontier funds were unaffected. “The hot money that poured into frontier markets in 2007 and 2008 came out and never came back again,” he says. “These days when a crisis seems to be looming, there isn’t a massive rush for the exit because the people invested in frontier aren’t fleet of foot.”

What some analysts fear could spark a panic, given the preponderance of commodity-rich economies in the frontier space, is the much-touted prospect of a hard landing in China. “As long as growth overall doesn’t slow dramatically and commodity prices remain at similar levels to where they are today, then frontier markets are in excellent shape,” says Johansen. “But if, God forbid, China should slash into growth to absolutely nothing and their appetite for commodities dropped accordingly, then these economies are extremely vulnerable to that.”

Most frontier managers, however, dismiss such fears as overdone – Mobius says speculation about problems in China is driven by hedge funds talking their own books, while Ashmore’s Booth points out that even after a major correction, emerging markets would likely still show growth rates well above anything imaginable in the West. “Yes, one needs to be concerned about commodities, but if you’ve got something big enough to really cause you to be worried, then you want more frontier markets and you want to have nothing in the US or Europe,” he says.

Mobius also insists that the concept of frontier markets as pure commodities plays is misguided given that – as, for example, in Nigeria, a resource-rich country and one of the fastest-growing economies in the frontier space – both the firms that control the sector and the money made from it are frequently kept outside the jurisdiction. “I wouldn’t say frontier investors need to be bullish on commodities, I would say they need to be bullish on the growth of consumer markets,” he says.

For him, the most exciting recent development both in Nigeria and other markets such as Vietnam is the move towards privatisation of utilities, which provides a large investor such as Franklin Templeton with a rare combination of scale, regulatory security and exposure to an infrastructure boom he sees as inevitable. “On average, including all the basket cases, emerging and frontier markets are growing three times faster than developed countries and that means there’s demand for everything,” he says, citing his own recent experience of being twice stuck in an elevator in Lagos due to power outages.

Feriani at Advanced Emerging Capital agrees that consumer stocks – typically dominated by sectors such as finance, telcos, retail, food and beverage, and infrastructure – offer the best opportunities for frontier investors, giving access to the growing middle class and providing some insulation from events in developed markets. “We prefer to be exposed to the domestic sector in these rapidly growing economies because the export sector remains vulnerable to what happens in the West for the time being and how the Western consumer behaves,” he says.

Indeed, lack of correlation with both the rest of the world and each other remains one of the key appeals of frontier economies – particularly after three years of repeated convulsions in the core markets of Europe and the US. As Feriani points out: “Many of these countries are actually negatively correlated with each other – if you have an event in Tunisia you don’t expect contagion from that in Vietnam, and what happens at the macro level in Qatar doesn’t necessarily have anything to do with what’s happening in Argentina.”

Some frontier advocates go even further. “Even if the fundamentals in the US and Europe are getting really bad, there are always going to be pockets of investors with money to spend and it’s not absurd to think that many of them might start looking at the better-managed frontier markets as safe havens over the next five years,” says Peter Bartlett, managing director of frontier-investment bank Exotix. He cites the example of Dubai, which saw huge capital inflows during the MENA region troubles this year, and Mauritius, which has already achieved partial safe- haven status for African investors.

For Mobius, the biggest challenge is overcoming outdated investor prejudice. “It’s beginning to dawn on people that the perception of risk is changing – but it’s going to take a long time because it’s very difficult to explain that if you really want to be safe, you’ve got to be diversified, and the way to diversify is to get out of your own country and invest globally,” he says.

Booth at Ashmore agrees that frontier markets stand to benefit from a paradigm shift on the part of investors in the near future. “As the perception of risk and the perception of macroeconomic factors filters into the heads of big institutional investors, it’s going to radically change the way they view the world and the way they think about asset allocation, and that’s naturally going to lead to more allocation to emerging and frontier markets,” he says.

If they are right, frontier’s early adopters could yet be the big winners of the next investment cycle.

THE FINAL FRONTIER

For risk-hungry investors, the news that frontier markets are becoming safer by the day is far from welcome. Fortunately for such souls there are still economies at the extreme edge that offer the prospect of huge returns and equally large losses.

Countries such as North Korea, Cuba and Zimbabwe offer what is known as an ‘event risk’ profile. As Peter Bartlett of Exotix explains: “You buy into these economies because, while it’s very hard for you to say what the right value should be on those assets at the moment, you know that there is an event in each of these countries that will stimulate a massive surge in demand.”

In many cases that event is the removal or death of whoever is in power. For North Korea it would be the signing of a reunification treaty with its southern neighbour.

