Sri Lanka Newspapers -11/01/2012

Race for SEC DG down to three
*Commission meets today to deliberate on price bands, broker credit and DG post
By Ravi Ladduwahetty

The Commission Members of the country’s capital markets watchdog, the Securities and Exchange Commission, are expected to meet today to deliberate on the price bands and credit restrictions plaguing the exchange and also to appoint the next Director General, with three names being shortlisted for the post.

The three-pronged race is between the SEC’s incumbent Director Training, Dr. D. B. P. H. Dissa Bandara, Attorney General’s Department’s former Senior State Counsellor Harsha Fernando and top Investment Banker Nishan Sumanadheera, sources told The Island Financial Review.

Analysts said the Colombo Stock Exchange continues to slump as investors eagerly await a policy directive from the regulator, but until it gets its house in order, this may not happen.

The once-best performing stock exchange in the world declined by 8 percent in 2011. Year-to-date, the exchange has slumped 3.54 percent by the end of day’s trading yesterday (Jan. 10).

Last year, the government removed Malik Cader from the Director General’s post when influential investors complained to the President about the SEC’s tough stance on market manipulation. Soon after, Chairperson of the SEC Ms. Indrani Sugathadasa resigned saying it was a ‘matter of conscience’.

Tilak Karunaratne was appointed Chairman of the SEC in December. Since then the market has been in anticipation as to whether or not the SEC would continue to implement the tough stance adopted by Ms. Sugathadasa, Cader et al.

"Until the SEC gets its act together and finalises key appointments, a policy direction may not be forthcoming anytime soon," a market analyst said.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=42914

The Central Bank was seen playing its role as lender of the last resort more frequently as banks continue to face liquidity tightening. After seeing some easing last week, interbank interest rates have begun to increase with liquidity continuing to tighten as the Central Bank defends the exchange rate, dealers said.

The Sri Lanka Inter Bank Offered Rate rose to 8.84 percent yesterday (Jan. 10) from 8.62 percent the previous day. Call money interest rates for interbank borrowings without collateral inched up to 8.92 percent from 8.68 percent while gilt-backed market repo rates inched up to 8.11 percent from 7.94 percent.

The Central Bank infused Rs. 8 billion into the system through reverse repurchase auction at 8.21 percent, at slightly higher yield than 8.03 percent the previous day where Rs. 7 billion was pumped into the system.

Banks have also been going to the Central Bank to borrow funds, under the repurchase window at 8.50 percent, where the regulator lends as a last resort to banks facing liquidity issues and cannot borrow from the market. A total of Rs. 6.2 billion had been lent to the banking system through this window on Tuesday which was the highest for a day after Rs. 10 billion was lent on the first working day of this year. Not often used, this window has seen some activity in recent weeks

Dealers said the country was on the verge of a balance of payments crisis which could be averted if the expected foreign currency inflows estimated at US$ 25 billion materialised soon, in the meantime, the exchange rate would continued to come under pressure.

The Central Bank is selling dollars to keep the exchange rate steady, but this is squeezing rupee liquidity. With credit growth stronger than what the Central Bank had expected, the liquidity squeeze is putting pressure on interest rates. Already banks and non-bank financial institutions have increased their deposit rates in a bid to mobilise funds.

Dealers are clueless as to what to expect thanks to the Treasury and Central Bank pulling in opposite directions regarding the exchange rate, but not short of suggestions they are also divided on what needs to be done.

Some suggest allowing the rupee to depreciate could help, but imported inflation was a concern. Others suggest the Central Bank should allow interest rates to move upwards, as this would cut off the credit feeding import demand, but increasing borrowing costs could dampen growth and put fiscal consolidation off track given the domestic debt component in government borrowings.

Still others suggest a little bit of depreciation coupled with a little tightening of interest rates could work. "We sincerely hope the Central Bank is right and the expected inflows arrive, but a lot would depend how the European debt crisis spreads and how fast the US is able to really recover," a dealer said.

Fitch Ratings has already grouped Sri Lanka among the highest-risk financial systems in the Asia-Pacific region. Standard Chartered Bank says economic growth is expected slowdown this year to 7.5 percent.

"The Central Bank probably could have taken measures to avoid this situation. We are now in the brink of a huge problem and our only hope is that Central Bank forecasts would turn out to be right. Last year it said Credit growth would moderate but we have not seen that. Yes the high credit growth rate comes from a low base, but the actual quantum of loans has risen. Last year the Central Bank was adamant the exchange rate could and would be defended, and the Treasury saying other wise has not helped either, but now the Governor of the bank says there could be room for flexibility," a dealer said.

"The global economy is such that central banks, let alone anyone else, cannot really predict what would happen. But then the trends were there to be seen. The exchange rate and interest rates have been under siege for some time, and something could have been done, rather than resorting to quick fixes to maintain rates where they are," another dealer said.

