Acuity Stockbrokers Research | Sri Lanka Equities

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 20 Feb 2020

Indices vs. Turnover (17th Feb – 20th Feb)

ASPI Closes Flat Amid Market Volatility… Sri Lanka

Records a B-o-P Surplus in 2019… 5,900 2,950 ASPI 5,880 S&P SL20 2,910

S&P SL20

ASPI ^ 0.02% | S&P SL20 ^ 0.54% 5,860 2,870 ASPI 5,840 2,830 The Bourse ended the week… Cont. P2 5,820 2,790 5,800 2,750 17-Feb 18-Feb 19-Feb 20-Feb Foreign investors closed the week... Cont. P3 0.75 0.60 0.45

Sri Lankan equities gained ….… Cont. P4 0.30 LKR Bn) LKR

(Turnover 0.15 0.00 Economic Snapshot………… P5 17-Feb 18-Feb 19-Feb 20-Feb

KEY STATISTICS

Week ending 20-Feb 14-Feb +/- ASPI 5,830.51 5,829.21 0.02% S&P SL20 2,788.31 2,773.26 0.54%

Banks 664.54 653.93 1.62%

Capital Goods 830.26 831.53 -0.15% Food, Beverage & Tobacco 861.41 856.63 0.56% Consumer Durables & Apparel 921.80 969.00 -4.87% Materials 634.67 638.78 -0.64% Diversified Financials 872.01 885.14 -1.48% Turnover (LKR Bn) 1.80 2.21 -18.89% Foreign Buying (LKR Mn) 242.15 499.50 -51.52% Foreign Selling (LKR Mn) 364.62 851.01 -57.15% Daily Average Turnover (LKR Bn) 0.45 0.44 1.39% Daily Average Foreign Buying (LKR Mn) 60.54 99.90 -39.40% Daily Average Foreign Selling (LKR Mn) 91.15 170.20 -46.44%

TOP 10 GAINERS TOP 10 LOSERS

Opening Closing WoW % Opening Closing WoW % Company Code Company Code Price Price Change Price Price Change TESS AGRO[NON-VOTING] TESSX 0.4 0.5 25.0% S M B LEASING SEMBN 0.5 0.4 -20.0% CITRUS LEISURE REEFN 9.7 11.5 18.6% SINGHE HOSPITALS SERVN 1.7 1.5 -11.8% RADIANT GEMS RGEM 18.0 21.2 17.8% TANGERINE TFILN 42.8 38.7 -9.6% BLUE DIAMONDS BLUEN 0.6 0.7 16.7% MAHAWELI REACH HPL N 14.3 13.0 -9.1% MULLERS MULLN 0.8 0.9 12.5% HORANA LALUN 21.9 20.0 -8.7% BROWNS BEACH BBH N 9.4 10.4 10.6% HOTEL SIGIRIYA KVALN 56.8 52.0 -8.5% AGALAWATTE AGALN 14.4 15.9 10.4% TEEJAY LANKA HDFCN 40.7 37.6 -7.6% ON'ALLY ONALN 30.1 33.2 10.3% ASIA ASSET SLNDN 8.0 7.4 -7.5% SERENDIB HOTELS SHOTN 20.8 22.9 10.1% SINGER SRI LANKA GHLLN 34.6 32.2 -6.9% VIDULLANKA VLL N 4.6 5.0 8.7% HATTON KHL N 5.9 5.5 -6.8%