Gaining access to these markets is not easy but several have outstanding bonds, and in Zimbabwe stocks such as drinks- maker Delta and telecoms firm Econet offer upside potential. Advanced Emerging Capital’s frontier fund has a 3% allocation, and CEO Slim Feriani sees it as a long-term play. “We don’t expect Zimbabwe to become a South Africa overnight but in situations like this one, the impact of any positive change on returns from an equity-market point of view could be massive,” he adds.

TIPPED FOR SUCCESS

Frontier’s next hotspots

Mark Mobius, Franklin Templeton

CAMBODIA, LAOS, BANGLADESH, SRI LANKA, COLOMBIA, PERU, LIBYA

“Laos has just opened its stock exchange and we’re looking at that, and there are places that in the past we were invested in and we’ll go back into, such as Bangladesh and Sri Lanka. Before the recent upheaval we were invested in Libya... I would say we’ll be back there within a year.”

Peter Bartlett, Exotix

MONGOLIA, SRI LANKA, BANGLADESH, PAKISTAN, ANGOLA, RWANDA, ZAMBIA, EGYPT, THE CARIBBEAN, KAZAKHSTAN, KENYA

“If the smaller English-speaking Caribbean islands could pool their list of companies into one stock market, you’d have some interesting opportunities. Kazakhstan and Kenya lost a third of their value this year... At some point they will bounce back.”

Arild Johansen, FMG

RWANDA, GHANA

“Rwanda is a booming economy – they’ve just set up their capital markets and they’ve started listing some companies. Ghana recently became an exporter of oil and is growing tremendously – and it doesn’t just have oil, it also has other commodities such as cocoa, coff ee and gold.”

Jerome Booth, Ashmore Investment Management

QATAR, ZAMBIA, MAURITIUS, BOTSWANA, ZIMBABWE, NIGERIA, EGYPT

“We’re bullish on Nigeria, particularly the financial sector. Places such as Zambia offer commodities exposure and have always been very well run. We’ve got almost 5% of our frontier market fund in Botswana, and there are things in Zimbabwe.”

source - http://www.cnbcmagazine.com/story/betting-on-outsiders/1498/1/

Saboteurs and sceptics at work?

noreply@blogger.com (SRILANKANSTOCKPICKS) — Wed, 18 Jan 2012 00:30:00 +0000

The loss of momentum yesterday despite the early boost following the SEC’s easing of credit rules saw some market circles privately talking of theories of sabotage and sceptics being at work.

This couldn’t be verified independently, but at least one broker alluded to scepticism in its market report. DNH Financial in its commentary said it was “time to shed the scepticism”.

It said that while the number of sceptical market participants sitting on the sidelines appeared to be relatively large, given the presumption that the bourse simply has to retreat before it can move upwards, a key argument underlying its overweight recommendation on the bourse was that market fundamentals had improved significantly with valuations for several stocks trading at highly attractive multiples.

“Many of the stocks we recommend are in the industrials, banking, diversified and tourism sectors. While these companies possess significant long-term fundamentals and produce substantial cash flow, several of them have suffered price declines over the last few months producing highly attractive buying opportunities trading at less than 10X multiples,” DNH added.

source - www.ft.lk

Harry’s 23-year stint on HNB Board ends

noreply@blogger.com (SRILANKANSTOCKPICKS) — Wed, 18 Jan 2012 00:28:00 +0000

Business leader Harry Jayawardena has vacated his Board seat which he occupied for 23 years in HNB Plc.

This was in conformity with the Monetary Board direction on good corporate governance.

In a filing to the CSE, the HNB said at a Board meeting on 12 January that it was decided that by operation of Monetary Board Direction No. 11 of 2007 as amended by Direction No. 5 of 2008 issued under the Banking Act, D.H.S. Jayawardena is deemed to have vacated his office as a Director of HNB after having completed his term of office.

“His vacation of post as a Director of HNB was accepted by the Board with effect from 31 December 2011,” HNB added.

Jayawardena was first appointed to the Board in 1988. Via Milford Exports, Stassen Exports and Distilleries, Jayawardena currently controls a 15% stake in HNB.

Also in compliance with Monetary Board directives, Raja Obeyesekere resigned from the HNB Board from 31 December 2011.

source - www.ft.lk

Sri Lanka SEC allows more broker credit

noreply@blogger.com (SRILANKANSTOCKPICKS) — Mon, 16 Jan 2012 16:09:00 +0000

Jan 16, 2012 (LBO) - Sri Lanka's Securities and Exchange Commission said it had allowed brokers to lend up to three times their net capital to clients to buy shares in a relaxation of credit rules imposed last year.

The adjusted net capital is arrived at after deducting from net capital 50 percent of the value of fixed assets.

Earlier brokers were only allowed to lend only their own assets. The new rule allows them to leverage, effectively engaging in a finance business of borrowing and lending.

