During the first quarter of 2008, the MSE Share Index fell 5.8 per cent to 4,649.994 points after touching a high of 5,053.126 points on January 14. A dose of consolation emerges when this performance is viewed against the major international markets, which suffered from heavier declines mainly as a result of the huge sub-prime-related losses and fears of a recession in the US. For example, the FTSE 100 shed 11.7 per cent during the first quarter of the year. Germany's DAX fell 13 per cent, France's CAC 40 dropped 16.2 per cent while Cyprus, a euro newcomer like Malta, experienced a massive 40 per cent decline in its main index during the first quarter.
Back to the local market, 10 of the 17 equities ended the quarter lower with Bank of Valletta leading the laggards with a 17.4 per cent decline. This was followed by Lombard Bank with a decline of 10 per cent to €13 (however, one must note that this equity had rallied by 24 per cent during the final month of 2007, closing the year at a new all-time high of €14.451).
Only five equities staged a positive performance in the first three months of 2008 with newcomer MaltaPost strongly outperforming the rest of the market with an extraordinary appreciation of 68.8 per cent. FIMBank and Crimsonwing also had an excellent run, gaining 19 per cent and 12 per cent respectively followed by Plaza Centres with a very respectable 9 per cent rise. Malta International Airport concludes the list of positive performers with a slight gain of 3.3 per cent during the quarter under review.
Meanwhile International Hotel Investments and Datatrak closed the quarter unchanged. In recent weeks IHI announced two important acquisitions in London and Benghazi.
Following the strong downturn in trading activity in 2007, during the first quarter of this year there was a 20 per cent rise in equity market trading to €20.8 million. While the larger capitalised companies experienced a decline in the number and value of trades, the increased activity was mainly attributable to the large deals effected in Lombard Bank on March 12 when 453,850 shares (equivalent to 5.3 per cent of the total issued share capital) changed hands at €13 per share. In previous weeks, Marfin Popular Bank of Cyprus acquired a 43 per cent shareholding in Lombard at €13.057 per share through five deals effected in the "Off-Exchange Market" totalling 3,698,509 shares. The increase in activity was also due to the commencement of trading in MaltaPost in which almost 2.1 million shares were exchanged for a value of €1.4 million. FIMBank also registered a strong increase in activity on the back of record profits and important corporate developments.
Although the general trend during the first quarter of the year was negative, the fundamentals and outlook of many of the companies listed on the Malta Stock Exchange remain positive. Dividends to shareholders have again increased and many companies are currently trading on historic gross dividend yields above the 6 per cent level, thus offering investors a strong return on their investments purely from an income perspective. The undemanding valuations and attractive yields make this an interesting time for value investors to accumulate shares for capital appreciation. Other investment opportunities are likely during the rest of the year as the Malta Stock Exchange is expected to experience a boost in listings in the coming months. The chairman of the MSE stated in a recent interview that six local companies are considering going public this year by way of an Initial Public Offering, while eight others are planning to issue corporate bonds.
Undoubtedly these are interesting times for the local market.
Below is a review of the five companies ranked in terms of performance that made important announcements during the year.
• Mr Rizzo is a director with Rizzo, Farrugia and Co. Rizzo, Farrugia & Co acted as sponsoring stockbrokers to MaltaPost plc and are corporate brokers to FIMBank plc and Malta International Airport plc.
http://www.rfstockbrokers.com
MaltaPost plc: MaltaPost plc was admitted to the official list on January 24 following a share offer by the government of Malta and Malta Government Investments Ltd of 11,200,000 shares (40 per cent of the issued share capital) at a price of €0.50 per share. The share offer attracted a substantial number of applicants (over 2,900 applications) and was more than 13 times oversubscribed. As a result all applications were heavily scaled down and this excess demand rolled over into the secondary market as the equity began trading on January 25. On its debut, the share price climbed 24 per cent to €0.62 on substantial volumes of 473,600 shares. On February 1, MaltaPost announced that it was notified by GasanMamo Insurance Ltd that it held 5.68 per cent of the total share capital. The equity remained in strong demand, maintaining a level of €0.66 per share throughout most of the month of February before climbing a further 6 per cent to €0.70 during the final week. Moreover on March 20, MaltaPost issued a further announcement stating that on March 17 Mohammed Ibrahim Marafie of Kuwait held just over 5 per cent of the total share capital. This announcement fuelled further demand with the share price surging a further 19 per cent from €0.711 on March 14 to close the month at €0.844, representing a 68.8 per cent rise over the IPO level. MaltaPost's half-year results to March 31, 2008 are expected to be published following a board meeting to be held on May 22.
