A half Bourse!

Stock market ends week with activity 50% less than the previous week exposing inherent fundamental weaknesses despite temporary boost from relaxation of
broker credit to clients 


The Colombo stock market yesterday finished the week with half the activity enjoyed in the previous week reinforcing and exposing the inherent fundamental weaknesses.

Turnover this week was only Rs. 8.65 billion, 55.4% less than the previous week figure of Rs. 19.4 billion whilst volume of shares traded was 338.5 million, 53.4% less than the 726.79 million shares in the previous week.
The week ended 19 August was boosted by the 16 August Securities and Exchange Commission (SEC) directive enabling broker credit to clients. Whatever positivism arising from that breakthrough fizzled off by early this week. The market also lost Rs. 35 billion in value during the week.
Analysts said how the market behaved this week reinforces as well as exposes the inherent fundamental weaknesses such as lack of institutional play by both foreign and local in addition to the underlying lack of confidence in general.
For the week ASPI and MPI declined 1.42% and 1.77% respectively as opposed to gains of 1.74% and 2.39% the previous week.
With returns being less than 4% year to date, the stock market has now become almost equivalent to bank savings in terms of an option for investment whilst the fixed deposits business as well as zero-risk Treasury Bills provides higher return of 11 to 7%.
However other analysts found strength from the rebound in sentiments as well as buying during the past two market days. Thursday saw a welcome finish with ASI up 26 points and MPI by 31 points whilst yesterday ASI gained by over 13 points (0.2%) whilst MPI was flat. Turnover was also up 22% to Rs. 1.98 billion over Thursday. Earlier loses were greater hence finishing the week negative.
Continued speculative trading driven by a select few high net worth investors ensured liveliness in the Bourse prompting analysts to point that this segment was keeping Colombo alive.
A half…
“Speculative trading continued to take the lions’ share of the market proceedings with retail & high net worth investor participation seeing a rise,” SC Securities said.
“Trading kicked off with a positive start and remained in the green throughout the day. The retail community proved to be the most active class of investors as they continued to their speculative ride on the low – mid cap caliber,” noted Arrenga Capital.
SC Securities said the primary contributors to the days’ market turnover were Colonial Motors, Singer Finance, HVA Foods, Colombo Land & East West Properties. The top five contributors accounted for close to 50% of the days’ total turnover.
NDB Stockbrokers said Banks, Finance and Insurance sector was the main contributor to the market turnover (due to Singer Finance) and the sector index increased by 0.90%. The share price of Singer Finance increased by Rs. 7.20 (23.92%) and closed at Rs. 37.90. Around 7.2 million shares of Singer Finance changed hands. A few other finance sector counters including Multi Finance and Vallibel Finance also saw some investor participation, Arrenga said.
Motor sector also contributed significantly to the market turnover (due to Colonial Motors) and the sector index increased by 3.53%. Colonial Motors was the main contributor to the market turnover with 818,400 shares traded for Rs. 323.7 million. The share price increased by Rs. 68.10 (19.71%) and closed at Rs. 408.
United Motors gained by 9%.
The share prices of the speculative stocks which gained for the past couple weeks were volatile today with high activity. Renewed interest was witnessed in Serendib Hotels. The share price closed at Rs. 28.90, gaining Rs. 1.70 (6.59%).
Arrenga Capital also said rally on HVA Foods continued with active interest from high net worth individuals and retailers. The property sector counters including Colombo Land & Developments and East West Properties were found in the day’s retail picks with The Lanka Hospitals Corporation also falling into the list.
Lion Brewery (Ceylon) registered a block of 146,000 shares being crossed off at Rs. 200 whilst Ceylinco Insurance saw a 50,000 parcel being transacted at Rs. 640.
Reuters reported that stock market gained in light trading but concerns remained over the lack of liquidity.
It also said foreign outflows of Rs. 11.8 million took place and thus far in 2011, offshore investors have sold Rs. 10.46 billion, after a record Rs. 26.4 billion in 2010.
Reuters also said on Friday, European shares and the dollar fell with markets playing down chances of a major shift towards further economic stimulus from U.S. Federal Reserve chairman Ben Bernanke later in the day.
The rupee meanwhile ended flat at 110.00 a dollar, despite heavy importer dollar demand as a state bank, through which the Central Bank directs the market, protected the currency by selling it at 110, dealers said.

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Sri Lanka stocks end up 0.2-pct

Aug 26, 2011 (LBO) - Sri Lanka's main share index closed marginally higher Friday with some interest in a finance company and a motor firm and continued speculative trade in certain shares, brokers said.

The main All Share Price Index closed at 6,852.96, up 0.20 percent (13.76 points) while the more liquid Milanka index fell 0.05 percent (2.95 points) to close at 6,222.08, according to stock exchange figures.
Turnover was almost two billion rupees.

Singer Finance (Lanka) was the most actively traded stock, with over 7.2 million shares done, closing at 37.30 rupees, up 7.20, having hit a high of 40.60.

Colonial Motors was also actively traded, closing at 413.60 rupees, up 68.10, with 818,400 shares traded. It hit a high of 421 rupees during the day.

Speculative trade continued in HVA Foods, with over 4.6 million shares done, closing at 38.50, up 60 cents, after hitting a high of 40.50.

East West Properties was also actively traded, closing at 48.30 rupees, down 10 cents, with almost 1.8 million shares changing hands.

There was again speculative trade in Colombo Land & Development Company which ended at 63.60 rupees, down 50 cents with over 1.6 million shares traded.

source - www.lbo.lk

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S’pore company orders four ships from Dockyard

Shirajiv SIRIMANE

Colombo Dockyard has secured a deal to build four 78-metre Multipurpose Platform Supply Vessels for a company based in Singapore.

Chairman Colombo Dockyard PLC, Mangala Yapa speaking to Daily News Business last night disclosed that this deal is to the tune of US $ 110 million.

Multi-purpose Platform Supply Vessels, or (MPSVs), are designed to have an enhanced accommodation area for 50 persons. These accommodation areas are well-appointed and are aesthetically designed with special attention being made to noise and vibration levels and crew comfort onboard the vessel.

The Vessel is also classed with “In Water Survey” denoting the vessel could be operated without being dry-docked for five years. Due to this, surveying the underwater parts of the vessel could be carried out while the vessel is still afloat instead of having to dry dock the vessel for examination of under water areas, as is conventionally done. This is a huge saving for the owner.

In addition, the vessel is also equipped with the Tail Shaft monitoring system (SCM), a huge advantage to the owner in his quest for monitoring of temperature and conditions in the tail shafts.

“At a time when the other shipyards are going through a recession, we have been blessed to have such ‘deals’ to keep the industry moving forward,” Yapa said.

The expertise of the Colombo Dockyard, quality of workmanship backed by the on time delivery track record was the key to secure this second deal from Singapore ahead of other countries in the region. This vessel shall be another green, eco-friendly vessel to be built by the yard, with lower fuel consumption, reduced NOx and greenhouse gas emissions. Up to date, Colombo Dockyard has built 4 MPSVs in its facility and three more are under construction for another Singapore based company. The latest additions to the Colombo Dockyard’s Shipbuilding Order Book, will take the Shipyard through the years 2012, 2013 and 2014 with an impressively heavy order book, especially considering the current global shipbuilding down-turn, which will undoubtedly make other shipyards in the region envious.

source - www.dailynews.lk

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CDB capital funds rise

Raises Rs 718 m from Rights Issue:

Citizens Development Business Finance PLC (CDB) capital funds have risen to around Rs 1.8 billion subsequent to the CDB’s Rs 718 million rights issue which was fully subscribed.

CEO Mahesh Nanayakkara said the Rights Issue successfully raised Rs 718,110,435. “This fresh capital infusion has substantially strengthened our balance sheet while also supporting our rapidly expanding lease and loan book portfolios,” he said. “Parallely it will help us further accelerate our growth trajectory capitalizing on the massive opportunities available for the financial services industry in post-war Sri Lanka.”

CDB affirmed plans to swell its current islandwide branch network from 33 to 47 an effort to reach to a greater populace with its vibrant bouquet of products and services.

“This also falls in line with the compliance requirements of Central Bank of Sri Lanka,” Nanayakkara said.

Under the recently concluded Rights Issue, 6,614,175 new Ordinary Voting Shares were issued at Rs 70 per share raising a total amount of Rs 462,992,250 from voting rights and 5,669,293 new Ordinary Non-Voting Shares were issued at Rs 45 per share, which was a new class of shares raising a total amount of Rs 255,118,185.

For the Financial Year 2010/11 CDB recorded a net profit after tax figure surpassing the rupees half a billion mark which was an over seven fold increase compared to the corresponding previous financial year. Total assets and revenue grew by 53 percent and 47 percent respectively. Continuing its growth momentum, CDB recorded a 132 percent growth in after tax profits for the First Quarter of FY2011/12. This reflects a 132 percent year on year (YoY) growth.

Revenue surpassed the rupees half a billion mark during the Q recording a Rs 572.57 million. Figure, a 37 percent Year on year increase. Net interest income grew by 60 percent to Rs 259.61 million. During the quarter, CDB’s asset base grew 9.16 percent from the previous financial year ended March 31, 2011, thus surpassing the Rs.11 billion. mark.

The loan portfolio quality reflected in NPL stood at 3.19 percent and has been benchmarked as among best in the industry.

The results posted for first quarter 2011/12 are seen as a continuation of the exceptional financial results posted during the previous financial year.

NDB Investment Bank acted as the Advisor to the Issue while Nithya Partners acted as the Legal Advisors. (ss)
source - www.dailynews.lk

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HVA to venture into organic farming, leisure operations

By ChannaFernandopulle

HVA Group of companies is looking to venture into organic farming and leisure sector, and a new subsidiary company named HVA Farms (Pvt) Ltd has been formed for this purpose, Mirror Business learns.