The SEC said the new rule will increase the amount all brokers can lend to the market to 8.7 billion rupees from the current 5.0 billion rupees.

In 2011, the SEC put credit curbs and the stocks, especially fundamentally weak illiquid stocks were punted upwards amid credit bubble supported by lower interest rates and excess liquidity in the banking system.

Credit growth has since hit the balance of payments and rates are now rising.

The market has since corrected and profits of many firms have also improved.

Brokers went to Sri Lanka's President to pressure the SEC to relax credit rules, eventually leading to the resignation of the chairperson of the SEC.

The cabinet of ministers earlier removed the SEC director general soon after a crackdown on price manipulation, hype and dump scams and insider dealing started.

source - www.lbo.lk

Credit Boom

noreply@blogger.com (SRILANKANSTOCKPICKS) — Mon, 16 Jan 2012 13:29:00 +0000

The SEC further relaxes stock broker credit extension – additional credit available will increase by Rs. 5 billion resulting in total credit available in the market to Rs. 8.7 billion

At the Commission meeting held on 16th January 2012, the Securities and Exchange Commission of Sri Lanka (SEC) decided to permit Stock Broking Firms to leverage 3 times adjusted Net Capital with immediate effect. “Adjusted Net Capital” is the Net Capital computed as per the Colombo Stock Exchange (CSE) Member Regulations less 50% of Fixed Assets. In line with other regional markets, 50% was deducted to take into account the concerns of realizing illiquid assets into cash.

By permitting the Stock Broking Firms to leverage 3 times adjusted Net Capital, the additional credit available in the market will increase by Rs 5 billion resulting in the total credit available among Stock Broking Firms to Rs 8.7 billion.

Having considered the dimensions of credit extension and to establish a balance between the two principals of lending norms and risk management the SEC reviewed the Credit Extension by Stock Broker Firms.

As a Capital Market Regulator, it is a core function of the SEC to ensure that capital and other prudential requirements are sufficient to address the level of risk taking by the Stock Broking Firms in extending credit with adequacy in the financial strength, disclosures, systems and governance processes which should be monitored on a regular basis in order to prevent any systemic risk to the Capital Market.

At present the Stock Broking Companies are permitted to extend credit based on the Liquid Assets of the company less obligations.

source - www.lankabusinesstoday.com

MTD Walkers involved in A32 road construction, piling work at top hotel site

noreply@blogger.com (SRILANKANSTOCKPICKS) — Sun, 15 Jan 2012 14:53:00 +0000

With two major contracts in the bag -- constructing the A32 road linking the North and South and the piling contract for the 5-Star international Hotel Softlogic Movenpick through a subsidiary CML MTD Construction Ltd -, MTD Walkers PLC says it’s looking forward to a progressive year.

Viraj de Silva, the group’s Chief Financial Officer, said these projects are two of the largest contracts to be undertaken by any engineering company in 2011. “We successfully won these contracts and both these projects are slated for completion within the next two years,” he said in a press release issued by the company.

Describing the organization as Sri Lanka’s only listed, fully fledged engineering and infrastructure-development company, the release said the company will undertake the construction of 36 km of the A32 road at a cost of Rs 1.7 billion. On completion, the road will connect the North with the South and will be the shortest route from Colombo to Jaffna.

CML-MTD Construction has also received a letter of acceptance for the reconstruction of the Giriulla –Narammala Highway worth Rs 1.4 billion. The company has already successfully completed the construction of substantial components of the new Southern Expressway and is in the process of contributing specialist construction capacity for constructing the Colombo-Katunayake Expressway.

The statement said Walkers’ Piling (Pvt) Ltd, a fully owned subsidiary of MTD Walkers and one of the largest piling contractors in Sri Lanka, will commence work this month at the Movenpick hotel site using specialized ‘secant’ piling technique which is frequently used overseas for deep excavation.

source - www.sundaytimes.lk

Qatar seeks stakes in CSE, Kalpitiya and other property

noreply@blogger.com (SRILANKANSTOCKPICKS) — Sun, 15 Jan 2012 14:50:00 +0000

By Duruthu Edirimuni Chandrasekera

Qatar Holdings, the investment arm of the state-owned Qatar Investment Authority, is interested in various development projects ranging from a stake in the Colombo Stock Exchange (CSE), the Kalpitiya Tourism Zone (KTZ), the Colombo Commercial Property (CCP), and a host of sites in the South for hotel projects, according to official sources.

A preparatory team ahead of today’s arrival (visit) of Sheikh Hamad bin Khalifa Al-Thani, the Ruler of Qatar, is in Colombo here at the moment and a group of six including the Deputy CEO of the Qatari Exchange has had initial discussions at a joint meeting with the Securities and Exchange Commission (SEC) and the CSE on Thursday and a separate meeting with the SEC on Friday, a source close to the discussions told the Business Times on Friday.

