CSE News Updates

Sept 26, 2011 (LBO) - PC House, a Sri Lankan information technology company, has bought a 90 percent stake in Infoserve (Private) Limited for 45 million rupees.
Infoserve is a company based in Sri Lanka providing Internet research services which operates under the 'athandz' brand name, a stock exchange filing said.

"This acquisition is in line with the PCH group's stated policy of increasing its reach in the BPO (business process outsourcing) and KPO (knowledge process outsourcing) space of the IT industry," the PCH statement said.

Infoserve is a firm approved by the island's investment promotion agency, Board of Investment, which provides incentives like tax breaks.

"'athandz' specialises in gathering, filtering and summarizing data on behalf of clients to suit their exact needs," the PCH statement said.

The firm gathers data by doing research on the Internet using both free and paid information sources including search engines, market intelligence portals and specialised and general news media websites, it said.

PC House was trading at 17. 40 rupees, up 40 cents, at mid-day Monday on the Colombo bourse.

PC House has said it is planning a 100-seat business process outsourcing centre in the island's northern Jaffna peninsula to provide accounting and back office services to the international market.

The company also has a firm revenue stream from computer hardware and software sales and setting up networks.

Sept 26, 2011 (LBO) - Sri Lankan stocks were barely changed Monday and turnover was also lower than usual with heavy trade in shares that had drawn the interest of speculators, brokers said.
The main All Share Price Index rose 0.02 percent (1.42 points) to 6,736.02, while the more liquid Milanka index rose 0.03 percent (1.88 points) to close at 6,025.81, according to stock exchange figures.

Turnover was 1.4 billion rupees.

HVA Foods, the most actively traded stock, which had been falling steeply in recent days after an equally rapid rise, gained 8.60 to close at 58.60 rupees with over 2.1 million shares done. It was the day's third highest gainer.

Tess Agro, which had drawn speculators recently, was the second most actively traded stock, closing at 6.60, up 80 cents, with 25.6 million shares traded. It accounted for the highest turnover of the day.

Muller and Phipps (Ceylon), another stock that had drawn speculators, closed at 3.30 rupees, up 20 cents with 11 million shares changing hands.

Fridge maker Regnis (Lanka), which had been pumped up by speculators recently, was also heavily traded, closing at 318.40 rupees, up 14.10.

A British Virgin Islands-based investment firm, Gulf East Finance, which has bought up to 59.27 percent of Singalanka Standard Chemicals, made a mandatory offer under trading rules to acquire the remaining shares at 55 rupees a share.

There were no crossings or off-market private deals.

Mr. Dhammika Perera and companies he controls - Royal Ceramics, Vallibel One and LB Finance are seeking 50% control of Hayleys PLC according to a mandatory offer announcement made under the Companies Takeovers and Mergers Code.

Perera currently owns slightly over 34.4% of Hayleys while Royal Ceramics owns 5.04%, Vallibel One 1.52% and LB Finance 0.002% totaling 40.794%.

The mandatory offer is at Rs.380 per Hayleys share - the price at which Perera acquired nearly 6.9 million shares (9.2%) on the trading floor of the CSE on September 1 adding to a previously purchased 25.3% stake some months ago.

The present offer covers 44.4 million shares (59.2%) of the total number of shares in issue in Hayleys, the announcement said.

It says that "the offer shall be unconditional as to acceptance upon the offeror having received acceptances in respect of shares which will result in the offeror and parties acting in concert with the offeror holding shares carrying more than 50% of the voting rights."

Detailed mandatory offer document giving other relevant information including the period during which the offer

would be kept open will be sent to all Hayleys shareholders on or before October 6.

Perera is described in the announcement as "a well-known prominent entrepreneur and investor whose business interests include hydropower generation, manufacturing, hospitality, entertainment, banking and finance."

He serves as Chairman of Vallibel One PLC, L B Finance PLC, The Fortress Resorts PLC, Vallibel Power Erathna PLC, Vallibel Finance PLC and holds directorships in his other private sector companies.

