14 21gpgppivg Morning Notes 14 October 2014 Market Diary ASI Outlook (based on charts) Today: Acme Printing & Packaging - Right Issue – Provision of allotment Industrial Asphalts (Ceylon) - Dividend payment date (LKR 3.00 per share) Tomorrow: Acme Printing & Packaging - Right Issue – XR date Samson International - Capitalization of Reserves - Allotment Corporate Announcements Renuka Holdings – Right Issue: Number of shares to be issued - 44,517,313 ordinary voting shares & 6,428,415 ordinary non-voting shares. Proportion in which shares to be issued - 01 new ordinary voting share for every existing 01 ordinary voting share and 01 new ordinary non-voting share for every existing 01 ordinary non-voting share. Consideration for which shares to be issued – LKR 21.00 per ordinary voting share LKR 15.00 per ordinary non-voting share Current stated capital of the company – LKR 175mn Purpose of which proceeds of the issue are to be utilized – Investment in property development at Colombo 03. Mercantile Investments & Finance – Debenture Issue of LKR 200mn: 2mn senior, unsecured redeemable rated debentures at an issue price of LKR 100.00. Issue Rating – BBB+ (Lanka Rating) Issuer Rating – BBB+ (Lanka Rating) Date of opening of the subscription – 30th October 2014 Date on which the prospectus would be delivered – 20th October 2014 Bimputh Finance – USD 750,000 loan received from Incofin IM’s Rural Impulse Fund: On 29th September 2014, the company received a loan of USD 750,000 (approx. LKR 98mn) from Incofin IM’s Rural Impulse Fund S.A. SICAV-FI, Luxemburg. The funds will be used to expand the micro finance operations of the company. Industrial Asphalts (Ceylon) – Mandatory offer – Extending the offer period: An extension of acceptance period of the mandatory offer made by Mr.G.Ramanan by 7 days due to the delay of independent advisors to forward the views, comments and advice on the offer document. Therefore the offer period will be extended for a further period of 7 days from 13th October 2014. Dealings by Directors Company Director Purchase The Lightshouse Jetwing Hotels Hotel Management Softlogic Capital A.M.Pasqual Vallibel Finance S.B.Rangamuwa Sale Lanka Century Inv. – Caledonian W0006 Securities Ltd Dialog Axiata Dialog Axiata ESOP Royal Ceramic Lanka A.M.Weerasinghe Date 09 Oct Quantity Price (LKR) 299 60.00 01 Oct 09-10 Oct 11,000 20,000 7.60 46.00-47.40 02-07 Oct 7,071,858 0.40-0.60 03-07 Oct 10 Oct 141,968,962 12.50 113.00 350,000 Local Business News Sri Lanka’s DFCC is to become a public limited company: Sri Lanka’s Government presented a Bill in Parliament on 10th October 2014 that provides for the registration of DFCC Bank as a public limited company incorporated under the Companies Act with the name DFCC Bank PLC (Company). The bill will become law once parliament passes it and it is certified by the Speaker, the company says in a stock announcement. The proposed law will enable the company to come into being on a date to be specified and continue to carry on its business as a licensed specialized bank without any interruption. The Bill provides for all assets, liabilities, rights, obligations and contract of DFCC Bank including those relating to all borrowings, securities issued, deposits, lending, investments, shares issued, services, undertaking of government relating to foreign exchange risk cover, directors and employees to seamlessly transfer to and vest in the company. Further disclosure will be made in due course as matters progress. (LBO) Fitch affirms Seylan Bank at ‘A-(lka)’; Outlook Stable: Fitch Ratings Lanka has affirmed Seylan Bank National Long-Term Rating at ‘A-(lka)'. The outlook is stable. Fitch has also affirmed Seylan's senior unsecured debentures at ‘A-(lka)’ and subordinated debt at ‘BBB+(lka). Seylan's rating is driven by Fitch's view that the Sri Lankan state (BB-/Stable) 30 would provide extraordinary support to the bank, in case of need, because of its systemic importance. The Sri Lankan regulator has identified Seylan as one of six systemically important domestic banks. However, the state's ability to support the bank, if needed, is limited as reflected in the sovereign's ‘BB-’ rating. (DN) Comments (short term trend): ASI is trading near a moderate resistance level. Several other technical indicators suggest a possible consolidation in the near term. Cautions approach is advised. ASI - Pivot Points Previous day’s close Pivot Point R1 R2 ASI - Moving Averages 07 day 14 day 21 day 7,184.22 7,232.31 7,291.99 7,399.77 7,334.01 7,290.46 7,259.83 S1 S2 7,124.53 7,064.85 50 day 100 day 200 day 7,093.08 6,773.59 6,411.38 Short-term Technical Indicators RSI 46 MACD The MACD line has crossed the signal line from above. Global Equity Indices S&P 500 (USA) FTSE 100 (UK) NIKKEI 225 (Japan) Shanghai Comp (China) BSE Sensex (India) KSE All (Pakistan) MSCI frontier markets MSCI emerging markets Index 1,874.74 6,366.24 15,079.23 2,380.14 26,384.07 30,394.41 686.94 989.87 Change -31.39 +26.27 -221.32 +14.13 +86.69 +235.78 -4.62 -18.46 % Change -1.65 +0.41 -1.45 +0.60 +0.33 +0.78 -0.67 -1.83 Global Business News WTI Extends Decline From 22-Month Low as Supply Gain Seen: West Texas Intermediate extended its rout from the lowest price in 22 months amid speculation that rising U.S. stockpiles are exacerbating a global glut that’s driven prices into a bear market. Brent fell in London. Futures dropped as much as 1.1 percent in New York, declining