Responding to our inquiry, Chairman of HVA Rohan Fernando said, he hopes to locate the organic farm on 500 acres of land near the Southern border of the Wilpattu National Park.

“HVA has invested Rs20 million up to date on the project and are looking to invest another Rs100million-Rs200 million in the future. We are hoping  to create employment for around 100 families.’

Negotiations with the government for the lease agreement for the said land are currently underway with an aim of starting work on the land beginning October.

Furthermore, plans are in place to build 10-15 eco-bungalows on 50 acres of private land adjoining the farm.
According Fernando, the farm is to be based on another model farm that HVA has in the area which grows crops such cashew, mango and oranges.

“The aim of the project is to produce 100% organic produce as well as to build a nursery of heritage root stock to help sustain the local ecology,” he pointed out.

Fernando also noted that Phase-two of the project is aimed at involving out growers systems where the farm will give farmers the resources to start their own farms with the aim of buying back that produce.

Work on the eco-bungalows is targeted to begin simultaneously with the farm which will be ready in a year’s time.

“We are excited about this project to build real eco-bungalows which will incorporate reverse osmosis clay air conditioners and solar panels for roofing material that will be capable of heating water and generating electricity” HVA Chairman remarked.

He further said that the project was first initiated as far back 1998 when the government of that time was supporting initiatives for organic farming, but was caught up in legal battles for a period of 10 years culminating in a decision being given in favor of HVA by the Supreme Court.

 Since then, the project has been granted presidential approval and HVA Farms is now in the process of recruiting staff for its organic farm.

“The model farm has been running for the duration of our legal battle, so we have 10 years of data on rain and sunshine figures and we have transformed the soil to a better pH value” Fernando added.

Heladiv Foods, a subsidiary of HVA Group recently came up with its Initial Public Offering of Rs.319 million offering 30 percent stake (19,928,598 Ordinary Voting Shares) of the company to the public at Rs.16.

source - www.dailynews.lk

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Softlogic Capital Holdings to be listed

By Indika Sakalasooriya

The subsidiary which is going to be the financial services holding company for Softlogic Holdings’ finance and insurance companies will be listed in the Colombo bourse within two months time, a top official said.

“We are planning to bring Softlogic Capital to the Colombo Stock Exchange (CSE) by way of a share Introduction. We have already applied to the CSE in this regard” Chairman and Managing Director of Softlogic Holdings PLC (SHL) told Mirror Business.

Softlogic Holdings has Softlogic Capital Ltd, which was acquired and re-branded last financial year, Softlogic Finance PLC and recently acquired Asian Alliance Insurance PLC to its credit.

According to Pathirage, Asian Alliance Insurance PLC and Softlogic Finance PLC, which are already flagship subsidiaries of Softlogic Capital, will be held under Softlogic Capital Ltd that has been identified as the financial services holding company and is due to be listed on the Colombo Stock Exchange shortly.

Commenting on the new developments taking place in the retail operations of the company, Pathirage said that they are looking for a large retail space for the Debenhams Department Store, which is going to be the first international department store in Sri Lanka.

“Branded Apparel remains a key growth strategy for the group, currently with 3 Levi’s outlets and one Nike store. We are committed to enhancing our portfolio of international retail brands, and in line with that commitment we will be opening Giordano and Mango stores in Colombo in the second quarter,” he noted.

He further noted that the SHL is going forward with the target of setting up 150 retail outlets by December this year and increase the number to 250 by the end of 2012. The company currently has 85 stores.

Commenting on firm’s hotel operations, Pathirage said they have plans to commence construction of the Movenpick City Hotel in Colombo in collaboration with the Movenpick Group in September 2011 and the project is expected complete it in 24 months. 

SHL also recently entered into an agreement with Thailand’s Centara International Management to mange its Ceysands hotel, which is situated in Bentota.

“Refurbishment and reconstruction of Ceysands will to commence in September 2011 which will transform it from a 84 room hotel to a 160 room 4 star plus resort which will reopen in time for the 2012 winter season,” Pathirage said.

In another development, the healthcare arm of SHL, Asiri Group also plans to set up a pathology laboratory in Jaffna to serve the area with high-tech healthcare diagnostics expertise.

“The group also acquired a project to construct a 100-bed hospital in Kandy, construction of this is anticipated to commence in the near future” Pathirage noted.

Net profit up 169% to Rs.275mn

Softlogic Holdings PLC has recorded a net profit of Rs.275 million for the quarter ended June 30, 2011. This shows a169 percent increase in profits compared with the corresponding quarter of the previous year.

The consolidated revenue of the group also rose 162 percent to Rs.4.4 billion during the period under consideration.According to Softlogic Chairman Ashok Pathirage this was partly due to the consolidation of Asiri Group results which contributed Rs 1.3 billion to the turnover. He also said that the growth in profits does not reflect the interest savings from consolidation of the Group’s borrowing position consequent to the Initial Public Offering (IPO) of shares of Softlogic Group, as the funds were received towards the end of the quarter.“The benefits of the interest savings will be reflected in the future periods” Pathirage noted.However, according to the consolidated balance sheet, SHL has over Rs.6 billion short-term borrowings and over Rs.5 billion interest bearing borrowings.As per the segmental analysis provided with the accounts, the Information Technology sector of SHL has recorded Rs.1.5 billion revenue during the period under consideration.

 The revenue contribution from the retail sector was over Rs.900 million, while the financial and automobile sectors recorded Rs.299 million and Rs.264 million respectively. The leisure sector recorded revenue of Rs.18 million.

Being the second biggest Initial Public Offering (IPO) after Dialog Telekom, SHL recently raised Rs.4 billion issuing 139 million ordinary shares, each at Rs.29.

 source - www.dailymirror.lk

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Turnover tops Rs 1.6 bn

Colombo Land & Development Plc (Rs 194.7mn) topped the turnover list today with attractive retail investor participation.

Premier blue-chip, John Keells Holdings Plc recorded the second highest turnover while recording two off-the-floor transactions.

John Keells closed at Rs 210.60, up Rs 6.00. Further, HVA Foods Plc made notable contribution to the daily turnover with an amount of Rs 137.8mn and traded heavily. Softlogic Holdings Plc made a crossing of 951,800 shares at a price of Rs 23.00.

Softlogic Holdings released its quarterly earnings yesterday and it recorded a net profit of Rs 275.5mn for the first quarter of the financial year 2011/2012, which is a growth of 168.6 percent over the comparative quarter earnings.

However the counter closed with no price changes. Meanwhile, counters such as East West Properties Plc, Citrus Leisure Plc warrant 0019 and Singer Finance Plc were among the mostly traded stocks during the day. Foreign participation was lower at 6.5 percent of the total market activity. However at the end of the day foreign investor ended as net buyers with a net foreign inflow of Rs 62.5mn.

Lanka Securities Research
source - www.dailynews.lk

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Climatic conditions, tapper shortage will affect Rubber production-FLCH CEO

By Jithendra Antonio

Despite every possible precautionary measure that is taken by the Plantation Companies to minimize negative impacts on the industry, the adverse climatic conditions and shortage of skilled tappers may affect the Rubber production, according to Free Lanka Capital Holdings (FLCH) Chief Executive Godfrey Aloysius.

In the first annual report that is released to Colombo Bourse, Aloysius in his review adds that some rubber factories have been renovated and developed to handle the production and improve the quality of end product.

However he also notes that the demand for Synthetic rubber would be a determinant of the demand in natural rubber.

Free Lanka Capital Holdings (FLCH) has investments in two Plantation Companies namely Maturata Plantations Ltd and Pussellawa Plantations Ltd through its managing agent companies of Free Lanka Plantations Co. (Pvt) Ltd and Free Lanka Management Co. (Pvt) Ltd. Being subsidiaries of the company, they enjoy the leasehold rights of over 23,000 hectares of Lands located in diversified elevation categories.

 The two plantation companies are primarily involved in the cultivation, manufacture and sale of tea and rubber.

Meanwhile outlining the Tea industry performance Godfrey Aloysius further notes that being a labour intensive Industry, Tea industry continuously sees an increase in Cost of Production particularly on worker wages including the estate staff that has a considerable impact on the viability of the sector.

“The continuous reduction in the worker force due to migration and any worker unrests may affect the day-to-day operations of estates” Aloysius notes adding that the Workers Collective Agreement which had been due for renewal on 01st April 2011 was signed on 6th June 2011 with retrospective effect. Further, he highlights that both Plantations have programmed to undertake new and replanting of rubber with high yielding clones having recognized its profitability and less labour intensive nature of the crop as a long term strategy.

According to Aloysius the volatile situation erupted in Middle East region may affect prices at the Colombo Auction. “The Plantation Companies are taking all measures to improve the quality at all the points of operations, covering the process of cultivation, harvesting and manufacturing” he notes. While the Tea production is vulnerable to adverse weather conditions such as prolong drought spells, heavy rains, very low temperatures ; Aloysius says that the FLCH Plantation Companies have adopted good agricultural practices to mitigate the impacts of adverse climatic conditions as much as possible.

source - www.dailymirror.lk

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LIOC to invest US $ 4 m this year

Sanjeevi JAYASURIYA

Sri Lanka needs to invest more in the petroleum sector development focusing on expansion of infrastructure facilities. Lanka Indian Oil Company will continue its investment drive and looking at investing US $ 4 million during the year, Lanka IOC Managing Director K.R. Suresh Kumar told Daily News Business.
“The country’s petroleum industry needs capacity building and further investments to sustain the growth momentum,” he said.

Lanka IOC continues to invest in the country’s petroleum sector and there will be more investments at the Trincomalee terminal this year.

We are keen on entering the bunkering business at the Hambantota Port once it is ready for business by November.

“We are awaiting a positive response from the Government and have the capability to commence business immediately once the green light is given,” he said.

