ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 10 March 2017

HNI & Institutional Investors Dominate Market Indices vs. Turnover (06th Mar – 10th Mar) Activity … Cumulative 9M Results Up 20% Y-o-Y 6,150 ASPI 3,580 S&P SL20 6,130 3,560 ASPI v 0.27% | S&P SL20 v 0.80% S&P SL20

6,110 3,540 ASPI 6,090 3,520 The Bourse ended in… Cont. P2 6,070 3,500 6,050 3,480 Foreign Investors Closed the Week in... Cont. P3 06-Mar07-Mar08-Mar09-Mar10-Mar

1.5 Institutional and HNI interest continued … Cont. P5 1.1 0.8

LKR Bn) LKR 0.4 Economic Snapshot………… P6 (Turnover 0.0 06-Mar 07-Mar 08-Mar 09-Mar 10-Mar

KEY STATISTICS

Week ending 10-Mar 03-Mar +/- ASPI 6,084.99 6,101.51 -0.27% S&P SL20 3,496.58 3,524.77 -0.80% Banking & Finance -1.98% 14,975.39 15,277.88 Food & Beverage 21,396.37 21,207.46 0.89% Diversified 1,532.23 1,546.04 -0.89% Hotel & Travel 2,935.27 2,935.66 -0.01% Plantations 678.38 674.62 0.56% Manufacturing 4,225.32 4,283.44 -1.36% Turnover (LKR Bn) 3.90 6.13 -36.35% Foreign Buying (LKR Mn) 2,500.10 2,864.33 -12.72% Foreign Selling (LKR Mn) 1,342.46 1,765.80 -23.97% Daily Average Turnover (LKR Bn) 0.78 1.23 -36.35% Daily Average Foreign Buying (LKR Mn) 500.02 572.87 -12.72% Daily Average Foreign Selling (LKR Mn) 268.49 353.16 -23.97%

TOP 10 GAINERS TOP 10 LOSERS

Opening Closing WoW % Opening Closing WoW % Company Code Company Code Price Price Change Price Price Change KOTMALE HOLDINGS LAMBN 60.1 73.6 22.5% BLUE DIAMONDS[NV] BLUEX 0.4 0.3 -25.0% MULLERS MULLN 1.0 1.2 20.0% LANKEM DEV. LDEVN 2.9 2.3 -20.7% E B CREASY EBCRN 1224.0 1447.9 18.3% CEYLON PRINTERS CPRTN 61.0 50.0 -18.0% SERENDIB HOTELS[NV] SHOTX 17.0 19.9 17.1% COMM LEASE & FIN CLC N 3.0 2.5 -16.7% CIFL CIFLN 0.7 0.8 14.3% ANILANA HOTELS ALHPN 1.4 1.2 -14.3% AMANA TAKAFUL ATL N 0.7 0.8 14.3% PEOPLE'S MERCH PMB N 14.0 12.2 -12.9% PDL PDL N 72.1 82.4 14.3% CITRUS WASKADUWA CITWN 3.9 3.4 -12.8% COLD STORES CCS N 735.0 820.6 11.6% EASTERN MERCHANT EMERN 5.5 4.8 -12.7% SWARNAMAHAL FIN SFS N 0.9 1.0 11.1% CITRUS LEISURE REEFN 8.0 7.0 -12.5% LAXAPANA LITEN 9.4 10.4 10.6% ORIENT FINANCE ORINN 11.4 10.0 -12.3%

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES Weekly Market Review 10 March 2017

Market Review

Indices | Liquidity (in Volume Terms) | The Bourse ended in negative territory this week as the The Diversified Sector dominated the market in terms of ASPI decreased by 16.52 points (or 0.27%) to close at share volume too, accounting for 25.71% (or 24.05Mn 6,084.99 points, while the S&P SL20 Index too decreased shares) of total volume, with a value contribution of LKR by 28.19 points (or 0.80%) to close at 3,496.58 points. 1.43Bn. The Bank, Finance & Insurance sector followed suit, adding 22.24% to total turnover volume as Turnover & Market Capitalization | 20.80Mn shares were exchanged. The sector’s volume JKH was the highest contributor to the week’s turnover accounted for LKR 1.08Bn of total market turnover value, contributing LKR 0.585Bn or 14.99% of total value. The Telecommunication Sector meanwhile, turnover value. followed suit, accounting for contributed 15.93Mn shares (or 17.03%), amounting to 14.86% of turnover (value of LKR 0.580Bn) while NDB LKR 0.18Bn. contributed LKR 0.39Bn to account for 10.09% of the week’s turnover. Total turnover value amounted to LKR Top Gainers & Losers | 3.90Bn (cf. last week’s value of LKR 6.13Bn), while daily Kotmale Holdings was the week’s highest price gainer; average turnover value amounted to LKR 0.78Bn increasing 22.46% W-o-W from LKR 60.10 to LKR 73.60. (-36.35% W-o-W) compared to last week’s average of Mullers gained 20.00% W-o-W to close at LKR 1.20 LKR 1.23Bn. Market capitalization meanwhile, while E.B. Creasy gained 18.29% W-o-W to close at LKR decreased by 0.27% W-o-W (or LKR 7.25Bn) to LKR 1447.90. Serendib Hotels [X] (+17.06% W-o-W) and 2,672.12Bn cf. LKR 2,679.37Bn last week. CIFL (+14.29% W-o-W) were also amongst the gainers.

