A Breather in the Long Walk…

Sri Lanka's stock market (CSE) ended at a new one-month low on Friday, as investors stayed cautious on economic worries, repercussions from a U.S. insider trading case and the possible loss of an EU trade concession. The All-Share Price Index of the Colombo Stock Exchange fell 0.23 points or 0.01 percent to 2976.93, its lowest close since Sept. 30.

"Investors are waiting for directions," said Prashan Fernando, executive director at Acuity Stockbrokers. "Turnover has been very low for this week on this wait-and-see approach."

The day's turnover was at 325.61 million rupees ($2.83 million) and the this week's daily average turnover recorded 329.1 million rupees, well below this year's daily average turnover of 530.6 million rupees. The bourse has been sliding despite state bank's lending rate were slashed by almost half with effect from Wednesday.

The market has already been cooling off because of the likely loss of an EU trade concession , worries of lower-than-expected corporate earnings and the arrest of one of Sri Lanka's main investors in a U.S. insider trading case earlier this month. Trade union actions in the state sectors like power, energy, education, health, and transport, demanding post-war salary hikes ahead of national polls due by April 2010, are also weighing on the investor confidence.

The oil palms sector closed 3.29 percent weaker led by Bukit Darah (BUKI) falling 5.8 percent to 1,600.50 rupees, while top mobile phone operator Dialog Telekom (DIAL) closed 3.44 percent weaker at 7.00 rupees a share.

Market heavyweight John Keells Holdings JKH, which posted 43 percent drop in its net profit in the September quarter, closed 0.53 percent at 142.50 rupees. With around 98 percent return so far this year, the CSE is still one of the best performing bourses in Asia.

The rupee LKR= closed flat at 114.80/85 a dollar with the central bank buying dollars at 114.80, dealers said. The interbank lending rate or call money rate CLIBOR edged up to 9.121 percent from Thursday's 8.963 percent.

In search of direction


The Colombo bourse experienced the second consecutive lull week after its bullish run for the past few months. This was mainly due to the mixed reactions of the investors who were awaiting the news on quarterly earnings and political developments. The market expected to consolidate during the coming week due to uncertainty surrounding the political front and September quarter earnings and the resultant low investor activity. Institutional and high net worth investors would be in search of opportunities whilst retailers would take a conservative approach.

In addition, backed by the favourable macro economic outlook resulted by easing inflation, falling improved foreign reserve position and also the IMF concessionary loan (USD2.6 bn) and other capital inflows, market is expected to recover soon from its breather state to its lively ways. The market currently trades on 4 quarter trailing earnings multiple of 17.8X earnings and given our expectation that corporate earnings would rise 12.2% YoY in FY10E and 32% YoY in FY11E the Colombo bourse is considerably attractive.

October inflation rises from record low


Sri Lanka's annual inflation picked up to 1.4 percent in October from a record low of 0.7 percent in September due to increasing food prices, government data showed on Friday.

Annual average inflation slowed to a six-year low of 5.2 percent this month, from 6.6 percent in September. It has fallen over 12 straight months after hitting a six-year high of 23.4 percent in October last year.

"This is in line with our projection," Nandalal Weerasinghe, assistant central bank governor, told Reuters. "We expect it to be between 3-4 percent by the end of December."

The food index, which accounts for more than 45 percent of the consumer price basket has risen 1.1 percent compared to last year, the data showed. Analysts have said inflation is now bottoming out with a pickup of consumer spending due to declining interest rates and post-war economic optimism.

Economists polled by Reuters had forecast October inflation at 1.3 percent while annual average inflation was seen at 5.0 percent.

On Tuesday, Sri Lankan President Mahinda Rajapaksa, in his capacity as finance minister, ordered state banks, which have a 45 percent share of the island's banking sector, to cut lending rates almost by half.


Analysts said the sudden drop in borrowing costs could trigger demand-driven inflation in the short term, compelling the central bank to raise it policy rates. However, Weerasinghe said there would not be an 'immediate' rise in inflation. The International Monetary Fund on Sept. 22 raised Sri Lanka's economic growth forecast for 2009 to the central bank's minimum growth target of 3.5 percent. It predicted 3.0 percent when it approved a $2.6 billion loan to Sri Lanka in July. Economists expect consumer prices to rise due to an anticipated increase in taxes and energy prices, after the government has agreed with the IMF to trim its fiscal deficit to 7 percent.

SAGT throughput up for the fifth straight month

South Asia Gateway Terminals (SAGT), 42.2% owned associate of John Keells Holdings recorded the second highest monthly throughput volumes in September 09 (the highest ever being recorded in August 09 - 163,023 TEUs). SAGT which operates the 1.9 mn TEU capacity at the Queen Elizabeth Quay at the Colombo Port witnessed 3.8% YoY increase in the volumes to reach 161,450 TEUs in September 09.

The volumes have risen for the fifth consecutive month in September 09 after witnessing a dip in volumes for five straight months (due to global economic turn down). However, the cumulative volume is still 1.4%YoY lower than the same period last year. The increase in throughput volumes is mainly on the back of increased activity in low margin transhipment. The increase could be attributable to the competitive rates, gaining market share from the state run Sri Lanka Ports Authority terminal and persuading existing shipping line customers to move containers through the Colombo port than direct calls at Indian ports.

Earnings from SAGT is expected to improve on the back of increasing volumes coupled with the expected change in mix between domestic container volumes (which gives four times the revenue of the transhipment containers) and the transhipment containers (the current mix between domestic volumes to transhipment is circa 78% to 22%). This change in mix is expected to materialize with increased activity in the economy.

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Galleon Jitters…

The All Share Price Index (ASPI) dipped 75.3 points to close the week at 3,056.6 points (-2.4%), whilst the Milanka Price Index also dipped 112.9 points to close at 3,434.0 points (-3.2%). Indices dipped mainly on the back of losses made in DFCC Bank (-6.7% WoW), NDB Bank (-5.9% WoW), John Keells Holdings (-5.7% WoW), Dialog Telekom (-3.3% WoW) and second liners led by; Maskeliya Plantaions (-8.4% WoW), The Finance Company (-7.9% WoW), CT Land Development (-7.6% WoW) and Brown and company (-5.9% WoW).