“The company is in the process of evaluating the Trincomalee facility to upgrade its current status. A detailed engineering evaluation is being done at present and once the report is ready we will quantify the investment necessary,” Kumar said.

The Trincomalee oil tank farm has 99 tanks each with a capacity of 12,259 kilolitres. The company imports petroleum products to the two ports of Colombo and Trincomalee where it also uses its storage facilities.

Lanka IOC will open four more filling stations next month adding to its current network and with these units it will have 156 filling stations islandwide.

The company emphasises its keen interest in becoming a dominant player in the country’s bunkering business and plans to expand its presence in the sector. “The company’s businesses are progressing well at present.

However, we are concerned of the volatility in oil prices.

The diesel price in the domestic market is not attractive as import cost is higher than the market price. Therefore compensation is low,” he said.

source - www.dailynews.lk

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Hilton Accounts: A tale of two decades

By Jitendra Antonio

After a long two decade silence, Hotel Developers PLC (HDEV), the owning company of the Hilton Hotel Colombo, yesterday released its audited annual financial accounts for the last 20 years, starting from 1990.
However, any of the audited financial account did not have a list of major shareholders.

“The Colombo Stock Exchange (CSE) or the Securities and Exchange Commission (SEC) does not have the authority to demand a share holder list from the company in their audited accounts”

“CSE rules very clearly mention about Annual Reports, not audited financial statements. Annual Reports need to have information about the shareholders” Renuka Wijewardena General Manager, Regulatory, told Mirror Business.

He also confirmed that the HDEV will not be allowed to move out from the ‘Default Board’, until the company submits the annual reports that are due since 1990.

“We are currently working with the SEC to get the company to disseminate its delayed annual reports and the quarterly reports” Wijewardena said.

The1990 financials of HDEV outlined that company’s turnover had rose to Rs.231.3 million in as 31 March 1990 compared to Rs.154.1 million in previous year.

However, the company reported a net loss of Rs.79.4 million in 1990 compared to Rs.256.7 million in 1989. Subsequently company’s accumulated losses had rose from Rs.286.6 million to Rs.366 million in 1990.

On the contrary 20 years later the accounts as per 31 March 2010, the company said that its loss attributable to ordinary shareholders had shot up from Rs.1.1 billion in 2009 to Rs.1.2 billion in 2010 whilst the Loss per Share (LPS) rose from Rs.26 to Rs.26.87 and the loss is worth about 45,226 ordinary shares of the company.

However, financials also outlined that revenue of the company had increased to Rs. 1.7 billion in 2010 compared to Rs.1.3 billion in 2009 whilst the revenue from rooms had rose from Rs.532.6 million in 2009 to Rs.728.9 million in 2010. Company’s cost of sales has topped from Rs.287.3 million to Rs.382.4 million as at 31 March 2010.

On the other hand the company’s audited accounts for 1990 said that its long term loan value had decreased from Rs.3.6 billion to Rs.2.4 billion in 1990 whilst the long-term loans consist of capital outstanding on the construction loan obtained from Mitsui and Taisei Consortium and furniture, fittings and equipment loan obtained from Mitsui & Company Limited.

“These loans were rescheduled on 28th June 1995 as per the Settlement Agreement No 1, and the rescheduled loan will be repaid to Mitsui and Taisei Consortium in 15 equal annual installments commencing from 1st July 1996 together with the interest thereon at the simple interest rate of 5.25% per annum.”

Financials outline adding that the company has issued 15 promissory notes to the above Consortium in respect of the loan payable.

Subsequently accounts also note that the values of the buildings, furniture and fittings and other operating assets have been restated as per the settlement agreement dated 28th June 1995 by reducing proportionately to write off 30% of the loan capital.

Accordingly the foreign exchange effect on the 30% capital write off and the foreign exchange effect on the  interest write off balance and exchange loss write off balance on fixed assets amounting to Rs. 1051.349 million and Rs. 43.773 million respectively have been adjusted. As a result of this reduction the value of the property, plant and equipment and depreciation charged there on has also been adjusted as a prior year adjustment.

In another note, in 1990 the company said that in terms of the settlement agreements dated 28th June1995 the loan payable to Mitsui & Taisei Consortium was reduced to Japanese Yen 9.27 billion.

Back in 1990, and 20 years since then, the company’s financials pin points that the leasehold land has been obtained on a 99-year lease from Cornel & Company Limited and that Cornel & Company Limited had failed to comply with the terms of the lease agreement by not making the balance 80% of the due payments to the UDA. In 1999 the UDA surrendered its right to the land to the GoSL by deed 673 and 674 and the land has subsequently been taken over by the Government of Sri Lanka.

While there had been no pending litigation till 1997 the first two legal cases related to the company had emerged in 1998 in which is filed by Cornel & Company Ltd., against Mitsui & Company Ltd., Taisei Corporation, and then Attorney-General, Nihal Ameresekere and the Company.

However as to date company has a total of five legal cases pending and the total loans that HDEV has to pay which stands at nearly Rs.11.7 billion with Rs.1.4 billion to Mitsui and Taisei Corporation and Rs.10.1 billion Ministry of Finance of Sri Lanka and Rs.105.1 million to Bank of Ceylon till 2010
source - www.dailymirror.lk

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Corporate earnings make a promising start

NDB Stockbrokers in a recent research report says public quoted companies are having a promising start to the 2011/12 financial year with total profits of a sample of companies listed on the Colombo Stock Exchange increasing 27 percent for the period ending June 30, 2011. The full text of the report follows:

"The total profits of a sample set of companies selected to represent the overall market increased 27% (excluding exceptional items) to Rs.31,032Mn for the period ending 30.06.2011. Growth in profits including exceptional items stood at 31%. Profit growth was seen across most sectors.

The highest growth came from the Hotel and Travel sector (464%), followed by the Motor sector (394%). Growing number of tourists helped the hotels to record phenomenal growth rates while demand for vehicles aided by the tax cuts continued to benefit the Motor sector.

Manufacturing (72%) and Diversified (69%) sectors also performed well during the period under consideration.

In absolute terms, Bank, Insurance and Finance (43%), Diversified (18%) and Telecommunication (14%) sectors contributed the highest to the total profits.

Banks, Finance & Insurance…

Our sample size for banks consists of 6 months results ending June 2011 for

COMB, HNB, MBSL, NDB, NTB, PABC, SAMP, and SEYB. DFCC results are for 3 months.

Banks excluding DFCC recorded a profit growth of 58% (excluding exceptional gains) compared to the same period last year. PABC (169%), SAMP (91% - adjusted for the exceptional items) and COMB (75%) recorded the highest growth rates.

The growth was mainly due to the reduction in both Financial Services VAT and Corporate Taxes that was effective from 01.01.2011 while net provision reversals were also common among most banks. Commencing 01 January 2012, banks are required to maintain a general provision of 0.5% of total outstanding of on-balance sheet performing loans and advances. To meet this purpose banks are allowed to reduce the existing general provision requirement of 1% to 0.5% at a rate of 0.1% per quarter during the five quarters commencing 01 October 2010.

The finance companies are represented by 6 companies. The results are for 3 months ending 30.06.2011. The sector recorded a profit growth of 37% (excluding exceptional items). VFIN (139%), CFIN (119%) and LFIN (94%) registered the highest growth rates.

We feel Banking and Finance sector is one of the most attractive sectors considering an average PBV of 2 and a P/E significantly lower than the market P/E. Further, the profit growth during 2011 is likely to be significantly higher compared to 2010, helped mainly by the tax reductions while the demand for loans and advances is expected to be high as a result of the prevailing low interest rates.

Beverage, Food & Tobacco

We have considered a sample set made up of 11 stocks as representative of the sector. Of them, profit of NEST and CTC are for 6 months. Excluding NEST and CTC, the sector profit improved 35% during the 3 months period while NEST and CTC profits rose 47%.

The largest profit contributors were DIST (57%), CARG (15%) and LION (15%). DIST (58%), CCS (49%) and LAMB (47%) registered the highest growth rates helped by the growth in demand while acquisition of LAMB by CARG boosted its revenue performance.

KFP and LMF’s return to profitability compared to the losses incurred last year further lifted the profits of the sector whilst reduction in profits registered by BFL and COCO during the period hindered the growth.

Chemical & Pharmaceuticals…

CIC and HAYC were considered as representative of this sector.

The sector reported a marginal growth of 4% during FY11/12Q1 compared to FY10/11Q1. CIC (62%) contributed the highest to the sector profit, while its profit growth stood at 29%. HAYC’s (-21%) profits declined compared to FY10/11Q1 as a result of escalating raw material costs.

Diversified…

A sample set consisting 8 stocks was considered to represent the sector. Diversified holdings recorded a growth of 31% excluding exceptional gains during 3 months ending 30.06.2011. CARS (43%), JKH (28%) and SPEN (11%) were the largest profit contributors where they registered profit growths of 77%,

35% and 25% respectively during the period under consideration. HAYL (72%) also recorded a significant improvement during the quarter as a result of the superior performance of hand-protection and transportation sectors.

Healthcare…

We have considered AMSL, LHCL and NHL as representative of the healthcare sector. LHCL profit is for 6 months while AMSL and NHL profits are for 3 months ending 30.06.2011. Excluding the NHL exceptional gain of Rs.904 in FY10/11Q1, the sector recorded a growth of 18% during the period. LHCL contributed 59% to the profits of the sector while it recorded a profit growth of 26%.

Hotels & Travels…

The sample set consists of 5 stocks. Hotels and Travels sector grew at a phenomenal rate (464%) during 3 months ending 30.06.2011 helped by growing tourist arrivals. AHPL and AHUN contributed 76% and 22% respectively to the growth where both local and foreign operations performed better compared to the same period last year. HSIG (1089%), AHUN (354%) and AHPL (57%) recorded the highest growth rates.