He said the Qatar Holdings, which owns around 20% in the London Stock Exchange, will do a feasibility study of the CSE in an effort to invest in a 'sizeable' stake. “But the CSE has to be demutualised and made into a public limited company which is now being fast-tracked," he said. He added that much assistance by the World Bank team during the last year was obtained in this regard and within six months' time CSE's demutualisation will be completed. "The team wanted to know about the demutualisation, about CSE's IT platform, details on the transaction settlement time, legal framework, etc,” he said.

He added that the visitors are also eyeing tourism projects and looking at the KTZ and the Colombo Commercial Property at Sir James Pieris Mawatha for hotel projects. “They are also keen on real estate development and are scouting for land,” he said. There are 17 islands in the Kalpitiya area, which is a peninsula that separates the Puttalam lagoon from the Indian Ocean and is about 150 km away from Colombo. The source added that Qatar Holdings is interested in a large site in this area which will most probably include these islands. “They are eyeing mixed development for CCP,” he said.

He added that the Qatari leader will be accompanied by a group of leading Qatari investors who will explore the possibilities for mobilisation of more Qatar investment in the tourism industry and also infrastructure projects in the agriculture and fisheries sectors.

During his two-day visit, he will hold bilateral talks with President Mahinda Rajapaksa and other ministers and officials. Several agreements covering improvement of bilateral relations in economic, trade, investment, cultural and industrial sectors are also scheduled to be signed during the visit.

Last month, Sheikh Hamad bin Jassim Al-Thani, the Prime Minister of Qatar visited Sri Lanka.

source - www.sundaytimes.lk

MTD Walkers announces major projects for 2012

noreply@blogger.com (SRILANKANSTOCKPICKS) — Sat, 14 Jan 2012 14:58:00 +0000

New construction and piling plans get underway

MTD Walkers, Sri Lanka’s only listed, fully fledged engineering and infrastructure development company, continues to affirm its role in the Nation’s infrastructure development drive through its subsidiary CML MTD Construction Ltd contracting to construct the A32, which is an important conduit between the North and South. Meanwhile, their other subsidiary, Walkers Pilling has won the Piling contract for the new five-star international Hotel Softlogic Movenpick.

According to MTD Walkers PLC CFO Viraj de Silva, these projects are two of the largest contracts to be undertaken by any engineering company in 2011. de Silva said, “We have successfully won these contracts and both these projects are slated for completion within the next two years.”

As one of the best rated general contractors in the country specialising in road construction, railway and road bridges, the Company will undertake the construction of 36 kilometres of A32 roadway which is expected to be completed by 2013.

After completion, the A32 road will connect the North with the South and will be the shortest route from Colombo to Jaffna. De Silva added that the cost of the road construction is Rs. 1.7 Billion. CML-MTD Construction has also received a letter of acceptance for the reconstruction of the Giriulla –Narammala Highway at a value of Rs 1.4 billion. The Company has received the highest CI grading in three construction sectors, namely Highways, Bridges and Land Reclamation. The Company also has received ISO-9001:2008 Quality Standard certification from BVQI for its management systems in connection with earth moving and land grading, roads, road bridges, railway bridges, industrial parks, irrigation systems, storm water drainage, port construction and building of revetments, sheet piling, concrete pile driving, pre-cast concrete products, industrial mining, quarrying and crushing.

In continuation of its policy of being extremely sensitive to Environmental impacts caused by construction activities and considering the steps taken to minimise such impacts the company recently obtained ISO 14001-2004 certification for environmental management systems from SGS.

The company has already successfully completed the construction of substantial components of the new Southern Expressway and is in the process of contributing specialist construction capacity for constructing the Colombo-Katunayaka Expressway.

Meanwhile, Walkers’ Piling (Pvt) Ltd, a fully owned subsidiary of MTD Walkers and one of the largest piling contractors in Sri Lanka has secured the contract to carry out piling work on the world renowned Movenpick Hotel, commissioned by Softlogic.

Walkers Piling will commence work this month using specialised ‘secant’ piling technique which is frequently used overseas for deep excavation.

The Softlogic Movenpick Hotel is one of several international hotels slated to commence operations in Sri Lanka following the post-war Nation development drive. The Chief Operating Officer of MTD Walkers Piling, Lal Perera said, “Winning this contract is an endorsement of our strength and confidence as one of the most reliable companies to handle such large projects. We have previously carried out numerous large projects successfully and are now in the forefront of this industry.”