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 20 Feb 2020

Market Review

Indices | Liquidity (in Volume Terms) | The Bourse ended the week on a positive note as the The Capital Goods Industry Group dominated the ASPI increased by 1.30 points (or +0.02%) to close at market in terms of share volume, accounting for 28.41% 5,830.51 points, while the S&P SL20 Index also (or 20.15Mn shares) of total volume, with a value increased by 15.05 points (or +0.54%) to close at contribution of LKR 0.51Bn. The Food Beverage & 2,788.31 points. Tobacco Industry Group followed suit, adding 25.77% to total turnover volume as 18.28Mn shares were Turnover & Market Capitalization | exchanged. The Industry Group’s volume accounted for Access Engineering was the highest contributor to the LKR 0.28Bn of total market turnover value. The week’s turnover value, contributing LKR 0.30Bn or Consumer Durables & Apparel Industry Group meanwhile, contributed 8.52Mn shares (or 12.02%), 16.69% of total turnover value. Teejay Lanka followed suit, accounting for 14.49% of turnover (value of LKR amounting to LKR 0.28Bn. 0.26Bn) while Commercial Bank contributed LKR 0.21Bn to account for 11.57% of the week’s turnover. Top Gainers & Losers | Total turnover value amounted to LKR 1.80Bn (cf. last Tess Agro [NV] was the week’s highest price gainer; week’s value of LKR 2.21Bn), while daily average increasing 25.0% W-o-W from LKR0.40 to LKR0.50 turnover value amounted to LKR 0.45Bn (1.39% W-o- while Citrus Leisure (+18.6% W-o-W), Radiant Gems (+17.8% W-o-W) and Blue Diamonds (+16.7% W-o-W) W) compared to last week’s average of LKR 0.44Bn. Market capitalization meanwhile, increased by 0.02% were also amongst the top gainers. W-o-W (or LKR 0.62Bn) to LKR 2,715.49Bn cf. LKR 2,714.88Bn last week. SMB Leasing was the week’s highest price loser; declining 20.0% W-o-W to close at LKR0.40. Singhe Liquidity (in Value Terms) | Hospitals (-11.8% W-o-W), Tangerine (-9.6% W-o-W) The Banks Industry Group was the highest contributor and Mahaweli Reach (-9.1% W-o-W) were also amongst to the week’s total turnover value, accounting for the top losers over the week.

30.73% (or LKR 0.55Bn) of market turnover. Industry TOP 10 TURNOVERS

Group’s turnover was driven primarily by Commercial Opening Closing Value Bank, Sampath & HNB which accounted for 83.68% of Company Code the sector’s total turnover. The Capital Goods Industry Price Price (Rs. Mn) Group meanwhile accounted for 28.59% (or LKR ACCESS ENG SL AEL N 20.6 20.8 299.6 TEEJAY LANKA TJL N 40.7 37.6 260.1 0.51Bn) of the total turnover value, with turnover driven COMMERCIAL BANK COMBN 85.5 90.0 207.8 primarily by Access Engineering, Hemas Holdings & JKH SAMPATH SAMPN 166.9 166.0 163.3 which accounted for 91.82% of the sector turnover. The HNB HNB N 156.5 156.0 90.6 Consumer Durables & Apparel Industry Group was also HEMAS HOLDINGS HHL N 72.5 70.4 87.8 amongst the top sectorial contributors, contributing JKH JKH N 155.0 155.5 84.0 15.43% (or LKR 0.28Bn) to the total turnover, with MELSTACORP MELSN 37.1 36.0 81.8 turnover driven primarily by Teejay Lanka accounting BROWNS INVSTMNTS BIL N 5.0 5.0 65.5 CARGILLS CARGN 190.0 190.0 58.8 for 93.85% of the total turnover.

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 20 Feb 2020

Market Review (Cont’d)

Net Foreign Purchases (14 Feb-20 Feb) Net Foreign Sales (14 Feb-20 Feb) HOTEL SIGIRIYA COMMERCIAL BANK[X.0000] Volume Change ('000s) ACCESS ENG SL Volume Change ('000s) SIERRA CABL EXPOLANKA TOKYO CEMENT MILLENNIUM HOUSE LAUGFS POWER[X.0000] RICHARD PIERIS LANKEM DEV. DIALOG JKH CENTRAL FINANCE HNB HEMAS HOLDINGS SAMPATH RENUKA AGRI COMMERCIAL BANK* MELSTACORP* TEEJAY LANKA* 0 200 400 600 800 1,000 (400) (320) (240) (160) (80) - *Volume change of Dialog (9.93Mn Shares) & Union Bank (1.24Mn Shares) from 15th Nov – 22nd Nov not displayed.

Foreign investors closed the week in a net selling position with total net outflow amounting to LKR 0.12Bn relative to last week’s total net outflow of LKR 0.35Bn (+65.2% W-o-W). Total foreign purchases decreased by 51.5% W-o-W to LKR 0.24Bn from last week’s value of LKR 0.0.50Bn, while total foreign sales amounted to LKR 0.36Bn relative to LKR 0.85Bn recorded last week (-57.2% W-o-W). In terms of volume, Melstacorp & Renuka Agri led foreign purchases while Teejay Lanka & Commercial Bank led foreign sales. In terms of value, Melstacorp & Hemas Holdings led foreign purchases while Commercial Bank & Teejay Lanka led foreign sales.