The possible sell down of Sri Lankan equities held by Mr. Raj Rajaratnam and his Galleon Group sent shock waves amongst the investment community throughout the week. The alarming news plunged the ASPI to 2,900 levels during the week whilst the average daily turnover dipped by 48.7% to LKR658.4 mn. However with Rajaratnam and his fund only holding approximately 1.3% of the market capitalization, we believe the market had over reacted and triggered a selling spree. The market fall was further escalated by over leveraged retail investor swift to exit whilst attempting to cap trading losses.

The week’s turnover was mainly supported by the banking sector, contributing for circa 32% on the back of strong institutional and high net worth interest. Heavy weight John Keells Holdings contributed for +7% of the week’s turnover whilst the manufacturing sector counters witnessed moderate buying interest throughout the week. Further, two announcements were released with regard to Vallibel Power Erathna, on an offer made to purchase 160 mn of its issued shares and acquisition of two power plants which made the counter trade in large volumes.

The week saw a net foreign outflow of LKR81.3 mn, where foreign purchases for the week amounted to LKR374.4 mn, whilst foreign sales amounted to LKR455.7 mn.


Galleon Group founder, Rajaratnam charged with insider trading

The Colombo bourse lost its steam and the All Share Price Index fell to 2900 levels mid this week owing to a panic selling spree triggered by retail investors who sold down following the news release of Mr Raj Rajaratnam been arrested in the US. The Galleon Group founder and a key player in the Colombo stock market, Mr. Raj Rajaratnam and five others were charged with insider trading that netted USD20 mn on trades in Google, Hilton Hotel Corp and several other companies in New York. Mr.Rajaratnam who has significant stakes in some of Sri Lanka’s blue chip companies has invested his personal funds and those of Galleon in several companies where he holds investments worth of circa 1.3% of the CSE’s market capitalization. With the limited availability of share holding information we’ve managed to unearth the following top holdings (of the group collectively) registered in the CDS as at 30th June 2009.

**Click to Zoom

However, we believe there have been changes to this holding structure since June 2009 whilst Mr. Rajaratnam and his funds have been net sellers during the past few years in the Colombo Stock market. Furthermore though not confirmed, Mr Rajaratnam or his company may have a stake in the 21 mn unregistered shares of Hatton National Bank where the holding parties are not disclosed. However we believe the market which had overrated Rajaratnam’s and Galleons holding in the Colombo bourse with the news being released. On Monday the ASI dropped 2% whilst making the situation worse in Tuesday with the All Share Price index dropping to 2983 points (dip of 3%). This is mainly due to the retailers who couldn’t afford holding on to their investments being on the sell side and margin calls also being triggered. According to Bloomberg; Mr Rajaratnam who is on USD 100mn bail has raised USD453,150 reducing its investments in India. It further stated that the Galleon Group is exploring the sale of its unit in Asia which opened its headquarters in Singapore last year.

In Sri Lankan context; Since Galleon group and Mr Rajaratnam has stakes mainly in the blue chips we believe the depth of the market would be sufficient to absorb the selling pressure which could materialize in the event of Galleon deciding to exit Sri Lanka. However with daily market turnover averaging around USD9 mn in the past few weeks we believe strategic shareholders (foreign and local) would be eager to buy out Galleon Funds Holdings in Sri Lanka.

Conservative investors

During the week, the Colombo bourse took a breather after its bullish run for the past few months. This was triggered by the news of Mr Raj Rajaratnam (holds nearly 1.3% of market capitalization of the Colombo Stock Exchange) being arrested in the US.


With the uncertainty over the verdict on Mr Rajaratnam, we believe the market would be consolidated during the coming week due to low investor activity where institutional and high net worth investors would be in search of opportunities whilst retailers would take a conservative approach.

Nevertheless, we expect the market to pick up on the release of quarterly results (3Q09) during the coming weeks. We believe most of the local corporates would mark a turnaround in terms of earnings, owing to the positive business environment creating the next market rally. Furthermore, backed by the favourable macro economic outlook resulted by easing inflation, falling interest rates, improved foreign reserve position and also the IMF concessionary loan (USD2.6 bn) and other capital inflows, we believe the market would soon recover from its breather state to its lively ways.

The market currently trades on 4 quarter trailing earnings multiple of 18.2X earnings and given our expectation that corporate earnings would rise 12.2% YoY in FY10E and 32% YoY in FY11E the Colombo bourse is considerably attractive.

Our favourites would be the banking, hotels and consumer sectors, whilst diversified and manufacturing sectors could become secondary market movers. We see pockets of strong growth in key sectors such as Banking (Hatton National Bank, Commercial Bank, National Development Bank, Sampath Bank, Nations Trust Bank), Hotels (Asian Hotels & Properties, Aitken Spence Hotel Holdings, Keells Hotels, Stafford, Eden), Consumer (Hemas Holdings, Ceylon Tobacco), Manufacturing sector (Lanka Tiles, Royal Ceramics, Chevron Lubricants) and Diversified Sector (John Keells Holdings,Aitken Spence,Chemical Industries Colombo)

Courtesy - Asia Securities Research

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Raj Rajaratnam Arrested for Insider Trading

The founder of the Galleon Group, a big New York hedge fund, was charged on Friday with insider trading in the stocks of several companies, including Advanced Micro Devices, Clearwire and Akamai, earning about $20 million in the process.

Federal prosecutors for the Southern District of New York accused Raj Rajaratnam, 51, with illegally obtaining and trading on information on these companies, which also included Polycom, Hilton Hotels, Google and People Support. He was charged with four counts of conspiracy and nine counts of securities fraud.

The prosecutors’ case is built on both statements from an unnamed cooperating witness, who has agreed to plead guilty, and from the recording of four conversations between the witness and Mr. Rajaratnam. The unnamed witness began conversations with the Federal Bureau of Investigation in 2007, which led to the phone taps.

At a press conference Friday afternoon, law enforcement officials described the case as a sign that the Justice Department, the Federal Bureau of Investigation and the Securities and Exchange Commission were stepping up their efforts against white-collar crime. Preet Bahara, the United States attorney for the Southern District of New York, compared the investigation to those used against the Mafia and drug cartels.

“This case should serve as a wake-up call to Wall Street and to every hedge fund manager,” Mr. Bahara said. “These people were privy to inside information, but they didn’t know one secret, that we were listening.”

Others charged by prosecutors include Mark Kurland, the president of New Castle Partners, another large money manager; Danielle Chiesi, a former Bear Stearns executive who now works at New Castle; Rajiv Goel, an executive at Intel’s treasury department who supported the company’s venture capital arm; Anil Kumar, an executive at McKinsey & Company; and Robert Moffatt, an executive at I.B.M.