He is the Deputy Chairman of Lewis Brown & Company (Pvt) Limited controlling Delmege Forsyth, Delmege Forsyth & Co. Ltd., Royal Ceramics Lanka PLC and Amaya Leisure PLC and Hayleys PLC.

He is also a Director of Sri Lanka Insurance Corporation Ltd, Sampath Bank PLC, Hayleys PLC, Haycarb PLC, Hayleys-MGT Knitting Mills PLC, Hotel Services (Ceylon) PLC which owns Ceylon Continental Hotel, Colombo, Hunas Falls Hotels PLC, Dipped Products PLC, Nirmalapura Wind Power (Pvt) Ltd and Alutec Anodising & Machine Tools (Pvt) Ltd.

He is the Secretary to the Ministry of Transport and is a member of the Board of Directors of Strategic Enterprise Management Agency (SEMA).

Softlogic Holdings PLC which held its AGM last Friday has in its annual report claimed "perfect timing" bringing what it called "an exciting, diversified and well managed portfolio of products and services to all our clients and other stakeholders."

The highlights of the year ended March 31, 2011 shows that the group which is into retail, financial services, healthcare, information and communication technology, travel and leisure and automobiles had posted spectacular results in the year prior to its listing on the Colombo Stock Exchange.

Group revenue was up 122% to Rs.10.79 billion, profit before-tax up 84% to Rs.1.9 billion and profit after-tax up 528% to Rs.970.8 million and the profit attributable to equity holders of the parent was Rs.829.2 million, up 438% from the previous year.

The group’s Chairman, Mr. Ashok Pathirage, said in the annual report that Softlogic had leveraged on opportunities that presented themselves through the year under review "positioning ourselves for a phase of expansion and consolidation of the existing lines of business."

"Our solid experience in the retail sector and the entrepreneurial culture within the group enabled us to identify valuable opportunities and to form excellent business alliances during the year, further strengthening the group’s balance sheet," Pathirage said.

Against the backdrop of post war macro economic growth, Softlogic had acquired controlling interest of the Asiri group of hospitals and Capital Reach Holdings Limited now re-branded as Softlogic Capital which was listed on the CSE last week.

"We successfully strengthened our market share in the diversified sectors of retail, healthcare, information and communication technology, financial services, automobiles, and travel & leisure sectors in 2010/11," Pathirage told his shareholders.

They were now number one in private healthcare with the most number of beds in the country. The Asiri group of hospitals had posted record profits with the gross profit from the healthcare alone increasing 27% to reach Rs.2.2 billion, Pathirage said.

He revealed that they are on track to meet the target of opening 150 retail outlets by December this year and 250 by December next year.

"These well-appointed showrooms will showcase the world’s best brands in consumer electronics, branded apparel and furniture. Softlogic has built up a vast network of partnerships with reputed global brands, acquiring distributorships for some of the most high profile retail brand names in the world over the years – and these will find pride of place in our showrooms," Pathirage said.

The group recently took control of Asian Alliance Insurance PLC with Pathirage saying that having this company under their banner offers perfect synergies with existing business lines such as financial services, healthcare and automobiles.

The group is the authorized Ford dealer here and also handles the Daihatsu agency.

The year under review saw Nokia maintaining its market leadership of mobile phones selling 767,325 hand sets against the previous year’s 370,390.

The group has also aggressively entered the leisure sector with the takeover of Hotel Sea Sands in Bentota last year. The hotel will be closed for a year from October to be re-launched as what Pathirage called "a world class beach resort and spa under Centara International management in time for the peak winter season next year."

"The beachfront property will be extensively developed and transformed into a luxury 4-star plus resort with 160 well appointed world-class rooms and a full suite of amenities. Guests will have access to both the sea and the lagoon, and water sports will feature heavily in the hotel’s recreation options," he said.

The group has also finalized plans for a 24-storey, 220-room five-star city hotel in Colombo’s business centre in partnership with Movenpick, one of the world’s leading hotel chains.

