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Business


The market experienced a full scale bear run during the four market-day week while retailers were on the sideline. All Share Price Index (ASPI) shed 40.3 points WoW to 1,694.1 while more sensitive Milanka Price Index (MPI) reported a loss of 69.8 points WoW to close at 1,773.9. Negative outlook of corporate earnings hampered the investor sentiment despite the positive developments on the northern battle front. The government intervention to reduce interest rates and strategies to pump liquidity to the banking system did not have a positive impact on the Colombo bourse.

Average daily turnover for the week was Rs.188.5mn. Foreigners ended the week as net sellers of Rs.42.9mn while contributing 16.8% to the total market activity.

On Tuesday, the first trading day of the week, market closed on negative grounds with ASPI loosing 7.5 points to close at 1,726.9 and MPI plunging 9.8 points to end at 1,833.8. Thin volumes and low activity levels were witnessed during the day. John Keells Holdings registered the highest turnover for the day of Rs.11.6mn while total market turnover for the day amounted to Rs.65.6mn.
Market continued its negative momentum on Wednesday where ASPI dropped 20.6 points to 1,706.3 and MPI decreased 45.2 to 1,788.7. Activity levels remained low throughout the day. Ceylinco

Insurance injected Rs.31.5mn as the highest turnover of the day while total market turnover amounted to Rs.106.3mn.
Yet again, the market ended in red on Thursday reporting further losses for both the indices. ASPI dropped marginally by 7.7 points to stand at 1,698.6. MPI plunged 9.2 points to close at 1,779.5.

Substantial volumes changed hands in Union Assurance (crossing of 1,299,000 shares @ Rs.72.0), John Keells Holdings (crossing of 500,000 shares @ Rs.60.0), Commercial Bank (crossing of 300,500 shares @ Rs.85.75) and Aitken Spence pumped up the day’s turnover to high Rs.275.3mn.

On Friday, the last trading day of the week, market ended flat while ASPI declined marginally by 4.5 points to 1,694.1 and MPI dropped 5.6 points to 1,773.9. Two crossings in Ceylinco Insurance
(1,418,444 shares @ Rs.166.0) boosted the day’s turnover to Rs.306.9mn. A crossing recorded in Sampath Bank (143,000 shares @ Rs.70.0 ) and relatively large volumes of John Keells Holdings were also notable during the day.

 

Economic crisis hits Dankotuwa Porcelain

By Indika Sakalasooriya
Global economic turmoil has taken its pound of flesh from Dankotuwa Porcelain as the company yesterday revealed that one of its major US buyers has ceased placing orders.

The company in a stock exchange filing said Crate and Barrel of USA who has been doing business with the company since 1998, have stopped placing orders with the company with effect from March 2009.
It further said during the past 3 years, on average they have purchased goods to the value of USD 1 million per annum, and for 2008 Crate and Barrel amounted to approximately 9% of the export turnover.

As stock market analysts point out, Dankotuwa had been exporting white ware to Crate and Barrel over a decade. Though the margins for white ware were not very attractive, the company had been exporting great volumes.
However according to company sources majority of its US exports are sent to a US retail chain called Macys.
Dankotuwa also exports designed ware to the US and EU markets at a premium.

According to stock market analysts around more than 30 percent of Dankotuwa Porcelain’s exports go to the US market while another 44 percent and 6 percent go to European Union and Japan respectively.

The company also exports some selected products to Russia, India and Ukraine.
Dankotuwa made a rights issue of 22.6 million ordinary shares in April 2008 to settle its short term debts and also went for a share consolidation in the mid part of 2007.

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It’s service with a smile as usual at Waters Edge

Waters Edge - the venue that created a bench mark in the hospitality industry has announced its plans for the organisation’s maintenance and growth.

‘Waters Edge’, which is currently managed by ‘Waters Edge Limited’ with a new Board of Directors headed by the Chairman - Dr. Prathap Ramanujam, who also serves as Secretary to the Ministry of Urban Development & Sacred Areas, now operates under the auspices of the Urban Develoment Authority ( UDA).

The Board of Directors appointed by the Supreme Court includes the following prominent business personnel some of who are well known to the hospitality and banking industry supported with design consultants and they are Hiran Cooray - Chairman - Jet Wing Hotels & Resorts, Prema Cooray - Head of Sri Lanka Conventions Bureau, Kirmali Fernando - Chief Executive Officer - Pan Asia Bank Corp., S. G. Gardiner - Chairman - Galle Face Hotel, Sugath Karunanayake - prominent Attorney-at-law and Ismeth Rahim - well known Architect.

