Finance performance

~ 1 ~
 To: Managing director – “Rix PLC”
 From: Management Accountant ”Rix PLC”
 Date: 8th
of November 2012
 Subject: Investment portfolio for LKR 10 million

~ 2 ~
1. Executive Summary
According to this report I think Sri Lankan market is profitable in different industries.
Because statistics indicated Sri Lanka economic growth hit 6.2% and expected to reach
around 8%, though world economy faces many problems. Inflation also improving and able
to maintain around 4.2% and overall, these statistics are good signals for investing.
Beverage Food and Tobacco Industry, Bank Finance and Insurance Industry, Diversified
Holdings Industry, Hotel and Travel Industry and Telecommunications Industry are selected
industry for 10 million investments of Mix PLC. Following market visibility study I
proposed Commercial bank of Ceylon PLC, Nestle Lanka PLC, John Keels hotels PLC,
Trans Asia hotels PLC and Dialog AXIATA PLC for the selected companies which are
acting major leaders role in each industry.
According to the identification below money allocation is effective to Rix PLC.
 Commercial bank of Ceylon PLC - 1 million
 Nestle Lanka PLC – 1.5 million
 John Keels hotels PLC – 3 million
 Trans Asia hotels PLC – 2 million
 Dialog AXIATA PLC – 2.5 million
Rix PLC can get high margin of profit with investing share market using above allocation.
It can create successful for Rix PLC, because existing market in Sri Lanka is glomming day
by day.

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2. Introduction
Rix PLC is expecting to invest in the stock exchange using their excess funds. There is
LKR 10 million available in funds to invest minimum risk companies.
As the objective of this report has been presented with recommendations and justifications
on what amount is invest in which companies? It can be seen that market as a hold indicating
retarding or declining growth due to economic recession spreading around the globe. It is
how ever some industries in Sri Lanka is sawing promising opportunities for investments
Figure – 2.1
Industry - 1
Company -1
Industry -2
Company 2
Industry - 3
Company- 3
Industry - 4
Company -4
Industry - 5
Company -5
Expect to do LKR 10
million investments in
effective five companies
in different industries.
Rix PLC

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3. Methodology
3.1 Secondary data.
3.1.1 External sources of secondary data.
 Accounting records of Colombo stock exchange registered companies
 Sales force report of
 Budget report from
 Central bank report.
 Censes and statistic department report.
 Trade association.
 Web pages/ internet.
(Refer annexure: 1)
3.1.2 Internal sources of secondary data.
 Articles of
 Catalogs.
(Refer annexure: 2)
3.2 Primary data
 Studying a system of Colombo stock exchange
 Find details of companies registered in it.
(Refer annexure: 3)

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4. Sri Lankan Grooming opportunity to new investments
Sri Lanka has become ASIA'S emerging growth centre, with one of the most vibrant
economies in the South Asian region. Liberal market oriented policies have accelerated the
development process. There is in new vistas for investment and business opportunities in the
country.
For the discerning international buyer, Sri Lanka has become a highly productive location
and an ideal supply source for a variety of quality products & services. Presently identified as
the "Hub of South Asia", Sri Lanka is geared for promising long term growth and offers
business opportunities to pursue profits in a conductive environment.
Pioneering South Asia's economic liberalization, Sri Lanka has for over two decades
followed free market polices and has evolved a business-friendly policy environment
favorable to investment and economic growth.
Sri Lanka’s growing opportunity for investments following the post - war period sees
many companies locally expanding their opportunities as well as many foreign investors
coming into the country.