Pathirage said that their business portfolio "has great balance, with solid cash flows being generated from the healthcare sector."

Softlogic has a stated capital of nearly Rs.1.1 billion, capital reserves of Rs.684.9 million and revenue reserves of nearly Rs.1.3 billion with total assets running at over Rs.29.1 billion.

Non-current liabilities stood at Rs.4.1 billion and current liabilities at nearly Rs.18 billion according to the last published balance sheet.

Pathirage has the controlling shareholding of 50.23% followed by Messrs. H.K. Kaimal (10.08%), R.J. Perera (9.12%) and G.W.D.H.U. Gunawardena (8.91%).

Both Ceylon Investment PLC and Ceylon Guardian Investment PLC are substantial shareholders together owning slightly under 5% of the company.

Softlogic has net assets of Rs.4.75 per share and earnings per share during the last financial year was Rs.1.30. The company was listed on the CSE last July and had 142 shareholders in its register prior to the listing.

The directors of the company are: Messrs. A.K. Pathirage (Chairman/MD), G.W.D.H.U. Gunawardena, R.J. Perera, H.K. Kaimal, M.P.R. Rasool, S.A.B. Rajapaksa, Dr. S. Selliah, P.D. Rodrigo and P.L. de Alwis.

Net assets of Pelwatte Sugar Industries PLC recently taken over by parties connected to business leader Harry Jayawardena have slumped to less than half the company’s stated capital as of March 31, 2011, and the directors are recommending a Rs. 200 million capital infusion through a rights issue

Under terms of the Companies Law, an extraordinary general meeting of Pelwatte Sugar has been summoned for September 30 to table and discuss a report prepared by the directors in terms of Section 220 of the Companies Act No.7 of 2007. The financial position of the company will also be discussed at this meeting.

A report to shareholders signed by Messrs. D.H.S. Jayawardena and L.U.D. Fernando, directors of Pelwatte Sugar, said that the company had posted a loss of Rs.628.8 million as at March 31, 2011, up from a loss of Rs.444.2 million the previous year.

Consequent to these losses, the net asset position of the company as at March 31, 2011 has declined to Rs.262.2 million.

"At this level the net assets of the company as at March 31, 2011 was less than half of the company’s stated capital as of the said date," the report has said.

It explained that high administration cost together with high production related overheads were among the main causes for the losses with the 20% gross profit margin recorded by the company during the last financial year inadequate to cover administration expenses of Rs.522 million.

"The reduction in the gross profit was due to the increase in the purchasing price of cane together with a less than proportionate increase in the sugar selling prices," the report said.

"Reduction of the gross profit margin from 6.3% (Rs.123.4 million) in the last year to 2.0% (Rs.44.8 million) in the current year together with the increase in administrative expenses from Rs.391.1 million to Rs.522.2 million resulted in the loss recorded by the company."

The report said that the increase in the administrative expenses was mainly due to the increase in staff costs including gratuity as a result of granting the agreed revision of salaries and wages in 2010 and 2011.

Pelwatte’s management changed in the latter part of financial year 2010/11 with the purchase of a 47% stake in the company by Melstacorp Limited, a Harry Jayawardena company, and the board was subsequently re-constituted.

The re-constituted board anticipates restructuring the company to ensure the profitability of operations "within a reasonable period of time," the shareholders have been told.

Currently, the directors are focusing on improving the quality of productivity in the plantations with special attention paid to enhancing both labour productivity and machinery utilization.

"The financial strength of the main shareholders will also benefit the company reducing its financing costs," shareholders have been told.

The directors have explained that it takes longer to realize positive changes in an agriculture industry. They announced they were recommending raising Rs.200 million by way of a rights issue.

By Elton R. Ebert

The week commenced on a bad note when the ATS at the Colombo bourse ran into difficulties a few minutes after trading activities got underway. The few transactions which were effected were cancelled, and for the first time there was no trading during the whole day. This caused many problems and various comments were made by brokers and investors some of which are unprintable.

