Sri Lanka Newspapers 28/01/2012

Brokers smile as bourse looks up on blue chips
*ComBank, JKH, Spence and banking stock attract interest
*Foreign buying helps market

The smiles came back in Colombo’s stock broking industry yesterday with the market distinctly looking up closing with turnover comfortably topping a billion rupees and both indices up sharply with many brokers and analysts attributing foreign buying into some blue chips triggering upward movement.

Turnover at Rs.1.72 billion was down from the previous day’s Rs.2.29 billion and the All Share Price Index up 133.04 points (2.38%) while the Milanka gained 163.35 points (3.43%) with 193 gainers leaving 20 losers trailing dismally behind.

"All are smiling today," a stockbroker from a leading brokerage said. "The market was helped by foreign buying which triggered interest."

Foreign buying was evident in JKH which closed Rs.4.50 up at Rs.167 on 0.7 million shares done between Rs.163.40 and Rs.169 generating a turnover of Rs.118.6 million which was number four on the turnover league.

The big business generator was Commercial Bank closing Rs.4 up at Rs.106 on nearly 3.5 million shares done between Rs.100.50 and Rs.106 contributing Rs.348.9 million to turnover.

Aitken Spence followed gaining Rs.3.50 to close at Rs.113 on two million shares done between Rs.108 and Rs.115 contributing Rs.350 million to turnover while NTB was up Rs.5 to close at Rs.62.50 on over 2.2 million shares done between Rs.55.90 and Rs.62.80.

Noting that blue chips moved on price and volume, a broker said that this was good for the market adding that institutions are still not active with state institutions yet absent.

Asia Asset Finance closed flat at Rs.7 on 14.8 million shares done between Rs.6.80 and Rs.7.50 with other speculative stocks likes Swarnamahal, ERI and Ceylinco Finance also showing volume and price gain.

Commercial Bank’s non-voting shares did better than the voting shares gaining Rs.7.20 to close at Rs.86 on a million shares traded between Rs.76 and Rs.86. Brokers explained that since the dividend yield was the same for the voting and non-voting shares, many investors preferred to buy the non-voting stock.

Other than ComBank and NTB, banking stocks that were active included Sampath up Rs.8.70 to Rs.179.90 on nearly 0.2 million shares done between Rs.174 and Rs.179.90, HNB up a rupee to close at Rs.145 on nearly 0.6 million shares done between Rs.141 and Rs.145.

Pan Asia too was up Rs.1.40 to Rs.25.50 on slightly over 0.3 million shares done between Rs.23.30 and Rs.25.50.

Union Bank was up 90 cents to close at Rs.20.50 on nearly 0.4 million shares and Seylan Bank (non-voting) up Rs.1.70 to Rs.29.70 on nearly 0.3 million shares traded between Rs.27.10 and Rs.29.70.

Dividend announcements for the day were by Royal Ceramics, a tax-free interim dividend of Rs.2 per share for 2011/12 XD from Feb. 8 and payment on Feb. 17; Alliance Finance an interim dividend of Rs.25 per share for 2011/12 XD from Feb. 8 and payment on Feb. 17; and Bairaha an interim dividend of Rs.2 per share for 2011/12 XD from Feb. 8 and payment on Feb. 21.
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Fitch Ratings Lanka says that its outlook for the majority of Sri Lankan banks is stable, underpinned by improved earnings prospects due to post-war growth in the domestic economy as well as the government’s capacity to support the banking system. However, rapid loan growth will test the banks’ risk management systems and funding profiles.

"A significant revision of government economic policy, macroeconomic shocks, or rapid lending that undermine liquidity, earnings or asset quality and lead to significant capital impairment could be negative for the Outlook and/or ratings of Sri Lankan banks. Conversely, structural changes such as improvements to risk management and enhanced capital buffers could be positive for the outlook and/or ratings," the ratings agency said.

"Real GDP growth should drive strong credit demand and licensed commercial banks are best-placed to meet this demand. However, Fitch expects a policy response from the authorities to rein in credit demand should inflation increase significantly.

Fitch questions the Sri Lankan banking system’s ability to manage above-average loan expansion on a sustained basis. However, the agency believes that any deterioration in asset quality may not be as severe as that seen in 2008 and 2009.

Fitch expects net interest margins to remain under pressure from intensifying competition.

However, the agency believes this could be mitigated by strong loan demand, manageable credit costs and lower effective taxes to allow continued robust profitability in 2012.

Fitch notes that heightened competition and diminishing liquidity are being reflected in rising interest rates on deposits. While the agency expects deposits to remain the main source of funding for Sri Lankan banks, strong lending could result in a rising share of non-deposit funding.

Capital ratios could come under pressure from continued strong credit growth. Fitch believes that capital planning to maintain an adequate buffer is important in light of loan growth levels, credit concentrations, loan loss reserve coverage and exposure to macroeconomic volatility," Fitch
said.
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Shirajiv SIRIMANE
Richard Pieris and Co is looking at diversifying to the healthcare industry in Sri Lanka, Arpico is currently looking at building a 250 to 300 bed hospital in Colombo.

Chairman Arpico, Sena Yaddehige said that paper work in this regard has been already done and they are now liaising with the Board of Investment and other line bodies to find suitable land for the project.

The chairman also said that they are also keen in acquiring the Ceylinco Eye hospital in Borella. "We have made a strong bid to procure this property and are awaiting a feed back," he added. After the financial scam of Golden Key owned by former Chairman Lalith Kotalawela, Ceylinco Eye hospital is now listed to be 'sold' to settle part of the depositors. Hotel Cey Sands, Bentota too was sold for this purpose.
http://www.dailynews.lk/2012/01/28/bus04.asp

Shirajiv SIRIMANE
Richard Pieris and Company is having a good financial year and will end year with a profit in the excess of Rs 3 billion. Retail sector had been one of their best performers.

Chairman, Richard Pieris and Company Arpico, Sena Yaddehige in an interview with the ‘Daily News Business’ said that all sectors performed up to expectations excluding the plantation sector where high wages were still an issue. “The weages have been steadily increasing by around 60 percent over the last two years and is a growing concern,” he said.

Due to the success in the retail sector Arpico is planning an aggressive expansion drive in the retail business and have plans to move to the North East in a big way.

The chairman said that they are planning to invest Rs. 2 billion in two years for expansions in the retail sector.

Outlining his plans he said that they want to expand into the leasing industry and are currently looking for an overseas partner preferably from Australia.

“The diversification with regard to insurance has been very successful and the acceptance the company received were overwhelming. The main reason for this is the proven reputation and track record of Arpico and the trust people have towards Arpico for several years,” he said.

The insurance industry still has tremendous potential since only around 12% of the population and 27% of the labour force had been covered.

Expressing his views on short term plans for the company he said that they are also looking for a 250,000 square feet warehouse in Colombo mainly to increase efficiency in both their import and export business.

“Our furniture business is a Rs. 3 billion operation while the retail business too is growing. In addition the company also exports tea and we need large warehousing,” he said.

Commenting on the leisure sector he said that the company is very keen to have their foot print in the industry as well. “We want to enter the hospitality industry in a big way for a long time and had expressed our interests to acquire Hotel Cey Sands, Bentota which too was owned by Ceylinco Group and also the Confifi Hotel,” he disclosed.

He said that as a matter of principle they are not keen to pay more than the market value for any ‘deal.’ “We earn the hard way and uphold transparency all the time maintaining an open book,” he said.

Yaddehige added that shareholders are also a primary concern of them and would keep on giving them more returns.
http://www.dailynews.lk/2012/01/28/bus01.asp