Sri Lanka blue-chips tumble

May 27 (As Reuters article) - Sri Lanka stocks fell to a three-week low on Tuesday led by select blue-chips like Sri Lanka Telecom PLC and conglomerate John Keells Holdings PLC, while trading in shares of some financial firms boosted turnover.

The main stock index ended 0.41 percent, or 25.58 points, lower at 6,267.44, its lowest close since May 7.

The day's turnover stood at 1.38 billion rupees ($10.58 million), more than this year's daily average of 1.02 billion, helped by Multi Finance PLC, Entrust Securities PLC , and Asia Asset Finance Ltd.

The bourse saw a net foreign inflow of 35.6 million rupees on Tuesday, extending the year-to-date net foreign inflow to 1.87 billion rupees.

Stockbrokers expect the market to gain in the near future due to lower interest rates after the central bank kept key rates at multi-year lows on Tuesday for the fourth straight month, as expected.

Shares of Sri Lanka Telecom PLC fell 5.74 percent to 46.00 rupees, while John Keells Holdings PLC fell 0.38 percent to 233.10 rupees. Both stocks dragged the overall index.

After the market closed, Keells said its March-quarter net profit fell 9 percent to 4.68 billion rupees.

Multi Finance PLC ended 0.6 percent up at 16.70 rupees, while Entrust Securities PLC rose 1.46 percent to 20.80 rupees. Asia Asset Finance PLC ended flat at 1.80 rupees a share.

The market has been on a rising trend since mid-March as many investors were compelled to return to the stock market because low interest rates have made fixed-income assets less attractive, stockbrokers said.

However, analysts have raised concerns over sluggish economic growth due to lower credit growth and consumer spending.

Despite a multi-year low interest rate regime, data showed private sector credit grew 4.3 percent in March from a year earlier, the slowest expansion since May 2010.

The latest trade data, released on Monday, showed imports have gained 8.2 percent in March, while exports hit a record high of $1.07 billion helping to narrow the March trade deficit by 15.5 percent compared to a year ago.

Central bank Governor Ajith Nivard Cabraal on May 19 said Sri Lanka's private sector credit growth would pick up to around 15 percent by the end of this year and continue to improve through 2016.

Initial Public Offerings (IPOs) in Sri Lanka

The Colombo Stock Exchange (CSE) witnessed an increase in Initial Public Offerings (IPOs) since the beginning of the year as a result of the incentives given by the budget for the year 2014 and the prudent measures taken by market stakeholders.

The current trend attracts many investors to the market. These investors will be able to maximize opportunities only if they make informed decisions. They should refrain from making unwise decisions as done in the past. Hence, this article will give out some useful tips when investing.



Seek — and secure — objective research
It’s not as easy as you might think to find good objective information or research on a private company on the cusp of going public, yet doing so is absolutely essential.
Start by scouring the web for information on the company — particularly any details regarding financing as well as past and current press releases. They can inform you of any news, research or analysis of your IPO, the anticipated price for the offering and perhaps even how the company’s major executives and shareholders have been buying and selling their stocks.

There are still other firms that specialize in performing in-depth IPO researching and reporting. They may charge a nominal fee for this extra information but ensuring you’re well-informed on your prospective IPO is often worth the extra expense. By performing good research, you’ll be able to determine whether your IPO is a stable company, or if it’s just being over-hyped.

It’s also a good idea to take a look at the health of the overall sector in which the company you’re interested in belongs to (e.g., manufacturing, information technology, health care, bank finance and insurance, hotels and travels, etc.). For example, if you’re considering an IPO in the manufacturing sector but that particular sector hasn’t been faring well, you may want to reconsider.




Read and understand the prospectus
For most people, thoroughly reading their investment prospectus can seem nothing more than a tedious — if not entirely soporific — endeavour they’d rather not undertake. Investing in stocks, however, and particularly investing in IPOs, requires that you do more than just skim the prospectus — you must read it from cover to cover. While the material may be a bit dry, the information contained within the prospectus such as the company’s opportunities/risks and how the funds the IPO raises are proposed to be used is invaluable.
Highlighted below are some of the sections of an IPO prospectus that an investor should consider. 

•  Legal proceedings disclose the significant litigation involving the company.
   