There were a few heated verbal exchanges between some clients and brokers. It was stated that a few of the clients who were badly let down due to the spate of forced selling were most vociferous. In this instance, the problem was the malfunctioning of the ATS in the Colombo Stock Exchange and not the brokers.

Global stock markets have tumbled due to fear of slipping back into recession. This factor plus a combination of other factors seem to be pushing down the indices. A further decline would see the emergence of the resistance level which would mean the return of a host of bargain hunters. The ASI, on the decline for the whole week, ended at 6734. Many are curious to see at which point there should be some resistance.

Moving away from this depressing tone we have some constructive news coming from the NDB which is moving into an investment banking alliance with DBS Bank of Singapore, and with the focus on sectors like infrastructure, telecom, power and tourism, should prove beneficial in due course. The share price of the NDB had a marginal gain immediately after the announcement.

The Finance Co witnessed a temporary surge on Wednesday due to a transaction between two high profile players at the bourse. Around 8 million Voting shares and 2 million Non Voting shares were transacted, the closing levels being Rs.45.40 and Rs.15.90, respectively. Both categories, however, contracted as the week progressed.

Commercial Credit which reported very encouraging earnings recently came in for extra market support on Tuesday when transactions were effected in excess of 2 million shares and at enhanced levels. The two insurance companies - Ceylinco Insurance and Asian Alliance Insurance which is now controlled by Softlogic Capital were on a steady upside.

Softlogic Capital which had a reference price of Rs.40 commenced trading on Wednesday when over one million shares was traded. It rose to Rs 75 but began to pull back immediately afterwards. Softlogic Holdings which is now on the main board was also on the decline. The closing levels were Rs 43 and Rs 22, respectively.

Also drawing attention was the heavy dealings in Lanka Orix Finance Co, in which a solitary deal of 52 million shares at Rs 12 was transacted on Thursday. Some are speculating that the seller was a fund based in India.

In the manufacturing sector, Regnis went on the overdrive on Thursday when dealings in excess of 800,000 shares were traded reaching a peak level of Rs 290 before closing for the day at Rs 275. There was a further hike the next day as it reached Rs 315,but closed for the week at Rs 303.70. Capital Alliance Finance have got approval for the listing on the Diri Savi board 33,920.282 ordinary shares.
PRICE BANDS: - Was imposed on Asian Alliance Insurance PLC from 21st to 27th September. It was removed from Muller & Phipps on Thursday.

The turnover for the four days was Rs 6.8 billion against Rs 10.2 billion last week. Both indices were in negative territory, the All Share Price losing 136.32 points or o.1% to end at 6734.60 while the Milanka was also 185.31 or 0.2% lower at 6023.93

LOLC Leisure has finalised the international hotel chain operator to rebrand and manage some of its hotels bought from the Furkhan family one year ago. It is also planning an Initial Public Offering (IPO) in a bid to raise funds for the planned refurbishment and expansion, sources close to the company said.
They said the Hilton chain will most likely manage Riverina, Club Palm Garden and Tropical Villas while negotiations are still on for a partner for Eden. These hotels have been closed for business for 18 months since May to complete an accelerated refurbishment programme.

“We plan to spend roughly US$ 30 million in refurbishing its properties,” a source told the Business Times. He added that the IPO details are also being finalised to fund both the refurbishment and expansion of hotels.

The Furkhans sold some of their stakes in related holding companies of the three Confifi hotels – Club Palm Garden (CPG), Riverina Hotel and Eden to a consortium led by LOLC and Browns last year. This consortium now own 52% in Confifi Hotel Holdings (the owners and managers of CPG), 25.5% in Riverina and 23.71% in Eden. Further firming its position in the country’s famed golden mile, the company bought a 60% stake in Tropical Villas, a beach resort with 50 luxury villas in Beruwela, through a subsidiary LOLC Leisure last August.