Blue Diamonds [X] was the week’s highest price loser, Liquidity (in Value Terms) | declining 25.00% W-o-W to close at LKR 0.30. Lankem The Diversified Sector was the highest contributor to the Dev (-20.69% W-o-W), Ceylon Printers (-18.03% W-o- week’s total turnover value, accounting for 36.53% (or W) and Commercial Leasing & Fin (-16.67% W-o-W) LKR 1.43Bn) of market turnover. Sector turnover was were also amongst the top losers over the week. driven primarily by JKH, Melstacorp & which accounted for 93.05% of the sector’s total TOP 10 TURNOVER turnover. The Bank, Finance & Insurance Sector meanwhile accounted for 27.66% (or LKR 1.08Bn) of the Opening Closing Value (Rs. total turnover value with turnover driven primarily by Company Code Price Price Mn) NDB, Commercial and Sampath Banks which accounted JKH JKH N 141.7 139.9 584.9 for 79.46% sector turnover. The Beverage, Food & MELSTACORP MELSN 63.3 61.9 579.8 Tobacco Sector was also amongst the top sectorial NAT. DEV. BANK NDB N 149.0 139.9 393.8 contributors, contributing 9.54% (or LKR 0.37Bn) to the COLD STORES CCS N 735.0 820.6 288.0 market. The sector turnover was driven by Cold Stores COMMERCIAL BANK COMBN 142.0 138.0 275.9 which accounted for 77.38% of the sector turnover. SAMPATH SAMPN 271.0 270.0 187.7 DIALOG DIALN 11.1 11.1 182.1 HEMAS HOLDINGS HHL N 108.5 108.0 161.3 RENUKA HOLDINGS RHL N 20.0 19.5 134.8

TEEJAY LANKA TJL N 38.9 37.5 100.7

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES Weekly Market Review 10 March 2017

Market Review (Cont’d)

Net Foreign Purchases (03 Mar-10 Mar) Net Foreign Sales (03 Mar-10 Mar)

ROYAL CERAMIC Volume Change ('000s) COM.CREDIT Volume Change ('000s) HNB SLT SERENDIB HOTELS A.SPEN.HOT.HOLD. NATION LANKA AHOT PROPERTIES TOKYO CEMENT SINGER SRI LANKA HEMAS HOLDINGS CHEVRON COMMERCIAL BANK ACCESS ENG SL MELSTACORP KEELLS HOTELS EXPOLANKA* PEOPLES LEASING DIALOG* - 620 1,240 1,860 2,480 3,100 (900) (720) (540) (360) (180) - *Volume change of (14.31 Mn shares) & Expolanka Holdings(5.50 Mn Shares)not displayed between 03rd Mar -10th Mar 2017.

Foreign investors closed the week in a net buying position with total net inflows amounting to LKR 1.16Bn relative to last week’s total net inflow of LKR 1.10Bn (+5.38% W-o-W). Total foreign purchases decreased by 12.72% W-o-W to LKR 2.50Bn from last week’s value of LKR 2.86Bn, while total foreign sales amounted to LKR 1.34Bn relative to LKR 1.77Bn recorded last week (-23.97% W-o-W). In terms of volume, Dialog Axiata and Expolanka Holdings led foreign purchases while Teejay Lanka & Peoples Leasing led foreign sales. In terms of value, Commercial Bank & Melstacorp led foreign purchases while Teejay Lanka & Chevron 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 10/03/17 03/03/17 (LKR. Mn) 10/03/17 03/03/17 (LKR. Mn) COMMERCIAL BANK 30.61% 30.44% 1,432,137 197.63 TEEJAY LANKA 45.42% 45.55% (888,792) (33.33) MELSTACORP 25.17% 24.91% 3,012,365 186.47 CHEVRON 27.24% 27.26% (49,443) (8.42)