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5. Sri Lankan renowned business leaders
 NDB Bank
 Sampath Bank
 Aitken Spence
 Cargills Ceylon Ltd
 Lankem
 Lanka Orix Leasing Company
 Chevron Lubricants
 Nestlé Lanka
 Tokyo Cement Company
 Diesel & Motor Engineering
 Seylan Bank
 Lanka Walltile

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6. Colombo Stock Exchange
The Colombo Stock Exchange (CSE) is the main stock exchange in Sri Lanka. It is one of
the most modern exchanges in South Asia, providing a fully automated trading platform. The
vision of the CSE is to contribute to the wealth of the nation by creating value through
securities.
The headquarters of the CSE have been located at the World Trade Center Towers in
Colombo since 1995 and it also has branches across the country in Kandy, Matara,
Kurunegala, Jaffna and Negombo. As of 8th June 2012, the Colombo Stock Exchange had
283 listed companies with a combined market capitalization over 13.5 billion US dollars.
As of 17th January 2012, 275 companies are listed on the CSE, representing twenty
business sectors with a market capitalization of 2,200 billion rupees (over US$20 billion),
which corresponds to approximately 41% of the Gross Domestic Product of the country.
Figure- 6.1

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There are currently three indices in the CSE:
1. The All Share Price Index (ASPI)
2. The Milanka Price Index (MPI)
3. The S&P Sri Lanka 20 (S&P SL20)
The CSE operates 3 main systems:
1. The Central Depository System (CDS)
2. Automated Trading System (ATS)
3. Debt Securities Trading System (DEX)
Source: www.cse.lk
Figure – 6.2

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7. Investment in Colombo Stock Exchange
This led CSE to be consistently dubbed as one of the best performing markets in the world.
As of 2005 the CSE had recorded a consistent annual growth of over 30% in the All Share
Price Index (ASPI) for the previous three years. It surpassed that in 2006, with the ASPI
growing by 41.6 %, and the MPI growing by 51.4% during the calendar year. CSE recorded
the highest point in history on 26th February 2007. Milanka Price Index (MPI) reached
4,214.8 points on that day.
Buoyed by improved investor confidence due to positive political developments and strong
corporate results the CSE continued to achieve strong growth in 2007, as the ASPI surged
passed the 3,000 mark for the first time in its history on February 13, reaching a record high
for the seventh consecutive day. The CSE has also recorded an average daily turnover of Rs.
776.8 million for 2007.

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Task 01
8. Most profitable industries
Figure – 8.1
Bank Finance and Insurance
Industry
Telecommunications Industry
Diversified Holdings Industry
Rix PLC
Hotel and Travel Industry
Beverage Food and Tobacco
Industry

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9. Bank Finance and Insurance industry in Sri Lanka
Sri Lanka’s standards in the area of banking and finance are on par with the world’s best in
terms of services and expertise and professionals in the field. The financial sector is one of
the most liberalized and developed in the region, yet another feature that puts the country
alongside developed nations.
Investments in the country’s financial sector are further supported by liberal policies and
attractive facilities and concessions (such as specific tax holidays and repatriations on both
capital and income) provided through the Board of Investment in Sri Lanka.
There are several foreign banks, headquartered in various developed nations, operating in
the country offering investment and commercial banking services which is a testament to Sri
Lanka’s attractiveness to long-term investors. Strong infrastructure based on stable
telecommunication facilities; high quality standards and a professional and experienced work
force provide a firm foundation for investments in the sector.

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10. Beverage Food and Tobacco industry in Sri Lanka
Processed Food & Beverage industry has become a booming product sector during last
few years contributing around 10% to the GDP. The total value of exports of food,
beverages & tobacco was US$ 312 in the year 2010.
Sri Lanka is blessed with natural resources and climatic conditions from tropical to sub
tropical, suitable for a wide range of fruits & vegetables. The factors such as quality, taste
and flavor which are unique to Sri Lankan products are associated with the intrinsic quality
of resources available in different geographical locations of the country.
The producers and exporters are highly concerned and competent with international
standards in food hygiene. The exporters have taken measures to closely monitor the supply
and production chains to ensure the traceability and supply of a quality product to the
consumers.

