The Malta Independent 23 September 2018, Sunday

Monthly Round up Report for August 2018: MSE Index maintains negative stance

Thursday, 6 September 2018, 09:45 Last update: about 17 days ago

Jesmond Mizzi


The MSE Equity Total Return Index almost replicated July's 0.713% loss, having declined by 0.725%, to close at 8,513.44 points. Turnover amounted to €8.2 million and was spread over 23 issues of which 10 fell and seven gained ground.

HSBC Bank Malta plc shares headed the list of fallers, having stumbled by 8.6% - fully erasing the previous month's 2.2% gain. The banking equity was active across 100 deals of 384,368 shares, closing €0.16 lower at €1.71.

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This negative performance was reflected by a decline in profit before tax of 38% or €9.8 million for the first six months of 2018, amounting to €16.2 million. Downturn in profits was somewhat expected, as it was the result of a strategy focused on mitigating risks and overhauling the bank's compliance function. Profit was also impacted by the continuing negative interest rates.

The implementation of these de-risking actions is now nearing completion, and thus, the bank is transitioning into a new phase of its long-term strategy, shifting its main focus to growth and value creation by enhancing return on equity.

Net interest income for the period was down by 10% compared to the first half of 2017, partly as a consequence of a lower average yield on the investment book, and the contraction of the commercial banking loan book. Non-interest income remained relatively stable as net fee income was recorded at €11.9 million.

Customer deposits were 1% higher than the end of 2017, as deposits increased in all segments of customers of the commercial banking business. The bank has managed to maintain a strong capital position, thus enabling the board to sustain the 65% dividend payout policy. A net interim dividend of €0.026 per share is being recommended by the board of directors, to be paid on September 18, 2018 to all registered shareholders as at August 17, 2018.

 

Close Close % Change
Monthly changes 31/08/2018 31/07/2018  
MSE Equity Total Return Index 8,513.440 8,575.586 -0.72%
Bank of Valletta plc 1.510 1.540 -1.95%
FIMBank plc (USD) 0.560 0.540 3.70%
GlobalCapital plc 0.286 0.300 -4.67%
Grand Harbour Marina plc 0.750 0.750 0.00%
GO plc 3.440 3.420 0.58%
HSBC Bank Malta plc 1.710 1.870 -8.56%
International Hotel Investments plc 0.630 0.630 0.00%
Lombard Bank plc 2.420 2.300 5.22%
Loqus Holdings plc 0.090 0.060 49.17%
MIDI plc 0.570 0.480 18.75%
Medserv plc 1.050 1.110 -5.41%
Malta International Airport plc 5.550 5.400 2.78%
Malita Investments plc 0.890 0.870 2.30%
Mapfre Middlesea plc 1.860 1.960 -5.10%
Malta Properties Company plc 0.488 0.500 -2.40%
Main Street Complex plc 0.665 0.665 0.00%
MaltaPost plc 1.610 1.650 -2.42%
PG plc 1.380 1.340 2.99%
Plaza Centres plc 1.040 1.040 0.00%
RS2 Software plc 1.190 1.210 -1.65%
Simonds Farsons Cisk plc 7.350 7.400 -0.68%
Santumas Shareholdings plc 1.320 1.320 0.00%
Tigné Mall plc 0.950 0.950 0.00%
Trident Estates plc 1.320 1.320 0.00%
*figure represents the issue price of €0.65
Compiled by Jesmond Mizzi Financial Advisors Limited      

Bank of Valletta plc (BOV) shares closed in the red for the third consecutive month, having declined by 2% across the highest turnover of €2.9 million. Activity was spread over 490 trades, to close €0.03 lower at €1.51. This negative performance was reflected by the bank's interim financial results, which showed a profit before tax of €13.5 million, down from €67.8 million for the corresponding period last year. The decrease in profit is wholly attributable to a litigation loss provision of €75 million that the group has decided to set aside in the current financial reporting period. In fact, operating profit, which does not account for this litigation provision, increased by almost 43% over the previous year, to €84.2 million.

The litigation provision is being made in the context of changing circumstances affecting three material litigation cases which the bank is currently involved in, mainly the case concerning the bankruptcy of the Deiulemar Group. Although the legal advice furnished to the board remains that the bank has strong legal defences on the merits of the case, the board has resolved to recognise a provision to reflect a higher probability of an eventual outflow of funds in connection with the case. This figure may be reassessed should further developments so require, in which case the market shall be informed.

The group recorded an improvement in all its revenue streams. Interest margin rose by 8% to €79 million, while commission income grew by 21% to €40 million. These improvements are in line with the bank's strategy to diversify its revenue sources. From the financial point of view, the group remains highly liquid, with cash and short-term funds amounting to €3.5 billion. Customer deposits stood at €10 billion as at the end of June, as retail customer deposits grew while international corporate deposits decreased in line with the bank's strategy. Capital ratios remain satisfactory, as the Capital Adequacy Ratio stood at 19.8%, while the Common Equity Tier 1 ratio stood at 16.8%, compared to 19.4% and 16.1% respectively registered in December 2017.The bank announced that the board decided not to declare an interim dividend and has also expressed its intent not to recommend a final cash dividend for financial year 2018.

