      Business Editor : Eriq Dewanarayana
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Business Editor : Eriq Dewanarayana
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Sanasa Development Bank
Bhagya and Surathal Savings schemes for childrenWith a capital base of Rs. 100 million the Sanasa Development Bank, a fully accredited autonomous banking operation licensed as a specialised bank celebrated its first year of operation on Wednesday this week by launching two new products. One is a dual purpose Certificate of Deposit and the other is a savings scheme for children. The former is termed Bhagya and the other Surathal.
The Chairman of the Bank, P. A. Kiriwandanage told the media he was happy to see the bank grow to this extent within a period of just one year and three months. All top officials of the bank were associated with Mr. Kiriwandanage at the media briefing.
The Sanasa Development Bank is the culmination of the 90—year operation of the co-operation concept in Sri Lanka. The directors emphasise the fact that it is one among the six development banks in the country and operate as much. But the Sanasa Bank differs from the others in that the equity is held by the 8000 primaries and 33 district unions and the federation along with the other organisations in the co-operative movement. It has an authorised capital of Rs. 1000 million of which Rs. 100 million has been subscribed. It is said Sanasa covers 20 per cent of the population of Sri Lanka.
The bank mobilises savings in the different areas it has its branches. Thus the savings of one district does not go out to others but utilised to assist the development of the particular area. With its branches now dotting the country except in the conflict areas most of the branches have broken even and are now becoming profitable.
Besides this it helps in the disbursement of government finances that go to help the development of regional enterprises. This is being done with the aid of the National Development Bank.
With a Rs. 500 million deposit base its total assets are said to have reached Rs. 644 million. Fifty per cent of this is invested with Treasury Bills and government bonds. The portfolios of advances have now reached Rs. 320 million with 4730 persons being set up in their own businesses.
But all this has been achieved with low interest rates which extends between 16% to 21%. The Bank’s interests rates for pawning is said to be a mere 20%.
The Chairman explained that whatever, the pawned article will not be auctioned off in the event of non redeeming the article. The person who pawns the article will be helped to hold on to his material asset by turning it to a loan whereby it could be paid over a period of time and the article redeemed.
There have been no defaults, its General Manager Noel Cramer said. All borrowers had kept to their commitments.
However, lending operations are conducted with another organisation working with the Insurance Corporation assisting the Bank. Besides entrepreneurs are being assisted to market their products through the Producer Consumer company which specialises in arranging for markets.
Stock Market Review
WEEK ENDING 04TH December 1998Over the week to 4th December 1998 the ASPI lost 4.2 points WoW (1% WoW) to close at 567 points at the end of trading. The SPI also lost 12.3 points over the week (1% WoW) to close at 863.5 points. During the week foreigners remained active in the markets net buyers Rs. 31.7m and contributing to 42% of the total turnover for the week.
Corporate results for the week:
Colombo Dockyard Ltd: Results for 9M FY 12/98 indicate that turnover is up by 9.2% YoY to Rs 2.34 bn. PAT for the period has come in at Rs. 245.4m. up by 128.3% YOY.
Hapugastenne Plantations Ltd: Results for 9 MFY 12/98. Turnover has increased by 131% to Rs. 830.4m PAT has increased by 270% to Rs. 86.4m.
Ceylinco Insurance Co. Ltd. Results for 9M FY 12/98 indicate that turnover has increased by 10% YoY to Rs. 1709m and PAT is up by 2% YoY to Rs. 35m.
Diesel & Motor Engineering Co. Ltd: Results for 1HFY 3/99 indicate that turnover has increased by 22% YoY to Rs. 751M. PAT has dropped by 27% YoY to Rs. 96.4m.
James Finlay and Company Ltd: Results for 9 MFY 12/98 indicate that turnover has increased by 92% YoY to Rs. 1.7bn. PAT after minority interest came in at Rs. 41.2m. Although this indicates a drop in earnings from 9m FY 12/97, the company has accounted for an exceptional item of Rs. 67m.
Ceylon Brewery Ltd: Results for 1H FY 3/99 indicate that turnover has increased by 16.5% YoY to Rs. 719m while the PAT has dropped by 146% YoY to Rs. 122m.
Lion Brewery Ceylon: Results for 1HFY 3/99 indicate that turnover was Rs. 260m while the PAT has come in Rs. 77.4.
United Motors Lanka Ltd: Results for 1H FY 3/99 indicate a 2.5% YoY drop in turnover to Rs. 471m. PAT has increased by 5.4% YoY to Rs. 52.4m.
Vanik Incorporation Ltd. Results for the 9M FY 12/98 indicate that net operating income has risen by 235% YoY to Rs. 2284m and the PAT has gone up 328% YoY Rs. 21m.
Central Finance Co. Ltd. Results for 1H FY3/99 indicate that turnover is up 8% to Rs. 2791m. PAT has declined by 16% YoY to Rs. 88m.
Lanka Ceramic Ltd: Results for 1H FY3/99 indicate that turnover is up by 9.8% YoY to Rs. 1.24bn. PAT for the period after minority interest has come in at Rs. 16.3m, up by 12.1% YoY.
Lanka Walltile Ltd: Results for 1H FY3/99 indicates that turnover has increased by 15.6% YoY to Rs.995.1M PAT after minority interest has come in at Rs. 24.6M, up by 11.8% YoY.