The rupee closed at Rs. 113.89/90 against the dollar. By the end of the day’s trading activities yesterday, the Central Bank had sold more than US$ 835 million to keep the exchange rate steady since the rupee devaluation in November 22. US$ 1.1 billion was sold in three months July to September last year to prop up the rupee.

http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=42915

*Heavy trades in ERI after warrant conversion

The slide on the Colombo bourse continued for the sixth straight day yesterday on a turnover of Rs.534.3 million, up from the previous day’s Rs.434.45 million, with both indices down – the All Share by 13.27 points (0.23%) and the Milanka by 24.95 points (0.50%) with 101 losers well ahead of 64 gainers.

Much of yesterday’s business came off Environment Resource Investments (ERI) whose 2011 warrants have been converted with the new shares beginning to trade yesterday.

The ERI price dipped Rs.2.40 to close at Rs.27.20 with over 6.5 million shares done between Rs.25.50 and Rs.28.80.

ERI has postponed a warrant conversion due next month to Sept. 2013.

The warrants were converted at Rs.24 and there was a small profit for those who opted to sell new shares, brokers said.

While ERI generated a turnover of Rs.178.7 million, JKH followed with over 0.5 million shares done between Rs.165 and Rs.167 closing Rs.2 down at Rs.165 contributing Rs.91.1 million to turnover.

Other contributors included Tokyo (non-voting) down 40 cents to close at Rs.28.40 on nearly 0.9 million shares done between Rs.28 and Rs.28.50, Ceylon Leather up Rs.1.70 to close at Rs.102.10 on 0.2 million shares done between Rs.99 and Rs.102.10, Asian Cotton down Rs.6.60 to close at Rs.160 on nearly 0.1 million shares traded between Rs.150 and Rs.160.

People’s Leasing Company lost 30 cents to close at Rs.15.20 on nearly 0.9 million shares, Nestle was up Rs.34.60 to close at Rs.910 on 12,700 shares while Aitken Spence Hotels lost 40 cents to close at Rs.66.20 on over 0.1 million shares.

Some banking stocks gained yesterday with Commercial Bank up 10 cents to Rs.100.30 on 52,800 shares, NTB up Rs.1.20 to Rs.59.80 on 88,700 shares and ComBank (non-voting) up 10 cents to Rs.45.40 on 65,300 shares. Seylan Bank (non-voting) was up 10 cents to Rs.29.60.

Aitken Spence where a mandatory offer is pending gained Rs.2.20 to close at Rs.114.30 on 23,600 shares.

People’s Merchant Bank announced the appointment of three new directors, Mr. Thushan Wickremasinghe, Chairman of Capital Trust Holdings and MD of Capital Trust Securities, Mr. G. Ramanan MD/CEO of Capital Trust Financial and Capital Trust Wealth Management and Mr. Anil Weerasinghe, a former director of the People’s Bank who had also served on the board of CDB and Lanka Cement.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=42916

*New Construction, and Piling plans get underway

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

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

As one of the best rated general contractors in the country specializing in road construction, railway and road bridges, the Company will undertake the construction of 36 kilometers of A32 roadway which is expected to be completed by 2013. After completion, the A32 road will connect the North with the South and will be the shortest route from Colombo to Jaffna. De Silva added that the cost of the road construction is LKR 1.7 Billion. CML-MTD Construction has also received a letter of acceptance for the reconstruction of the Giriulla –Narammala Highway at a value of Rs 1.4 billion.

The Company has received the highest CI grading in three construction sectors, namely Highways, Bridges and Land Reclamation. The Company also has received ISO-9001:2008 Quality Standard certification from BVQI for its Management Systems in connection with Earth moving and Land grading, Roads, Road Bridges, Railway Bridges, Industrial parks, Irrigation systems, Storm water Drainage, Port Construction & Building of Revetments, Sheet Piling, Concrete Pile Driving, Pre-cast Concrete Products, Industrial Mining, Quarrying and Crushing. In continuation of its policy of being extremely sensitive to Environmental impacts caused by construction activities and considering the steps taken to minimize such impacts the Company recently obtained ISO 14001-2004 certification for Environmental Management Systems from SGS.

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

Meanwhile, Walkers’ Piling (Pvt) Ltd, a fully owned subsidiary of MTD Walkers and one of the largest piling contractors in Sri Lanka has secured the contract to carry out piling work on the world renowned Movenpick Hotel, commissioned by Softlogic. Walkers Piling will commence work this month using specialized ‘secant’ piling technique which is frequently used overseas for deep excavation. The Softlogic Movenpick Hotel is one of several international hotels slated to commence operations in Sri Lanka following the post-war Nation development drive.