• Management’s discussion and analysis gives the management an opportunity to discuss in narrative form the management’s perspective on the company’s financial condition, changes in financial condition and results of operations. This narrative section should provide investors with information to help them understand how and why the company’s financial results have changed over the time period covered by the financial statements and factors that management thinks might affect the company’s future financial condition or operating results.
   
• Dilution illustrates the usually significant disparity between the price that investors are paying for shares in the company’s IPO to both the book value of such shares and the average price paid by the existing shareholders that include founders, officers and early investors.
   
• Use of proceeds specifies what the company plans to do with the money it raises in the offering.
   
• Prospectus summary briefly summarizes information that is disclosed in greater detail throughout the prospectus, including the company’s business, strategy, plans for using the funds raised in the IPO, financial condition and as well as the terms of the IPO itself.
   
• Risk factors identify risks that the company’s management feels could significantly impact the company’s business, operations or performance or an investment in the securities being offered.
   
• Dividend policy describes the company’s history of paying and possibly its plans to pay, dividends to shareholders.
   
• Selected financial data discloses certain key financial and other data in a summarized column format. The information and presentation can highlight significant trends in the company’s financial condition and results of operations.  Companies are generally required to disclose selected financial data for the past years. You should also study the projected accounting figures in the prospectus carefully. If the IPO’s future earnings projections look too good to be true, well, that just might be the case. This is perhaps one of the biggest red flags you should look for when performing your research.
   
• Business describes the company’s lines of business, its principal products or services and their markets, any significant suppliers and customers on whom the company’s business depends and its competitive landscape and principal methods of competition. This section may also provide information regarding the relative contribution to the company’s financial results from different significant lines of business or operations in foreign countries.
   
• The management offers biographical information regarding the directors and executive officers of the company.

It’s also worth remembering that while most companies do their best to disclose everything about the IPO in their prospectuses and provide as much information as possible, all the data and information are written by the company, not a disinterested third party or group.



Watch out for lock-up period
Lock-up agreements are legally binding documents that prevent existing shareholders from selling any shares of stock for a specified period of time. The problem is, when lockups expire all the insiders are permitted to sell their stock. The result is a rush of people trying to sell their stock to realize their profit. This excess supply can put severe downward pressure on the stock price.



Evaluate the offering price
The company and the investment bank make the decision on where to set the offering price. It is important to understand that the offering price is determined by a mix of market conditions, analysis and the company’s performance.  Competing interests affect the determination of the offering price.

From the perspective of the company offering its shares in the IPO, the higher the offering price, the more capital the company can raise.

Under-pricing an IPO creates a discount for the initial investors and increase the quantity of shares applied for. This in turn could once again generate more capital to the company. Under-pricing may also affect how much, if at all, the stock’s price rises on its first trading day. If there is a large increase, or ‘bump’, from the offering price during the initial trading, the underwriter’s client-investors may be satisfied because the value of their investment will have increased. However, the company may be unsatisfied in that case, as it might have been able to sell its shares at a higher initial offering price and thereby raise more capital.

All of the foregoing factor into the determination of the offering price.  Whether you have an opportunity to participate directly in an IPO or are buying shares in the open market, it is important to realize that the offering price reflects a negotiated estimate as to the value of the company. The offering price may bear little relationship to the trading price of the securities and it is not uncommon for the closing price of the shares shortly after the IPO to be well above or below the offering price.




Bottom line
Successful companies go public but it is difficult to sift through and find the investments with the most potential. Just keep in mind that when it comes to dealing with the IPO market an informed investor is likely to perform much better than one who is not.

source- dailymirror.lk

Bansei Royal Resorts IPO

Sri Lanka based Bansei Royal Resorts Hikkaduwa Limited has decided to list the firm in the Colombo Stock Exchange.

Accordingly, the resort firm will list the firm in the Colombo bourse as an introduction.

CSE has given approval to the firm to list 53,728,000 ordinary voting shares by way of an introduction.

The shares would be listed on the Diri Savi Board of the CSE.

Asiri Central Hospital delist from CSE

The latest company to announce delisting is Asiri Central Hospitals, which announced this decision on Thursday to the CSE. This followed an announcement by loss-making Beruwala Walk Inn PLC on Monday seeking permission from the CSE to delist the company in a bid to turn-around the organization and return to profits have failed over the past few years. “The company has been reporting losses almost every year since the tsunami as the hotel was extensively damaged and rendered non-operational unless huge capital is injected to demolish and reconstruct the hotel”.