The Board, has pledged its fullest support and keen interest in the future business plans of the facility.
With a large expanse of land of over 200 acres, Waters Edge will now use the water retentive golf course area to convert it to an ecologically conducive environment.

It is believed this process of ecological balance would promote the natural spread of both fauna and flora, whilst acting as a water retention basin for the areas surrounding Battaramulla.

Waters Edge will continue to offer its customers the exclusive products and services it has been famed for. Its kitchens will continue to emanate the familiar and welcoming aroma of baking of the finest of cakes and pastries. At its restaurants, the stewards will proudly wheel in the most elaborate A La Carte meals, making the simplest dish a work of art, making every meal a gastronomic delight to the customer.

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Parakrama to address TOC ASIA – Shenzhen

Dr. Parakrama Dissanayake – Chairman, Aitken Spence Maritime and Director, Aitken Spence Group, has been invited to address the prestigious Terminal Operators Conference (TOC Asia), the largest global annual event in the Ports Industry, which will be held in Shenzhen from March 3- 5, 2009.

Amongst those who will address the Conference are: Dr. Sun Jiakang, Managing Director COSCO Container Lines, John Elliott, CEO – Asia Container Lines Ltd., Ken Soerensen – President, United Arab Shipping Company.

Dr. Dissanayake who has served on the UN/UNCTAD Panel as an expert on Ports and Shipping, has in the past held the positions of Chairman – Sri Lanka Ports Authority, Chairman – Jaya Container Terminals, Chairman – Chartered Institute of Logistics and Transport, Chairman – Institute of Chartered Shipbrokers – Sri Lanka Branch.

Dr. Dissanayake is also Chairman Central Advisory Board of Sri Lankan Transport Board and is the Co-Chairman of the Transport Cluster of the National Council for Economic Development.

He has also been conferred with the Lifetime Distinguished service to society Award by PIMMA of the University of Sri Jayawardenapura and Best Shipping Personality Award by the Institute of Chartered Shipbrokers.

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AIVA PLC reports significant growth, Global, Life sales for 12 months, 2008

Aviva PLC, the fifth largest insurance group in the world which acquired the controlling interest in Eagle Insurance PLC in 2006, has reported significant growth in Global long-term savings sales and Life and pensions sales in 2008; Today Aviva is the biggest insurer in the UK. The group has 57,000 employees serving 45 million customers worldwide with more than GBP 359 billion of assets under management.

• Sales have continued to grow
- Global long-term savings sales up 1% to £40.3 billion (down 7% on local currency basis)
- Life and pensions sales up 11% to £36.3 billion (up 2% on local currency basis)
- Sales figures reported on Market Consistent Embedded Value (MCEV) basis for the first time

• Strength from our geographic spread and range of distribution
- UK: highest ever life and pensions sales at £11.9 billion
- Europe: life and pension sales up 8% to £17.0 billion, buoyed by strength of the euro (down 7% on local currency basis)
- North America: target to double sales in three years achieved a year ahead of plan, up 57% (up 45% on local currency basis)
- Asia Pacific: life and pension sales up 8% (down 1% on local currency basis) - led by 66% growth in China (up 40% on local currency basis)

• Capital and liquidity position remains strong
- Consistent strategy through global crisis has ensured the financial health of Aviva
- Estimated £2.0 billion IGD surplus as at 31 December 2008
- Strong liquidity position maintained
- Group dividend policy remains unchanged

Aviva’s Chief Executive, Andrew Moss commented:
“In a year of unprecedented turbulence, our sales have continued to grow. Operating across 27 markets with a range of products and varied distribution has served us well, and has brought us an additional real benefit from currency appreciation. Growth in developing economies such as Asia and central and eastern Europe has offset difficult conditions in more mature markets such as Ireland and Italy. Our capital position remains strong and Aviva continues to be attractive to customers seeking security for their long-term savings. Our priorities are to maintain our financial strength and continue to transform Aviva for the benefit of customers and shareholders.”