The Chief Operating Officer of MTD Walkers Piling, Mr. Lal Perera said, "Winning this contract is an endorsement of our strength and confidence as one of the most reliable companies to handle such large projects. We have previously carried out numerous large projects successfully and are now in the forefront of this industry."

For the past 30 years, Walkers Piling (Pvt) Ltd., the pioneer Pile Foundation company in Sri Lanka, has been specializing in pile foundations. The Company was incorporated in the year 1981 along with Voltas International Limited of India as a joint venture with approvals from Foreign Investment Advisory Committee of Sri Lanka. In 2008, the Company was acquired by MTD Walkers PLC, the only fully fledged multi disciplinary Engineering Company in Sri Lanka.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=42921

Shares of Asia Asset Finance will be listed on the Colombo bourse from 12 January.

The company, which offered 120 million shares through its recent Initial Public Offering, complying with a Central Bank directive for all finance companies to list, will see 559,471,889 shares listed on the Diri Savi Board.
The company’s Rs. 425.4 million IPO took 14 days to be fully subscribed, making it the first IPO not to be subscribed on the opening day.

The offering was for 120 million shares priced at Rs.2.50 with the option to issue a further 50.16 million shares. The company has an asset base of Rs. 2 billion and profits grew 200% to Rs. 80 million in financial year 2011.
Funds from the IPO were earmarked to expand the core operations of the company. Shares of its holding company Asia Capital Plc closed at Rs. 62 yesterday.
http://www.ft.lk/2012/01/11/shares-of-asia-asset-finance-to-debut-on-cse-tomorrow/

(News360.lk) Sri Lanka has started negotiations with Global Investment Bank Goldman Sachs to obtain a US$ 1 billion loan facility to help finance the country’s state run petroleum utility CPC.

According to highly credible government sources, a delegation from the Goldman Sachs has arrived in the country during this week and held a round of discussions with the Sri Lankan Government.

The delegation has met officials of both the Central Bank and the Ministry of Petroleum and Petroleum Resources Development.

They have also held a meeting with the country’s Petroleum Minister Susil Premajayantha.

The meetings have taken place yesterday.

“The deal will go through within weeks or months” said an official who is familiar with the workings of the deal.

Another Official who has taken part in the meeting said that the terms and conditions of the financing facility is yet to be decided.

Governor of the Central Bank, Ajith Nivard Cabraal, last week announced that Sri Lanka will seek US$ 1 billion during this year as a means of a special long term financing for Petroleum.

The money, once received is expected to be used for petroleum payments.
Sri Lanka’s Petroleum Import bill during the year 2011 is estimated to have reached a sum of US$ 4.5 billion, compared to US$ 3 billion spent on 2010.
Reporting By: Prasanna C. Rodrigo
http://www.news360.lk/economy/sri-lanka%E2%80%99s-cpc-start-discussions-with-goldman-sachs-to-obtain-a-us-1-billion-loan

By Sanjeevi JAYASURIYA

The Colombo Stock Market has to consolidate and continue consistent performance as its trading stocks reach more realistic values. The stock market is the secondary market for listed equity. It offers guidance to raising fresh capital in the primary market. Raising fresh capital has all but run dry.

The real value reflection will augur well for the market to improve its level of performance moving out from its negative territory, Fitch Ratings Country Head Maninda Wickramasinghe told Daily News Business.

The market had to come down as it was unable to sustain the yoy high value. The stock market should reflect a company’s performance against the growth prospect of the country. Some sectors in the economy will grow at a faster pace than others. Foreign investors are more likely to return to invest then, he said.

The stability of the economy depends on a good banking system, bond market and an equity market. There is a need for a long-term capital and both debt and equity markets can serve that need. There is now a conscious requirement for a formal institutionalized mechanism such as an investment bank.

Sri Lanka’s corporate debt market needs to be strong and an effective mechanism should be in place to overcome the present transparency issues. The draft Securities and Exchange Commission Act has recognized non- listed company debt and this is a progressive step to make debt market accessible to international capital markets, along with the liberalization of capital inflows and outflows into them, he said.

Foreign direct investment will play an important role in capital funding and the country should look at monetizing to generate definite cash flows to sustain development projects. This can be done through the securitization mechanism to take it to the market for investment. Securitization is a credit enhancement and requires a legal framework. The next phase of inflows should be from these projected cash flows be it from road, port, airport or other infrastructure projects.

The PPPs could be customized as there is no specific model and this could form an integral part of financing long-term mega projects. The banking system requires larger pools of capital to help finance the next stage of growth. Internal resources alone will be constrained.