All six were arrested Friday morning. Five of the six are set to be arraigned in federal court in Manhattan Friday afternoon. Mr. Goel is set to be arraigned in California.

According to the complaint, the witness first approached Mr. Rajaratnam in mid-2005 about divulging nonpublic information. That led to a scheme that ran from January 2006 through July 2007 involving insider information about three companies — Polycom, Hilton and Google — in which the hedge fund executive garnered about $12.7 million in profit. Mr. Rajaratnam reciprocated by supplying inside information about other technology companies.

Mr. Rajaratnam partnered with the likes of Mr. Goel and Mr. Kumar, who supplied information about their portfolio companies or clients, and in turn made profitable trades for these associates. The unnamed cooperating witness is alleged by prosecutors to have also obtained insider information, including from an analyst at Moody’s Investors Service covering Hilton (and who was paid $10,000) and an unnamed employee at Market Street Partners, an investor relations firm working for Google.

Mr. Rajaratnam, a native of Sri Lanka, is listed as No. 551 on Forbes’s 2009 list of the world’s richest people, with an estimated net worth of $1.3 billion.

Law-enforcement officials on Friday said that Mr. Rajaratnam’s success appeared built not on “genius trading strategies,” but on his insider-trading connections.

“He is not a master of the universe,” said Robert Khuzami, the S.E.C.’s director of enforcement. “He is a master of the Rolodex.”

A spokesman for Galleon said in a statement: “Galleon was shocked to learn today that Raj Rajaratnam was arrested this morning at his apartment. We had no knowledge of the investigation before it was made public and we intend to cooperate fully with the relevant authorities. Galleon continues to operate and is highly liquid.”

Raj’s arrest triggers panic in Lanka

Sri Lankan-born billionaire businessman Raj Rajaratnam's arrest in the United States on Friday on an alleged US$ 20 million insider trading charges has hit Sri Lanka like a thunderbolt with not only the Colombo Securities & Exchange Commission(SEC) here scrambling to check whether his million-dollar dealings bordered on any illegality, but also high-level politicians under a cloud for involvement with him.

The US Attorney, Preet Bharara, announced Rajaratnam's company Galleon Group had as much as US$ 7 billion in assets. "This is not a garden variety insider-trading case", he told a news conference after the arrest. "This case represents the largest hegde fund insider-trading case ever charged criminally".

Rajaratnam being taken to courts by FBI agents on Friday. Reuters

In Colombo, news that his arrest by US federal agents who wire tapped his telephone calls by court authority sent the political establishment as well as the business community into a tail-spin. Cabinet Ministers and former Cabinet Ministers with whom the US-based Sri Lankan fund manager had been talking were concerned if their names would come up in the investigations.

In September this year, Justice Minister Milinda Moragoda had told President Mahinda Rajapaksa that Rajaratnam was willing to pay US$ 1 million for the rehabilitation of LTTE child-soldiers. Foreign Minister Rohitha Bogollagama had objected to the exercise saying that the Foreign Ministry had given a dossier to the US Treasury Department's Directorate of Intelligence on Money Laundering that Rajaratnam is a front for LTTE finances.

Minister Bogollagama yesterday confirmed to the Sunday Times that he had objected to his Cabinet colleague's suggestion. The Justice Ministry later made a public announcement stating that Rajaratnam would be giving this money.

Rajaratnam's tentacles into the Sri Lankan political mainstream extends to meetings with President Mahinda Rajapaksa and Opposition Leader Ranil Wickremesinghe. His business associates included frontline Cabinet Ministers, past and present. Much of his Sri Lankan portfolio is managed by the son of a now retired multi-millionaire businessman of a blue-chip company and who is married to a Cabinet Minister's sister.

The single largest known US contributor to a charity linked to the LTTE, the Tamil Rehabilitation Organisation (TRO), Rajaratnam was a major contributor to US Secretary of State Hillary Clinton's campaigns.

Rajaratnam had given as much as US$ 3.5 million to the TRO. "The TRO passed off its operations as charitable, when in fact it was raising money for designated terrorist groups responsible for heinous acts of terrorism," director of the Treasury Office of Foreign Assets Control at the time said.


The New York-based businessman has a stake in all ten of the top listed Sri Lankan companies.

In the general sense of things we need to probe and find out whether any of the transactions Rajaratnam was involved were questionable, said an SEC official, who declined to be named. “There haven’t been any issues in the past (over his investments) but due to the new developments it is incumbent on our part to look at these issues afresh”

Mr. Rajaratnam, is the single largest foreign investor in Sri Lankas stock market, investing millions in blue chips companies and lately in smaller firms. This has raised some eyebrows, according to stock market analysts.

When he first began investing in 2002-03, it raised concerns on whether he was using funds indirectly raised by the LTTE, a charge he vehemently rejected.

US TV footage and newspaper pictures of Mr Rajaratnam being led by US agents in handcuffs would be the worst nightmare for any top corporate CEO and a “good” lessons for Sri Lankan corporate bosses who get away scot free on similar issues, said a respected corporate CEO, who didn’t want to be identified. “That’s what is called democracy, where no one --the richest and the most powerful included -- is above the law. That is governance in the real sense, not the kind of nonsense that is practiced here -- where everything is only on paper and annual reports,” he said.

But a Colombo executive, who has associated with the suspect, said it was unfair to condemn Mr Rajaratnam until “proven guilty” “He has invested heavily in the stock market here and also spent his own funds on tsunami housing for the needy and recently gave a million dollars to a government project to rehabilitate LTTE cadres. This present issue has been brought upon by competitors and is a fall-out from the global financial crisis,” the executive, who declined to be named, said, adding that, “instead of a trial by media, let’s wait for the legal system to ascertain whether he is guilty or not.”

Mr Rajaratnam, 52, was ranked No. 559 by Forbes magazine this year among the world's wealthiest billionaires, with a $1.3 billion net worth, according to AP news agency reports. He was among six hedge fund managers and corporate executives arrested on Friday in a hedge fund insider trading case that US authorities say generated more than $25 million in illegal profits and was a wake-up call for Wall Street. He was given bail at $100 million to be secured by $20 million in collateral despite a request by prosecutors to deny bail. The judge also ordered Mr. Rajaratnam, who has both U.S. and Sri Lankan citizenship, to stay within 110 miles of New York City.