We anticipate the sector to post significant profits during FY11/12H2 as the last two quarters attract higher number of tourists compared to the first two quarters of the financial year.

Land and Property Sector…

Sample size consists of 3 companies where profits for CLND and OSEA are for 6 months ending 30.06.2011 while CTLD profits are only for 3 months. The sector profits improved 60% helped mainly by OSEA (70%) profit growth.

Manufacturing…

The sample set taken to represent the sector consists of 13 stocks. Profits of 11 companies represent 3 months ending 30.06.2011. Profit figures for GRAN and LLUB are for 6 months.

Profits excluding GRAN and LLUB grew 185% compared to FY10/11Q1. DIPD (26%), RCL (26%) and TKYO (12%) were the highest contributors to profits while KCAB (760%), DIPD (583%) and CERA (147%) registered the highest growth rates.

Growing demand helped lift the performance of KCAB while the efficiency improvements of the hand protection segment contributed to the exceptional performance of DIPD. CERA failed to record an improvement when compared with the profit excluding the VRS cost of Rs.192Mn incurred during FY10/11Q1. LLUB and GRAN registered a growth of 8% for 6 months. With the expected GDP growth of 8%, the sector is likely to benefit from growing demand.

Motors

The sample set consists of 2 stocks, DIMO and UML.

The sector posted a profit growth of 394% for the quarter ending 30.06.2011, supported by the demand for vehicles. DIMO (61%) contributed the highest to the profit, and registered a growth of 321% while UML posted a growth of 576%.

Plantations…

A sample made up of 8 stocks has been considered to represent the sector. Profit figures of BALA, KVAL and TPL are for 6 months.

All Plantations recorded a decline in profits during 3 months ending 30.06.2011. The losses are attributable to the cost increase that arose as a result of the wage hike effective from April 2011. Plantations with high exposure to tea are likely to suffer most from the wage hike because tea is more labour sensitive compared to rubber and oil palm.

5 companies that posted FY11/12Q1 results recorded a negative growth of 171% while 6 months results of BALA, KVAL and TPL were down 7%. The rate of loss was lower as a result of the positive growth of KVAL (64%). The wage hike could continue to weigh on the profit growth of the sector despite attractive tea and rubber prices.

Power & Energy…

We have considered a sample set of 4 stocks for the 3 months ending 30.06.2011 to represent the sector. The sector posted a growth of 30% supported by HPWR (4%) while LIOC losses reduced compared to the same period last year. VPEL (54%) contributed highest to the profits during the period under consideration.

Dry weather conditions may pose a challenge to the hydro power sector in the immediate future.

Telecommunication…

The sector consists of DIAL and SLTL. Profits of both companies are for 6 months. The telecommunication sector posted a 50% growth, with SLTL and DIAL posting a 30% and a 77% profit growth respectively. SLTL and DIAL contributed equally to the sector profits.

source - www.island.lk

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Net foreign outflow tops Rs. 10 b

Net foreign outflow from the Colombo Bourse has now topped the Rs. 10 billion mark on the back of Rs. 26.3 billion in 2010 prompting analysts to call for urgent and aggressive promotion overseas given Sri Lanka’s positive post-war growth opportunity.

It was pointed out that except for two events organised by those other than the CSE or SEC in June, the Colombo stock market as a high potential investment location hadn’t been effectively or aggressively marketed globally since 2007 i.e. nearly 4 years ago. The last Colombo Stock Exchange (CSE) driven exercise was a road show in Singapore in 2007 whilst the same venue was picked by a SEC-initiated event in late 2009. The CSE road show in Singapore was preceded by two successful exercises in Dubai and Abu Dhabi followed by Australia and New Zealand in 2005.
           
These initiatives also targeted expatriate Sri Lankans who have wealth for investments.

Analysts lamented that since the end of the war two years ago, not a single comprehensive road show had been held overseas except for a Heraymila Investments/Securities organised event in Dubai and a London Stock Exchange arranged conference in London in June. However for the latter event there was involvement by officials from the SEC and CSE.

“Based on macro-economic fundamentals and high 8% growth it is fair to describe that Sri Lanka has the best investment story to tell the world. We saw how successful results can be when the US$ 1 billion Sovereign Bond issue was marketed via road shows despite gloom and doom in the rest of the world,” analysts pointed out. The Government’s Bond Issue drew heavy appetite with bids worth US$ 7.5 billion received. This was largely attributed to effective selling on the part of the Central Bank and lead managers to the issue as well as upgraded rating by agencies.

“Colombo Bourse has been Asia’s best performing market for two and a half years running yet lack of organised marketing of Colombo among overseas funds has led to the country and its growth story missing in the radar of fund managers,” analysts opined. With 125% return in 2009 and 96% in 2010, Colombo apart from being Asia’s best was world’s second best and the high returns also made Colombo the most consistent best performer.  Even midst sharp correction this year and the bearish run, Colombo has remained Asia’s second best and seventh in global ranking until recently.

Though there has been a concerted effort by either the CSE or the SEC, individually some broking firms have done private road shows both locally and abroad showcasing some of their select clients. Among those who have done such exercises are John Keells Stock Brokers in partnership with Credit Suisse, CT Smith Stockbrokers, IIFL Securities Ceylon Ltd., TKS Securities and Capital Alliance.

Industry sources said that aggressive marketing of Colombo is important since medium to long term foreign investors are critical for the sustenance of the Bourse as well as take up some of the future and big ticket new listings.

Some of those who have conducted or participated in overseas exercises emphasised that when presented with Sri Lanka’s growth story there is spontaneous interest by foreign fund managers but the small size of the market as well as low liquidity issues prevent active investments on their part.

The few of the foreign investments that have taken place so far include only some of the large cap and liquid blue chips and this too because of wanting to have some exposure to South Asian markets.

“In a critical analysis Colombo (Bourse) needs to scale up in tandem with aggressive promotion overseas,” analysts pointed out. Others also said that greater interests from Lankan expatriates can be generated if the CSE is more proactive and supportive of those who are keen to promote investing in equities back home.
“The pro-Sri Lankan Diaspora can be an immediate conduit as they are quick to realise the potential and there is no hard selling required,” they added.

source - www.ft.lk

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Inflation will drive global stocks higher: Mark Mobius

SYDNEY/HONG KONG: Global stock markets are “bouncing along the bottom” after tumbling 16% in the past four weeks, and will start to climb as inflation accelerates, said Templeton Asset Management’s Mark Mobius.

The US Federal Reserve hasn’t given up supporting the economy by printing money and buying more Treasuries, said Mobius, executive chairman of Templeton Asset’s emerging markets group. The firm is buying commodity stocks, expecting raw material prices to rise, he said.

“At this point, I do think we’re bouncing along the bottom,” Mobius, who helps manage about $50 billion, said in a telephone interview with Bloomberg Television on Monday. “For us in equities, it’s particularly good because people will eventually realise that to beat inflation that’s coming as a result of this higher money supply, we’re going to have to be into equities.”

The MSCI World Index of stocks fell last week for a fourth straight week as investors took flight after a deadlock in the US congress brought the government to the brink of default, reports showed the world’s biggest economy is slowing, and concern grew that Europe’s sovereign-debt crisis will spread.

The losses triggered speculation US Fed chairman Ben S Bernanke will this weekend signal a third-round of asset purchases to help sustain a recovery.

Energy and material stocks have been among the three worst performers in the past months in the 10 industry groups tracked by the MSCI Asia-Pacific Index, as a measure of primary metals traded in London and New-York-traded oil futures slumped.

“It’s been an opportunity,” said Mobius. “With the amount of liquidity coming into the system, commodity prices have to be maintained at higher and higher levels. The trend is very, very clear, and that’s up.”

source - www.dailymirror.lk

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Chairman Godahewa buys more into Colombo Land

Chairman Dr. Nalaka Godahewa was among buyers of Colombo Land Development yesterday.
Around 1.86 million shares of CLND traded yesterday between a high of Rs. 67 and a low of Rs. 62.50 before closing at Rs. 64, down by Rs. 1.60.


Godahewa had picked up 350,000 shares at Rs. 65.50 in a deal worth Rs. 23 million. As at 30 June 2011, he had two million shares amounting to a 1% stake in the company.
Godahewa, who is also the Chairman of Sri Lanka Tourism, now becomes the seventh largest individual shareholder of Colombo Land, control of which is held by Singapore-based shareholders who collectively own 35%, Dilith Jayaweera-controlled Kalpitiya Beach Resort 20.1% and Urban Development Authority 17.45%.

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Retailers keep bourse active

By Dinali Goonewardene

The market slipped lower on turnover of Rs. 2.3 b and was largely retail driven. The All Share Price Index edged 0.34% lower to 6928.03 while the Milanka Price Index dipped 0.66% to Rs.2.3 billion.
“We expect the market to remain at current levels during the course of the week with interest in the same type of stocks in which there is retail interest,” said Prashan Fernando, a stock broker at Acuity Stock Brokers.

“Only the speculative counters were seen mostly watched by retailers whilst a few crossings assisted to hold up activity levels,” Arrenga Capital said.

“Despite the initial marginal gains recorded with an intraday high of 6983.8 (Vs last week’s close of 6951.6 points), the market ended on a weaker note. Overall market behaviour was on a slow mode demonstrating the negative investor sentiment.
Though the credit rules were relaxed by the regulator, market was unable to sustain its previous week’s upward momentum owing to profit taking by the retail investors,” noted Asia Wealth Management.

The highest turnover for the day was generated by HVA Foods which saw 11 million shares trade for Rs. 423 million with share price up 9.4% to Rs. 39.50 while four million shares of Laughs Gas traded contributing Rs. 194 m to turnover. Retailers were most active on HVA in addition to Laugfs which also saw institutional play.