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11. Diversified Holdings industry in Sri Lanka
Companies have the sole authority to decide their diversification strategy. One can go for
99.9% plantations and rest 1% on anything else and vice versa.
Companies do so to generate revenue in the sectors they've identified potential and the
sectors
Again, all companies go thru difficult times. We can’t expect companies to have growth if
natural perils, economic policies change, but they need to pay the salaries of employees so
companies can engage in investment activities from their money if it generates additional
revenue for them.
Also on a stronger outlook, companies can invest in other companies in long term to reap
the benefits in time. Additionally they do this in their competitors to know the strategies used
by them wants most businesses are looking at is competitive advantage

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12. Hotel and Travel industry in Sri Lanka
Sri Lanka has a growing tourism industry. Since gaining independence from the British in
1947, Sri Lanka has continued to attract foreign investors and tourists to the island. The
country's important placement also enables it to attract transit visitors into the island.
Over the years, many beautiful resorts, hotels and spas have opened. Incorporating the
diverse culture of the country, the various Tourist Establishments here offer visitors a unique,
yet memorable experience to remember with.
The Ceylon Tourism Board was formed in 1966 and in 2005, under a new Act of
Parliament; the Sri Lanka Tourism Development Authority (SLTDA) was formed in that
year.
The Sri Lanka Government established the Ceylon Tourist Board in 1966. The Board’s
primary responsibility was to revitalize the tourism industry. Operating as an autonomous
corporation, the Board had promotional and organizational responsibilities. Provisions for the
tourists were largely based in the private sector, although the Board had facilities in areas
where the private sector one establishments were considered inadequate.

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13. Telecommunication industry in Sri Lanka
Sri Lanka’s telecom sector has shown a significant growth in recent times. The sector has
been the No.1 contributor of Foreign Direct Investments (FDI) to the county totaling well
over US$ 1.5 Billion.
The telecom sector is expected to expand the capability of users for quick adaptation to
digital technology, create partnerships with the private sector to improve information and
knowledge sharing, upgrade the telecommunications services to meet the expectations and
requirements of government, business communities international community’s & general
public and minimize the regional disparity of telecommunication facilities.
The expansion of the e-governance network, the improvement of access to
telecommunication facilities, the establishment of dedicated Economic Zones and
Telecommunication Parks and the encouragement of the private sector to set up ICT
Institutions are among the future strategies to move forward this rapidly growing sector.

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14. Selected companies
Figure – 15.1
Nestle Lanka PLC
Dialog AXIATA PLC
Trans Asia hotels PLC
John Keels hotels PLC
Commercial bank of Ceylon PLC
Rix PLC

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15. Commercial bank of Ceylon PLC
Figure 15.1
Table: 01
Symbol COMB.N0000
ISIN LK0053N00005
Last Traded Price (Rs.) 103.10
Change (Rs.) and (%)
Turnover (Rs.)
Share Volume
Trade Volume
0.20 (0.19%)
1,130,063.88
10,963
13
Market Capitalization (Rs.)
Market Cap/Total Market Cap (%)
Beta Values Against ASI
(As of Third Quarter of year 2012)
Beta Values Against MPI
80,338,108,416.00
3.79(%)
0.77
0.58

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16. Nestle Lanka PLC
Figure – 16.1
Table: 02
Symbol NEST.N0000
ISIN LK0128N00005
Last Traded Price (Rs.) 1,273.10
Turnover (Rs.)
Share Volume
Trade Volume
67.10 (5.56%)
733,814.81
588
17
68,397,887,488.00
3.23(%)
0.34
0.09

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17. John Keels hotels PLC
Figure – 17.1
Table: 03
Symbol JKH.N0000
ISIN LK0092N00003
Turnover (Rs.)
Share Volume
Trade Volume
3.20 (1.55%)
578,126,784.00
2,753,290
81
178,520,113,152.00
8.42(%)
0.96
0.90