U.S. Attorney Preet Bharara told a news conference it was the largest hedge fund case ever prosecuted and marked the first use of court-authorized wiretaps to capture conversations by suspects in an insider trading case. "Greed is not good," Mr. Bharara said. "This case should be a wake-up call for Wall Street." AP quoted Joseph Demarest Jr., head of the New York FBI office, as saying it was clear that "the $20 million in illicit profits come at the expense of the average public investor."

In Colombo, the corporate world was stunned and officials at the companies and banks where the savvy US-educated investor has major stakes declined to comment. “He is an investor like anyone else,” said one official, declining further comment.

According to latest available figures, Mr Rajaratnam, whose father -- J.M. Rajaratnam was the chairman of Singer (Sri Lanka) in the 1970s before being promoted to head the multinational's South East Asian operation based in Bangkok, has a 9.2% stake in John Keells Holdings (JKH), his biggest investment upto date and, through two Galleon-related funds has 13% in People’s Merchant Bank (PMB) and 3.4% in Commercial Bank.

Brokers in Colombo say that, Mr Rajaratnam, who began investing in the Sri Lankan bourse soon after the United National Party-led peace process began in 2002, has investments -- individually and through the Galleon Fund group in the 10 top Colombo blue chips (biggest companies) which include DFCC, NDB, Dialog, SLT and Hayleys, though in some of these companies he has exited (sold his stock) in the recent past.

His most recent, big investment was in Hemas Hospitals, and like in all other companies he has not sought a board (director) position, though, brokers say, many companies would have “loved” to have him on board given his international status as a global investor.

“While there have been no issues with his investments in the big companies, there has been ‘talk’ in the market over his investments in smaller firms where the return (on investment) is lower,” one stock market analyst said.

Mr Rajaratnam is the second Sri Lankan investor who made it big in the US to hit the headlines for the wrong reasons. In 2006, Sri Lankan-born Sanjay Kumar, former Chief of a California-based company called Computer Associates International, was sentenced to 12 years in prison and fined US $8 million for securities fraud and obstruction of justice following a two-year investigation of an improper accounting scheme. Some years back, Mohamed Muhsin, former World Bank Vice President in charge of IT, hit the headlines in the US media over allegations of impropriety during his tenure at the bank, charges he has rejected.

The Sri Lankan suspect was a prominent speaker at the local CIMA business summit in June 2005, sharing the podium with well known personalities like former Malaysian Prime Minister Mahathir Mohamed and cricket legend Imran Khan.

In an interview with the Sunday Times FT published on June 5, 2005, Mr Rajaratnam dismissed speculation that he had funded Tamil Tiger guerrillas. "I have funded orphanages in Mullaitivu, as much as I have funded education projects in Kalutara. I funded Vanni Tech as much as I funded Sunera Foundation. I know there is speculation, but I don't worry about it one bit. When somebody is successful, apparently it appears that no good deed goes unpunished. People don't understand philanthropy in this country.

“Here when you do charity people say that I have got political ambitions. I am very tenacious, so these statements are not bothering me," he was quoted as saying.

According to US news reports, also charged in the insider dealing scheme were Rajiv Goel, 51, of Los Altos, Calif., a director of strategic investments at Intel Capital, the investment arm of Intel Corp., Anil Kumar, 51, of Santa Clara, Calif., a director at McKinsey & Co. Inc., a global management consulting firm, and Robert Moffat, 53, of Ridgefield, Conn., senior vice president and group executive at International Business Machines Corp.'s Systems and Technology Group.

Mr Rajaratnam, like any US businessman, has contributed to political campaigns, the latest being $30,800 to Barack Obama and $4,600 to Hillary Clinton in the last presidential election. He lives in a $10 million condominium with his wife of 20 years, their three children and two elderly parents, according to the reports. Mr Rajaratnam has a degree from Britains University of Sussex and an MBA from the Wharton School at the University of Pennsylvania. He founded Galleon Group in 1997 making it among the biggest hedge funds in the world.

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The Bottled Poetry - Distilleries Company of Sri Lanka

Originally set-up as a pioneering distillery, Distilleries Company of Sri Lanka (DIST) has pursued a policy of planned growth which has resulted in its transformation from a cash rich beverage play to a diversified company with exposure to key sectors of the economy. The company's primary focus remains in the distillation, manufacture, import and distribution of liquor products. The company has secondary interests spanning diverse industries such as Telecom, Plantation, Textiles and through an associate stake in Aitken Spence (one of the largest local conglomerates) in fields ranging from banking and leisure to power.

The structure of the group is as follows:


DIST has two listed plantation companies under it’s umbrella namely Balangoda and Madulsima whilst it has an associate stake in Aitken Spence, one of the largest listed conglomerates in the country. DIST currently holds an associate stake in Apollo Hospitals, a listed hospital and has a majority stake in Lanka Bell, a leading CDMA operator. Apart from the holding liquor company DCSL also owns Pericyl Ltd which produces high end liquor products.

Beverage Sector

The country's alcohol industry is a mature market with the per capita consumption of 8.25 l per annum. However, a near 65% of the total consumption is contributed by illicit liquor. The heavy dependence on illicit liquor is mainly due to heavy tariffs which account for 66% of the sales price imposed on the liquor industry by the Sri Lankan Government resulting in significantly higher arrack prices. The total excise duty on alcoholic beverages accounted for circa 4.5% of total government revenue in 2008.


Nevertheless, despite the comparatively low volume growth, growing threat from illicit liquor and high tariff structure, the country's hard liquor business has proved to be a profitable venture with significant cash generation potential due to the relatively inelastic nature of demand, reasonably low cost structure and the regulatory entry barriers limiting new entrants.

DIST is undisputedly the market leader in the local liquor industry and the sector is the main stay of the group that boasts of a near 75% market share of the legitimate hard liquor industry. The liquor business is the main contributor to the group performance in terms of revenue and earnings. The company's principle activities are distillation, manufacture, import and distribution of liquor. The manufacturing segment mainly consists of coconut spirits (Coconut and Processed Arrack) and rectified spirits (Extra Special and Special Arrack). DIST has two main distilling factories in Seeduwa and Kaluthara with sufficiant manufacturing and bottling capacity.

DIST also has a 100% stake in Periceyl (Pvt) Limited, which manufactures high value added products such as Whiskeys, Brandys, Vodka, Rums and Gin which falls into the 'Country made foreign liquor' segment. Periceyl (Pvt) Limited is also engaged in the distribution of wines and other products manufactured by Pernod Ricard Group World wide. However, contribution to the sector turnover is less than 2%.