Among the other heavily traded stocks were Citrus Leisure which saw 1.7 million shares trade contributing Rs. 146 million to turnover. Interest was also seen in PC House with 6.25 million shares traded for Rs. 120 million though share price dipped by 6% to Rs. 19.10.
Among the day’s top gainers were Miramar which gained 13.21% or Rs. 35 to close at Rs. 300 and Asiri Central which gained 11.42% or Rs. 22.30 to close at Rs. 217.50. The top losers for the day were Beruwala Walk-inn which lost 8.84% to close at Rs. 173.20 and EB Creasy which dipped 8.33% to close at Rs. 2,200.
A redeemer for the day was the net foreign inflow Rs. 44.2 million.

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Sunil to step down as Dankotuwa MD

The Managing Director of Dankotuwa Porcelain PLC (DPL), Sunil Wijesinghe will be stepping down from the top position, as DPL is planning to recruit a CEO-Designate to run the tableware company.

Once a CEO-Designate is appointed, Wijesinhe is expected to gradually handover the responsibilities and only function as the Chairman of the company.

“I wanted to step down for a long time as I was operating both as the Managing Director and Chairman since July, 2005. But I couldn’t do it earlier because the company’s ownership went through a transition,” Wijesinghe told the Mirror Business.

When asked about the company’s much awaited turnaround following the acquisition of the majority control by Environmental Resources Investment PLC, Wijesinha noted that the expected turnaround will at least take about 3 years as the company is involved in one of the most complex businesses.

“Huge repositioning and restructuring process should be done to get to that turnaround point. However it won’t be easy as orders from US and European markets are on the decline due to the financial constraints,” he remarked.

The net loss of DPL widened to Rs.33 million in the first quarter of financial year 2012 from Rs.16 million in the same quarter previous year, the un-audited financial statements of the company showed.

The turnover of the firm also dropped 6 percent to Rs.269 million while the cost of sales during the period increased by 10 percent to Rs.248 million.

source - www.dailymirror.lk

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Bourse affected by global turmoil

Despite the boost given by the market regulator last week, reviving restrictions on the brokers providing credit to investors, Colombo bourse started off the week negatively, largely owning to the uncertainties prevailing in the global economies and capital markets.

According to Lanka Securities, “the market sentiments were weak during the day in line with overall global uncertainties”.

However, Bartleet Mallory Stockbrokers took a different stance in interpreting the market performance as they opined that selling pressure was seen today as investors cashed in on stocks that were accumulated following last weeks optimistic run.

All Share Price Index (ASI) closed 6,928.03, down 23.61 points (-0.34%) while sensitive Milank Price Index (MPI) settled at 6,292.35, down 42.06 points (-0.66%).

 HVA Foods Plc was the top contributor to the turnover with Rs.427.5million. The counters also traded heavily.   In addition, Laugfs Plc (Rs.194.8mn) and Citrus Leisure Plc (Rs.146.9million) made significant contributions.

 Meanwhile PC House Plc, Tess Agro Plc and Panasia Power Plc traded aggressively during the day.

Foreign participation accounted for 6% of the total market activity. At the end of the day,  foreign investors were the net buyers with a net foreign inflow of Rs.44.2mn. The market turnover reached Rs.2.3 billion.

Indian capital markets which were experiencing turbulences largely due to global economic uncertainties recovered yesterday, as both Sensex and Nifty landing on green.

However the Japans’ Nikkei stock average marked its lowest close since March 15 on Monday, as worries about the U.S. economy offset signs that the Japanese authorities stand ready to quell any further Yen strength. According to Reuters, the index fell as low as 8,619.21, breaking below the intraday low of 8,656.79 set on August 9, but holding above the March 15 closing low of 8,605 hit in the wake of the March 11 earthquake and tsunami.

Reuters also reported that Wall Street ended a fourth straight down week, with losses of more than 1 percent on Friday as most buyers left the market before the weekend.

“Growing fears of another U.S. recession and destabilization in Europe’s financial system weighed on investors’ minds” Reuters noted.Weak sentiments drag market down

The market sentiments were weak today in line with the overall global uncertainties. Besides, on certain counters such as PC House Plc, Multi Finance Plc notable levels of profit realizing were depicted.

 The market turnover reached Rs.2.3bn. ASI closed 6,928.03, down 23.61 points (-0.34%) while sensitive MPI settled at 6,292.35, down 42.06 points (-0.66%).

source - www.dailymirror.lk

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Weak sentiments

The market sentiments were weak yesterday in line with the overall global uncertainties. Besides, on certain counters such as PC House Plc, Multi Finance Plc notable levels of profit realizing were depicted.
The market turnover reached Rs 2.3bn.

ASI closed 6,928.03, down 23.61 points (-0.34 percent) while sensitive MPI settled at 6,292.35, down 42.06 points (-0.66 percent).

HVA Foods Plc was the top contributor to the turnover at Rs 427.5mn.

The counters also traded heavily. In addition Laugfs Plc (Rs 194.8mn) and Citrus Leisure Plc (Rs 146.9mn) made significant contributions.

Meanwhile PC House Plc, Tess Agro Plc and Panasia Power Plc traded aggressively during the day.
Foreign participation accounted 6 percent of the total market activity.

At the end of the day foreign investors were the net buyers with a net foreign inflow of Rs 44.2mn.

 Lanka Securities Research
source - www.dailynews.lk

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CDB Rs. 718mn rights issue fully subscribed

Citizens Development Business Finance PLC’s (CDB) Rights Issue was fully subscribed recently raising Rs. 718,110,435. "This fresh capital infusion will substantially strengthen CDB’s balance sheet while permitting the company to add 14 new fully fledged branches inline with compliance requirements of Central Bank of Sri Lanka. The capital raise via the Rights Issue will also support CDB’s rapidly expanding lease and loan book portfolios, the finance company said in a statement issued on Monday (22)

Under the recently concluded Rights Issue, 6,614,175 new Ordinary Voting Shares were issued at Rs. 70/- per share raising a total amount of Rs. 462,992,250/- from voting rights and 5,669,293 new Ordinary Non Voting Shares were issued at Rs. 45/- per share,  which was a new class of shares raising a total amount of Rs. 255,118,185/-.

For the FY2010/11 CDB recorded a net profit after tax figure surpassing the rupees half a billion mark which was an over 7 fold increase compared to the corresponding previous financial year. Total assets and revenue grew by 53% and 47% respectively. Continuing its growth momentum, CDB recorded a 132% growth in after tax profits for the First Quarter of FY2011/12.

CDB intends to aggressively expand its distribution network while further accelerating its growth trajectory capitalising on the immense opportunities available for the financial services industry in post-war Sri Lanka.

NDB Investment Bank acted as the Advisor to the Issue while Nithya Partners acted as the Legal Advisors.

source - www.island.lk

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Bourse still draws a beeline

Despite bearish behavour and low returns, more investors flock as new CDS accounts opened in first seven months of 2011 comfortably surpass full year figure of 2010 Total CDS accounts top 600,000 mark.

The investing public is increasingly taking the equity route and bearish sentiments throughout or negative returns at times have failed to be deterrents, judging by the latest data on new entrants.

Between January and July this year a staggering 74,000 new CDS accounts had been opened, already surpassing the 2010 full year figure of 57,285. The number of new CDS accounts opened in 2010 was the highest ever and it is likely that 2011 full year will produce an imposing total.

In comparison to 2010 full year data, the first seven months of 2011 figure reflect a 29% increase or nearly 17,000. As against the first seven months of last year, the current year’s comparable figure shows a staggering 231% increase or 51,682 new accounts.

Analysts said the steady increase in new investors was encouraging because it was amidst the bearish behaviour of the bourse, especially in recent months.

Perhaps largely on account of the flood of IPOs, March saw a record near 22,000 new accounts opened, preceded by 13,000 in February. Between May and July the average has been over 7,000 monthly, which is highly encouraging. As at end 2010, the total number of CDSs amounted to 554,192, up by 12% over 2009 figure of 496,907. As at end July the cumulative number has risen to 628,192. In comparison to record figures in 2010 and so far in 2011, the previous highest was in 2009 amounting to 18,705 whilst during years 2006 and 2008 it ranged between 11,833 and a high of 15,000.

Thanks to Securities and Exchange Commission (SEC)-approved relaxation of credit rules, the Colombo bourse got a lift during the past two weeks, improving the year-to-date return to 4.4%. It turned negative in late July. However, the Milanka Index continues to languish with a negative return now at 11%.

The boom in new investors has been ably aided by new listings, which is a record 25 year-to-date. This, however, includes listings by way of introductions especially registered finance companies under a Central Bank directive.

With improved investor sentiments and rebound in turnover levels, most analysts expect a return of IPOs, though in a more phased-out manner during the remainder of the year.

The interest among the investing public in getting to know prospects in the capital market was also amply evident by the large crowds at the Investor Day organised by the SEC in association with the CSE.

Thousands have thronged to events held so far in Galle, Kandy and Kurunegala, whilst future ones are being planned in Negombo, Anuradhapura, Badulla and Matara in the next few months. Increased investor education via electronic media has also elicited interest among the public.

With interest rates forecast to remain at the low end of single-digit levels, most analysts opine that the equity market is the only hope for the public for better returns. Strong outlook for economic growth and impressive corporate earnings have further backed prospects for the market though it continues its struggle in attracting institutional investors, both foreign and local.

DNH Financial Ltd. last week sounded highly bullish of the Colombo stock market as it is forecasting the benchmark All Share Index (ASI) to hit the 7,500 points level by end third quarter and 9,000 points level by end 2011.

“While the SEC’s decision to allow stock broking companies to provide margin facilities to clients based on their liquidity capacity is definitely encouraging, we expect investors to now focus more significantly on corporate fundamentals, which would provide the necessary catalyst for a sustainable rally leading to the market re-rating comfortably above the 7,500 levels during 3Q2011 and reduce the somewhat fear-based emotional selling that has characterised certain periods of trading over the last few weeks,” DNH said in its weekly stock market review.