FIMBank plc shares added to July's 3.9% gain, having advanced by 3.7% as 176,055 shares changed ownership across 19 transactions, closing at $0.56. The board of the trade finance bank met in London and approved the interim financial results for the first six months of 2018. During the period, the group posted a net profit of $6.1 million, translating to a substantial 47% increase on the previous year's $4.1 million.

Net operating income increased by 18%, driven by increases in all segments of income, including net interest income, net fee and commission income, and dividend income. This was the result of higher gross yields and lower cost on funding sources, as the group was more selective in its funding sources.  A net gain from foreign currency operations of $0.9 million was also registered, compared to a $2 million loss during the same period last year.

Operating expenses for the period were down by 13% to $18.5 million, reflecting the deconsolidation of Latamfactors and the non-recurrence of regulatory costs booked in the prior period. This, coupled with the increase in operating income, translated in a threefold increase in net operating income, to $9.8 million.

The group's Capital Adequacy Ratio stood at 17.3%. The board of directors has decided that it will not be recommending the payment of an interim dividend.

Lombard Bank Malta plc shares extended the previous 0.9% increase, having appreciated by 5.2% across 24 deals of 63,965 shares, to close €0.12 higher at €2.42. The group registered a profit before tax of €6.1 million for the first six months of 2018, translating to a significant 29.7% increase. This was in line with a 32% increase in operating income, which reached €35.4 million, as activity remained strong in all significant business lines. The group's performance was positively impacted by higher volumes of commercial credit activity during the past year.

Loans and advances to customers were up by 10.7% to €474.7 million, backed by a 2.5% increase in customer deposits to €751.8 million. This resulted in the Bank Advances to Deposits Liquidity Ratio to rise from the 58.2% recorded at the end of year 2017, to a still healthy 62.7%. The Capital ratio was registered at a solid 13.6%, well above the 8% regulatory minimum requirement. All of this resulted in an improved earnings per share figure of €0.084, compared to the €0.06 registered during the same period last year.

Santumas Shareholding plc's board approved the audited financial statements for the year ended April 30, 2018.  These statements will be submitted for the approval of the shareholders at the forthcoming Annual General Meeting scheduled for October 23, 2018. The results show a loss before tax of €82,597, compared to a profit of €1.8 million for 2017. This was mainly the result of an 82.9% drop in investment income, coupled with a decrease in fair values of financial assets of €519,230, as opposed to an increase in value of €303,424 in 2017. Earnings per share stand at a loss of €0.026 per share, down from the previous year's €0.239. The equity was not active in August.

Mapfre Middlesea plc shares erased the previous month's 1% increase, having slipped by 5.1% or €0.10. The shares of the insurance and investment services provider were active on 14 trades of 31,311 shares, and closed at €1.86.

In the same sector, GlobalCapital plc shares reversed July's 3.5% increase, having declined by 4.7%, as one deal of 150 shares was negotiated, closing at €0.286.

Malta International Airport plc shares appreciated by €0.15 or 2.8% - having extended July's 8.4% rally. The local airport operator's shares oscillated between an all-time high of €5.70 and a monthly low of €4.90, but ultimately closed at €5.55. Activity was spread over 84 transactions of 201,146 shares. Unsurprisingly, the airport's traffic results for July 2018 were very positive, setting a new monthly traffic record of 756,356 passengers. This figure translates to an increase of 12.1% over July 2017. This positive performance was observed in parallel with an 11.3% increase in aircraft movements, an 11.5% rise in seat capacity, and a seat load factor of 87.1%.

While four of the top markets registered growth that ranged between 14.4% and 34.3%, Germany's passenger movements decreased by 4.3%. This decrease resulted from a reduced schedule by TUI cruises, affecting the cruise and fly passenger traffic throughout.

Medserv plc shares partially erased the previous month's 11% advance, having declined by 5.4%. The oil and logistics services company's shares witnessed 27 transactions of 103,720 shares, and closed €0.06 lower at €1.05.

Medserv published its half yearly report, showing a loss before tax of €2.7 million, translating to a loss reduction of 20.3%.  Turnover for the first half of 2018 amounted to €18.1 million, 33.2% higher than the €13.6 million registered in the corresponding period last year. The increase in revenue is partly a result of increased oil and gas exploration activities, and engineering services in Malta and Cyprus.