Balangoda Plantations Ltd: Results for 9M FY12/93 indicate that turnover has increased by 10.7% YoY to Rs. 1bn while the PAT has dropped by 12. 3% YoY to Rs. 191m.
Madulsima Plantations Ltd: Results for 9 MFY 12/98 indicate that turnover has increased by 9.6% to Rs. 620m while the PAT has come in Rs. 135m.
Upside potential exists
We believe that the recent rally at the Colombo market has been spurred by the sentiment of the local investors. Of late foreign investors have also become increasingly active in the market. We believe that the increase in global liquidity conditions assisted by Federal Rate cuts will assist the upward momentum of equity markets. In Sri Lanka we expect the attractiveness of earnings yield relative to interest rates to be the backbone of recovery. However, the volatility experienced in major global markets this week may restrain the activity in the CSE. Our recommendations include: Colombo Dockyard, Lanka Lubricants, Lion Brewery, Ceylon Brewery, Ceylon Grain Elevators, Sampath Bank.
- JF - HNB Research
Central Bank reduces Repo Rate
The Central Bank has reduced its overnight repurchase (repo) rate from 11.75 per cent to 11.50 per cent, with effect from 04 December 1998. The repo rate is the rate at which commercial banks and primary dealers can invest their surplus funds in Treasury bonds and Treasury bills held by the Central Bank. It is thus a key interest rate which influences other short term interest rates in the market.
The reduction in inflation and greater stability in exchange markets experienced in the past few months enabled the Central Bank to reduce the repo rate in several steps from 12.10 per cent in September 1998 to 11.75 per cent in October. The inflation rate has continued to decline, while international interest rates have also come down. In view of these developments, the Central Bank considered that a further reduction in the repo rate is desirable.
‘Inconsistent policy’ on beer taxation will affect investor confidence — Lion Brewery
The Lion Brewery of Ceylon Ltd., has warned the government that its ‘inconsistent policy’ on taxation on beer will affect investor confidence and Sri Lanka’s ability to attract much needed quality foreign investment.
The management of the company has said in their six-month review report that "Not only is the government’s reversal in policy investor unfriendly, it will also benefit the illicit liquor industry due to a shift in demand".
In November 1995, excise duties were reduced by 70% to which the beer industry responded favourably and invested Rs. 2.4 billion in capacity expansion, modernisation and employment generation. Approximately 45% of this investment was generated from overseas, it said.
The company in its review of the six months ended September 30, 1998 said that during the first seven months of this financial year, the industry has contributed approximately Rs. 100 million more to Government revenue, in the form of excise duty, General Service Tax (GST) and National Security Levy (NSL) than it did during the preceding year.
" The November 1995 experience clearly indicates that beer is extremely price sensitive". They reiterated that "a sizable price increase at this juncture will lead to a considerable reduction in volume", it said.
As part of the long term interests of the beer industry, Lion Brewery Ceylon Ltd., has decided to pass only a part of the tax increase, provided in this year’s budget, to the consumers and absorb the balance against the company’s earnings. The six month review report also quotes management as saying that because of this move, they anticipate a sharp drop in profitability of the company during the ensuing period unless relief is provided to the industry by the Government.
If the entirety of the tax increase is passed on to consumers, the price of the beer would revert to pre November ‘95 levels, the period in which excise duties were reduced by 70%, the report stated.
Lion Brewery Ceylon Ltd’s results for the first six months ended September 30th were satisfactory and in line with its expectations for both corporate and industry growth, according to the report.
The report also said that after taxation, the company’s profit for the said period was recorded at Rs. 77.4 million. (DB)
Stock Market Weekly
Dec. 4, 1998Finally, the word peace has emerged again. Any further developments in this area, which is very much likely will give the market a boost, despite the slow down in international markets. The week witnessed negative sentiment among the investors around the world. But what is of interest is Colombo bourse on its own.
During the four-day trading week, indices continued to plunge as a result of profit taking. All Share Index lost 5 points for the week before closing at 566 while Sensitive Index declined from 875 to 863 during the week. Lack of institutional interest resulted in low turnover levels except for Monday. Despite moderate performance of the economy for Jan-Aug period the market did not gather the expected momentum.
The poor performance of Kahawatta at the bourse is likely to discourage investors moving into plantation sector while delaying upcoming IPOs. Widespread losses in the sector may influence further price falls of plantation stocks.
The fading foreign investors perception was fuelled by bearish regional markets. Selected foreign activities were witnessed with DFCC, Sampath, Grain Elevators and JKH changing hands. The net purchases for the week amount to Rs. 31 million as a result of foreign purchases of Rs. 127 million.
Sri Lankan Rupees started to fluctuate within a narrow range. The week witnessed the exchange rate fluctuating around Rs. 68 while the touching the highest of Rs. 68.11 on 30th November. The interest rates too are on an upward trend with TB rates are on the verge of touching 14%.
The recently announced corporate results are disappointing with plantation companies leading biggest losers. Except for banking sector, the rest are on a recessive tone.
Upcoming elections have already sparked off the competition with the event being a test for the government. This is likely to create uncertainty in the investors’ mind on the future.
Despite the negative factors, we still do believe that the current market sentiment influenced by discussion about peace will push to the indices further up. The All Share index may touch 600 before the end of the year with good picks being Dockyard, Tokyo Cement, DFFC, Commercial Bank, Grain Elevators while Asia capital and Hayleys are recommended for long term investments.
MMBL Group Research For MMBL Philip Securities Ltd.