Sales volume at DIST has grown in line with the legal hard liquor industry at circa 5.0% over the last four years. DIST has progressively moved away from a price sensitive consumer base to a more loyal, quality conscious consumer base. This has enabled the company to maintain stable margins despite price increases and the resultant impact on volumes.

However, the sector continues to be plagued by the unabated growth of the illicit liquor and cheaper imitations of DIST's products. The sale of illicit liquor still accounts for approximately 65% of the hard liquor industry, indicative of the potential available to DIST should authorities at the Excise Department succeed in cracking down on illicit liquor sales. Further, high government excise duty policy, stringent legislation, negative social perceptions, excise led price increases, dip in consumer disposable income and restrictions on issuing licenses to retailers also contributes to the less than desired growth of the industry. Hence, volumes in the beverage sector are expected to grow at a marginal 5% from FY10 - FY11 with margins remaining somewhat stable on account of incremental increases in prices to match increases in excise, and increased volumes from sales in supermarkets.

The beverage sector recorded LKR2.68 bn in FY09 and is expected to record flat earnings growth in FY10 and a modest rise of 6% in FY11.

Telecommunication Sector

The acquisition of a 98% stake in Lanka Bell in June 2005 for approximately LKR 2.6bn has proved to be a resounding success for the group, with the wireless fixed line operator posting earnings of LKR 1.03 bn in FY07 and LKR0.90 bn in FY08 stemming from aggressive growth in fixed line subscriber base following the roll out of its CDMA network. The company had invested significant resources in developing its brand and now commands a very strong nationwide brand presence. However, due to an industry wide price war in 2009 the sector profitability decreased sharply to LKR76 mn. Lanka Bell had submitted a bid to the TRC, to enter the mobile segment as the 5th operator, due to the limited potential of a pure fixed line operator. The bid was however unsuccessful with the license being awarded to Bharti Airtel.

The company also signed up with FLAG Telecom (a Reliance Telecom subsidiary) as the only landing station in Sri Lanka for its international fibre optic network as well as investing in a WiMax data network. As the capacity of the submarine cable is excessive for DIST, negotiations are underway with other providers to share the facility. Given the lower returns expected from these investments and the anticipated slow down in incremental subscriber growth in the fixed line segment coupled with the price war amongst the operators, returns from DISTs' investment in Lanka Bell is expected to slowdown. We expect Lanka Bell to contribute earnings similar to FY09 (LKR 76 mn).


Plantation Sector


DIST manages two listed plantations under which it controls closer to 9,300 ha of tea and 1,900 ha of rubber through its subsidiary Balangoda (BALA) and associate Madulsima (MADU) plantations. BALA (43% owned by DIST) has 5,400 ha of tea and 1900 ha of rubber cultivated land whilst MADU (31% owned by DIST) has 3,900 ha of tea cultivated land. Both plantations are managed by Stassen Exports, a key shareholder of DIST. However, the overall contribution from the sector to DIST's operating profit has been minimal. The company has decided to consider Madulsima (MADU)plantations as an associate from the current year.


This is mainly due to its high exposure to the tea industry, which is highly susceptible to high wage increases and strikes. Further, the management agreements of most plantations results in bulk of the profits being retained by the plantation management. Another problem with the industry is its low value addition resulting in price sensitivity towards global supply and demand conditions in addition to dependence on weather conditions.

Although presently tea prices are on the up, gross margins of rubber are greater than that of tea largely due to increases in wages during this year. BALA has been profitable in the recent years on the back of positive contributions made by rubber whilst MADU has been operating with losses.

Diversified Business

Associate Aitken Spence - A Steady Contributor

The group's key strategic investment in the conglomerate Aitken Spence (SPEN) has expanded DIST's business scope effectively to some of the country's key growth sectors such as Tourism, Transportation and Power. Nevertheless the loss of Sri Lanka Insurance Corporation (SLIC) subsequent to the Supreme Court ruling on a fundamental rights application filed that reversed the sale of SLIC has reduced a significant equity stake (28.04%) in the conglomerate to its current 17.2%. However, due to DIST's significant influence over the company it is still treated as an associate. We believe SPEN to contribute an associate profit closer to LKR360.9 mn and LKR418.4 mn in FY10E and FY11E respectively.

Others

DIST has made investments in the areas such as unit trust management, vehicle repairs and textile printing. National Asset Management Ltd (NAMAL) is the pioneer in Mutual Fund Management in Sri Lanka having commenced operations in 1991. The company manages seven funds comprising over LKR4.2 bn. NAMAL is 70% owned by Milford Holdings which is 98% held by DIST. Further, the firm in alliance with Acuity partners launched NAMAL Acuity Value Fund which was listed in the Stock Exchange in September 2009 where NAMAL would act as the manager of the fund. However, the contribution to the group earnings from the fund manager has been marginal where it posted LKR14 mn in FY08 and LKR17.4 mn (up 24%) in FY09.

Texpro Industries is in the business of dyeing and printing of woven fabrics to customer requirements. The company currently supplies dyed woven fabrics to several leading apparel manufacturers in the country. However, Texpro's performance in the recent past has been hampered mainly on the back of the global economic down turn and reduced apparel exports from Sri Lanka. Nevertheless, with the recovery of the apparel sector we believe Texpro would post circa 50 mn in FY10-FY11 (it recorded LKR64 mn in FY08).

The Collision Repair Centre, established in 2005 was a motor vehicle repair centre exclusive to "Formula Plus" Motor Insurance policy holders of Sri Lanka Insurance.
Thus we believe it is still too early to consider impairment of this investment consequent to the Supreme Court order regarding the sale of SLIC.

Loss of SLIC

Deeming it illegal, the Supreme Court reversed the privatisation of Sri Lanka Insurance Corporation in June 2009 and ordered the Treasury to refund the money paid for the deal by two companies owned by business tycoon Harry Jayawardene. Milford Holdings (Pvt) Ltd and Greenfield Pacific EM Holdings Ltd bought the shares of SLIC in 2003 for LKR 6.05 bn, the price which will now be repaid to DIST in the form of treasury bills with a maturity period of five years (DIST owns 98%of Milford and Greenfield is an offshore company incorporated in Gibraltar). Court ordered the companies to return SLIC to the Treasury but said they could keep the profits earned during the time they ran the insurer (From11th April 2003 to 04th June 2009).

