CSE News Updates

By Duruthu Edirimuni Chandrasekera
Renuka Holdings PLC (RHL) is on an aggressive expansion and is pursuing value added food and beverage exports, automotive, Fast Moving Consumer Goods (FMCG) food service, portfolio management and property development on the back of the peace dividend, officials said.

“We reclassified our business areas this financial year into four key segments in order to forge ahead with our expansion plans. The Renuka Agri Foods PLC group (RAL) heads the agribusiness sector, McShaw Automotive Ltd group the automotive sector, Shaw Wallace Ceylon Ltd group, the FMCG and foodservice sector, while Coco Lanka PLC group is our investment arm (portfolio management and property development).” Shamindra Rajiyah, Executive Director RHL told the Business Times in an interview.

RAL has a most diversified coconut factory in the country at Wathupitiwela off Nittambuwa, utilizing many alternative food processing technologies. Mr. Rajiyah said the company’s agribusiness segment is engaged in plantations, manufacturing and marketing, noting that this firm went public two years ago. “We’re currently commissioning our coconut water production plant and hope to be ready by January 2012. These products will mainly be for exports,” he stated. Mr. Rajiyah said that coconut is Sri Lanka’s third major agricultural export crop and that earnings from this sector accounted for 1.8% of last year’s gross domestic product.

“The demand for value added coconut based products are generated mainly through households, catering industry (hotels, restaurants, caterers) and food manufacturing industries,” he said. RAL manufactures coconut milk, coconut milk powder, granulated de-fatted coconut, etc, while its subsidiaries manufacture organic certified products, tea bags, spices, rice products among many other products, the unique feature being that over 50% of their exports are their own brands. Mr. Rajiyah added that after the coconut water project takes off the ground, RAL will venture into a Greenfield plantation project. “We’re exploring about 5,000 acres of state land and this will be in the East and/ or North Western parts of the island," he explained.

Mr. Rajiyah said that RHL’s automotive segment is the leader with Delphi Lockheed having an 80% share in brake oil market. “Shaw Wallace got together with McLarens Holdings early this year to put together a much larger automotive company – McShaw Automotive. Though this firm, we are in tyres, tubes, lubricants and will go into automobile agencies, etc,” he said. He also added that if there are areas for expansion in auto assembly or any other related fields, McShaw will explore these options as well.

As for RHL buying into Shaw Wallace Ceylon Ltd early this year, Mr. Rajiyah noted that this was a good fit for the company which was looking to acquire a distribution arm at the right value. “Shaw Wallace Ceylon is unique that it has more than 70% of their sales outside the Western province and we supply more than 65,000 outlets directly and some 100,000 outlets indirectly. Further 70% of Shaw Wallace sales are from our own brands.” He said Shaw Wallace Ceylon is a corporate icon, nurtured by a lifetime of trust and conviction among the millions of Sri Lankan’s who grew up with its products.

Shaw Wallace's FMCG brands include Captain and Plaza tinned fish, Sun Gold instant drinks, Rainers colourings and essences, Ranposha breakfast cereal, Milk White laundry soap, Ranwan Venivel herbal soap and agencies such as Ajinomoto flavour enhancer, Supermax shaving products, etc.

“We also recently formed a company called Shaw Wallace Food Services Ltd through Shaw Wallace Ceylon Ltd to establish a fully fledged food services arm,” Mr. Rajiyah said. He said that this was done to benefit from the underlying opportunity of the current tourism boom. He added that they are gearing to set up a manufacturing plant for Shaw Wallace.

Mr. Rajiyah explained that Shaw Wallace has a vast portfolio of brands (some not in use in the recent past) and that the company is on a journey of expansion and growth to extend its product portfolio and unlock brand values. “Today, under Renuka, Shaw Wallace possesses manufacturing capabilities (unlike earlier),” he explained.

Mr. Rajiyah added that RHL will forge ahead with its portfolio management activities, investing in the stock market, private equity projects through Coco Lanka. “We’re also looking to develop our portfolio of properties. We’re initially looking at commercial projects in Colombo,” he added.

By Duruthu Edirimuni Chandrasekera
Sri Lanka’s Securities Exchange Commission (SEC) has sanctioned First Class International Funds (Pvt) Ltd owned by 27 year-old Dhammika Herath as a fund manager three weeks ago, officials said.
"We were granted a fund management license by the SEC and we hope to start operations by mid next month," Dhammika Herath, Chairman First Class International Funds (Pvt) Ltd told the Business Times. He said that now they are empowered to handle and manage funds of any scale both locally or internationally.