Net Foreign Purchases (By Transaction Value) Net Foreign Sales (By Transaction Value)

Foreign Holding (%) Value* Foreign Holding (%) Value* Company Net Change Company Net Change 20/02/20 14/02/20 (LKR. Mn) 20/02/20 14/02/20 (LKR. Mn) MELSTACORP 25.74% 25.56% 2,154,038 77.55 COMMERCIAL BANK 27.37% 27.50% (1,223,948) (110.16) HEMAS HOLDINGS 27.04% 26.95% 521,155 36.69 TEEJAY LANKA 47.05% 47.36% (2,167,808) (81.51) CENTRAL FINANCE 15.47% 15.33% 308,867 30.70 SAMPATH 20.14% 20.25% (389,694) (64.69) HUNTERS 88.90% 88.09% 41,650 15.49 HNB 34.01% 34.06% (180,842) (28.21) CARGILLS 7.48% 7.46% 50,000 9.50 JKH 44.99% 44.99% (82,157) (12.78) RENUKA AGRI 6.49% 6.32% 979,088 2.74 COMMERCIAL BANK[X.0000] 19.87% 19.94% (42,915) (3.36) HOTEL SIGIRIYA 3.76% 2.90% 50,610 2.63 TOKYO CEMENT 21.99% 22.01% (47,043) (1.93) L O L C HOLDINGS 4.21% 4.21% 16,163 2.33 CHEVRON 18.90% 18.91% (25,200) (1.84) BAIRAHA FARMS 3.60% 3.51% 15,000 1.55 SUNSHINE HOLDING 52.82% 52.83% (19,087) (0.86) DIALOG 93.83% 93.83% 101,785 1.28 REGNIS 1.63% 1.71% (9,500) (0.83)

Note: *Value based on closing price and not on actual traded price Please note that the foreign shares data displayed above include private transfers done outside of the market.

Foreign Purchases Vs. Sales Week Ending Net Position of Foreign Holdings 300 0 Foreign Purchases Foreign Sales 240 -250

180 -500 LKR. Mn LKR. 120 Mn LKR. -750

60 -1,000

0 -1,250 17-Feb 18-Feb 19-Feb 20-Feb 31-Jan 7-Feb 14-Feb 20-Feb

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 20 Feb 2020

Announcements for the Week

Dividend Announcements

Company DPS (Rs.) Type XD Date CEYLON COLD STORES 12.00 First Interim 27-02-2020 NATIONAL DEVELOPMENT BANK 2.00 First & Final 28-02-2020 OVERSEAS REALTY (CEYLON) 1.25 First & Final 29-04-2020 DFCC BANK 2.50 First & Final 31-03-2020 DIALOG 0.53 First & Final Dates to be Notified