Meanwhile, the reversal of the insurance deal also gives the government control of Apollo Hospital, which became a member of the DCSL Group in October 2006. Currently DIST has an associate stake (28.76%) in Apollo Hospital.

In order for DIST to obtain the purchase consideration and the profits earned from SLIC, the Government of Sri Lanka has to approve a supplementary budget (which is time consuming process) and the company has planned to split the claim into two and lodge,separately for the purchase price and profits.

The Treasury Bonds are to be issued at interest rates which prevailed at the date of judgment (circa 13.4%) whilst interest is accrued from the judgment date. The coupon rate is assumed to be 10.5%.

Financial Performance and Outlook

Strong historical earnings growth except FY09. DIST's earnings have grown at a remarkable 18% CAGR FY04-08 on the back of its aggressive investment strategy, however FY09 earnings dipped 17.3% YoY to LKR3.38 bn mainly on the back of reduced earnings from plantations and telecommunications. Earnings have been shouldered by strong performance in the core liquor sector which accounted for circa 78% of group’s net earnings in FY09. Earnings from the telecommunication sector fell by an alarming 92% YoY whilst the plantation sector too performed poorly (LKR 94 mn in PBT vs LKR260 mn in FY08) due to drought, low productivity and prices. The associate company profits contributed circa 7.0% to group earnings in FY09 (down 38% YoY). The profit from SLIC group that was classified as profit from discontinuing operations posted LKR730 mn.


Earnings growth

Since privatization in 1992, DIST has recorded continued strong growth mainly due to the strong earnings growth at its distilling operations coupled with the group's successful acquisition strategy. At the point of privatization the distilling operation only accounted for a LKR48 mn in net profit, compared to LKR2.7 bn in FY09.

Earnings estimates and valuation

Discount to market despite conservative assumptions. We forecast the net profit for FY10E to be LKR3,581 mn (+5.7% YoY), withstanding the nonrecurring hit resulting from the SLIC ruling. Given continued strong performance of the distilling operation and interest income from the treasury bonds, despite the non-recurring setback, we believe earnings outlook of the company remains positive in the medium run.


Accordingly, we project FY11E earnings to rise by a strong 12.5% YoY to LKR4,028 mn. At 8.8XFY10E earnings and 7.8XFY11E earnings the counter is at steep discount (45% and 37% respectively) to the market whilst trading at just 1.3XPBV (FY11E).

At steep discount to peers. Distilleries with its wide business scope has earned conglomerate status but at these valuations is trading well below valuations of peers such as John Keells Holdings (18.9XFY10E), Hemas Holdings (14.7XFY10E) and Aitken Spence (11.5XFY10E).

Assumptions on valuation The difference between the net assets of SLIC and the amount to be received from the treasury is charged to the reserves. Hence the net asset value has dropped from LKR74.8 in FY09 to LKR69.5 in FY10E. However, the net asset value would increase to LKR78.2 in FY11E mainly on the back of increased earnings during that year.


Fundamental outlook remains healthy. Despite the temporary setback caused by the Supreme Court ruling on SLIC we believe future prospects for DIST are promising in the medium run, given the sustained growth in the beverage sector and with the purchase consideration being paid provides the company the opportunity to capitalize on future lucrative investment opportunities (however the nature of the bonds is still not known).

If the company would hold the bonds till maturity then the interest payment (circa LKR635 mn, assumed @10.5% coupon rate) would cushion the lost earnings from SLIC (On average SLIC has been contributing a near LKR600 mn to the bottom line).

Share price performance

The share has gained nearly 91% in value year todate vs a broad market gain of an outstanding 106%. Subsequent to the Supreme Court ruling on SLIC which led to panic selling by retailers, the share fell sharply and has not entirely witnessed the same rise seen in the over all market. Given its proven ability to sustain robust earnings through new acquisitions, coupled with the favourable macro environment and cash rich liquor business, the share is attractive at present trading on 7.8X forecast FY11E net earnings and 1.3X PBV. - BUY

Courtesy - Asia Securities Reserach

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Sri Lanka Market cap tops trillion

The All Share Price Index (ASPI) made an impressive gain of 97.3 points to close the week at 3,115.3 points (+3.2%), whilst the Milanka Price Index also gained 109.3 points to close at 3,504.2 points (+3.2%). Indices gained mainly on the back of gains made in Dialog Telekom (+6.9% WoW), Sri Lanka Telecom (+5.6% WoW), Hatton National Bank (+3.3% WoW), National Development Bank (+2.4% WoW) and second liners led by; Lanka Milk Foods (27.9% WoW), Brown and Company (+27.9% WoW), LB Finance (+24.0% WoW) and The Finance Company (+20.5% WoW).

The Colombo Bourse marked another milestone during the week surpassing LKR1 trillion in terms of market capitalization on Tuesday, whilst ASPI recorded the all time high level of 3,127 points on the same day.

Furthermore with positive local and foreign investor sentiments the ASPI continued to be above 3,000 levels throughout the week whilst with healthy turnover levels above LKR1 bn during the first four days of the week.

However the market closed down today to end a strong bout of upward movement and the comparatively low turnover level today ended the seven consecutive days of turnover levels surpassing the LKR1 bn mark. Average daily turnover increased by 23.1% WoW to LKR1, 110 mn on the back of strong activity during the week. Heavy weight John Keells Holdings and Hatton National Bank enticed strong investor interest contributing for +21% of the week’s turnover. Furthermore strong buying was evident in banking sector counters such as Commercial Bank, Hatton National Bank and National Development Bank.

In addition manufacturing sector counters such as Tokyo Cement and ACL Cables witnessed strong activity on the back of increased development of infrastructure projects and the expected positive impact on the manufacturing sector counters. Brown & Company lured investor interest throughout the week on the back of the speculation that the Company along with another related party may own 20% stake in Seylan Bank after the closure of the PO. The favourite pick of the retailers for the week was Lanka Cement. The week saw a net foreign inflow of LKR477.9 mn, where foreign purchases for the week amounted to LKR1,568.1 mn, whilst foreign sales amounted to LKR1,090.2 mn.

Sri Lanka outlook upgraded to stable

Fitch Rating has lifted the “B+” sovereign rating of Sri Lanka from negative to stable on the back of improving macro economic factors following the end of the three decade old war, approval of the USD2.6 bn loan and other capital inflows. This would reduce the risk of credit default, which in turn would enhance investor confidence.

