Political News Focus

News sources revealed that the European Parliament has recommended a total freeze on the Liberation Tigers of Tamil Eelam (LTTE) assets in the 25 member states. The Parliament has also declared that it was actively considering the formal listing of the LTTE as a terrorist organization. The landmark development follows the European Union's (EU) imposition of a travel ban on the LTTE in 2005. The 700 member assembly called on the European Commission and Member States to freeze the assets of the LTTE associated bank accounts, holdings, companies or undertakings in member states of the EU. (19.05.2006)

Corporate News Focus

Sri Lanka's leading hotel chain Aitken Spence & Company Limited (SPEN) announced that it unveiled its new brand "Heritance". SPEN further stated that Tritan Ahungalle will be officially launched as a five star plus hotel under the new name Heritance Ahungalle in June 2006, after a USD12 mn refurbishment. Kandalama Hotel will follow with its USD6 mn refurbishment as Heritance Kandalama. Whilst The Tea Factory is also being revamped to meet both HACCIP and ISO 14001 standards. In addition, 54 Villas will be constructed in the adjacent 10 acres of Heritance Ahungalle. The project titled Evanescence Hideaway is estimated to cost around USD18 mn aiming to make Heritance Ahungalle the best regional resort. (18.05.2006)

Aitken Spence & Company Limited (SPEN) stated that it is currently finalizing a deal to sub lease the Lohifushi Island Resort which is located in the North Male atoll approximately 45 minutes boat ride from Male airport. The 4 star multi facility resort paradise will be SPEN's fourth Maldivian resort. However, the new property will not come under the group's five-star hotels, currently being re-branded under the name "Heritance". In addition, SPEN is also aiming to re-brand its second tier hotels, which include the Earl's Regency and Neptune Hotels in 2007. SPEN also plans to construct a City Hotel in Sri Lanka with an estimated investment of USD90 mn. (19.05.2006)

John Keells Hotels Limited a (89.07%) subsidiary company of John Keells Holding Limited (JKH) announced that its subsidiary John Keells Maldivian Resorts Limited obtained a 15 year lease for Dhonvali Beach and Spa, which is located in the North Male Atoll for a total investment of USD21.8 mn. The 4 star resort consists of 60 water bungalows and 90 land bungalows. (17.05.2006)

" Global Finance Magazine stated that it rated Commercial Bank of Ceylon (COMB) as the Best Bank in Sri Lanka for the eighth consecutive year, followed by an in-dept evaluation of COMB's performance over the past year including its asset growth, profitability, strategic relationships, customer service, competitive pricing and innovative products. (16.05.2006)

" Arpico Plastishells Limited a subsidiary company of Richard Pieris Group (RICH) announced that it commissioned its third water tank factory in Dambulla aimed at catering to the increasing number of consumers arising from the Central and Eastern Province. (16.05.2006)

Economic News Focus

"Sri Lanka's Central Bank stated that it opted to maintain its policy rates for the fifth straight month amidst a possible bottoming out of inflation, though private sector credit demand showed little signs of abating. The repurchase rate stayed at 8.75%, whilst the reverse repurchase rate remained at 10.25%. In addition, inflation declined to 9.2% in April 2006, while point-to-point inflation rose sharply from a 23-month low of 6.4% in March 2006 to 9.2% in April 2006, following the GoSL decision to raise fuel prices for the first time since June 2005, by LKR8.00 in mid-April 2006. (15.05.2006)

Corporate News

Sri Lanka Telecom 1Q06 net profit up 42% YoY to LKR1,292 mn - BUY

Sri Lanka Telecom (SLTL) the country's only integrated telecommunications provider has reported a strong 42% YoY increase in its 1Q06 net profit to LKR1,292 mn largely driven by a healthy 43% YoY growth in earnings to LKR1,515 mn in its fixed line sector.

However SLTL's mobile arm Mobitel-Limited continued to be in negative territory with the company reporting a net loss of LKR223 mn in 1Q06 as against a net loss of LKR152 mn in 1Q05.

This is mainly due to higher operating costs (up 65% YoY - mainly due to higher promotional expenses) and higher depreciation (up 45% YoY) and interest expenses (up 58% YoY) associated with on going capacity expansion carried out by the company.

Nevertheless on a positive note Mobitel's 1Q06 revenues have increased by a strong 57% YoY mainly on the back of higher subscriber numbers.

Further with FY06 revenues forecast to grow at 49% YoY we expect Mobitel to reduce its losses by 37% YoY to a net loss of -LKR780 mn in FY06.