The broking firm expects a number of themes to emerge over the next few weeks, which it said would shape market trajectory; prolonged nervousness in the global markets as they continue to capitulate to US and euro zone debt tensions, conversely, record performance in the Sri Lanka economy and strong double digit corporate top line as well as bottom line growth and improved margins, cheap PEG valuations in the majority of the companies in our universe, and the relative unattractiveness of alternatives such as T-Bills, fixed deposits or real estate.

“The convergence of all these factors will provide the perfect backdrop for the Colombo bourse to comfortably breakthrough the 9,000 resistance level by year-end, generating a return of 25-30% from current levels. We are not unaware, however, that we may encounter sporadic lumps and bumps along the way as we climb a solid upward slope, but our conviction for equities remains well and truly strong and justifiably so,” DNH said.

source - www.ft.lk

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A 5-star loss!

After two decades, Hilton Colombo owning company Hotel Developers finally releases accounts Accumulated losses by end FY 2009/2010 top Rs. 10 billion Revaluation of hotel results in Rs. 4.7 b gain yet company beset with negative networth of Rs. 4.7 b as against Rs. 8.26 b in 2008/9 Total outstanding loans and borrowings near Rs 12 b Analysts claim latest results fuels case for winding up After two decades, Hotel Developers (Lanka) Plc, the owning company of the country’s premier 5-star Hilton Colombo, has released its accounts with Rs. 1.2 billion loss in the 2009/10 financial year, bringing the accumulated loss to a staggering Rs. 10.3 billion.
Perhaps benefitting from initial upturn in post-war tourism, HDL has posted a Rs. 1.4 billion gross profit as against Rs. 1.08 billion in 2008/9 financial year. However a combination of factors such as lower other income, higher administrative and other expenses and finance cost saw pre-tax loss increase to Rs. 1.2 billion from Rs. 1.1 billion. Net cash generated from operating activities had improved to Rs. 468 million as against Rs. 58 million in 2008/9.
HDL revenue had increased to Rs. 1.78 billion from Rs. 1.37 billion whilst cost of sales had risen to Rs. 382 million from Rs. 287 million. Other income had declined to Rs. 87.2 million from Rs. 115 million whilst administrative expenses were Rs. 1.1 billion up from Rs. 998 million a year earlier. Other expenses increased from Rs. 180 million to Rs. 237 million. Staff costs had increased to Rs. 264 million, up from Rs. 240 million.
Aided by minimum rates and high occupancy HDL’s room revenue in 2009/10 had increased by 37% to Rs. 729 million whilst food and beverage revenue rose by 28% to Rs. 948.5 million.
In March 2010, the company had re-valued the hotel building by an independent value – Government Valuation Department for Rs. 5.6 billion as opposed to Rs. 1.9 billion at cost. This move had resulted in a revaluation gain of Rs. 4.7 billion with carrying value of the building being Rs. 903 million as at 31 March 2010.
Thanks to revaluation gain HDL’s reserves topped Rs. 5 billion from Rs. 328 million in 2008/9. This saw negative net worth of HDL being reduced to Rs. 4.7 billion in 2009/10, as against Rs. 8.26 billion in the previous year.
Total liabilities crossed the Rs. 12 billion mark in FY2010 up from Rs. 10.6 billion a year earlier. Thanks to revaluation fixed assets rose to Rs. 6.31 billion from Rs. 1.7 billion whilst total assets amounted to Rs. 7.4 billion as against Rs. 2.4 billion in 2008/9. Debt repayment was over Rs. 1 billion mainly on Finance Ministry loan, with finance cost amounting to Rs. 1.35 billion, up from Rs. 1.18 billion in 2008/9.
As at 31 March 2010, HDL had Rs. 1.45 billion in short term interest bearing loans and borrowings up from Rs. 705 million a year earlier whilst long term loans and borrowings were Rs. 10.26 billion, up from Rs. 9.7 billion a year earlier.
Audited accounts said Hilton Colombo has full possession and control of the property, plant and equipment of the hotel. Although, the management agreement between the company and Hilton International USA expired on 31 December 2007, management fees have been accounted as per the terms of the agreement without prejudice to the rights of the company. In 2009/10, management fees amounted to Rs. 76.4 million, 187% higher than Rs. 26.5 million paid in 2008/9. This is on account of higher Gross Operating Profit (GOP). Hilton is estimated to be getting around 33% of GOP as combined management fees and group services as against only gets 12% of GOP at Hilton Residencies as per industry sources.
Company analysts opined that eventual release of results by HDL is likely to fuel the case for winding up HDL which most insist is bankrupt given the negative networth and soaring liabilities. However given the multitude of related court battles HDL and Hilton and shareholder saga in Sri Lanka continue to be a sour point, analysts added.
Results vs share price
Hotel Developers 2009/10 results were announced after the market closed on Friday. It finished the week up 20 cents to Rs. 143.70 with 26,200 shares changing hands. Its 52-week highest is Rs. 165 whilst the lowest is Rs. 115.
Despite lack of audited or provisional accounts for 20 years HDL shares have had elicited investor interest. However, its basic loss per share now is confirmed at Rs. 26.87, up from Rs. 25.87 in 2008/9.
Analysts said that HDL’s performance in 2010/11 financial year is likely to have improved in tandem with the post-war rebound in leisure sector. This together with future upside in earnings is being factored in the price which investors are willing to pay for HDL shares.
Due to non disclosure of accounts, HDL had been on the default board since June 2001, a decade ago and the eventual release of audited accounts comes many months after the board finalised and approved same.
A few months ago some analysts opined trading in HDL shares must be suspended temporarily at the time of release of accounts after a 20-year absence. This suggestion however seem to have not won favour from the CSE or the SEC on the premise that the company was on the default board.
HDL announced on Friday that it was taking necessary steps to issue the audited statement of accounts for the years starting from 1990.
Cornel and Company owns 56% stake in HDL whilst Mitsui Co/Taisei owns 27.5% followed by Treasury 9%. The public holding is around 7.5%.
Auditors raise several issues, including going concern
External auditors SJMS Associates have raised several issues concerning Hotel Developers (Lanka) Plc’s accounts of 2009/10 as well as accumulated losses eroding stated capital and going concern.
In response to the latter concern, the HDL management had said that the financial statements have been prepared on the assumption that the company is a going concern, i.e. as continuing in operation for the foreseeable future. It is therefore assumed that the company has neither the intention nor the necessity of liquidating or of curtailing materially the scale of its operation.
The management also said the Government of Sri Lanka has opposed the winding up action in the District Court with Attorney General appearing for the Government (DC Colombo Case No.217/Co). There is also provision in the settlement agreement which states that the Government may convert the outstanding loan of Rs. 10.19 billion into equity at any time after July 1997 and such a course of action will prevent erosion of the stated capital. Further, the Government has not made any claim on the loan to date.
“Taking such into consideration, the directors have assessed and are confident that the company will be able to continue its operations for the foreseeable future; hence adoption of the going concern assumption in preparation of these financial statements is considered appropriate,” the HDL Management has said.
Auditors SJMS Associates in other opinion expressed said that it had not received declarations from the several key management personnel stating their emoluments and their interests in contracts with the company hence unable to determine the adequacy of disclosures in related party transactions.
Due to the several matters, auditors were unable to determine the existence and value of property, plant and equipment. One is there is a legal dispute in respect of lease of land on which Hilton Colombo is constructed.
As per note to financial statements the leasehold land has been obtained on a 99-year lease from Cornel & Company Limited. Cornel & Company Limited had obtained the lease of the said land from the Urban Development Authority (UDA) on a 99-year lease ending on 15 February 2083. The company had issued shares for the full value of the lease rental to Cornel & Company Limited.
In terms of the Share Transfer Agreement between the Government and Cornel & Co, shares issued to Cornel & Company Limited have been transferred to the Government. Cornel & Company Limited had failed to comply with the terms of the lease agreement by not making the balance 80% of the due payments to the UDA. In 1999 the UDA surrendered its right to the land to the Government by deed 673 and 674 and the land has subsequently been taken over by the Government.
Auditors also said there has not been a physical verification of plant and equipment. Further, the plant and equipment register and the assets do not indicate identification code numbers.
Another issue is that the management agreement dated 31 January 1984 between the company and Hilton International USA expired on 31 December 2007. The renewal or extension of the management agreement is in dispute and the management fees had been accounted as per the terms of the said agreement.
“In our opinion, except for any disclosures or adjustments that may be required in the financial statements due to the matters referred to in the preceding paragraphs (1) to (3), the company maintained proper accounting records for the year ended 31 March 2010, and the financial statements give a true and fair view of the company’s state of affairs as at 31 March 2010 and of its loss and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards,” chartered accountants SJMS Associates said in their audit report.
Many litigations pending still
HDL, whose existence has been riddled with litigations, has in store several coming for consideration of a settlement, if any.
The case in District Court Colombo filed by Cornel and Company against Mitsui and Company Ltd., Taisei Corporation, Attorney General and Nihal Ameresekere and the company will be called on 8 November 2011.
HDL is the fifth respondent in the case where the plaintiff has filed (in March 1998) that the defendants are acting against the rights of the plaintiff in the Hilton Project contrary to the conditions in the agreement entered into between the parties.
Cornel and Company’s relief prayed include a declaration that the agreements are illegal and void and interim injunction restraining the defendants from giving effect to any of all the terms and conditions in the agreement.
A case filed in November 2006 in District Court Colombo by Nihal Ameresekere to wind up HDL will see written submissions being made on 28 November 2011 whether the inquiry into the winding up application should be disposed of by way of written submissions or oral submissions. The company is opposing the winding up.
The stay order issued by High Court staying the proceedings of the Magistrate Court until the final determination of the High Court is coming up for argument on 24 October 2011.
The background to this is in October 2008, when the CMC filed in the Magistrate Court a case against the company for operating Hilton without a trade licence for 2007 and thus not having paid the Trade Licence Duty in terms of Government Gazette No. 1062 of 20 July 2007.
The company appealed to the High Court against the order dated 25 January 2010 made by the Magistrate Court in relation to a preliminary objection raised by the company.