Results were impacted by costs incurred to set up the facilities necessary for the three year contract secured in Egypt, and the contract related to exploration activities taking place offshore Cyprus. These contracts are expected to generate positive earnings over the coming months. The company's outlook is optimistic as the board is confident that EBITDA will be improved in the coming months and years, as current works in progress should start to generate positive cash flows. The board has decided not to recommend an interim dividend.

Malta Properties Company plc (MPC) shares extended their recent losing streak, having registered a decline for the third consecutive month. The equity witnessed 31 trades of 318,807 shares, and closed 2.4% lower at €0.488. The board of MPC approved the group's interim unaudited financial statements for the six-month period ended June 30, 2018. Profit after tax was up to €501,818 from €447,047.

This upturn was mainly driven by a 6.2% improvement in rental income to €1.6 million as a result of the completion of new developments, as well as inflation. The long-term lease agreements that the group has with its tenants secure levels of revenues for the foreseeable future, while additional developments should increase revenue even further.

This was partially offset by a 10.7% rise in administrative expenses to €529,045. This was driven by growth in the group's operations and the planned redevelopment projects being undertaken. Finance costs on the other hand were lower at €307,528 following a decrease in bank charges.

The board has resolved to determine the extent of any dividend distribution for 2018 at the end of the year, and thus no interim dividends were declared.

In another announcement, MPC reported that its wholly owned subsidiary, SGE Property Company Limited has entered into a promise of sale agreement with Mercury Exchange Limited for the property known as Saint George's Exchange, in Triq San Gorg, Saint Julian's.

The property is currently occupied by GO plc, resulting from a deed signed in 1998. The consideration for the sale of the property is €13.8 million. As part of the deal, Mercury Exchange Limited will transfer a 303 square metre site below road level at Triq San Gorg to GO for a nominal amount of €100.

Furthermore, MPC provided an update with regards to the promise of sale agreement between its wholly owned subsidiary, SLM Property Company Limited as seller, and Toncam Properties Limited as buyer, for the property known the Sliema Old Exchange.

The final deed of sale has now been officially executed between the two parties for a consideration of €5m, of which €500,000 was paid upon the execution of the promise of sale agreement, and €4.5m paid upon the final deed of sale. The proceeds from this sale are expected to go towards funding MPC's development projects or any acquisition opportunities.

The telecommunications services provider GO plc, registered a minimal 0.6% loss in its share price. The equity was active on 47 trades of 128,468 shares, and closed at €3.40.

MIDI plc shares stayed faithful to its winning streak, having closed in the green for the fifth consecutive month. The property management equity rallied by 18.8% as 1.2 million shares changed hands over 48 transactions, closing €0.09 higher at €0.57.

MIDI group registered a profit after tax of €10.5 million for the first six months ending June 30, 2018, compared to a loss of €1.7 million registered for the same period last year. Revenue for the six months amounted to €35.5 million (2017: €1.9 million) of which €33.6 million (2017: €185k) was generated from sale of property. Operating profit from sale of property amounted to €13.4 million (2017: Loss of €1.4 million). The property management activities of the group generated revenues amounting to €1.8 million (2017: €1.7 million) and an operating profit of €968k (2017: €673k). As a result, earnings per share was up from negative €0.0078 last year to a positive €0.0492 this year.

Malita Investments plc shares extended their positive performance, having closed in the green for the fourth consecutive month. The equity advanced by 2.3% and closed at €0.89. Activity in the property management equity was spread over 37 deals of 534,732 shares. The board of Malita approved the condensed interim financial statements for the six months ended June 30, 2018. Profit before tax decreased year-on-year from €9.7 million in 2017 to €6.5 million in 2018. Profit after tax increased substantially from €1.7 million in 2017 to €5.5 million in 2018, mainly due to the substantial differed tax during the same period in 2017. Meanwhile, earnings per share increased from €0.0113 to €0.0372.

The board approved the payment of an interim net dividend of €0.00858 per share. The interim dividend will be paid on September 7, 2018 to the shareholders on the company's share register as at August 23, 2018.

Trident Estates plc shares closed unchanged at €1.32, as 22 deals of 50,443 shares were executed.

Tigne Mall plc (Tigne) shares swayed between a monthly high of €0.97 and a low of €0.94, but ultimately closed unchanged at €0.95. The shopping mall's equity witnessed 10 trades of 70,158 shares. The company registered a 7.2% increase in profit after tax for the six months ended June 30, 2018, driven by higher rental revenue and lower finance costs. During the period, the company registered an improvement in liquidity as cash and cash equivalents were up to €1.6 million.  The directors anticipate this level of activity to be maintained throughout the second half of the year.

Tigne distributed an interim net dividend payment of €0.0128 per share on August 31, 2018 to all shareholders on the register as at August 17, 2018.