for the fifth time in six days. U.S. crude stockpiles probably expanded by 2.5 million barrels last week to 364.2 million, according to a Bloomberg News survey before a report from the Energy Information Administration on Oct. 16. That would be the highest level in two months. (Bloomberg) Copper Trades Near Week High Before European Industrial Output: Copper traded near the highest level in a week and nickel rose before euro-region industrial data that may show output is shrinking. Copper was little changed after rising yesterday to the highest since Oct. 6, while nickel rose 0.3 percent. Industrial output during August in countries that share the euro fell 1.6 percent from the previous month, when it expanded by 1 percent, according to a survey of economists by Bloomberg News before the data today. (Bloomberg) Gold Holds Near Four-Week High as Rates Outlook Weakens Dollar: Gold traded near the highest level in almost four weeks as speculation the U.S. Federal Reserve may delay raising borrowing costs on slowing global growth hurt the dollar and boosted demand for a store of value. Gold for immediate delivery traded at $1,234.55 an ounce at 11:22 a.m. in Singapore from $1,235.87 yesterday, when it rose to $1,237.86, the highest level since Sept. 17, according to Bloomberg generic pricing. The metal advanced after Fed Vice Chairman Stanley Fischer said on Oct. 11 that the central bank may remove accommodation more slowly than otherwise should the pace of overseas growth be weaker than expected. (Bloomberg) Morning Notes Local Business News Sathosa Motors AGM postponed: The Annual General Meeting (AGM) of SML Sathosa Motors Company Plc was compelled to be postponed due to the unavailability of audited figures of its subsidiary companies under the group. The company's second largest shareholder Pinsiri Fernando told the Daily News Business that the company is making money but the management company Access Group failed to submit audited figures of its subsidiary companies. (DN) Sri Lanka big businesses should link with SME’s: Chamber: Sri Lanka’s small and medium enterprises are encouraged to partner with big companies, so they could take advantage of consumer market and finance. “A request to big business, Build strong, sustainable supply chain linkages with the SME sector,” Suresh Shah, Chairman of Ceylon Chamber of Commerce said. “Do more business with SME’s and also help build capacity and transfer knowledge,” “Strive for a win – win relationship rather than negotiate for the last rupee.” Shah said the SME sector, which is the backbone of the rural economy, must be transformed into an integral part of the supply chain within the country. It is estimated 75% of all enterprises fall into the SME category in Sri Lanka and 45% of country’s employment represent by SME’s. (LBO) BBm invests US$ 50m on quartz refining: Blue Bay Mineral International Private Limited (BBM) will be investing over US$ 50 million to set up a second plant to refine and process quartz powder to 99.99%. This will be in collaboration with one of the world’s leading computer giants, Asus computer of Taiwan and another German Company. The investments will come in two stages. Currently a ton of Quartz Powder refined to 99.64% in the international market is valued at around US$ 600. “However after its further refined to 99.99% SIO2 standards it could fetch up to US$ 2,500 per tons and it’s a very viable investment.” Said BBM MD, K. Wickramaratne. (DN) Sri Lanka think tank highlights the need of credit rating for SME’s: Sri Lanka needs a credit rating system especially for the small and medium businesses to have easy access to finance, said Kelegama, director of the Institute of Policy Studies, a think tank. Access to finance remains a key constraint for SME’s growth, with a one trillion dollar credit gap remaining globally, statistics showed. Most of the lenders reject the proposals of SME’s due to lack of account information which lead to make a make a successful business case. “It is needed to have a credit rating system for SME’s,” he said. By assessing the capabilities and credit-worthiness more accurately through the credit rating system, banks and financial institutions are better able to manage their risk and extend more credit to SME’s. (LBO) Elevated highway from Peliyagoda to Colombo Fort: Cabinet last week approved preliminary work towards building an elevated highway from Peliyagoda to Colombo Fort to ease traffic congestion and improve mobility. As per the approval, a Memorandum of Understanding will be signed between HASS Joint Venture, Australia and the Road Development Authority to obtain detailed proposals. Plans include constructing a new bridge over the Kelani River and an elevated highway from Peliyagoda to Colombo Fort. Official sources said the project for the construction of the new bridge and its approaches has been formulated separately and is being financed by the Japan International Co-operation Agency and feasibility study and the preliminary designs for the elevated highway have already been completed with financial assistance from the Asian Development Bank. (DFT) JKH’s Waterfront to put SL on world map: Balmond: World-renowned designer and architect Cecil Balmond expressed confidence in the Waterfront, Sri Lanka’s largest private sector investment, as being an icon for the region and one that would put the nation on the world map. In an exclusive