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18. Trans Asia hotels PLC
Figure – 18.1
Table: 04
Symbol TRAN.N0000
ISIN LK0166N00005
Turnover (Rs.)
Share Volume
Trade Volume
1.90 (2.32%)
255,664.00
3,090
20
16,780,000,256.00
0.79(%)
2.32
1.55

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19. Dialog AXIATA PLC
Figure – 19.1
Table: 05
Symbol DIAL.N0000
ISIN LK0348N00009
Turnover (Rs.)
Share Volume
Trade Volume
-0.10 (-1.22%)
4,690,481.00
574,611
48
65,964,605,440.00
3.11(%)
1.08
0.60

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20. Financial performance of above companies
20.1 Analysis of 2010
Table: 01
Analysis Commercial
bank of
Ceylon PLC
Nestle Lanka
PLC
John Keels
hotels PLC
Trans Asia
hotels PLC
Dialog
AXIATA
PLC
EPS 7 35.39 11.49 4.01 37
MPS 259.90 611.42 184 187 595
Dividend per
share
34 34.50 33.1 47 31
20.2 Analysis of 2011
Table: 02
Analysis Commercial
bank of
Ceylon PLC
Nestle Lanka
PLC
John Keels
hotels PLC
Trans Asia
hotels PLC
Dialog
AXIATA
PLC
EPS 10 49.07 11.49 4.86 32
MPS 100 764.38 285 78 651
Dividend per
share
41 47.50 30 46 27

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Task 02
21. Ratio analysis
Mainly liquidity ratios and investor ratios are most important to the new investment.
Others are not relevant for share holder situation.
21.1 Liquidity ratios
a) Current Ratio = Current Assets
Current Liabilities
b) Quick ratio (Acid test ratio) = Current Assets - stocks
Current liabilities
Table: 03
Analysis Commercial
bank of
Ceylon PLC
Nestle Lanka
PLC
John Keels
hotels PLC
Trans Asia
hotels PLC
Dialog
AXIATA
PLC
Current Ratio
2010
2.5 : 1.3 1.5 : 0.5 3.1 :1.8 1.1: 1 2.5 : 1
Quick ratio
2010
2 : 1.3 1 : 0.5 2 : 1.8 1 : 1 1.3 : 1
Current Ratio
2011
2.7 : 1 1 : 0.5 2.5 : 1 1.5 : 1 2.1: 0.9
Quick ratio
2011
1.6 : 1 0.5 : 0.5 1.5 : 1 1.1 : 1 1.8 : 0.69

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21.2 Investor ratios
a) EPS = Net profit after tax, pref; div. & M. Int;
No. of ordinary shares in issue
b) Dividend cover = PAT (Profit attributable to Ord. S/Hs)
Ordinary dividend paid
c) Dividend Yield = Dividend per Share
Market Price per Share
d) Price / Earnings Ratio = Market Price per Share (MPS)
Earnings per Share (EPS)

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Table: 04 - 2010
Table: 05 - 2011
Analysis Commercial
bank of
Ceylon PLC
Nestle Lanka
PLC
John Keels
hotels PLC
Trans Asia
hotels PLC
Dialog
AXIATA
PLC
EPS 7 35.39 11.49 4.01 37
MPS 259.90 611.42 184 187 595
Dividend per
share
34 34.50 33.1 47 31
Price
earnings ratio
259.90
7
= 37.12
611.42
35.39
= 17.27
184
11.49
= 16.01
187
4.01
= 46.6
595
37
= 16.08
Analysis Commercial
bank of
Ceylon PLC
Nestle Lanka
PLC
John Keels
hotels PLC
Trans Asia
hotels PLC
Dialog
AXIATA
PLC
EPS 10 49.07 11.49 4.86 32
MPS 100 764.38 285 78 651
Dividend per
share
41 47.50 30 46 27
Price
earnings ratio
100
10
= 10
764.38
49.07
= 15.57
285
11.49
= 24.80
78
4.86
= 16.04
651
32
= 20.34