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Ashok keen to buy more of NDB

Deputy Chairman Ashok Pathirage is keen to buy more shares of NDB Bank, if available at the right price.
On Friday, Ashok, who is the Chairman of Softlogic Holdings, bought 470,000 shares at Rs. 135 each in a deal worth Rs. 63.4 million. This was after he picked up one million shares at the same price on Thursday.


The 1.5 million shares in NDB Bank amounts to nearly a 1% stake, for which he had spent around Rs. 202 million. Ashok bought these shares from a foreign party.
“I am keen to buy more NDB shares if available at the right price, because I have confidence in the ongoing moves to make the Bank more dynamic and successful,” Ashok told the Daily FT.
In February this year Ashok, considered as one of the most dynamic and successful businessmen, was appointed to the Board of NDB Bank, whilst last month he was made Deputy Chairman, a newly-created post.

Originally appointed as a Non Executive Director, Ashok has now become the Director with the largest shareholding. State entities/funds Bank of Ceylon, EPF, SLIC, ETF and NSB collectively own a 33% stake in NDB Bank.
Following the demise of Manik Nagahawatte, another business leader and long-standing Director, Hemaka Amarasuriya was appointed as the Chairman of NDB Bank.
Since July last year the NDB Bank Board has seen several new faces. In one go, Sarath Wickramanayake, Anura Siriwardena and Kimarli Fernando were appointed, followed by Sujeewa Rajapaksa and Ashok.

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Bullish DNH forecasts ASI hitting 7,500 in 3Q; 9,000 by year-end

DNH Financial Ltd. appears to be highly bullish of the Colombo stock market as it is forecasting the benchmark All Share Index (ASI) to hit the 7,500 points level by end third quarter and 9,000 points level by end 2011.


“While the SEC’s decision to allow stock broking companies to provide margin facilities to clients based on their liquidity capacity is definitely encouraging, we expect investors to now focus more significantly on corporate fundamentals which would provide the necessary catalyst for a sustainable rally leading to the market re-rating comfortably above the 7500 levels during 3Q2011 and reduce the somewhat fear-based emotional selling that has characterised certain periods of trading over the last few weeks,” DNH said in its weekly stock market review.

The broking firm expects a number of themes to emerge over the next few weeks which it said will shape market trajectory; prolonged nervousness in the global markets as they continue to capitulate to US and Eurozone debt tensions, conversely, record performance in the Sri Lanka economy and strong double digit corporate top line as well as bottom line growth and improved margins, cheap PEG valuations in the majority of the companies in our universe, and the relative unattractiveness of alternatives such as T-Bills, fixed deposits or real estate.

“The convergence of all these factors will provide the perfect backdrop for the Colombo bourse to comfortably breakthrough the 9000 resistance level by year end generating a return of 25-30% from current levels. We are not unaware however that we may encounter sporadic lumps and bumps along the way as we climb a solid upward slope, but our conviction for equities remains well and truly strong and justifiably so,” DNH said.

Noting that although from an absolute PE valuation yardstick, the Colombo market at current levels may appear relatively expensive vis-à-vis regional markets DNH said from an all important PEG basis, the Colombo bourse can be described as not only attractive but cheap and getting cheaper as the full impact of the current earnings cycle is absorbed.

“At a PEG of 0.6X, we believe that the market offers considerably attractive buying opportunities for investors seeking double digit returns over a minimum three-four month investment horizon. For those with an investment horizon of even greater, we believe the returns will be considerably higher. We advise investors however to be ultra-selective in their stock selection and focus on companies that are fundamentally sound with a strong domestic consumption theme,” said DNH which comes under the ERI Group.

“While some industry commentators have expressed concerns over the prospect of an over-valuation of the market and a possible correction, we disagree and take a markedly different view. The fear and panic that have been rattling global investors over the US and Eurozone debt crises is unlikely to impact the Colombo bourse as we believe that there is a clear polarisation between the performance of the domestic bourse vis-à-vis its global peers. Consequently, lead by domestic factors, we believe the market will end 3Q2011 at least 8-10% higher characterised however by sporadic periods of volatility,” DNH said.

Supported by leadership mainly from large and medium sized stocks with a strong domestic theme, we believe that the bourse is well on course to breaking through the psychologically important 9000 key resistance level by year end and making the crossing at a prospective PEG of1.0X.
“We believe that the next few months will offer an attractive opportunity for risk savvy investors to be able to proactively position themselves to capitalise on a 25-30% rise in the market. Investors are advised that temporary dislocations in the market cannot be discounted and when they arrive many will question the ability of the bourse to bounce back; but bounce back it will. With alternatives to domestic equities becoming increasingly unattractive, we see a strong liquidity driven impact on equity returns.

Continued low interest will make equities more attractive and cash unattractive,” DNH said.
It pointed out that although inflation has been crawling upwards in recent months and is currently hovering at 7.0%, it still remains at relatively benign levels and is not a concern at this stage. While strong domestic consumption and resultant increased demand pull factors could stoke inflationary pressures going forward, we believe that given the increasingly cost push nature of the CPI, domestic inflation should remain at current levels as demand pull inflationary pressures will be comfortably offset by cost push factors, namely lower import costs a result of lower global commodity prices.
Given the Central Bank’s increasingly accommodative monetary policy, we expect interest rates to continue to remain at current levels notwithstanding the Bank of Ceylon (BOC)’s recent decision to cut loan interests from 12% to 9% which although could have the ability to trigger similar action from other commercial banks, is unlikely to result in an industry wide reduction in rates as we believe that the majority of banks will face increasingly downward pressure on margins if rates are actually reduced.

Meanwhile, despite the ‘safe haven’ appeal that cash instruments offer, an important point to note is that taking into consideration the current low interest rate environment, investors who maintain savings in the form of fixed deposits are now generating negative real returns given current inflation levels.

The scenario does not change significantly in the case of those currently invested in T-bills either, as the real rate of return on T-Bills was a mere 25 bps in July 2011. Consequently given DNH’s expectations of a 25-30% rise in the bourse by year end, the opportunity of not investing in the Colombo bourse could be painfully high for those investors sitting in cash, the broking firm argued.
“Considering the unattractiveness of either fixed deposits or T-bills in real terms, we therefore recommend a shift to high yielding equities which is likely to generate significantly higher returns. In this respect, we re-iterate the need to however adopt a rigorous stock selection strategy to identify fundamentally solid stocks that will outperform and generate above market risk adjusted gains,” it said.

DNH also said it is remains overweight on the Manufacturing, Banking, Diversified and F&B sectors which it opined have a strong domestic focus and will benefit fully from rapidly rising local consumption. “We are also bullish on the Hotel sector which has performed surprisingly well notwithstanding increasing global recessionary pressures,” it added.
Focusing on corporate results released so far, DNH said companies have definitely exceeded market expectations with average consolidated EPS growth of 30-35%.

“While we are certainly pleased that the majority of companies have recorded both healthy top as well as bottom line growth and improved margins, we advise investors to be somewhat wary of those that have reported unusually sharp earnings growth without a corresponding increase in top line revenues. This could mirror a non-recurring event such as an unusual or infrequent item (included as part of ‘Other Income’), which is unlikely to recur going forward or an extra-ordinary item. Consequently, we emphasise the need to select companies that are likely to report sustainable earnings growth going forward with top line revenues LEADING EPS growth,” DNH said.

With regard to the economy, DNH said having grown by an impressive 8.0% in 2010, GDP growth during the 2Q2011 is expected to remain strong notwithstanding the turmoil in the global markets. This is high by any standard. Growth will be broad-based across all sectors, most notably from the Industrial, Services and Hotel sectors and will be fuelled by strong domestic consumption at all levels as a result of a rise in consumer disposable income and corporate profitability. While export growth could tail off slightly as a result of a modest dip in demand from international buyers, we do not see any significant impact on the Balance of Payments as we expect tourist arrivals to continue to remain high while expatriate remittances will continue lend support to household spending.

Having enjoyed welcome gains from the real estate sector during last couple of years as a result of the end of the war, we see little to encourage investors to re- enter the market this year as we believe that much of the ‘easy’ gains in the sector has already been realised. Considerable value increase has pushed yields down to 5-6% levels, which, when considered against risk free T-Bill rates, do not appear overly attractive and certainly compares unfavourably when juxtaposed against equities. In the medium to longer term however, we expect the real estate sector to benefit from the ongoing domestic economic expansion which we believe will result in a re-rating of the real estate market.

Strong opportunity for foreign fund managers and unconstrained local fund managers 
Given the expectation of continued nervousness in the global markets during 4Q2011, we expect most international fund managers to square their books ahead of the new year. The dislocations in the global markets will consequently offer significant opportunity for global asset managers to invest these surplus funds in markets such as Sri Lanka which is currently at the top of economic performance.
“We believe that local fund managers meanwhile whom are unconstrained in their mandate will also be able to generate significantly positive alpha by exploiting market opportunities using an active portfolio management approach in their stock selection thereby outperforming those that are linked to indexes,” DNH said.