interview with the Daily FT, Balmond, designer of the newest project by John Keells Holdings said: “The Waterfront is very unique. It will be a big icon for the region and not just Sri Lanka. From an architecture and design point of view it will be a composition of several forms. It will be like nothing Sri Lanka has ever seen.” Balmond, highlighted the Waterfront is certainly a different project for the country as it would be a mini city within a city. The project is said to include an 850-bed hotel, a retail centre, conference facilities, 400 apartment units and many more components. (DFT) Healthy outlook for capital market: CSE Chairman: The Chairman of Colombo Stock Exchange Vajira Kulatilaka said the country's equity market was now in a better position to attract investors. "Overall, the country is now enjoying economic stability, political stability and social stability; the ideal background for investors to get active. The last five years has seen capital gains increase to Rs 235 billion from the stock market. Market capitalization is 30%. This shows what opportunities are available, the market will grow and more companies would list. So there are lots of hidden opportunities," Kulatilaka told a capital market forum in Colombo recently. Speaking on the banking sector consolidation and the low interest rate regime, the CSE Chairman said these would boost activity at the capital market. "The consolidation of the financial sector is crucial in order to be globally competitive. The real estate sector would also see growth with interest rates easing." (CFT) 14 October 2014 Global Business News Putin Deals China Winning Hand as Sanctions Power Rival: Defying his former enemies in the U.S. and Europe may force Vladimir Putin to aid the ascent of his biggest rival in the east. Isolated over Ukraine, Russia is relying on China for the investment it needs to avert a recession, three people involved in policy planning said, asking not to be identified discussing internal matters. This means caving in to pressure to grant China privileged access to the two things it wants most: raw materials and advanced weapons, two of the people said. (Bloomberg) Morning Notes 14 October 2014 Local Business News Rupee falls: The exchange rate (ER) depreciated by 20 Sri Lanka cents (SLc) to Rs 130.70 to the US dollar in interbank spot trading yesterday due to buying pressure by both the State, and importers, market sources said. The 'spot' is controlled at Rs 130.45 to the dollar by moral suasion by Central Bank of Sri Lanka (CBSL), so the 'spot' is merely academic, they said. Trades were therefore done at the 'spot next' price. Meanwhile, yesterday saw a minimum of Rs 25,059.6 million worth of excess liquidity creamed off on behalf of Government of Sri Lanka's (GoSL's) foreign exchange (FX) debt servicing commitments to buy the necessary FX from CBSL's FX reserves, CBSL's 'open market operations' statistics showed. According to CBSL, the daily average turnover (DAT) in the FX market in the week ended Friday (10 October, 2014) was US$ 64.36 million. Therefore, US$ 191.73 million is equivalent to 297.9% of the DAT in the week under review. (CFT) Airtel Lanka in negotiations to acquire Etisalat operations in SL Hutch also mulling sale: Global telecommunications giant Airtel is negotiating to buy the Colombo operations of Etisalat, and negotiations are taking place in the United Arab Emirates. However, Bharati Airtel Lanka Ltd., CEO Suren Gunawardena, when contacted declined to comment. "This is the reason for the UAE's telecommunications giant Etisalat being negotiated with by Airtel while simultaneous negotiations are going on with other global corporates as well," top telecommunication industry sources told the Ceylon FT yesterday. Etisalat, which is the third largest mobile operator in the Gulf, and it is believed that the Middle East operator either wants to divest its stake or team up with another player in the mobile industry where it has 21% of. (CFT) The information contained in this report, researched and compiled for purposes of information do not purport to be complete description of the subject matter referred to herein. In preparing this report care has been exercised to collect information from sources which we believe to be reliable although we do not guarantee the accuracy and completeness thereof. Lanka Securities (Pvt) Ltd. and/or its affiliates and/or its directors, officers and employees shall not in any way be responsible or liable for loss or damage which any person or party may sustain or incur by relying on the contents of this report and acting directly or in directly in any manner whatsoever. Lanka Securities Research Morning Notes 14 October 2014 Local Business News The information contained in this report, researched and compiled for purposes of information do not purport to be complete description of the subject matter referred to herein. In preparing this report care has been exercised to collect information from sources which we believe to be reliable although we do not guarantee the accuracy and completeness thereof. Lanka Securities (Pvt) Ltd. and/or its affiliates and/or its directors, officers and employees shall not in any way be responsible or liable for loss or damage which any person or party may sustain or incur by relying on the contents of this report and acting directly or in directly in any manner whatsoever. Lanka Securities Research