As mega development projects need international funding, the secondary market for debt is important. It provides an exit mechanism and a low risk profile. The country needs to have international capital framework and should embrace international standards, Wickramasinghe said.
http://www.dailynews.lk/2012/01/11/bus01.asp

* Respected blue chip Aitken Spence pulls out of biggest FDI project – the $ 500 m Colombo South Container Terminal due to issues with funding and cost escalations

* Construction cost up 30% to $ 350 m; overall project cost now estimated at $ 595 m up from $ 475 m at bid proposal stage

* Lender China Development Bank insists international venue for arbitration; excess cost to be funded via equity

In a development likely to reverberate for a long time, Aitken Spence Plc has decided to pull out of Sri Lanka’s biggest FDI project worth $ 500 million to build the Colombo South Container Terminal.

The Daily FT learns that Spence called it quits after much thought in the larger interest of its stakeholders and future viability in an apparent act of not wanting to be sorry later.The site of South Container Terminal in Colombo port.

Among key reasons for the Spence pullout, is the escalation of the project cost, largely on account of the construction deal going to China Harbour and tougher conditions set by prospective lender for the project China Development Bank (CDB). Some said there had been differences of opinion between Spence and Chinese partner.

Spence together with Hong Kong-listed but Chinese Government owned China Merchants Holdings (International) Co. Ltd., (CMHI) were selected two and half years ago over a bid worth $ 475 million or nearly $ 500 million. However the project cost is now estimated to have ballooned to nearly $ 600 million. Of that, construction cost had risen by 35% to $ 350 million.

Despite some of these hiccups, construction work on the new terminal that would add 2.4 million Twenty-foot Equivalent Units (TEUs) over two stages with first being completed by mid-2014 was ceremoniously flagged off by President Mahinda Rajapaksa and Chinese Government officials last month.

The project was to be financed 70% via debt and 30% by way of equity by the operating company Colombo International Container Terminals Ltd (CICT) the joint venture between CMHI (55%), Aitken Spence Plc (30%) and Sri Lanka Ports Authority (15%).

On original bid CDB’s commitment would have been $ 350 million and consortium partners’ equity financing in stages was $ 150 million.
Lender to the project CDB had insisted that any cost overruns have to be met via equity financing as it will stick only to the original estimate. This, if agreed, would mean a higher burden on Spence. Its overall exposure on equity on original cost was $ 52.5 million.

CDB had also insisted in the event of a dispute arbitration should be held outside Sri Lanka, a clause which hadn’t found favour with the Government especially when it has set sights to establish and promote Sri Lanka as a hub for arbitration.

The cost overruns had been partly attributed to inflation and exchange rate differences between the bid stage and at present though some argued that demand for port constructions globally is depressed due to international economic meltdown.

Others pinned the cost hike to the construction deal going to China Harbour. Though it couldn’t be confirmed whether the tender process was transparent or not, industry analysts opined that China Harbour appears to expensive despite it having a growing business in Sri Lanka hence already well mobilised unlike a total new entrant.

It is most likely that Spence stake would be bought by CMHI entirely or partly whilst SLPA which remains bullish over Sri Lanka’s future prospects as a maritime hub could explore increasing its stake within permissible levels (as per conditions set by Asian Development Bank which financed the $ 300 million breakwater for the project).

With Spence pulling out, the stage is seemingly set for biggest FDI project in Sri Lanka to be all Chinese, a development which is likely to increasingly unsettle India on issues of geopolitics though the latter has officially not vented its apprehensions.

The operating company CICT was awarded the tender to construct and operate the Colombo South Container Terminal for a period of 35 years, after which the terminal would be handed over to the SLPA.
The terminal comprises a total quay length of 1,200m and a land area of 58 hectares, with quay-side water depth of-18m and a design capacity of 2.4 million TEUs. The project is expected to take two phases, with Phase I to be ready for operation by the middle of year 2014.
Once completed, the Colombo South Container Terminal would be the only port in Sri Lanka able to service the mega container ships with over 14,500 TEU Capacity.

At the ceremonial launch on 16 December Dr. Fu Yuning, Chairman of China Merchants Group and officials from China Development Bank, China Export & Credit Insurance Corporation and China Harbour Engineering Company Ltd., were also present.

Dr. Yuning said: “as the Chairman of China Merchants Group, me and my Board of Directors are aware of the vast economic development that has been implemented through the opportunities created by Your Excellency and have no doubt that Sri Lanka, very soon will be the envy of all of Asia. This we believe had been made possible due to vision and the dynamic leadership of the President of Sri Lanka. Your Excellency let me further assure that this investment is only the beginning of many by China Merchants in this country.”

“China Merchant, during the past 140 years has been the forerunner of China’s national industry and commerce. It with pride that I state that China Merchants is the leading international port investor, owner and operator, as well the leading diversified conglomerate in transportation infrastructure (ports & toll roads), finance (banking, insurance, funds and securities), real estate and related community services, energy shipping and logistics. Given our involvement in the various spheres of business, our investment in CICT is the beginning of long-term mutual beneficial partnership between China Merchants and Sri Lanka,” Dr. Yuning pointed out.