DIALOG 94.05% 93.88% 14,308,119 158.82 PEOPLES LEASING 6.71% 6.74% (476,807) (7.58) COLD STORES 9.88% 9.70% 169,300 138.93 SINGER SRI LANKA 87.71% 87.75% (48,062) (6.82) HEMAS HOLDINGS 30.68% 30.53% 863,568 93.27 ACCESS ENG SL 6.21% 6.22% (65,500) (1.64) HNB 27.38% 27.29% 282,271 65.20 AHOT PROPERTIES 1.72% 1.72% (19,911) (1.15) TOKYO CEMENT 23.26% 23.01% 554,758 34.95 KEELLS HOTELS 0.79% 0.80% (74,799) (0.76) JKH 51.31% 51.30% 244,028 34.14 A.SPEN.HOT.HOLD. 0.87% 0.87% (14,730) (0.55) EXPOLANKA 77.30% 77.01% 5,500,848 33.01 COM.CREDIT 36.60% 36.60% (12,238) (0.53) REGNIS 3.47% 1.32% 242,346 32.72 SLT 45.02% 45.02% (13,430) (0.47)

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 1,200 750 Foreign Purchases Foreign Sales

600 900

450 LKR. Mn LKR. LKR. Mn LKR. 600 300

300 150

0 0 06-Mar 07-Mar 08-Mar 09-Mar 10-Mar 17-Feb 23-Feb 03-Mar 10-Mar Source: Colombo Stock Exchange 3

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES Weekly Market Review 10 March 2017

Announcements for the Week

Dividend Announcements Company DPS (Rs.) Type XD Date

AITKEN SPENCE PLC 1.25 Interim Dividend XD: 21.Mar.2017 AITKEN SPENCE HOTEL HOLDINGS PLC 0.50 Interim Dividend XD: 21.Mar.2017 SWISSTEK (CEYLON) PLC 1.50 Interim Dividend XD: 21.Mar.2017 JOHN KEELLS HOTELS PLC 0.10 Second Interim Dividend XD: 21.Mar.2017 TRANS ASIA HOTELS PLC 2.00 Interim Dividend XD: 21.Mar.2017 SOFTLOGIC CAPITAL PLC 0.50 Interim Dividend XD: 21.Mar.2017 E B CREASY & COMPANY PLC 36.00 Interim Dividend XD: 21.Mar.2017 COMMERCIAL DEVELOPMENT PLC 0.50 Final Dividend XD: 09.May.2017 L B FINANCE PLC 6.00 Interim Dividend XD: 21.Mar.2017 PLC 0.50 Second Interim Dividend XD: 20.Mar.2017 MULLER & PHIPPS (CEYLON) PLC 0.07 Interim Dividend XD: 20.Mar.2017 KOTMALE HOLDINGS PLC 13.10 Interim Dividend XD: 20.Mar.2017 C T HOLDINGS PLC 3.50 Second Interim Dividend XD: 20.Mar.2017 SOFTLOGIC LIFE INSURANCE PLC 2.16 Interim Dividend XD: 20.Mar.2017 MELSTACORP LIMITED 1.00 Final Dividend XD: 17.Mar.2017 OVERSEAS REALTY (CEYLON) PLC 1.25 First & Final Dividend XD: 27.Apr.2017 LANKA ALUMINIUM INDUSTRIES PLC 2.00 Interim Dividend XD: 17.Mar.2017 KEELLS FOOD PRODUCTS PLC 3.00 Second Interim Dividend XD: 17.Mar.2017 LAXAPANA BATTERIES PLC 0.77 Interim Dividend XD: 17.Mar.2017 J.L. MORISON SONS & JONES (CEYLON) PLC 10.00 Interim Dividend XD: 17.Mar.2017

Company Proportion Type Date

HATTON NATIONAL BANK PLC 1:73.33(V) Scrip Dividend XD: 31.Mar.2017 PLC 1:63.49(NV) Scrip Dividend XD: 31.Mar.2017

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES Weekly Market Review 10 March 2017

Point of View Cumulative 9M Earnings Rise 20 % Y-o-Y

Institutional and HNI interest continued to drive markets this Market earnings over the December 2016 quarter rebounded

week, as crossings in Blue-chips, Diversifieds and mid-caps strongly, helping push the trailing 12- month earnings of the accounted for ~52% of market turnover. Although lower than last market up by 24% Y-o- Y. Total corporate earnings1 for the quarter