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A.P.S Knitters awarded 150 9001/2000 int’l certification

A. P. S. Knitters (Pvt) Ltd a leading textile manufacturing institution in Sri Lanka was awarded 150 9001/2000 international certification recently. Picture shows the managing director of the firm, Kaushalya Samarasinghe receiving the certificate from the Minister of Industries Kumara Welgama. Director Deepani Samarasinghe too was present on the occasion

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A Guide to equity investment part 3

Balance Sheet

After gaining a sound knowledge about the company after going through the profit and loss account it is necessarily important to understand the financial position of the company. Balance Sheet is a statement of financial position and reveals a company’s assets, liabilities and the capital structure (including the owners’ equity) at the end of a given accounting period.

In a Balance Sheet, assets and liabilities are mainly categorised in to two segments as Short-term and Long-term. Assets are classified based on the life span and liabilities are segmented based on the due period. Current assets have a life span of one year or less and assets that have a more than one year life span is called Long-term assets. Liabilities that must be paid within one year is called short-term liabilities and liabilities that will be payable after one year are categorised as Long-term liabilities. Entries in a balance sheet are arranged to the level of liquidity where least liquid asset is recorded first and most liquid asset is recorded last. For instance, Land and Property is recorded first and Cash and Cash Equivalents are recorded last.

In addition balance sheet also displays the capital structure of the company and the amount of reserves maintained by them. Stated Capital is the funds collected from the equity holders (includes share capital and share premium). In financial accounting Preference shares and Debentures are categorised as debt capital since the cost of funds (dividend and interest) are fixed, which is similar to obtaining a loan.

Ratios

Most of the important investor ratios are based on the balance sheet figures. Gearing ratios, Liquidity ratios and other important investor ratios based the balance sheet entries.

Gearing Ratios demonstrate the degree to which a company’s activities are funded by borrowings or debt. Debt is considered as all interest and non-interest bearing borrowings (this includes both short and long term borrowings, debentures and preference shares). Conventionally, gearing ratio demonstrates the total debt of the company as a percentage of the total capital (Gearing ratio = Debt Capital / Debt + Equity Capital).

As an equity investor, when considering the gearing position, the best practice is to calculate the Net debt to Equity to understand the debt position of the company exclusively from an equity point of view (Net Debt to Equity = (Total interest and non interest bearing borrowings – Cash and cash equivalent) / Share Holders Funds).

Liquidity Ratio evaluates the ability of the company to settle its short term liabilities using the company’s short term assets. Basically, this shows how many short term assets a company possessed to a single unit of short term liability (Liquidity ratio = Current Assets / Current Liabilities). The adequate level is said to be two assets for one liability.
Return on capital employed (ROCE) measures the returns that a company has generated from its capital employed (ROCE = Operating profit / debt and equity capital employed). This can be used to assess whether a business generates enough returns for its investors.

Return on assets (ROA) measures the returns generated by the company to its total assets invested (ROA = Operating profit / total assets). This gives an idea as to how efficient the management has managed its assets.

Book value per share (BVPS) is the amount of money that an ordinary shareholder will receive if the company is ceased. It is important to note that if the assets are maintained at cost and not revalued for a reasonable time period, then the ratios will be unrealistic. Therefore it is advisable to workout the present market value of the company’s assets to identify the Net Assets Value in order to understand the actual position of the equity holder in a case of liquidation.

After a careful analysis of the Balance Sheet and respective ratios it is vital to compare the company’s financial position with industry averages and competitors. This will help you to gain insight in to a company’s competitiveness and ability to survive and face the potential challenges. Furthermore, returns can be compared easily with other alternatives to select better investment opportunities.

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High powered BOC delegation visit Jaffna

A high powered team of senior officials of the Bank of Ceylon, visited Jaffna to make a preliminary assessment of the rehabilitation process and development work to be carried out in the Northern Province.
They will have discussions with government officials, bank staff, representatives of NGO’s, social workers, to offer assistance for rehabilitation and development work in the area. The delegation will also take this opportunity to meet the IDP’s to assess their needs and provide possible assistance.

The Bank delegation is headed by M Kiritharan, Chief Legal Officer,C Samarasinghe, Deputy General Manager(Product & Development Banking), H M A B Weerasekara, Deputy General Manager (International & Treasury) and W D F Wimalaratne, Deputy General Manager (Human Resources Development) and N Sivaratnam, Assistant General Manager (Northern province) is co-ordinating the arrangements, and scheduling the meeting and the visits of the delegation

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