Last month Kuruwita Textile Mills announced it was delisting for the same reasons as Beruwala Walk Inn.

The three companies said that they will take all necessary steps in accordance with the terms of the regulations issued by SEC pertaining to delisting of shares, including the convening of an Extra-Ordinary General Meeting of the shareholders to seek their approval.

Earnings Review Q3 FY 14- Aitken Spence Hotel Holdings PLC

 

An increase in overall occupancies drove AHUN’s revenue growth in Q3 FY 14. Gross revenue grew 15.8% YoY to LKR 3.4bn to which the Sri Lankan (SL) and South Asian (SA) segments contributed ~27% and 73% respectively. The SL and SA segments recorded gross revenues of LKR 933mn (+16.2% YoY) and LKR 2.5bn (+15.7% YoY) respectively. AHUN recorded an EBIT of LKR 948mn (+ 31.7% YoY) on higher revenue. During the period AHUN entered into an agreement with Spanish hotel group ‘RIU Hotels’ to construct a 500 room resort in Ahungalla. The expected cost of the project is ~USD 100mn. Further, an additional 240 rooms will be added to the group portfolio in FY 2015E. Based on DCF valuation we have arrived at a TP of LKR 82 with an upside of 13% to CMP. We recommend BUY.  

 

                                                                                                                            Source: Company data and BRS Research

 

 

 

BRS Equity Research | Bartleet Religare Securities (Pvt) Ltd, Sri Lanka

 

CIC Holdings PLC- (CIC-LKR 45.50) - Initiation Report

 

Looking for a clear direction : HOLD

 

CIC is a diversified company with a majority exposure to agriculture. With the top line forecasted to grow tamely at 1.6% three-year CAGR, CIC is attempting to realign strategy by shedding some of the loss making units. While we are positive of the efforts’ medium term results, we are concerned about the working capital financing CIC is likely to endure caused by the delay in the Government payment of the fertilizer subsidy. A DCF based valuation suggests a Target Price (TP) of LKR 48. CIC trades at 10.3x PE ratio in FY 2015E after a forecast loss in FY 2014E. We feel with the uncertainty of the subsidy payments coupled with the thin margins of the key business segments and the low forward ROEs, these forward trading multiples are not a bargain. We recommend HOLD.

 

 

 

	Source: Company data and BRS Research

 

 

 

 

 

 

 

 

BRS Equity Research | Bartleet Religare Securities (Pvt) Ltd, Sri Lanka

Sri Lankan IT-BPO and Knowledge Services industry taught importance of going public by CSE

 Sri Lanka's Colombo Stock Exchange (CSE) and the regulator, Securities and Exchange Commission (SEC), in association with the Sri Lanka Association of Software and Service Companies (SLASSCOM) is scheduled to host a forum to educate the IT-BPO and Knowledge Services industry on the importance of going public.

The Forum is another step to attract companies that are of high value and worth to the capital market, in order for them to enter into a mutually beneficial partnership of wealth creation and value addition with the public, the CSE said in a statement.

The potential-issuer relations forum will be held on the 5th of March at the Dialog Future World Auditorium, from 08.30 a.m. to 11.00 a.m.

The programme will commence with an introduction to the benefits of listing by CEO of CSE Rajeeva Bandaranaike, followed by a presentation on "Valuing your Company" by Vice-President of Copal Amba (A Moody's Subsidiary) Asanka Herath. Chairman of SLASSCOM Madu Ratnayake will also speak at the event.

The CEOs and CFOs of potential-issuer companies from the target industry will be given an opportunity to pose their questions to a distinguished panel of the capital market.

The panel will comprise Director of CSE Ray Abeywardena, AGM of Regulatory Affairs at CSE Renuke Wijayawardhane, and Deputy Director General & Officer-in-Charge of SEC Dhammika Perera. The panel will be moderated by Executive Director of SLASSCOM Imran Furkan.

The forum is further seen as an ideal opportunity for the decision makers of these entrepreneurial endeavors to mingle and network with the senior management representatives of Investment Banks, to build mutually beneficial relationships for the future, the statement said.