FIMBank plc: FIMBank's share price ranked as second best performer during the first three months of 2008 with a 19 per cent rise in dollar terms adjusted for the one-for-five bonus share issue on March 10. On January 29, FIMBank announced that the State Bank of India (SBI) intended to purchase a 91 per cent shareholding in Global Trade Finance Ltd (GTF) in India from Export-Import Bank of India, International Financial Corporation and FIMBank (38.5 per cent shareholding). On the back of this announcement, the share price climbed 14 per cent within a few days to $2 on high volumes. The equity remained in strong demand following FIMBank's 2007 financial results publication on March 3. FIMBank registered a 38 per cent increase in profitability to a record $10.5 million. The sale of FIMBank's 38.5 per cent shareholding in GTF was confirmed on March 28 when the bank issued a company announcement stating that it had disposed of its 29.7 million shares in GTF at a price of INR 73 per ordinary share, for a gross consideration of INR 2.168 billion, (equivalent to circa $54 million). The substantial gains made on the sale of this investment will be reflected in the bank's 2008 financial results. Following the $25 million rights issue in December 2007 and the proceeds from the sale of GTF, FIMBank aims to develop further joint-venture factoring companies together with International Finance Corporation and other supra-national institutions in Latin America, China and Russia.
Bank of Valletta plc: The most disappointing and worst performer during the first three months of the year was BOV as its share price declined by 17.4 per cent following the 5.4 per cent drop in 2007. BOV effected a one-for-five bonus share issue on January 11 and the share price dropped to €6.71, 2.4 per cent lower than the theoretical ex-bonus price of €6.873. The equity continued to edge lower to €6.50 by January 28 when BOV issued its interim directors' statement. The directors explained that the volatile international credit market was likely to lead to further "mark to market write-downs" in the group's investment portfolio (mainly composed of high quality fixed income securities) for the half-year to March 31, 2008. As a result of this and the "material one-off costs" related to the euro adoption, the directors expect that the profits for the first half of the current financial year will be below that achieved during the first six months of 2007. This "profit warning" caused further selling pressure in BOV shares, forcing the equity to a fresh multi-year low of €5.50 on February 15. After staging a strong rebound within a couple of days, the share price resumed its downward trend hitting a low of €5.35 on March 25 before closing the month at €5.60.
Malta International Airport plc: MIA's share price closed the quarter only 3.3 per cent higher at €3.32 (after touching a low of €3.151) despite continued evidence of a strong rise in passenger movements and the company's announcement of pre-tax profits exceeding €14 million during the year ended December 31, 2007. On March 7, in conjunction with the publication of the preliminary profits statement, the board of directors also recommended the payment of a final gross dividend of €0.0892 per share (net dividend of €0.058) to those shareholders as at close of trading on Tuesday April 29. The dividend will be put forward for shareholders' approval during the annual general meeting on April 24 and, once approved, will be paid by not later than May 26. Recently appointed CEO Julian Jaeger addressed the media on January 24, explaining that MIA expects passenger movements to exceed 3.18 million in 2008 - an increase of 6.5 per cent over the 2007 figures. Actual passenger statistics for the first quarter of 2008 indicate a growth of 22.3 per cent in passenger departures over the corresponding period last year. The CEO stated that new carriers will begin operating to Malta in 2008, namely EasyJet, Vueling, Norwegian Air Shuttle and Volareweb. Moreover, MIA have identified other destinations that are considered underserved but which have good potential to attract new business to Malta. In order to accommodate the increase in passenger throughput, MIA is currently extending the air terminal to improve the security function and increase the retail floor space within the departure area. Improvements to the arrivals area are also planned to take place in the coming months. MIA also announced that with effect from March 1 it took over the running of the car park after it successfully negotiated the termination of the concession from the previous operator.