Elaborating on his background, Mr. Herath said that he was a retailer who entered the market some nine years ago. “I was 18 at the time and really interested in trading and was also quite successful at it. Then some of my closest friends wanted me to manage their funds and I made money for them. When the number (of friends) rose (in 2009) then the SEC wanted to regulate my operations and I had to apply for a license,” he explained. Mr. Herath added that he doesn’t possess fancy qualifications and attributed his success to his insight, experience and interest in the Colombo share market. “I made all my monies through trading shares. I managed to enter into other businesses also through the money I made through share trading,” he added.

He said that First Class International Funds has eight staff including two qualified fund managers. "The fund managers need to be qualified as per the SEC requirements. We will expand within the next two months as we foresee many clients and businesses approaching us," he noted. Mr. Herath added that he has already negotiated with about six high networth clients and also an equal number of foreign funds.

He noted that First Class International Funds’ will be investing in companies with a ‘future’.

By Duruthu Edirimuni Chandrasekera
With post Initial Public Offerings (IPOs) price crashes, the initial 60 IPOs on the cards for this year have dwindled by half to 30 as many firms have put on hold their IPOs which were to be issued this year, according to stock market sources.

“With over eight months gone, not more than 30 firms are slated to go public for 2011 mainly due to the weak performance in share prices of IPOs during the past few months (after they started trading in the stock exchange),” an analyst said.

Rationalized the “IPO craze”
He added that certain recent IPOs which didn’t perform as expected may have now rationalized the “IPO craze” as the issuing firms are also apprehensive with investors now more choosy about what they invest their money in.

So far only 25 firms have gone public and more than 70% are through introductions.
“Some of those who applied for IPOs from the Colombo Stock Exchange (CSE) and got the nod are also holding on," a source told the Business Times.

Analysts said that past levels of 60 times oversubscription again is unlikely in the future. "Listings have slowed mainly due to the slowing market condition. So people are not that enthusiastic for going into new listings," Danushka Samarasinghe Director Research TKS Holdings noted.

No fundamentals
Analysts say that some firms that came into the stock market aren't fundamentally strong or credit-worthy. "Everybody knows that some of them don’t even have proper business models and some don’t have any fundamentals. You cannot expect foreign investors to invest in these companies, just because they get oversubscribed by poor pensioners who want to make some quick money.

The investors are losing confidence," Adrian Perera, CEO RAM Ratings (Lanka) Ltd told the Business Times. He added that one cannot build confidence by telling such pension funds to come to the market.
He explained that the CSE must adopt either the western model the (US, UK) or Eastern model (India, Malaysia, HK, China) where only investment grade-rated companies are allowed to come into the market. "The reason is that if the company cannot pay its loan oligations they aren't able to justify a dividend. Only a handful of companies listed in CSE's main board are investment grade-rated," he pointed out. Contd. on page 9

Source - www.sundaytimes.lk

 The Softlogic Group, which recently acquired more than 90% in Asian Alliance Insurance Company (AAIC), will only retain about 70% in the firm in the medium term, informed sources say.

Softlogic bought Asia Capital PLC's 73% in AAIC last month and triggered the mandatory code which requires them to offer to buy the balance shareholders out at the highest traded price prior to the (mandatory code) trigger. The Richard Peiris Group (RPG) with 25% accepted this offer made by Softlogic to acquire the ordinary voting shares held by subsidiaries, Richard Pieris and Company PLC and Richard Pieris Distributors in AAIC at Rs.120 per share.

“Immediately after the mandatory offer was accepted by RPG, Softlogic sold less than 2%,” a source close to the company told the Business Times. The buyer was believed to be advertising personality and now major stock market investor Dilith Jayaweera. The source added that Softlogic will sell some 30% over the next few months.

“But they will try not to sell large strategic stakes,” he added. Softlogic, according to officials is bullish on the financial services and is eyeing (to set up/ acquire) a stockbroking company as well.
A 10% price band has been imposed on AAIC with effect from September 21 to 27 (both days inclusive)

Source - www.sundaytimes.lk

Regnis (Lanka) PLC (REG), shares hit record high yesterday with the news that some high net worth investors are interested in the stock.

Consequently 826, 400 REG shares or 17 percent of the company traded at the average price of Rs.246.60, contributing Rs,264.6 million to the day’s turnover.

The shares opened at Rs.235, hit an intra-day record high of Rs.290 and closed at Rs.275.  REG has only 4.83 million shares in issue.

According to analysts, REG has been trading on above average volumes during the past with todays being the highest in the past month.

They further pointed out the share price was as low as Rs.166 as at September 15, 2011.

source - www.dailymirror.lk

*Regnis clears Rs. 300 barrier
The Milanka Price Index on the Colombo bourse yesterday suffered one of its sharpest recent single day falls losing 83.56 points (1.37%) while the All Share Price Index was down 27.78 points (0.41%) on a turnover of Rs.1.14 billion, down from the previous day’s Rs.1.9 billion, with 56 gainers trailing 126 losers.