After the ceremony, Dr. Yuning had a media conference attended by correspondents from Xinhua News Agency, China news agency, Bloomberg and Sri Lankan domestic media. Dr. Yuning was questioned primarily as to the main business activities China Merchant were involved in, reasons for China Merchants’ decision to choose the development of Colombo South Harbour in Sri Lanka as the company’s first overseas Greenfield project and how should China Merchants further develop the traditional friendship existing between China and Sri Lanka. Dr. Yuning then responded to all these questions.
http://www.ft.lk/2012/01/11/colombo-under-crosscurrents/

Sri Lanka policy rates steady, market rates up

Jan 11, 2012 (LBO) - Sri Lanka's main policy interest rate at which cash is injected to the market will remain at 8.50 percent but an increase in market rates could help reduce money supply growth, the Central Bank said as it battles pressure on a dollar peg.

Sri Lanka's peg with the US dollar was pressured from the second half of 2011 due to high credit growth, which was financed with excess reserves which accumulated during a period of low credit expansion.
The central bank in it January monetary policy statement said broad money grew (M2b) grew 20.6 percent in November, though market rates moved up over the past few months.

Rates moved up due to liquidity shortages coming from the defence of a dollar peg.

Sales of dollars by the Central Bank results in an equivalent reduction in rupee liquidity, and to keep rates from spiking immediately the Central Bank injects fresh liquidity by printing money to 'sterilize the interventions."


Despite the sterilizations one year Treasury bill yields rose 175 basis points, the average weighted prime lending rate (AWPR) increased by around 120 basis points in 2011 and the average weighted deposit rate (AWDR) rose 100 basis points, the Central Bank said.
Analysts say higher deposit rates will help reduce aggregate consumption and provide deposits to finance credit growth. Higher lending rates can also reduce credit growth, allowing the monetary system to rebalance.

But credit to business by November was up 33.5 percent from a year earlier, the Central Bank said. In October credit growth was up 33.4 percent.

Analysts say expansionary sterilizations give additional reserves for banks to lend, keeping credit growth high. To break the cycle of interventions and sterilization, the currency has to be floated.http://www.lbo.lk/fullstory.php?nid=1535182373

Income of the cultural sectors has increased due to flow of tourist arrivals.

Ministry of Economic Development says income of the cultural sectors in the country has increased due to the growth of tourist arrivals to Sri Lanka.
The cultural triangle has earned over 880 million rupees by selling tickets. The cultural triangle has only earned 300 million rupees in the year 2008. Director General of the Cultural Triangle Professor deleted De Silva attributed this significant progress to the peaceful environment prevailing in the country at present.http://www.slbc.lk/index.php/component/content/article/1-latest-news/9338-income-of-the-cultural-sectors-has-increased-due-to-flow-of-tourist-arrivals-

State-controlled Lanka Hospitals gets A+ rating
*Despite strengths, overall profitability hampered by high cost business model and personnel expenses

RAM Ratings Lanka has assigned respective long- and short-term corporate credit ratings of A+ and P1 to Lanka Hospitals Corporation PLC (LHC). The long-term rating has a stable outlook.

"The ratings are upheld by the Hospital’s strong financial profile, liquidity, ongoing state support and the positive outlook for the private healthcare industry. On the other hand, the ratings are tempered by LHC’s moderate profitability; coupled with the fragmented nature of the private healthcare industry and the shortage of skilled personnel in the industry," RAM Ratings said.

"Incorporated in 2002, LHC was previously known as Apollo Hospitals Colombo, a subsidiary of Apollo Hospitals Group India. In 2003, Sri Lanka Insurance Corporation PLC (SLIC) acquired 54.61% of the Hospital while 28.66% was acquired by Distilleries Company of Sri Lanka Limited (DCSL).

"Following the renationalisation of SLIC in 2009, majority stake of LHC is now indirectly owned by the state. Meanwhile, Fortis Global Healthcare Holdings Pte Limited, an Indian-based private healthcare provider acquired 28.66% of LHC which was held by DCSL. We opine that state support will be forthcoming through its major shareholders as LHC is expected to play a key role in the Government of Sri Lanka’s (GOSL) agenda of making private healthcare more affordable. Furthermore, LHC’s board mainly consists of representatives of GOSL," the ratings agency said.

"The ratings are supported by LHC’s strong financial profile; its gearing ratio clocked in at a relatively low 0.06 times as at the end of FYE 31 December 2010 (FY Dec 2010) while the cash-protection metrics were also strong. At the same time, LHC’s funds from operations (FFO) debt coverage had improved to 3.10 times as at end-FY Dec 2010 (9M FY Dec 2009: 2.19 times), supported by the overall improvement in its performance. RAM Ratings Lanka notes that the Hospital’s gearing levels and debt coverage are better than those of its corporate and industry peers, reflecting the management’s conservative funding policy. Going forward, we expect these numbers to ease on LHC’s increased debt burden to fund its planned expansion. Nonetheless, they are still envisaged to be better than its peers’.