In the same sector, Main Street Complex plc shares traded flat at €0.665 on two transactions of 5,000 shares. The company recorded a profit before tax of €196,256 for the first half of 2018, which is 10.5% lower than the corresponding period last year. Revenues were marginally down at €353,860 while operating expenses increased from €20,391 to €31,241 as a result of lower recoveries of Common Area and Building Maintenance costs, higher management fees, additional depreciation on a new lift installation, and governance costs. Finance costs on the other hand decreased by 25.3% following the full repayment of banking facilities following the company's listing, as envisaged.

The board has resolved to distribute a net interim dividend of €0.00628 per share on September 14, 2018, to all registered shareholders as at September 7, 2018.

Plaza Centres plc shares closed unchanged at €1.04 for the fourth consecutive month. The shopping mall owner's equity was active on 20 deals of 109,475 shares.

RS2 Software plc shares extended July's 3.2% loss, having slipped by 1.7% over 46 trades of 134,118 shares, closing at €1.19. During the first half of 2018, the group registered total revenues of €15.6 million, compared to the €10.6 million recorded in the same period last year.

This significant increase in revenue was brought about by the implementation of IFRS15, the new revenue recognition Standard. After eliminating the effect of such adjustments, the group revenue figure would read €9.0 million, a reduction of 15% year-on-year. Gross profit for the first six months of the year stands at €9.3 million, compared with the €4.9 million in the previous year. After eliminating the effects of the adjustments brought about by the implementation of IFRS15, gross profit would read €2.7 million. Due to further substantial investment in infrastructure and business development, the Board is not declaring an interim dividend.

Loqus Holdings plc shares erased the previous month's 40% decline, having appreciated by 49.2%, closing €0.03 higher at €0.09. The I.T. equity was negotiated across three deals of 18,500 shares.

International Hotel Investments plc (IHI) shares closed unchanged at €0.63, despite having reached a monthly high of €0.655 and a low of €0.60. Activity in the hoteliers' equity was spread over 33 transactions of 433,620 shares.

IHI registered a loss before tax of €1.8 million for the first six months of 2018, compared to a loss of €2.3 million in the corresponding period last year. In terms of revenue, the group recorded an increase of €1.6 million over the previous period, to reach €116.9 million. This reflects an overall operational improvement, as well as the effect of the consolidation of the Corinthia Palace Hotel which was acquired in April 2018. No further dividend was declared following the net dividend of €0.02 declared in June 2018, an amount which is recognised in the half yearly statements as a current liability.

PG plc shares recorded an increase for the third consecutive month. The retail and supermarkets owner's shares advanced by 3%, as 26 deals of 195,385 shares were concluded, to close €0.04 higher at €1.38.

PG published its statements for the financial year ending April 30, 2018, reporting a profit before tax of €11.1 million - a 2.5% increase over the previous year. Turnover for the year was €99.8 million, 8.9% higher than the year ended in 2017.

This revenue growth mainly reflects the increased maturity of the PAMA Shopping Village, as well as the fact that this was the first full year of operations for the said retail mall. As expected, the group also incurred increased direct costs in line with the additional revenues, as well as higher marketing expenses, administrative overheads and employment costs. The group registered an operating profit of €11.7 million, translating to a 2.7% increase on the previous period.

The board has resolved to distribute a net interim dividend of €0.023611 per share, to be paid on September 5, 2018, to all registered shareholders as at August 24, 2018.

MaltaPost plc shares extended its recent losing streak, having registered a decline for the third consecutive month. The local postal operator's equity fell by €0.04 or 2.4%, and was negotiated across nine trades of 28,170 shares, closing at €1.61.

The food and beverage supplier Simonds Farsons Cisk plc recorded a 0.7% decrease in its share price. The equity witnessed 15 transactions of 60,463 shares, to close €0.05 lower at €7.35.

Grand Harbour Marina plc shares closed unchanged at €0.75 for the fourth consecutive month, as one trade of 4,400 shares was concluded.

In the corporate bond market, 53 issues were active of which 28 advanced and 17 declined. Turnover amounted to €9.9 million - out of which the 4% Exalco Finance plc Secured 2028 was the most liquid issue, having witnessed a turnover of €1.3 million, closing 4.5% higher at €104.50.

In the sovereign debt market turnover totalled €11.4 million, spread across 27 issues - all of which closed in the red. The 4.8% MGS 2028 (I) registered the worst performance, having declined by 1.9% over 13 deals worth €212,949, to close at €130.60.

This article, which was compiled by Jesmond Mizzi, Managing Director of Jesmond Mizzi Financial Advisors Limited, does not intend to give investment advice and the contents therein should not be construed as such. The Company is licensed to conduct investment services by the MFSA and is a Member Firm of the Malta Stock Exchange and a member of the Atlas Group. The directors or related parties, including the company, and their clients are likely to have an interest in securities mentioned in this article. For further information, contact Jesmond Mizzi Financial Advisors at 67 Level 3, South Street, Valletta, or on Tel: 21224410, or email [email protected]

 


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