GO plc: GO's share price performance continued to disappoint many investors as it shed a further 4.3 per cent in the first quarter of 2008. Activity in the company's shares remained subdued with only 404,000 shares changing hands for a value of €1.2 million. On January 18, GO announced that it was evaluating the possibility of acquiring shareholding of a Greek telecoms company. This was confirmed by a further announcement on January 29 in which it was stated that GO together with its majority shareholder Emirates International Telecommunications (Malta) Ltd (EITML), acquired a 21 per cent shareholding in ForthNet for a cash consideration of €93.8 million. Moreover on March 7, ForthNet announced that it submitted a binding offer for pay TV operator NetMed NV. Shortly before the publication of GO's 2007 full-year results on February 27, the share price edged up to €3.12 and regained its 2007 year-end level of €3.145 by March 10 on increased demand probably to gain entitlement to the net dividend of €0.1165 per share. The company's financial statements for 2007 were impacted by a series of one-off items. The group reported a pre-tax profit of €27.6 million as the continued decline in fixed-line turnover was offset by growth in mobile, broadband and TV services. GO continued to generate a strong level of free cash flow with cash and cash equivalents as at December 31, 2007 rising to €81.5 million. As the equity turned ex-dividend, GO's share price dropped back towards its 2008 low of €3 and continues to trade around this support level.
Rizzo, Farrugia & Co. (Stockbrokers) Ltd (RFC) are members of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It contains public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC may have or have had a relationship with or may provide or has provided other services of a corporate nature to companies therein mentioned. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC, nor any of its directors or employees, accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.
© 2008 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved.
http://www.rfstockbrokers.com
Back to the local market, 10 of the 17 equities ended the quarter lower with Bank of Valletta leading the laggards with a 17.4 per cent decline. This was followed by Lombard Bank with a decline of 10 per cent to €13 (however, one must note that this equity had rallied by 24 per cent during the final month of 2007, closing the year at a new all-time high of €14.451).
Only five equities staged a positive performance in the first three months of 2008 with newcomer MaltaPost strongly outperforming the rest of the market with an extraordinary appreciation of 68.8 per cent. FIMBank and Crimsonwing also had an excellent run, gaining 19 per cent and 12 per cent respectively followed by Plaza Centres with a very respectable 9 per cent rise. Malta International Airport concludes the list of positive performers with a slight gain of 3.3 per cent during the quarter under review.
Meanwhile International Hotel Investments and Datatrak closed the quarter unchanged. In recent weeks IHI announced two important acquisitions in London and Benghazi.
Following the strong downturn in trading activity in 2007, during the first quarter of this year there was a 20 per cent rise in equity market trading to €20.8 million. While the larger capitalised companies experienced a decline in the number and value of trades, the increased activity was mainly attributable to the large deals effected in Lombard Bank on March 12 when 453,850 shares (equivalent to 5.3 per cent of the total issued share capital) changed hands at €13 per share. In previous weeks, Marfin Popular Bank of Cyprus acquired a 43 per cent shareholding in Lombard at €13.057 per share through five deals effected in the "Off-Exchange Market" totalling 3,698,509 shares. The increase in activity was also due to the commencement of trading in MaltaPost in which almost 2.1 million shares were exchanged for a value of €1.4 million. FIMBank also registered a strong increase in activity on the back of record profits and important corporate developments.
Although the general trend during the first quarter of the year was negative, the fundamentals and outlook of many of the companies listed on the Malta Stock Exchange remain positive. Dividends to shareholders have again increased and many companies are currently trading on historic gross dividend yields above the 6 per cent level, thus offering investors a strong return on their investments purely from an income perspective. The undemanding valuations and attractive yields make this an interesting time for value investors to accumulate shares for capital appreciation. Other investment opportunities are likely during the rest of the year as the Malta Stock Exchange is expected to experience a boost in listings in the coming months. The chairman of the MSE stated in a recent interview that six local companies are considering going public this year by way of an Initial Public Offering, while eight others are planning to issue corporate bonds.
Undoubtedly these are interesting times for the local market.
Below is a review of the five companies ranked in terms of performance that made important announcements during the year.