"The ratings are further supported by the Hospital’s strong liquidity. LHC’s cash and cash equivalents (CCE) provide a strong buffer against its short-term borrowings; its ratio on CCE to short-term debts improved from 2.98 times as at end-FY Dec 2010 to 5.71 times as at end-September 2011, stronger than most of its corporate peers’. We note that LHC’s current and quick ratios are also stronger than those of its industry counterparts.

"Meanwhile, growth prospects for the local private healthcare industry remain encouraging, underscored by increased health awareness, higher disposable incomes, an expanding ageing population and better healthcare-insurance coverage among the working population. Moreover, better service quality and shorter waiting times compared to state hospitals also attract patients to private hospitals. In light of these factors, we envisage demand for private healthcare to continue to improve.

"Despite the above strengths, LHC’s overall profitability is hampered by high overheads arising from its high-cost business model and personnel expenses. Amid faster revenue growth along with increased occupancy, however, LHC’s margin on operating profit before depreciation, interest and tax (OPBDIT) broadened from 5.71% in fiscal 2009 to 12.04% in FY Dec 2010. Nonetheless, this is still weaker than those of its industry peers.

"On a separate note, the private healthcare industry is fragmented in nature. Nevertheless, the competition within Colombo is keen as most of the established players are concentrated in Colombo where the demand for private healthcare is high owing to higher disposable income. In this regard, our concerns hinge upon LHC’s lack of branch network as there are other private hospitals with multiple branches and the capacity to cater to the rising demand for healthcare. At the same time, a significant challenge to the sector’s growth is the shortage of skilled personnel and resultant rising costs," RAM Ratings said.http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=42900

Local boat building industry surpasses US $ 100 m mark

Sanjeevi JAYASURIYA

The boat building industry has performed well last year surpassing the US $ 100 million mark for the first time.

“We are confident that this trend will continue and improve further this year. The demand for boats both from local and export markets are growing at present making the industry a significant player in the export sector of the country,” Boat Building Technology Improvement Managing Director Gamini B. Herath told Daily News Business.

There is a healthy demand for work boats including boats for safety and passenger craft from the export market while a growing demand for transport boats and leisure boats from the local market could be seen at present, he said.

“We are concentrating on the regional markets including India and Pakistan. There is an order from Pakistan for 100 boats for coast guard activities. The boat building industry considers the local market to be an important component in its market segment where an improved demand is expected for multi day fishing boats to develop the fisheries industry,” he said.

The industry sees an upward trend in demand regarding the leisure and pleasure sectors and there is increased enthusiasm for whale watching thus creating a good demand for passenger craft with the growth in the tourism industry.

The industry is concerned with the attempts to import second hand boats to the country. These boats are to be imported involving a lesser duty component and the sizable local market could be badly affected by this move, he said.

There are inquiries for wooden boats from the UK exporters and this is an area where development should take place. The stakeholders have submitted a proposal to the Export Development Board to develop the industry.

“We expect 10 percent growth in exports this year and recovery of European markets will play a major role in increasing the product demand. The boat market is volatile and not so lucrative in the European region and with the expected recovery the local boat industry could improve performance,” Herath said.

As a new market initiative, the industry will be looking at Bangladesh and Africa including Nigeria from where a few export orders have already received at present.

http://www.dailynews.lk/2012/01/11/bus02.asp

Investors eye Trinco Port RFP’s

Indunil HEWAGE

Trincomalee Port

The Sri Lanka Ports Authority (SLPA) yesterday published the project proposal documents to private sector investors interested in setting up port related business ventures in the Trincomalee Port Industrial Park.

“Interested investors will be able to collect the project proposal documents at the Port Committee Building in Fort and the deadline for issuing the documents to investors will be April 10.

The Industrial Park which consists of 3,000 acres of land will have investment opportunities in various potential sectors. Each investor will be allocated five acres of land at the industrial park. However, investors are allowed to subdivide or amalgamate the land according to their preferences. The investors will have to comply with the requirements as requested in the project proposal document to get the SLPA approval to set up business ventures at the Trincomalee port vicinity, a SLPA senior official told Daily News Business.

The Trincomalee Port City Development Project mainly consists of the Industrial Park and the Tourism Zone. However, at the moment, relevant authorities have focused on developing the Industrial Park at first.