For the past 30 years, Walkers Piling Ltd., the pioneer Pile Foundation company in Sri Lanka, has been specialising in pile foundations. The Company was incorporated in the year 1981 along with Voltas International Limited of India as a joint venture with approvals from Foreign Investment Advisory Committee of Sri Lanka. In 2008, the company was acquired by MTD Walkers PLC, the only fully fledged multi disciplinary Engineering Company in Sri Lanka.

source - www.ft.lk - 11-01-2012

Annual Report - KAPI [ 2010/2011]

Quaterly Report - KAPI [2011 - 09]

Rubber optimism intact

noreply@blogger.com (SRILANKANSTOCKPICKS) — Thu, 13 Oct 2011 02:39:00 +0000

While the tea industry seems to be losing its lustre, the rubber industry is enjoying a healthy boom and seems comfortably geared for the next three months as well.

Achieving prices quoted at Rs. 600 per kg during the first nine months of the year, the last quarter will follow the same healthy pattern, Colombo Rubber Traders’ Association Chairman M.S. Rahim said yesterday.

Rahim stated that prices had remained high and that even if prices were brought down in any way during the next three months, the industry would still boom. “We have had a very dry season, therefore production is heavy and they have been tapping well. Even if there is a price drop, this would be compensated by the high production, which will keep the industry afloat.”

In 2010 total production was 153,000 kilos he said. “This year will be definitely more,” Rahim acknowledged, conceding that he could not give a proper figure at this point.

Rubber exports have increased from 35-45%, from which the majority is exported as solid rubber tyres.

Rahim noted that even with the State increasing the cess from Rs. 4 to Rs. 12, prices had been holding up fine until September. Production of classic white crepe rubber was sold at over Rs. 600 per kg.

“Sri Lanka is the only country that produces this kind in such good quality. Therefore, despite the troubles in Europe, the demand for it never died,” he explained.

Even the 1X crepe rubber used mostly for Sri Lanka’s consumption traded at Rs. 450 on average.

On Minister of Industry and Commerce Rishad Bathiudeen’s statement in Parliament on rubber manufacturers asking for a hike in cess, Rahim claimed that the statement was “irrational” and was one that was unlikely to be imposed.

“If there is an increase in the cess, it will kill the market. Demand will go down rapidly as the situation anyway is a decrease in demand as most countries including China slowing down,” he said.

source - www.ft.lk

Tea industry looking at bleak Q4

noreply@blogger.com (SRILANKANSTOCKPICKS) — Thu, 13 Oct 2011 02:37:00 +0000

By Cheranka Mendis

Sri Lanka’s tea industry has been battered and beaten by the weather gods this year and is now looking at lower production volumes and low auction prices despite early expectations of the year continuing the trend of 2010, which ended off as a record year for the industry.

Colombo Tea Brokers’ Association Chairman Sudath Munasinghe told the Daily FT that thanks to the weather patterns, production would amount to 225 to 227 million kilos this year. Total tea production at the end of 2010 was recorded as 333 million kilos. “It is purely a weather-related issue,” Munasinghe said.

“The south west monsoon was a bit of a flop this year and the north east monsoon is to start in November – a delayed start from the usual – which would not help the industry.”

Comparing fourth quarter expectations to last year figures, Munasinghe stated that total crops in October, November and December last year were 26.6 million, 26.7 million and 25.7 million respectively. He anticipates 23-24.5 million, 25.5 million and 25 million for the same months this year. The latest statistics which list August 2011 figures show the production level to have been 23.9 million in the said month.

“During the first eight months of the year (January to August) in 2010, production was recorded as 222.7 million. This year production during the same period was 220.9 million.”

Commenting on production in different elevations, Munasinghe stated that the high growns had increased in production by 1.7% while mediums had fallen by 7.8% compared to the previous year. The lower grade teas have also declined by 0.8%. Tea prices at auctions too have maintained lower numbers than the previous year and the negative trend is expected to continue in the fourth quarter as well. “Up to now we are below last year’s Colombo auction prices.”

He stated that the end September sales were at Rs. 361.49, while in 2010 the auction price was Rs. 369.39 at the end of the period.

“The prices will not be the same as last year. However, the reasons for this purely lie in the unrest in the Middle East and the devaluation of currency in certain countries such as Russia, which devalued its currency twice within the last month itself.”

He noted that even though Russia was buying tea in large volumes, the drop in purchasing power had affected pricing.

“At the beginning of 2011, we expected the year to continue the extremely positive trend of 2010. In that year the industry marked records in production and average auction prices as well as US$ earnings.”

The tea exports sector however is the only silver lining for the industry. In August export volumes were better than in 2010, he said. Exports within the first eight months of the year have been valued at 209.8 million kilos, while in 2010 the volume was 200.8 million kilos during the period.