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Task 03
22. Investing amount to each company
According to the above identification we can understand above 5 companies are give
effective value for our investment. So we can allocate our investment to each company under
its performance in share market.
Figure – 22.1
 Commercial bank of Ceylon PLC - 1 million
 Nestle Lanka PLC – 1.5 million
 John Keels hotels PLC – 3 million
 Trans Asia hotels PLC – 2 million
 Dialog AXIATA PLC – 2.5 million

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23. Expected total return performance in one year
 Commercial bank of Ceylon PLC - 1 million
1,000,000 * 10
100
= 100,000 * 5%
= 100,000 + 5000
= 105,000
 Nestle Lanka PLC – 1.5 million
1,500,000 * 49.07
764.38
= 96,293.73 * 5%
= 96,293.73 + 4,814.69
= 101,108.42
 John Keels hotels PLC – 3 million
3,000,000 * 11.49
285
= 120,947.35 * 5%
= 120,947.35 + 6,047.37
= 126,994.72

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 Trans Asia hotels PLC – 2 million
2,000,000 * 4.86
78
= 124,615.38 * 5%
= 124,615.38 + 6,230.77
=132,846.15
 Dialog AXIATA PLC – 2.5 million
2,500,000 * 32
651
= 122,887.86 * 5%
= 122,887.86 + 6,144.39
= 129,032.25

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24. Proposed allocation effectiveness
According to the above calculations we can definitely identify our selected companies can
create effective after one year.
105,000.00
101,108.42
126,994.72
132,846.15
129,032.25
594,498.54
Investment = 10,000,000
One year earning = 594,498.54
594,498.54
* 100%
10,000,000
= 6%

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25. Findings and conclusion
25.1 Findings
Share market prices are changing under economical factors, because the companies are in
dynamic economical environment. And also sometimes bank investment is better than share
market investment. So the share market companies are high profitable investment. Mainly
Milanka price index is very import to select effective company to invest. I think above
selected industries give successful value for investment to Rix PLC.
Figure – 25.1.1
25.2 Conclusion
Finally I would like to tell bank and finance industry, beverage and food industry,
diversified holdings industry, hotel and travels industry and telecommunication industry are
in effective way in Sri Lankan market. So I think the company can get high level profitable
with small risk.

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26. Recommendation
I recommend for the company it must give high consideration for the dynamic
environment. And also they have to understand business process of selected companies.
According to the economical changing bank interest rate may be increase. So that 10 million
can get high profits investing banks than share market. But existing situation is creating
profitable market in share market investment. So the company has to research and study
market environment well.

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27. Annexure
1.
Dialog Telekom, the Business Today Top Company for the year 2006/07 holds a distinct
position in Sri Lanka. Entering the mobile telephony industry behind three earlier entrants
Dialog Telekom emerged as market leader by redefining the Sri Lanka mobile telephone
market with good foresight and extraordinary courage. The success of the company could be
primarily attributed to its visionary leadership supported by a reservoir of human talent, an
entrepreneurial and success driven culture and the strong financial backing of Malaysia
Telekom, parent company of Dialog Telekom, who believed and invested in the company
despite volatile ground conditions.
John Keells Holdings has consistently found a place in the Business Today TOP 10
ranking and is a previous winner. The conglomerate has over the years been the undisputed
corporate benchmark in Sri Lanka and continues to hold that status. The group is known for
its appetite and sense for growth sectors and must be credited for showing the way to other
conglomerates and companies that now challenge the John Keells Group.
Commercial Bank, the Icon of modern banking in Sri Lanka dropped two places in the
ranking to number seven. The bank returned a post tax profit of Rs.2 billion in 2006
compared to Rs.2.4 billion in the previous year. Notwithstanding a lesser than desired
performance, Commercial Bank ended 2006 as the largest indigenous bank in the country,
and market capitalization was highest among all financial institutions in Sri Lanka. In
December 2006 the bank opened its 150th branch, exceeding the target set for the year. The
bank has 269 ATMs installed around the country for customer convenience.
Ceylon Tobacco Limited, a regular feature on the TOP 10 ranking is the only
manufacturing based company to consistently find a place amongst the TOP 10. The
company moved down the ranking to ninth place due to superior performance and growth
levels recorded by companies from other sectors. It is perhaps difficult for Ceylon Tobacco
to match growth rates of other