In addition, the government will provide the required infrastructure facilities such as water, electricity, internal roads and other amenities to the Industrial Park.
http://www.dailynews.lk/2012/01/11/bus03.asp

Coming decade will focus on blue economy'
Ramani KANGARAARACHCHI

The coming decade will be focusing on what is called blue economy, a concerted attempt to harness the resources of the sea for mankind, International Monetary Cooperation Senior Minister Sarath Amunugama told Daily News Business.

He said that Sri Lanka is well positioned for rapid growth under the forthcoming blue economy and, therefore, the country should have a vision of harnessing the sea because in the future the sea will be equally important as the land.

Dr Amunugama said that the land based resources are fast depleting largely due to population increase and environmental degradation. So mankind should focus on the sea for survival where plenty of resources are available in the two key areas of energy and fuel.

He said the current focus on infrastructure of the government would help the rural economy enormously. One of the chief policies of the present government is to develop infrastructure of the country. Without infrastructure an economy cannot grow. Countries such as China, India, Brazil and Russia will become strong economies because they invested on energy, transport, harbours and roads. Particularly a nation such as Sri Lanka has to invest in major infrastructure development such as ports and projects shipping which are the life line of the country.

He said that very few people know that two thirds of the wourld's shipping lines pass Hambantota as the sea lanes from middle east to far east go along the Sri Lankan coast.

On the other hand, Sri Lanka is a hub for travel and tourism and it has the advantage point. which can move to Middle East, India and the Far East. No other country has such a hub position. So it is very logical that the country develop its ports. airports and harbours, he said.

http://www.dailynews.lk/2012/01/11/bus04.asp

RAM Ratings assigns A+/P1 to Lanka Hospitals

Lanka Hospitals, Narahenpita

RAM Ratings Lanka has assigned respective long- and short-term corporate credit ratings of A+ and P1 to Lanka Hospitals Corporation PLC ("LHC" or "the Hospital").The long-term rating has a stable outlook.

The ratings are upheld by the Hospital's strong financial profile, liquidity, ongoing state support and the positive outlook for the private healthcare industry.

On the other hand, the ratings are tempered by LHC's moderate profitability; coupled with the fragmented nature of the private healthcare industry and the shortage of skilled personnel in the industry.

Incorporated in 2002, LHC was previously known as Apollo Hospitals Colombo, a subsidiary of Apollo Hospitals Group India. In 2003, Sri Lanka Insurance Corporation PLC ("SLIC") acquired 54.61% of the Hospital while 28.66% was acquired by Distilleries Company of Sri Lanka Limited ("DCSL"). Following the renationalisation of SLIC in 2009, the majority stake of LHC is now indirectly owned by the state.

Meanwhile, Fortis Global Healthcare Holdings Pte Limited ("Fortis"), an Indian-based private healthcare provider acquired 28.66% of LHC which was held by DCSL. We opine that state support will be forthcoming through its major shareholders as LHC is expected to play a key role in the government of Sri Lanka's ("GOSL") agenda of making private healthcare more affordable. Furthermore, LHC's board mainly consists of representatives of GOSL.

The ratings are supported by LHC's strong financial profile; its gearing ratio clocked in at a relatively low 0.06 times as at the end of FYE 31 December 2010 ("FY Dec 2010") while the cash-protection metrics were also strong.

At the same time, LHC's funds from operations ("FFO") debt coverage had improved to 3.10 times as at end-FY Dec 2010 (9M FY Dec 2009: 2.19 times), supported by the overall improvement in its performance. RAM Ratings Lanka notes that the Hospital's gearing levels and debt coverage are better than those of its corporate and industry peers, reflecting the management's conservative funding policy. Going forward, we expect these numbers to ease on LHC's increased debt burden to fund its planned expansion.

http://www.dailynews.lk/2012/01/11/bus05.asp

Lankan entrepreneurs talented, eager to branch out overseas
Shirajiv SIRIMANE

Enterprise Asia Manager B. Shanggri and Analyst, Tham Wai May in Colombo yesterday. Picture by Sumanchandra Ariyawansa

Sri Lankan entrepreneurs are talented and they are eager to branch out overseas said Enterprise Asia Senior Programme Manager B. Shanggri whose organization is co-hosting Asian Entrepreneurship Awards.

She said that this is the first time that Asian Entrepreneurship Awards are being held in Sri Lanka and the organiserers, the Ceylon Chamber of Commerce and the Sri Lanka Malaysia Business Council have received over 60 entries and this was very encouraging. "Our visit to Sri Lanka was to interact with some of the entrepreneurs," she said.

She said that though the companies are smaller in size they are very talented with high entrepreneur skills and have a passion to move out of the country and expand. "We conduct these awards ceremonies in many countries in Asia and the winners in Sri Lanka would automatically get the opportunity to internet with them," she said.