“Earnings have increased 4% more than last year,” he asserted. Total earnings as at now stand at Rs. 107 billion, a 26% increase from Rs. 98.8 billion in 2010. “In US$, we have earned US$ 968 million, an 11% increase from 2010, at Rs. 869 million.”

On FOB values, Munasinghe acknowledged that this year the value was 4.6 per kilo while in 2010 the value was 4.3 per kilo.

Touching on concerns for the industry, the Chairman stated that the regional plantation companies were struggling for survival due to the bad production. “With low production and the 27% wage increase, the regional plantation companies have had a tough year so far, which is likely to continue unchanged within the next three months.”

Causing additional hindrance to the local trade is the unrest in Syria and Libya as well as the US sanctions on Iran.

source - www.ft.lk

New Europe-based fund buying into JKH

noreply@blogger.com (SRILANKANSTOCKPICKS) — Thu, 13 Oct 2011 02:35:00 +0000

Buying by a new fund operating out of Europe into premier blue chip John Keells Holdings (JKH) has been the only silver lining in an otherwise gloomy Colombo stock market.

Analysts said that the fund based in London has been picking up available JKH quantities during the past two market days, including yesterday. The major seller on most days had been the Captains out of their trading portfolio.

Foreign holding in JKH had increased by three million shares to 317.6 million shares (or nearly a 38% stake) from 314.6 million shares on Friday.

Yesterday JKH saw 2.17 million of its shares traded for Rs. 434.7 million, of which 1.56 million shares were done via six crossings at Rs. 200. The bulk of the buying had been by the foreign fund.

On Monday, 1.63 million shares of JKH traded for Rs. 325.6 million inclusive of 0.87 million shares via three crossings at Rs. 200 each.

On Friday slightly over one million of JKH shares traded before closing at Rs. 202.50. Of the quantity traded, 0.45 million shares were done via two crossings at Rs. 201 per share.

source - www.ft.lk

DNH welcomes framework for ETFs, says timing crucial

noreply@blogger.com (SRILANKANSTOCKPICKS) — Thu, 13 Oct 2011 02:33:00 +0000

DNH Financial Ltd. yesterday welcomed the availability of regulatory framework for Exchange Traded Funds (ETFs).

The Daily FT yesterday exclusively reported this development in tandem with new Code for Unit Trusts being gazetted.

“Whilst ETFs could indeed provide a desirable investment opportunity for investors to tap the local market, its attractiveness will to a large extent depend on the performance of the market as ETFs are generally passive investment schemes. Consequently, market timing will be critical in the launch of any ETF,” DNH added in a commentary in its daily report on the market.

source - www.ft.lk

ASI back to negative return as Rs. 22 b in value wiped off

noreply@blogger.com (SRILANKANSTOCKPICKS) — Thu, 13 Oct 2011 02:32:00 +0000

The Colombo stock market yesterday is back to negative return territory for the second time in three months as Rs. 22 billion in value was wiped off due to lack of confidence and other concerns.

The All Share Index (ASI) dipped by nearly 1% bringing its year-to-date return to a negative 0.48%. On Monday it was a face-saving positive 0.5%. In mid-July the ASI sank to a negative return of 0.6% but recovered subsequently.

The overall negative run and gloomy outlook persists at Colombo bourse with analysts blaming it on a multitude of reasons. Though macroeconomic fundamentals are healthy as confirmed by Central Bank’s post-October monetary policy review, analysts cited the lack of overall confidence in the market due to certain manoeuvres of questionable nature.

Some also blamed overregulation; whilst others said prices dropping from their highly unrealistic levels was a good thing.

Yesterday’s turnover was only Rs. 1.6 billion and 64 million shares traded, with nearly 166 counters suffering dips.

“We believe that the selling has been partly due to the deadline (15 September 2011) nearing for the submission of the debtors’ list. We also believe the heavy speculative drive the bourse witnessed over the past months has reached some point of saturation with the market lost for direction. However, foreigners seem to have regained participation in fundamental counters, which had registered minimal price change over the past months,” Arrenga Capital said.

Apart from deals on JKH, a block of 15.7 million shares of Softlogic Holdings traded via a crossing at Rs. 20 each. In total 16.1 million Softlogic shares traded for Rs. 323 million with price down by 1% to Rs. 20.10.

Serendib Hotels increased the speculative count lot as the voting closed low at Rs. 30.4 after hitting an intra-day Rs. 37.9 whilst the non-voting also closed with a 6.7% dip at its close of Rs. 22.4 after touching a high of Rs. 24.7.

Regnis Lanka’s speculative play remained unfettered to the weak market play as it gained 1.7% at its close of Rs. 503.4 It was seen advancing especially after mid-trading hours. Colombo Land & Development continued to decline with heavier selling side, with Asian Alliance Insurance seen leading the price losers’ list after shedding a solid 26.5%. Some investor participation was evident in Citrus Leisure as the counter appreciated 6.2% whilst closing at Rs. 64.9.