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2.
Business today, true to its reputation as the Magazine of the Corporate World has since
1998 regularly conducted its own survey of top corporate performers and recognized and
honored the best of the best. The annual survey is strictly based on published financial
information of private sector companies listed on the Colombo Stock Exchange. Continuing
in its service of recognizing and celebrating business excellence, Business Today is yet again
pleased to present its TOP 10 performers for the year 2006-07.
As observed in the past, competition for a position in the TOP 10 ranking is intense and
close in contested. Those regularly securing a place in the list have done so through
consistent performance, consolidation and growth. Some entered and exited the ranking due
to inconsistency in performance and/or because of stronger contenders that emerged. The
Business Today TOP 10 performers must be proud of their success whilst those aspiring for a
place in the list, should feel inspired and encouraged by the more recent entrants. Companies
that have been/or are in the Business Today TOP 10 know what it takes to excel.
Established financial criteria applied to select the TOP 10 are Sales Turnover, Growth in
Sales Turnover, Profits, and Growth in Profits, Return on Equity, Earnings per Share, Market
Capitalization, Value of Shares Transacted and Value Addition. A high and growing top line
performance by companies although necessary is not sufficient to qualify as a top performer
in the absence of profits.
As in the past, weights applied to the respective criteria are not disclosed for proprietary
reasons. Business Today assures that weights were assigned to the above criteria after due
consideration to significance of the criteria and ensuring all business sectors are equitably
represented. Weights are applied uniformly without prejudice.

~ 34 ~
A clear and simple observation of the latest TOP 10 ranking is the superior performance of
the top mobile and fixed line telecom operators. Their top two positions with scores well
above other top companies is a reflection of their market attractiveness and above average
growth levels. It is interesting to note that the third best company in the TOP 10 ranking too
probably holds a lead position in the CDMA market.
The Finance and Banking sector which stood tall above other sectors as seen in earlier
TOP 10 rankings moved down in the TOP 10 ranking later, due to, initially aggressive
conglomerates, and then subsequently dominant telecom operators. Only knowing too well
that the financial sector cannot be kept down for too long, it is not unrealistic to assume that
the sector will return to higher positions in future TOP 10 rankings sooner than later.

~ 35 ~
3.
The Securities and Exchange Commission of Sri Lanka will kick start a series of forums to
educate and encourage large privately held companies to list on the Colombo Stock
Exchange in a bid to develop a vibrant capital market in the country, a senior official said.To
date there are 234 companies representing 20 business sectors listed on the 1.7 trillion rupee
capped Colombo bourse.
There are benefits to listing company's shares on a stock exchange including the ability to
raise new equity or sell down ownership through a public offer of shares. The shares are then
traded in the open market, like any other commodity. Companies usually use this strategy to
raise money for expansion or retire debt.
The securities regulator is also looking at luring government owned entities to list on the
stock exchange. A public firm could have thousands shareholders, to appoint directors to
govern the firm. "There is an option of raising part of the money for theses big infrastructure
projects to through the stock market. India does it very successfully."
Sri Lanka's stock exchange was a dry ground for investment until the end of war in May
last year. Following the end of conflict stocks staged a major comeback rising 125 percent
last year renewing investor interest for the Colombo bourse.

~ 36 ~
28. References
www.ias.com
www.cse.lk
www.commercialbank.com
www.nestlelanka.com
www.johnkeels.lk
www.transasia.com
www.dailog.com
www.investorboard.lk
www.tourismboard.com
www.ias2.com

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