The point to point inflation further dropped to 0.7% in September 2009 (vs. 0.9% in August 2009) which is the lowest since 2004. The annual average inflation rate continued to decelerate further and recorded 6.6% in September 2009 from its level of 8.5% in the previous month. We believe the pull back in inflation is due to sluggish consumer demand despite a marginal increase in consumer prices. Headline inflation is expected to drop to single digit level by the middle of the next year, as a culmination of the reaction to monetary policy and easing of commodity prices in the international market.

Furthermore, the Gross Official Reserves of Sri Lanka has risen dramatically to USD 4.2 billion by end September from USD 3.9 billion in August mainly on the back of the SDR allocation by the IMF. The external reserve position of the country is expected to stabilise on the back of the support from IMF which presently is sufficient to support 4.7 months worth of imports. The key targets and structural benchmarks as agreed with the IMF as at end September 2009 were comfortably achieved.

In addition, the low cost debt inflow from the IMF would wane the reliance (of the Government of Sri Lanka) on domestic borrowings and create downward rate pressure on the money markets due to the excessive liquidity been created in the banking system.

Further, the Central Bank eased the monetary policy stance by reducing the policy rates; the Statutory Reserve Requirement and the penal rate charged on reverse repurchase transactions to promote private sector lending. The yields at the Treasury bill primary auction held mid this week declined to a single digit level of 9.26% for three months Treasury bills. With this reduction, primary market yield rates of the Treasury bills have declined by 807 – 864 bps during the year 2009.

With the significant fall in interest rates, there would be a strong shift in funds from low yield fixed income securities to high yield capital markets which in turn could boost stock market performance.

SAGT throughput at record high in August 2009

South Asia Gateway Terminals (SAGT), 42.2% owned associate of John Keells Holdings reported record high throughput volumes in Aug 2009. SAGT which operates the 1.9 mn TEU capacity at the Queen Elizebeth Quay at the Colombo Port, witnessed 5.1% YoY increase in the volumes to reach 163,023 TEUs in Aug 09, surpassing the previous monthly record of 158,236 TEUs recorded in July 09. The volumes have risen for the fourth consecutive month in Aug 09 after witnessing a dip in volumes for five straight months (due to global economic turn down).


However, the cumulative volume is still 2.1%YoY lower than the same period last year where the transhipment volume is 897,504 TEUs and that of the domestic boxes is 212,185 TEUs. The increase in throughput volumes is mainly on the back of increased activity in low margin transhipment. The increase could be attributable to the competitive rates, gaining market share from the state run Sri Lanka Ports Authority terminal and persuading existing shipping line customers to move containers through the Colombo port than direct calls at Indian ports.

Earnings from SAGT is expected to improve on the back of increasing volumes coupled with the expected change in mix between domestic container volumes (which gives four times the revenue of the transhipment containers) and the transhipment containers (the current mix between domestic volumes to transhipment is circa 75% to 25%). This change in mix is expected to materialize with increased activity in the economy.

Sri Lanka's Sept tourist arrivals surge 28.6 pct

Sri Lanka's tourist arrivals jumped by more than a quarter in September from a year ago, the fourth straight monthly rise since the end of a decades-long war in May, the country's tourism board said on Friday.

September tourist arrivals to the Indian Ocean island nation rose 28.6 percent to 37,983, up from 29,529 recorded a year ago. In the four months since May, arrivals have risen 25.2 percent versus the same period a year earlier but year to date, total arrivals have dipped 2.6 percent year on year.

The rise in arrivals in recent months and expectations of post-war investment have driven the Colombo Stock Exchange's tourism sector index up 179 percent this year, about double of the gain in the broader market.

'Still we see the benefit of post-war peace,' S. Kalaiselvam, the director general at Sri Lanka Tourism Authority told Reuters. 'We have seen a huge increase from two major markets India and the United Kingdom.'

Arrivals from both United Kingdom and India accounted for over 37 percent of the total 309,142 in the first nine months. In August, Sri Lanka raised its 2009 annual tourist target to a six-year high of 500,000 visitors, which it expects to generate revenues of $400 million, a 17 percent increase from last year.

It received 438,475 visitors in 2008, a drop of 11.2 percent from a year earlier. Revenue fell by 11.2 percent to $342 million as visitors stayed away because of intense fighting. Sri Lanka is targeting 2.5 million arrivals and $2 billion in earnings by 2016.

Aitken Spence Hotels and Resorts launches Tamara in Coimbatore

Aitken Spence Hotels and Resorts, a part of the Sri Lanka-based diversified conglomerate Aitken Spence PLC, which manages over 25 hotels in Sri Lanka, India, Maldives and Oman, has launched its fifth property in India. The property known as Tamara is located in Coimbatore. Tamara is an enterprise of Pricol Ltd, a business house in Coimbatore.

Tamara is equipped with eight air-conditioned luxury tents; each with two double beds and an attached bathroom. There are plans to set up 14 air-conditioned cottages. The resort offers holistic treatments based on traditional ayurveda. Besides, the resort has facilities of kayaking, trekking and mountain climbing, angling and water sports.

Lakshman Ekanayake, Chief Executive Officer, Aitken Spence Hotel Managements in India said, “With the launch of Tamara, we have further strengthened the presence of Aitken Spence Hotels in the region. With the expected revival of the Indian economy, we are optimistic about the future of the industry and are looking for further expansion in India.”

Aitken Spence Hotels manages four other resorts in India: Heritance Madurai in Madurai, Atithi in Puducherry, Poovar Island Resort in Kerala and Barefoot at Havelock in the Andaman Islands.

Bharti mulls bid for Millicom's assets in Sri Lanka

Bharti Airtel, India's leading mobile operator, is considering a bid for Millicom's assets in Sri Lanka, Indian media quoted its chief executive Manoj Kohli as saying on Wednesday.

'We are considering it... that much I can say,' Mr Kohli told reporters.

Sweden's Millicom put its assets in Sri Lanka, Laos and Cambodia up for sale earlier this year, and said it expected to complete the deals by the first quarter of 2010.

Last month, media reports said Indian market leader Bharti Airtel, which recently started mobile operations in Sri Lanka, was looking at the Millicom unit, Celltel, to help it expand rapidly there.

Rivals Bharat Sanchar Nigam Ltd (BSNL) -- India's fourth-largest mobile operator and the second-largest telecoms firm -- as well as UAE's Emirates Telecommunications Corp (Etisalat) were also said to be keen in the bid for Celltel.