Thanks to JKH, the market saw net foreign inflow of Rs. 427 million. DNH Financial said that although net foreign selling had generally been on a rising trend on a year-to-date basis, it shouldn’t be a cause for concern and did not in any way indicate a declining appetite for Lankan equities.

“Foreign investors battered by global markets are understandably shaving off profitable positions in the Sri Lankan bourse,” DNH said, adding that a significant majority of foreign portfolio investments were likely to have been made during pre-bull run years at considerably lower price levels.

Meanwhile, world and European stocks were at a three-week high with car manufacturers as top gainers. Chinese shares were on a rebound. The MSCI Asia Pacific Index gained 0.8%, erasing its early losses with S&P 500 Index also advancing by 1%. Euro stocks fell earlier on speculation of the political dispute in Slovakia expecting to delay the approval of Euro’s bailout fund.

source - www.ft.lk

PLC aims phoenix rising from markets ashes!

noreply@blogger.com (SRILANKANSTOCKPICKS) — Thu, 13 Oct 2011 02:31:00 +0000

Way to wow the world?

■Issuer of Rs. 7 b biggest post-war IPO People’s Leasing confident of success midst challenges

■Says pricing attractive with good upside, robust leasing industry growing at double digit

■Preferential allocation for foreigners; strong appetite following road shows in Singapore, Hong Kong; next stop is three cities in India; managers believe IPO will lift the Colombo bourse

Given the bearish conditions in local and global stock markets, the timing may be highly challenging, but issuer of Sri Lanka’s biggest post-war IPO, People’s Leasing Plc (PLC) yesterday expressed confidence that the Rs. 7 billion offering would be a success.
“We are coming to the market without any overhang of pre or private placements. We have remained successful as the leader for the past nine consecutive years in the leasing industry, which is booming given the post-war momentum, and the country’s economy is on the rebound overall,” PLC’s longstanding Chief Executive Officer D.P. Kumarage told the Daily FT yesterday on the sidelines of the company’s media launch of the mega IPO.

Involving 390 million shares at Rs. 18 each, PLC’s IPO which is now open for subscription is the biggest since Dialog’s Rs. 8 billion offering in 2005. As a truly home-grown Sri Lankan entity PLC’s IPO is the biggest ever.

Whilst everything from company’s outstanding track record in mere 15 years, solid backing parent – People’s Bank, pricing, future earnings upside to growth prospects for the industry seems perfect, Kumarage admits the timing is tough.

“Yes, the market has had some bad experiences and had lost faith in IPOs. On top of it, the Colombo market has remained bearish whilst global markets are underperforming. These are the biggest challenges, but we remain confident,” added Kumarage, who has been PLC’s CEO and General Manager since 1997.
Having begun with a capital of Rs. 10 million, one-and-a-half decades ago, today PLC is Rs. 65 billion worth asset-strong. In FY2011, its after-tax profit was a whopping Rs. 2.58 billion, up from Rs. 1.2 billion in the previous year and reflecting a compound annual growth rate of 36%.

Top line enjoying a 12% CAGR was Rs. 9.8 billion in FY2011. The phenomenal growth in assets had been whilst ensuring top quality with non performing loan ratio of a mere 1.2% as at March 2011. Leasing industry is estimated to grow by 25% per annum over the next few years.

“We have been the market leader in leasing for nine consecutive years. The company possesses the potential to scale to greater heights in the next decade. I am confident that this IPO will receive an overwhelming response from investors, both individual and institutional enhancing the value for our shareholders, whilst strengthening our capacity to fund our ambitious growth plans in the future,” Kumarage added.

Noting that the IPO has the best potential to lift the Colombo bourse, joint managers to the issue NDB Investment Bank and Capital Alliance Holdings said the pricing of Rs. 18 was very attractive with an upside both in the short and medium term. From recurrent earnings basis the pricing reflects a PE of eight times, much attractive than some of the financial services peers in the Colombo bourse.

Based on the response at recently concluded road shows in Singapore and Hong Kong, the IPO has already elicited foreign appetite. Similar exercises are planned in three Indian cities Mumbai, Bangalore and Chennai.

Given the sheer size, liquidity as well as strong fundamentals, the PLC is expected to be a sought-after stock in Colombo bourse for foreigners. To make it a success, a 30% allocation has been set aside for Identified Investor Category which includes foreigners. Retailers will get 22.5% share and non-retail will get 27.5% along with 10% for Unit Trust and 10% for employees out of the IPO quantity.

The primary objective of the Issue is to obtain a listing for the Ordinary Voting Shares of PLCL on the CSE to comply with the regulatory requirement of the Monetary Board.