"The Asia Pacific Entrepreneurship Awards is a platform for Asian business leaders and entrepreneurs to network, share information and form lifetime acquaintances and alliances as we hold a global event where all top winners meet. There are 14 ASEAN nations in this programme. They are Singapore, Hong Kong, Taiwan, China, South Korea, Malaysia, Indonesia, Philippines, Brunei, Thailand, Vietnam, Macau, Cambodia, and India. Sri Lanka joins these elite group from 2012," she said.

NDB Bank is the principal sponsor of the event to be held on February 12 at the Hilton Colombo, the host hotel while Daily News and Sunday Observer are the print media partners. On a request of NDB Bank, the 2012 Asia Pacific Entrepreneurship Awards will also include an 'Emerging Entrepreneur' Category for the first time.

KPMG Ford, Rhodes, Thornton and Co., one of Sri Lanka's leading International audit firms has accepted the invitation by the organizers to be the Audit Partner for the event.

http://forum.srilankaequity.com/t14848-sri-lanka-newspapers-11-01-2012#96369

Foreign investors net buyers
The Colombo Stock Exchange dipped further yesterday with relatively low buying pressure.

ASI declined by 13.27 points (-0.23%) to close at 5,859.67 while sensitive MPI dipped by 24.95 points (-0.50%) to end at 4,995.48. Market turnover was recorded at Rs.534.3.

Environmental Resources Plc made the strongest contribution with active trading to the daily turnover at Rs.178.7 million along with John Keells Holdings Plc (Rs.91.1 million) and Tokyo Cement Plc nonvoting (Rs.25.2 million).

Yesterday Environmental Resources Plc witnessed a notable dip in price due to the additional shares launched in the market from Warrant conversion.

Meanwhile, heavy trading was seen in counters such as HVA Foods Plc, ACME Printing and Packaging Plc and Environmental Resources warrants.

Foreign participation stood at 16.2% of the total market activity and at the end of the day foreign investors were the net buyers with a net foreign inflow of Rs.13.1 million.

http://www.dailynews.lk/2012/01/11/bus07.asp

'Mannar Divineguma to revive regional industries'
More than 8,000 visitors are expected at the Divineguma exhibition to be held in Mannar. The show will focus on reviving industries, especially cottage, in the region.


Industry and Commerce Minister Rishad Bathiudeen, Traditional Industries and Small Enterprises Ministry Secretary V Sivagnanasothy and Industry and Commerce Ministry Secretary Tilak Collure at the seventh high level planning session held at Mannar DS Office premises on Sunday on the forthcoming Divineguma show to be held in Mannar.

"Many families in the area will be given the opportunity to become self-sufficient and even become suppliers of farm and livestock produce at micro level by this exhibition" said Industry and Commerce Minister Rishad Bathiudeen.

Minister Bathiudeen was addressing the seventh high level planning session held at Mannar DS Office premises on Sunday on the forthcoming Divineguma show to be held in Mannar on January 21 and 22.

The special session saw the participation of top officials, department heads and statutory institutional heads from the Industry and Commerce Ministry, the Youth Affairs Ministry, the Traditional Industries and Small Enterprises Ministry (with IDB), the Economic Development Ministry and the Science and Technology Ministry.

After the session, Minister Bathiudeen said, "We expect more than 8000 visitors from the area, including students for this top exhibition.

We will showcase many livelihood support and enhancement options for backyard economic improvement as per the committed efforts of Economic Development Minister Basil Rajapaksa under the vision of President Mahinda Rajapaksa."

Minister Bathiudeen also reiterated that the Mannar Divineguma is an ideal opportunity to kick-off and revive the industrial base in the region.

Traditional Industries and Small Enterprises Ministry Secretary V Sivagnanasothy said, "We expect to create awareness for village level families in the area on running cottage industries and facilities we offer for micro and medium scale cottage entrepreneurs. This exhibition will also be a machinery and equipment exhibition and we will also highlight spot in the production process where the machinery comes into manufacturing."

Industry and Commerce Ministry Secretary Tilak Collure addressing the gathering said, "I am happy to see the commitment of the officials of various Ministries towards the forthcoming Mannar Divineguma exhibition. We believe that your efforts will strongly assist in reviving the rural household economy in Mannar as outlined in the rural development concepts of Mahinda Chinthana."

The initial one million home gardens, livestock, poultry, fisheries and one million domestic economic units target under this programme as proposed by the 2011 budget proposals, has now been increased to 2.5 million by the budget proposals of 2012.

The programme is considered as a "strong pillar in the Mahinda Chinthana Vision for the Future" and is being implemented under five line ministries, including the Industry and Commerce Ministry. The Export Development Board (EDB) and the National Entrepreneurs Development Authority (NEDA) of the Industry and Commerce Ministry contribute to the programme according to the vested subject areas.

http://www.dailynews.lk/2012/01/11/bus10.asp