"Sri Lankan IT/BPM industry is on a rapid growth trajectory and gaining increasing attention globally. We would anticipate a growth of over 23% YoY this year at industry level, therefore many of the SLASSCOM companies are now gearing for their next phase of growth. Listing on the Stock Market would create avenues for companies to raise funds for this growth acceleration and will provide the general public an opportunity to participate in this very exciting growth phase of the industry, as investors. We are delighted to work with SEC and CSE to help companies understand the journey of raising funds from the capital market," Chairman of SLASSCOM Mr. Madu Ratnayake said.

"The Sri Lankan Capital Market is a vibrant atmosphere where long established, as well as entrepreneurial businesses can thrive by raising capital and maintaining a high standard of accountability to their stakeholders. By entering this affirmative environment, members of the knowledge services industry in Sri Lanka can benefit a great deal," Deputy Director General and Officer-in-Charge of SEC Dhammika Perera said.

"Listing on the Stock Exchange helps a company enhance its corporate profile and gives it a competitive advantage, while helping the company increase its worth by attracting strategic investors and high value employees. These benefits boost the prestige of a company and can thereby be utilized to fund the next stage of a company's expansion strategy," CEO of CSE Rajeeva Bandaranaike said.

-colombo page

Australian solar panels manufacturer will in CSE?

The Sydney-based Australian solar panels manufacturer, Energy Puzzle Group will invest US$ 190 million to set up a state-of-the-art factory in Sri Lanka to manufacture solar panels.

Sri Lanka's investment promotion agency, the Board of Investment (BoI) said the Energy Puzzle Group will set up its plant in the BOI's new Export Processing Zone at Mirijjawela, near Hambantota in the deep south.
Chairman of Energy Puzzle, Patrick Featherston and Chairman of the Board of Investment of Sri Lanka Dr. Lakshman Jayaweera signed the agreement recently in Colombo.
Energy Puzzle will be developing their operations in Sri Lanka under several phases and in the first phase, which is covered under the agreement with the BOI, the company will manufacture solar cells and panels of up to 150 MW/year.

"However the company envisages a greater production of Solar Panels and Energy Technology in the future," the BoI said.
The company will originally employ 150 staff of which there would be a mix of Sri Lankan and some Australian managers and workers.
According to the BoI, Energy Puzzle has a vast experience in solar power projects and provides consultancy services to the governments of Australia, the USA and Sri Lanka in this form of alternative energy.

Production of solar panels will be mainly exported but some of this production will also be made available to the local market. The Company could be listed in the Colombo Stock Exchange under a new scheme which is being set up by the BoI and Stock Exchange.

-colombopage.com

SLT’s revenues climb 5.9%

During the full-year 2013, the Sri Lanka Telecom (SLT) group reported LKR60.1 billion (USD456 million) consolidated net revenue, up by 5.9% compared to the previous year, driven by revenue increases at both SLT’s fixed network division and cellular subsidiary Mobitel. The group reported operational costs of LKR41.2 billion, with a ‘sustainable increase’ of 6.2% year-on-year, and recorded a 5.3% rise in EBITDA to LKR18.9 billion, attributed to ‘healthy revenue growth coupled with operating cost management’. EBITDA margin remained steady at 31.5%, while the rising EBITDA plus non-operational transactions drove a 38.2% y-o-y increase in group net profit to LKR5.4 billion. Net profit in 4Q 2013 dropped by 3.1% quarter-on-quarter to LKR1.5 billion due to the impact of taxation.

SLT which also has Mobitel, a mobile unit, said group revenues rose 7 percent in the December quarter, while operating costs fell 01 percent to 10.5 billion rupees, helping profits before depreciation to go up 31 percent to 5.0 billion rupees. Mobitel recorded gross turnover of LKR27.5 billion in 2013, up by LKR2.6 billion from the previous year, while for the fourth quarter the cellco’s revenue increased 9% y-o-y to above LKR7 billion. Mobitel added that its subscriber base crossed the five million mark.

SLT reported fixed division gross revenue of LKR36.8 billion for FY 2013, with 5.9% growth driven by broadband and IPTV uptake, while reporting 5.8% q-o-q turnover growth to LKR9.9 billion in 4Q13.