As a company carrying on business in the finance sector, primarily in the leasing and HP financing business, it is intended that the entirety of the monies raised through the Issue, subsequent to meeting all expenses in relation to the same would be utilised to part finance the loan disbursements made by the company to its customers during the remaining period of the FY 2011/12 through financial products such as leasing, HP and loans.

It is estimated that the funding requirement for such disbursements would amount to approximately Rs. 12-14 billion which is in excess of the total monies to be raised from the Issue. The balance funding requirements for disbursements would be financed through means such as bank borrowings, issuance of promissory notes and asset backed securitised instruments.

The increase in stated capital of the company subsequent to this Issue would improve its debt to equity position and would enable the company to leverage its balance sheet and raise the requisite debt financing in a comfortable manner.

The company expects to utilise the monies raised from the Issue before the end of FY 2011/12.
In addition, the IPO would facilitate PLCL to broad base the public ownership of the company and strengthen its identity through increased visibility and brand image amongst the public. PLCL believes that fulfilment of these objectives will further enhance the growth of the business operations of the company.

The company provides its financial services through a wide network comprising 37 regional branches and 121 window offices located within PB branches. Disbursements have grown at a Compounded Annual Growth Rate (CAGR) of 32% from Rs. 13.8 billion in FY 2006/07 to Rs. 41.8 billion for FY 2010/11 – resulting in an impressive 35% CAGR in the total assets of PLCL.

source - www.ft.lk

Commercial Banks deliver record interim performances

noreply@blogger.com (SRILANKANSTOCKPICKS) — Thu, 13 Oct 2011 00:55:00 +0000

Prasad Polwatte and Asanka Liyanage

The Sri Lankan economy is bouncing back with a projected nine percent growth in 2011, in the backdrop of a further fillip through increased foreign direct investments or FDIs with the surge in tourist inflows.

The Foreign Direct Inflows in the first quarter of 2011 totalled US$ 236m.

It was reported that the local financial markets were more stable with improved liquidity and declines in interest rates since the beginning of 2010.

The exchange rates were fairly stable during the period and the same trend is likely to continue in 2011. On the other hand financial markets encourage long-term borrowings through Initial Public Offering (IPOs) of shares and debentures which contributed to downward trend in interest rates.

The banking sector sustained its earnings via investment income from government securities and equities. In this article an effort has been made to compare and contrast the performances of Licensed Commercial Banks (LCBs) in the first half 2010 and 2011. Both state and private LCBs overall performances were comparatively higher and almost all key performance indicators showed an improvement.

Except Seylan all LCBs have increased their profits. Significant increases are noticeable in the performance of the two state banks and Commercial Bank and Pan Asia Bank of the Private Sector.

The main reason for this increases were the reduction in provisioning for bad and doubtful debts and loans written off compared to previous year. However, the increments in interest income and interest expenses were fairly moderate.

In the case of DFCC bank the results of 2010 included profit relating to the sale and change of classification of part of the Bank's shareholding in Commercial Bank Ceylon PLC (the contribution to profit after tax from this CBC share disposal was Rs 5,282 m). Generally, LCBs performances have improved in all measures and paved the way to set aside money for loan defaults and improved liquidity for on lending.

Even though an increasing trend was visible in the growth in Advance portfolio of the banks (Approximately 20% to 30%) the interest income showed only a marginal increase because of the decrease in Average Weighted Prime Lending Rates (AWPLR). Further, LCBs were more concentrated on Government securities and that especially in Treasury Bills, of which interest rates have decreased considerably during the period.

LCBs have shown an average deposit growth around 20% to 30% in the first half of 2011, and also, the same growth is reported for loan and advances.

These were remarkable achievements, when deposits during the period have experienced unattractive low interest rates. In sharp contrast the growth in loans and advances were not adequate with low interest rates offered by banks.

Apart from the Commercial and Nations Trust Bank shares, prices of all other LCB shares have declined during the period. This reduction in prices might be mainly due to overall declining trends in prices in the Colombo Stock Exchange. However, even with the drop in market prices, market prices of LCBs alone were positioned well above their respective book values. Due to the improved profits in the first six months of 2011, all LCBs have made a remarkable improvement in their ROA and ROE except Seylan.

Banks exercise a delegated function of CBSL as a monitor to ensure that firms use the resources allocated to them effectively.

They also play an important role in sharing risk in the economy by diversifying and thereby minimize market fluctuations during the period. Key performance indicators showed an overall improvement in the first half 2011.

However it was mainly due to the efficient recovery actions rather than profits generated from core banking activities.

Therefore, a greater challenge persists for LCBs to sustain and improve upon the first half performance to the next lap due to external shocks, immerging competitors, new regulations and tax structure.

source - www.dailynews.lk