Celltel, which operates under the Tigo brand, is Sri Lanka's third-largest mobile operator with about three million subscribers. It has a market share of about 15 percent.

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Sri Lanka All Share Index reaches record high

Sri Lanka stocks, Asia’s best performers this year, reached a record high as the end of the island’s civil war and inflation at the weakest pace in at least five years stokes an economic recovery.

The Colombo All-Share Index rose 0.7 percent to 3,018.01. The measure of 238 companies reached an all-time closing high of 3,016.42 on Feb. 13, 2007, on the Colombo Stock Exchange. Equity purchases accelerated after the index surpassed 3,000, previously seen as a so-called resistance level, said Acuity Stockbrokers director Narendra Godamunne.

The army’s victory over the separatist Liberation Tigers of Tamil Eelam rebels in May has prompted economists to boost their growth forecasts and spurred an equities rally, helping to double the benchmark index this year. Consumer prices in the capital, Colombo, rose 0.7 percent in September from a year earlier, giving the Central Bank of Sri Lanka room to continue cutting interest rates that are at a three-year low.

“With falling interest rates and the negative implications from the war removed, investors are looking positively at the growth prospects,” Godamunne said by phone in Colombo.

The All-Share index has rebounded after posting the region’s third-worst performance in the previous two years because record spending on defense strained government finances, and foreign currency reserves plunged to a record low, prompting the government to seek International Monetary Fund aid.


Better Returns

Dialog Telekom Plc, Sri Lanka’s biggest mobile-phone service provider, today gained 3.7 percent to 7 rupees. Aitken Spence Plc, the island’s largest operator of resorts, rose 1.7 percent to 885. John Keells Holdings Plc, which owns tea plantations and hotels, climbed 0.7 percent to 154 rupees.

Sri Lankan stocks may offer better returns as the end of the war frees up government spending for investments in infrastructure and agriculture, investor Jim Rogers said in August.

President Mahinda Rajapaksa is seeking funds to turn the north and east of the island into productive parts of the economy after driving out the LTTE rebels and killing their leader Velupillai Prabhakaran.

The government last month hired HSBC Holdings Plc, JPMorgan Chase & Co., and Royal Bank of Scotland Plc to sell $500 million of bonds overseas, the South Asian island’s first in two years.

The government plans to focus spending in the 2010 budget on rebuilding roads, schools and hospitals in areas formerly controlled by the LTTE, the Ministry of Finance said in July.

The central bank on Sept. 11 lowered the reverse repurchase rate to 10.5 percent from 11 percent. The repurchase rate was lowered to 8 percent from 8.5 percent.

Equity vs Fixed Income Securities

Given high interest rates and relatively low corporate profit outlook, investors were attracted to fixed income securities since 2007. However, with the positive macro changes taking place coupled with the continuous fall in the yield from fixed income securities, the attractiveness of the equity market has come into the forefront.

The Colombo bourse has gained plus 90% since Jan 2009 on the back of favourable macro scenario resulted by the end of three decade long war, easing inflation, falling interest rates, the recently granted USD2.6 bn IMF loan coupled with other capital inflows. With the complete end of conflicts on 18th May 2009, the island's outlook turned positive and the Colombo Stock Exchange has led the way with investor sentiment preceding fundamentals and recording a growth of 91.2% in 2009.


The ASPI has surpassed the all time high levels of 3,017 points (Feb 2007) and recorded 3018.01 points on Friday, whilst at present trading on 1.5X PBV vs 2.2X PBV recorded in Feb 2007. Further, with the positive macro developments and opening up of one third of the land mass and two third of the total resource rich coastal belt for economic integration coupled with the gradual recovery of global economy trickling down to the corporate sector, corporate sector earnings expected to rise by circa 30% YoY from 2010 onwards (During the ceasefire period [2002-2004] the corporate earnings grew by a staggering 52%). The anticipated higher corporate earnings from 2010 onwards are not yet fully factored into the market valuations. Therefore, although the market has reached the all time high levels, further upside is inevitable with micro and macro changes taking place in the environment. Equity market expected to gain around 30% to 40% during the next 12 months.

In contrast, the domestic interest rates have been on the decline with the 3 month Treasury Bill rate having already fallen by 1,182 bps (from 21.3% to 9.48%) since Jan’ 08 to date. Interest rates are expected to bottom out and remain at lower levels for the next 2 to 3 years.

The low cost debt inflow from the IMF, rising foreign fund inflow into the economy and high remittance inflow would wane the reliance (of the Government of Sri Lanka)on domestic borrowings and create downward rate pressure on the money markets due to the excessive liquidity been created in the banking system. With the build up of excessive liquidity within the banking system, the banks would be pushed towards lowering their lending rates, which would revive both corporate and retail, debt backed investments. Given the falling cost of borrowing, the corporate profit growth could bolster, the broad economy would grow faster with consumer, property and construction sectors spearheading the revival, which could drive real economic growth by 4.9% (in 2009E), 8.9% (in 2010E) and 11.3% (in 2011E). Therefore with the positive outlook investors would shift from low yield (low risk) fixed income investments to high yield investments laying the foundation for a market rally.

Inflation eased to 0.7% in September

The Government Statistics Department reported that the point to point inflation for September 2009 has decreased to 0.7% (whilst the 12 month moving average inflation is at 6.6%). We believe the pull back in inflation (i.e from 0.9% in August to 0.7% in September) is due to sluggish consumer demand despite a marginal increase in consumer prices. We believe the inflation would remain at single digit levels during the rest of 2009 due to eased monetary stance by the Central Bank. Further it is expected that the inflation on a year-on-year basis too would be at single digit levels throughout the year 2010.

“Right Track”

Central Bank Governor Nivard Cabraal said in August the $41 billion economy is on the “right track.” The bank expects lower borrowing costs and reconstruction spending to help boost 2009 economic growth to as much as 4.5 percent.



Standard & Poor’s raised its outlook on the island’s credit rating on Aug. 25 to stable from negative, citing improved foreign-exchange reserves.

The International Monetary Fund, which approved a $2.6 billion loan to Sri Lanka in July, on Sept. 22 increased the country’s 2009 growth forecast to 3.5 percent from a July estimate of 3 percent.

Sri Lanka’s economic growth accelerated for the first time in a year last quarter as the end of the war spurred rebuilding and consumer demand. Gross domestic product expanded 2.1 percent from a year earlier after gaining 1.5 percent the previous three months.

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