"Overall, sentiment was down the whole of this week with very little happening on the market," Prashan Fernando of Acuity Stockbrokers said.

Regnis, the Singer Sri Lanka subsidiary, continued to fly gaining Rs.26.30 to close at Rs.306 on over 0.6 million shares done between Rs.270 and Rs.315. The counter contributed the day’s highest Rs.183.1 million to turnover.

Renuka Holdings was next best on the turnover league with two crossings of nearly 1.8 million shares at a price of Rs.65.50 being among 2.2 million shares traded during the day. The counter closed Rs.3.50 up at Rs.64.40 generating Rs.144.9 million turnover.

Radiant Gems which had attracted recent interest gained Rs.8.90 to close at Rs.196.50 on nearly 0.4 million shares done between Rs.182 and Rs.197 while Asian Alliance Insurance was up Rs.10.80 to close at Rs.201 on nearly 0.4 million shares done between Rs.174 and Rs.209.

Brokers said that although the market had declined, six of the most traded stock yesterday had all posted price gains. This included Tess Agro up 70 cents to Rs.6 on 6.7 million shares and Singer Sri Lanka up 30 cents to Rs.124 on nearly 0.3 million shares.

"This could be due to the very sharp price movement of Regnis which is a Singer subsidiary," Prashan Fernando of Acuity said.

Many blue chips were among the losers yesterday although mostly on thin volumes. JKH was down to Rs.209 on 80,300 shares, Chevron down to Rs.158.60 on 14,100 shares, Ceylon Tea Services down Rs.5 to Rs.800 on 100 shares and Royal Ceramics down Rs.5.80 to Rs.136 on 11,300 shares.

Among blue chip losers were Hayleys down Rs.2.30, Cold Stores down Rs.2, Asian Hotel Properties down Rs.1.90, Commercial Bank down Rs.2 and Distilleries down Rs.2.30.

ACL Cables announced an interim dividend of 70 cents per share for 2011/12 XD from Oct. 3 and with payment on Oct. 13.

source - www.island.lk

By Dinali Goonewardene

As stock markets the world over strongly slid downwards on fears of slowing economic growth, foreigners took their money out of the Colombo stock market yesterday, contributing to a seven-week low.

Foreign sales were Rs. 70 million and net foreign outflows Rs. 21.8 million, albeit a relatively low component of total turnover. Reuters reported that thus far in 2011, offshore investors have sold Rs. 16.6 billion after a record Rs. 26.4 billion in 2010.

It added that the market closed at its lowest since 28 July but managed to hang onto its position as Asia’s best performer with a return of 1.49 per cent on the year. 

The International Monetary Fund in a recent release forecasted a dangerous phase for the global economy with slower growth of 4% in 2011. Growth in 2010 was 5%.

Europe is expected to slow with Italy expected to slow to 0.6% growth in 2011 from 1.3% in 2010. Japan too was in negative territory with growth for 2011 expected regress 0.5%.

The indices on the Colombo stock market fell with the All Share Price Index dropping 27.78 points (0.41%) and the Milanka Price Index falling 83.67 points (1.37%) on turnover of Rs. 1.1 b.

As blue chip counters fell and trading in illiquid stocks continued, the CEO of a broking firm said stocks appeared overvalued at the Price to Earnings multiple of 18-19 times.

Activity levels on the Colombo market had dropped turnover levels, which ranged around the Rs. 5 billion mark a year ago, and are now much lower.

The highest contributors to turnover yesterday were Regnis which saw 630,000 shares trade contributing Rs. 183 million to turnover, Renuka Holdings which saw 2.2 million shares trade contributing Rs. 144 million to turnover and Radiant Gems which contributed Rs. 72 million to turnover when 382,500 shares traded.

Renuka was up Rs. 3.50 to close at Rs. 64.20 and Radiant Gems closed up Rs. 8.90 at Rs. 192.50. 

It was rumoured that Regnis shares were being picked up by a high net worth individual, although this remains a relatively illiquid counter with about 4.6 million shares in the free float. Regnis shares closed up Rs. 26.30 at Rs. 304.30. The CEO of a stock broking firm who preferred to remain anonymous said firms required to clear their debtors’ positions must have done so by now.

Reuters reported that the rupee closed flat at 110.29/110.30 a dollar amid importer dollar demand, with a State bank, through which the Central Bank directs the market, selling the greenback at a flat rate of 110.30, 109.70/110.20, dealers said. 

The Central Bank mopped up Rs. 25 billion from the market through a repo auction at 7.08%.

source - www.ft.lk