week ’s ~72%, the proportion remains higher than the typical rose 28% Q-o-Q and 34 % Y-o-Y to Rs. 74Bn (cf. Rs. 58Bn in Sep’16 weekly average of ~35-40%. Investor interest was driven and Rs. 48Bn in Jun’16 quarter) driven mainly by Telcos which predominantly by JKH (25% of crossings), Melstacorp (24% of recovered from large FX losses and Banks & Finance and crossings), NDB (16% of crossings), Dialog (7% of crossings) and Diversifieds which benefitted from strong earnings performance in mid-caps such as CCS (8% of crossings), RHL (7%) and LION (3% JKH and VONE. From a cumulative 9-month2 perspective of crossings). Foreign inflows to equities which have been meanwhile, total market earnings rose to Rs. 177Bn, up 20% Y-o-Y consistent since early Feb and which have gathered pace since late from the Rs. 147Bn recorded a year ago. Robust earnings growth Feb also drove market activity over the week, helping ease losses stemmed from sectors such as Telecom, Banks & Finance and on the Index. Despite the interest from HNI, Institutional and Manufacturing although sectors such as Beverage, Food & Tobacco Foreign Investors though, the benchmark price Index fell steadily and Construction recorded losses over the period. Corporate over the week, falling below the 6100-mark for the first time in a earnings over the quarter reflect the mixed macroeconomic month. Nevertheless the pace of decline eased over the week as performance in H2’16; performance over the period has been positive earnings along with the IMF’s review and S&P’s credit mixed as the gradual improvement in growth has been ratings impacted sentiment. In its latest meeting to review its accompanied by an uptick in inflation due to the drought impact economic reform program with Sri Lanka, the IMF commended the and higher consumption-based tax increases (ie: VAT). authorities for meeting the December fiscal quantitative targets Nevertheless, the stronger earnings performance over the quarter and for progress in improving revenue collection and automating helped push the market PER lower to 12.5x relative to 14.1x in the revenue administration. The Group noted though that the comparable period in 2015 and lower than the average PER levels country’s net international reserves were short of the target as of both its Frontier Market Peers (MSCI FM Index PER : 14.4x) and some of the structural reforms were lagging behind original Emerging market peers (MSCI EM Index PER: 15.5x). The ASPI has timelines. S&P meanwhile, affirmed Sri Lanka’s B+/B' ratings while however, underperformed its peers over 2017, declining 1.7% maintaining its negative outlook due to the country’s vulnerability YTD3relative to the MSCI EM (+7.1% YTD) and MSCI FM (+5.4% to external shocks amid high external debt and low FX reserves. YTD). Markets in the week ahead are likely to remain largely driven by Institutional and HNI investors as Retailers continue to adopt a watchful stance.

Notes: 1. 97% of market 2. Jun 16-Dec ’16 for March companies and from Mar’16-Sept’16 for December companies 3. Upto 9.3.2017

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES Weekly Market Review 10 March 2017

Economic Snapshot

Jul’16 Aug’16 Sep’16 Oct’16 Nov’16 Dec’16 Jan’17 Feb’17 Interest Rates Prime Lending Rate 10.87 11.76 12.29 12.25 11.98 11.73 11.48 11.55 Ave. Wtd. Deposit Rates 7.10 7.32 7.56 7.79 8.00 8.17 8.42 8.66 Ave. Wtd. Fixed Dep. Rates 8.99 9.31 9.67 9.95 10.25 10.46 10.84 11.15 CCPI Inflation Y-o-Y % 5.8 4.4 4.2 4.1 4.0 4.5 5.5 6.8 (Base 2013) 2012 2013 2014 2015 GDP Growth (Base 2010) 9.1% 3.4% 4.9% 4.8%

Source Central Bank

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

155.0 10.0

149.0 8.0

143.0 6.0 CCPI

Rs /USD Rs 137.0 4.0

131.0 2.0 125.0 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 0.0 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Source: Central Bank Source: Central Bank

6 Month T-Bill Yield Tea Prices

15 620

13 540 11 460

9

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

T 7 380 Rs. Per kilo(Unweighted) Per Rs. 5 300 Feb-13 Nov-13 Aug-14 May-15 Apr-16 Feb-17 Mar-13 Dec-13 Sep-14 Jun-15 Mar-16 Dec-16

Source: Central Bank Source: Sri Lanka Tea Board

Export & Trade Balance Trends in Tourist Arrivals

2000 600 Trade Balance (USD Mn 210,000 80.0%

1600 200

168,000 64.0% Y

-

o - 1200 -200 126,000 48.0% Y Growth

800 -600 84,000 32.0%

400 -1000 Arrivals Total ) 42,000 16.0%

Exports /Imports (USDMn) Exports /Imports 0 -1400 0 0.0% Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Dec-13 Sep-14 Jun-15 Mar-16 Dec-16 Exports (LHS) Imports (LHS) Trade Balance (RHS)

Source: Central Bank Source: Sri Lanka Tourism Development Authority 6

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