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Market volatility may continue – Sources

By Ravishanka Withanachchi

Although Sri Lanka’s brokering community last week commended the move by the capital markets regulator, the Securities and Exchange Commission (SEC) on relaxing rules relating to the extension of brokerage credit to investors, they opine that market volatility is likely to still continue as some ten brokers fail in the new criteria imposed by the SEC. According to a top market source, if the SEC instead of linking the extension of credit with liquid assets had linked it to net assets, the Bourse would have been further boosted.
“I’ve heard that the new rules don’t help around 10 brokers of the 28 member strong community. Therefore, this means the respective brokers will have to boost capital through liquid instruments in order to lend to clients,” Head of Research at Asha Phillips Securities Ltd, Pasindu Perera told The Bottom Line.
He said that therefore these firms may be compelled to infuse fresh capital which would also be a little difficult situation at this point of time.
“However, it is also a good thing in a way as it will encourage most broking firms to opt for greater recapitalisation which in turn will improve their overall strength,” he opined.
Managing Director, JB Securities, Murtaza Jafferjee also voicing his opinion on the subject said that this directive seems to be more onerous on the firms as any unsettled debt beyond T+3 days now should be deducted from the liquid assets where as previously any unsettled debt beyond T+5 days should be deducted from the net capital of the brokering company.
“Deduction of any unsettled debt from the liquid asset base would pose a greater problem for the running of day-to-day functions of the firm where as if the deduction is to be made from the net capital the liquid asset base could be maintained,” he highlighted.
However, Director of Capital Trust Securities, Sarath Rajapaksa said that linking of brokerage credit to the availability of liquid assets is the right way forward since if it is based on Net Assets, it will lead to over lending leading to a liquidity crisis among broker firms.

Also supporting the claim was Prashan Fernando, Chief Operating Officer (COO) of Acuity Stock brokers (Pvt) Ltd who said that, “Lending to the investors based on net capital of the brokering company would lead to a speculative driven market as the ability to lend by a stock brokering firm is not restricted so there is a risk that a bubble can be created due to an excess liquidity in the market. However, lending based on liquid assets would avoid that situation as the ability of extending credits by an investor brokering company is at least restricted to the availability of liquid assets”.
SEC, which held a special commission meeting last week, reviewed the restriction imposed on Stock Brokers in extending credit to investors and decided to relax the said restriction subject to certain prudential requirements being met by the Licensed Stock Brokers, in order to facilitate retail investors to have access to credit by such Licensed Stock Brokers.

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Call for Private Placement lock in periods after IPOs

By Duruthu Edirimuni Chandrasekera
A company’s Private Placements (PP) should be imposed a lock in period from the date the firm goes public, which will prevent its share price from falling after trading on the Colombo Stock Exchange (CSE), according to a top entrepreneur and businessman.

“There should be a lock in period for PP from the date of listing a company on the CSE,” Ashok Pathirage, Chairman Softlogic Holdings PLC, which recently went public two months ago, told the Business Times. 

Speaking about Softlogic’s share price dip after its Initial Public Offering (IPO) he said that many PP investors decided to cash in and profit immediately after the company started trading, causing its share price to drop. As at now, many other firms which had PP before IPO are also trading below their issue price.

"Companies need to make sure that PP investors are here for a decent period of time and not merely to make a 'fast buck," Mr. Pathirage noted, adding that otherwise the regulators should bring in rules preventing the PP investors from selling immediately after the share starts trading.

“This (share price drops witnessed during the past few months in firms which had PP before going public) is a good lesson for all,” he added. On Softlogic’s performance, he said that Softlogic is on target to achieve Rs. 1.7 billion profit. “Softlogic after listing has seen a lot of foreign buying interest and (when share prices are down) it’s a great time to buy,” he added. Softlogic concluded a Rs 1 billion private placement to sell 21% in late 2009 ahead of the 137.9 million shares IPO which will be sold at Rs 29 per share. The Rs 4.031 billion which was erased, he said was used to retire debt.
His latest acquisition, Asian Alliance Insurance Company (AAIC), he said will not be rebranded it. “About their healthcare sector, Mr. Pathirage added that the Asiri brand wants to go international. “We are scouting Bangladesh for opportunities," he added. He said more leisure acquisitions are being eyed by Softlogic, as their target is 1,500 rooms within the next five years.

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Sri Lanka stocks down 01-pct

Aug 19, 2011 (LBO) - Sri Lanka stocks closed one percent lower down Friday with speculation on a few stocks dominating trading, brokers and analysts said.
Colombo's benchmark All Share Price Index closed down 79.21 points or 1.13 percent at 6,951.64 while the Milanka Index of liquid stocks closed down 1.18percent (75.71points) at 6,334.41, according to stock exchange provisional figures.

Turnover was 3.1 billion rupees.

PC House, an IT firm, closed at 20.20 rupees up 20 cents with 32.3 million shares traded for 704.6 million rupees showing the most turnover for the day.

Colombo Land closed at 65.60 rupees after rising 73.40 rupees in intra-day trading up 70 cents with 6.8 million shares traded for 458.9 million rupees.

Price band restricted HVA Foods and Multi Finance was rose to their maximum 10 percent level. HVA Foods closed at 36.10 rupees up 9.73 percent and more than 9.9 million shares were changing hands for 353 million rupees.

Multi Finance closed at 49.60 rupees up 9.98 percent.
Lake House Printers & Publishers was the day’s top and its share closed at 160 rupees up 20.52 percent or 27.70 rupees.

Renewed interest was seen in Serendib Hotels, The Finance, Fortress Hotels and Kelsy Developments which rose over 9 percent.

John Keels Holdings closed at 209 rupees down 1.30 rupees or 0.62 percent. Carsons Cumberbatch closed at 605 rupees down 10 rupees or 1.63 percent.

Privately negotiated deals included Central Finance 20,000 shares at 1,365 rupees, Dimo, 30,000 shares at 1,450 rupees, National Development bank 470,000 shares at 135 rupees, Tokyo Cement 481.800 shares at 42 rupees and Nawaloka Hospitals 10 million shares at 3.80 rupees.

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Sri Lanka Asia Capital to invest in hotels

Aug 20, 2011 (LBO) - Sri Lanka's listed Asia Capital, which has interests in financial services, leisure, will invest 700 million rupees in hotels and plans to take two operating units public in the next two years, an official said.
Asia Capital got 3.3 billion rupees after selling out of Asian Alliance Insurance.

"We sold our stake in Asian Alliance because we got the right price at the right time, at the time the investment matured," acting chief executive Stefan Abeyesinhe said.

The firm is planning to invest around 1.5 billion rupees in expanding its businesses, including hotels.

Asia Leisure, the group's leisure arm, plans build at least three luxury boutique hotels in Kalutara and Balapitiya in the Southwestern coast and in Trincomalee in the East.

"We are planning to invest around 700 million rupees for these hotel projects," Abeyesinhe said.

"We have already acquired one acre of land in Balapitiya and Trincomalee and is also looking for land in Kalutara and northern Jaffna."

Each hotel will include around 35 to 40 rooms. The group is planning to list the hotel unit within two years Abeyesinhe said.

Asia Leisure now operates four luxury boutique hotels: Park Street Hotel in Colombo, River house, Balapitiya, Tamarind Hill, Galle and Craigbank, Nuwara Eliya.

The leisure unit which has 269 million rupees in assets had lost 32 million rupees in the year to March, but is expected to stabilize next year, Abeyesinhe said.

Asia Capital had recently invested 2.5 million US dollars to new media company called Asia Digital Entertainment targeting both local and international markets.

"Our media group consists of both local and Indian experts," he said. "Our main objective is to provide quality digital cinema experience to the audience, which is lacking in the local market at present."

Asia Capital group will also invest in a new information technology company.

Asia Asset Finance, a fully owned unit which offers leasing, hire purchase and mortgage loans, plans to raise half a billion rupees through an initial public offering planned for October this year.

In the year to March 2011, the firm made 74 million rupees in profits, Abeyesinhe said. He said a 30 percent stake will be sold in an initial public offering probably at 2.50 rupees.

"By utilizing this IPO funds we are planning to expand our finance business more in to the micro finance sector especially in North and East," he said.

"We are already having discussions with relevant international lending bodies with regard to this micro finance initiative."

Asia Securities, the group's 21 year old stock brokering arm is looking to acquire some 'troubled' brokering firms, Abeyesinhe said.

"The industry needs more consolidation to survive. At the moment we have 11 branches, with some acquisitions we plan to expand our retail client base."

In the year to March the group reported profits of 885 million rupees including 268 million rupees in capital gains.

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Colombo Stocks dip in busy week’s trading

By Dinali Goonewardene

The market dipped marginally as turnover hit Rs. 3.18 m on Friday at the end of an active week of trading.
The All Share Price Index edged down 1.13 per cent to 6951.64 and the Milanka Price Index fell 1.18 per cent to close at 6334.41.
“Some of the clients did not purchase today after watching the unrelated foreign market coverage yesterday; therefore the index dropped,” Chief Executive Officer, Capital Trust Securities, Tushan Wickremasinghe said.


There was high net worth individual interest in PC House which saw 32 m shares trade, contributing Rs. 704 m to turnover, Colombo Land and Development Company which saw 458 m shares trade contributing Rs. 6.8 m to turnover and HVA Foods which saw 9.9 m shares trade contributing Rs. 353 m to turnover.
“This was mainly momentum trading or technical trading,” Wickremasinghe said.
It was a retail-driven market which saw some profit taking, a stock broker at DNH Financial Pvt. Ltd. Nishantha Mudalige said.

The main contributors to turnover were the Information Technology and Land and Property sectors. Net foreign sales were Rs. 218 m.
Lake House Printers gained 20.52 per cent to close at 162.70 and Serendib Hotels’ non voting shares rose 15.34 per cent to Rs.21.80 and were among the day’s top gainers.  Harishchandra Mills closed 44.83 per cent lower at Rs. 1,600 and Lanka Hospitals dropped 24.17 per cent to Rs. 70.90 being among the day’s top losers. Renuka City hotels declared a dividend of Rs. 5.50, Cargo Boat Rs. 4 and Colombo Fort Land and Building a 20 cent dividend.

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