Company Proportion Shares to be Issued Type

DFCC BANK 1:168.20 1,808,494 Scrip NATIONAL DEVELOPMENT BANK 1:20.46 10,837,475 Scrip

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 20 Feb 2020

Point of View Sri Lanka Records a B-o-P Surplus in 2019

Sri Lankan equities gained marginally (1.3 index points) over the Sri Lanka’s trade deficit narrowed significantly in 2019, with the holiday-shortened week amid persistent volatility as trade deficit falling to $8Bn relative to a deficit of $10Bn in 2018. developments with regard to the coronavirus and the country’s The decline was driven by a sharp contraction in imports, which political landscape continued to sway market sentiments. On fell 10% Y-o-Y amid import curbs on personal vehicles (down Monday, the broad share index fell ~15 points as selling pressure 48.2% Y-o-Y) and Gold (down 99.4% Y-o-Y) and lower fuel continued amid data that showed that manufacturing and service imports (down 6.3% Y-o-Y). Nevertheless, Sri Lanka’s earnings activity in Jan’20 slowed due to supply disruptions arising from from exports remained largely flat over the year (+0.4% Y-o-Y) as the coronavirus outbreak in China. However, some buying interest earnings from the country’s largest industrial export Apparel returned to the market on Tuesday and Wednesday as investors grew just 5.2% Y-o-Y over the year. In terms of service inflows sought out undervalued stocks after last week’s ~113 point meanwhile, Tourist receipts over the year fell 18% Y-o-Y (amid decline on the index while news that the rate of new coronavirus the disruption to the country’s Tourism sector post the Apri’19 infections in China has slowed also supported market sentiment. Easter Terror attacks) while Worker’s Remittances fell 4.3% Y-o-Y Buying interest in select banking sector stocks and blue chips amid geo-political tensions in the Middle-East. Financial flows to consequently led the ASPI to pare down earlier losses and the short-term debt and equity instruments also remained weak over index gained ~34 points over the 2 trading days. However, the the year, with net outflows from the CSE amounting to $35Mn (cf. positive momentum in domestic equities was short lived as selling outflow of $55Mn in 2018) and inflows to Government Bill/Bond pressure returned to the market once again amid an markets falling 16% Y-o-Y to $596Mn. Meanwhile, long term non- announcement by the Prime Minister that Sri Lanka is to debt creating inflows in the form of FDI’s contracted a sharp 53% withdraw from UNHRC resolution and the GoSL’s withdrawal of a Y-o-Y to $772Mn in 2019 relative to $1.6Bn in 2018. Despite the motion to amend the vote-on-account. Consequently, the Index weaker service and financial flows to the country, Sri Lanka’s shed ~17 points on Thursday to close at 5,830.51 points. Balance-of-Payments (B-o-P) position over the year improved Meanwhile, activity levels on the Colombo Bourse remained notably, switching from a deficit to a surplus position over the relatively unchanged with average daily turnover for the week year. The B-o-P for 2019 consequently rose to a surplus of amounting to Rs. 0.45Bn (cf. Rs. 0.44Bn last week). Local HNI and $377Mn relative to last year’s deficit of $1.1Bn. The improvement Institutional activity improved to some extent this week as in the country’s B-o-P position was driven primarily by the crossings for the week accounting for 11% of total market inflows from the $4.4Bn of international sovereign bond (ISB) turnover (cf. last week’s 6%). Investor buying interest was mainly issuances and helped the improvement in the trade deficit. The focused on AEL, SAMP, COMB, CFIN and HHL. Meanwhile, improved B-o-P position in turn, helped support the LKR over foreigners were net sellers this week albeit at a slower pace with a 2019, resulting in the LKR appreciating 0.6% against the USD over net foreign outflow of Rs. 0.12Bn (cf. net outflow of Rs. 0.35Bn last the year. So far in 2020, the LKR has appreciated a further +0. 1% week). Markets in the week ahead are likely to look for cues from against the USD, +3.5% against the Euro, +0.7% against the GBP, i) ongoing earnings releases and ii) economic and political +1.2% against the JPY and +0.4% against the Indian Rupee. developments.

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 20 Feb 2020

Economic Snapshot

Mar’19 Apr’19 May’19 Jun’19 Jul’19 Aug’19 Sep’19 Oct’19 Interest Rates Prime Lending Rate 12.23 12.07 12.01 11.45 10.93 10.69 10.57 10.42 Ave. Wtd. Deposit Rates 8.98 8.97 9.00 8.94 8.88 8.73 8.51 8.37 Ave. Wtd. Fixed Dep. Rates 11.11 11.15 11.19 11.07 10.97 10.74 10.46 10.27 CCPI Inflation Y-o-Y % (Base 2013) 4.3 4.5 5.0 3.8 3.3 3.4 5.0 5.4

2012 2013 2014 2015 2016 2017 2018 GDP Growth (Base 2010) 9.1% 3.4% 5.0% 5.0% 4.5% 3.4% 3.2% Source Central Bank

Exchange Rate, Rs. vs. US$ Inflation (CCPI-N) YoY%

10.0 190.0

8.0 176.0

162.0 6.0 CCPI

Rs /USD Rs 148.0 4.0

134.0 2.0

120.0 0.0 Oct-14 Oct-15 Oct-16 Oct-17 Oct-18 Oct-19 Apr-16 Dec-16 Aug-17 Apr-18 Dec-18 Aug-19

Source: Central Bank Source: Central Bank

6 Month T-Bill Yield Tea Prices

12 700

11 640

10 580

9 520

Bill (6M ) Rate (%) Rate (6M ) Bill

- T

8 460 Rs. Per kilo(Average ) kilo(AveragePer Rs.

7 400 Sep-16 Jun-17 Mar-18 Dec-18 Sep-19 Oct-16 Jul-17 Apr-18 Jan-19 Oct-19

Source: Central Bank Source: Sri Lanka Tea Board

Export & Trade Balance Trends in Tourist Arrivals

2000 600 Trade Balance (USD Mn 300,000 70%

1600 200 240,000 40% Y

- 1200 -200 180,000 10% Y Growth

800 -600 120,000 -20% Total Arrivals Total

400 -1000 ) 60,000 -50% Exports /Imports (USD Mn) (USD /Imports Exports 0 -1400 0 -80% Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Aug-16 May-17 Feb-18 Nov-18 Aug-19 Exports (LHS) Imports (LHS) Trade Balance (RHS) Source: Central Bank Source: Sri Lanka Tourism Development Authority

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