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Sri Lanka corporate earnings growth slows to 8.1-pct in Dec quarter

ECONOMYNEXT – Earnings growth of Sri Lankan listed companies slowed in the fourth quarter of 2016 from the previous quarter, with profits driven mainly by the banking sector as interest rates rose and demand for loans remained high, a new research report said.

Overall market earnings of firms on the Colombo bourse increased 8.1 percent to Rs62.3 billion in 4Q2016 from a year ago following an increase of 25.4 percent year-on-year to Rs57.4 billion in 3Q2016, Capital Alliance Securities (Private) Limited said.

“Banks, Finance & Insurance (47%); Diversified Holdings (18%); and Beverage, Food and Tobacco (11%) were the largest sector-wise contributors to market earnings in 4Q2016,” their report said.

The largest individual contributors to the fourth quarter 2016 earnings were John Keells Holdings (8.3%), Commercial Bank of Ceylon (6.9%) and Hatton National Bank (6.5%).

The Finance Company reported the highest net loss from continuing operations for the quarter of Rs484 million, compared with a net loss of Rs354 million in 4Q2015.

“Trailing 12-month (TTM) market earnings grew 10.8 percent YoY to Rs225.1 billion driven by the BFI sector (44%, +17% YoY) due to NII (net interest income) growth at private sector commercial banks on the back of rising interest rates and relatively high demand for private sector credit,” Capital Alliance Securities said.

The Colombo Stock Exchange currently trades on a TTM Price-to-Earnings Ratio of 11.0x and a Price-to-Book Value of 1.2x.
TTM earnings growth during the same period last year was 4.5 percent YoY, the report said. 

This mainly due to Sri Lanka Telecom’s loss of Rs383 million in 4Q2015 causing a 26 percennt YoY drop in the telecommunications sector’s 4Q2015 TTM earnings, the plantations sector posting a TTM loss of Rs1.8 billion in 4Q2015, Lanka Indian Oil Corp’s 4Q2015 TTM loss of Rs381 million versus Rs3.7 billion TTM profit in 4Q2014, and the investment trusts’ sector 4Q2015 TTM loss of Rs453 million versus a 4Q2014 TTM profit of Rs4.0 billion.

 The largest individual contributors to TTM 4Q2016 earnings were John Keells Holdings (7.0%), Hatton National Bank (6.6%), Commercial Bank of Ceylon (6.4%), Ceylon Tobacco Company (5.6%) and Lanka Orix Leasing Company (4.4%).
(COLOMBO, March 13, 2017)





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