• Mr Rizzo is a director with Rizzo, Farrugia and Co. Rizzo, Farrugia & Co acted as sponsoring stockbrokers to MaltaPost plc and are corporate brokers to FIMBank plc and Malta International Airport plc.
http://www.rfstockbrokers.com
MaltaPost plc: MaltaPost plc was admitted to the official list on January 24 following a share offer by the government of Malta and Malta Government Investments Ltd of 11,200,000 shares (40 per cent of the issued share capital) at a price of €0.50 per share. The share offer attracted a substantial number of applicants (over 2,900 applications) and was more than 13 times oversubscribed. As a result all applications were heavily scaled down and this excess demand rolled over into the secondary market as the equity began trading on January 25. On its debut, the share price climbed 24 per cent to €0.62 on substantial volumes of 473,600 shares. On February 1, MaltaPost announced that it was notified by GasanMamo Insurance Ltd that it held 5.68 per cent of the total share capital. The equity remained in strong demand, maintaining a level of €0.66 per share throughout most of the month of February before climbing a further 6 per cent to €0.70 during the final week. Moreover on March 20, MaltaPost issued a further announcement stating that on March 17 Mohammed Ibrahim Marafie of Kuwait held just over 5 per cent of the total share capital. This announcement fuelled further demand with the share price surging a further 19 per cent from €0.711 on March 14 to close the month at €0.844, representing a 68.8 per cent rise over the IPO level. MaltaPost's half-year results to March 31, 2008 are expected to be published following a board meeting to be held on May 22.
FIMBank plc: FIMBank's share price ranked as second best performer during the first three months of 2008 with a 19 per cent rise in dollar terms adjusted for the one-for-five bonus share issue on March 10. On January 29, FIMBank announced that the State Bank of India (SBI) intended to purchase a 91 per cent shareholding in Global Trade Finance Ltd (GTF) in India from Export-Import Bank of India, International Financial Corporation and FIMBank (38.5 per cent shareholding). On the back of this announcement, the share price climbed 14 per cent within a few days to $2 on high volumes. The equity remained in strong demand following FIMBank's 2007 financial results publication on March 3. FIMBank registered a 38 per cent increase in profitability to a record $10.5 million. The sale of FIMBank's 38.5 per cent shareholding in GTF was confirmed on March 28 when the bank issued a company announcement stating that it had disposed of its 29.7 million shares in GTF at a price of INR 73 per ordinary share, for a gross consideration of INR 2.168 billion, (equivalent to circa $54 million). The substantial gains made on the sale of this investment will be reflected in the bank's 2008 financial results. Following the $25 million rights issue in December 2007 and the proceeds from the sale of GTF, FIMBank aims to develop further joint-venture factoring companies together with International Finance Corporation and other supra-national institutions in Latin America, China and Russia.
Bank of Valletta plc: The most disappointing and worst performer during the first three months of the year was BOV as its share price declined by 17.4 per cent following the 5.4 per cent drop in 2007. BOV effected a one-for-five bonus share issue on January 11 and the share price dropped to €6.71, 2.4 per cent lower than the theoretical ex-bonus price of €6.873. The equity continued to edge lower to €6.50 by January 28 when BOV issued its interim directors' statement. The directors explained that the volatile international credit market was likely to lead to further "mark to market write-downs" in the group's investment portfolio (mainly composed of high quality fixed income securities) for the half-year to March 31, 2008. As a result of this and the "material one-off costs" related to the euro adoption, the directors expect that the profits for the first half of the current financial year will be below that achieved during the first six months of 2007. This "profit warning" caused further selling pressure in BOV shares, forcing the equity to a fresh multi-year low of €5.50 on February 15. After staging a strong rebound within a couple of days, the share price resumed its downward trend hitting a low of €5.35 on March 25 before closing the month at €5.60.
Malta International Airport plc: MIA's share price closed the quarter only 3.3 per cent higher at €3.32 (after touching a low of €3.151) despite continued evidence of a strong rise in passenger movements and the company's announcement of pre-tax profits exceeding €14 million during the year ended December 31, 2007. On March 7, in conjunction with the publication of the preliminary profits statement, the board of directors also recommended the payment of a final gross dividend of €0.0892 per share (net dividend of €0.058) to those shareholders as at close of trading on Tuesday April 29. The dividend will be put forward for shareholders' approval during the annual general meeting on April 24 and, once approved, will be paid by not later than May 26. Recently appointed CEO Julian Jaeger addressed the media on January 24, explaining that MIA expects passenger movements to exceed 3.18 million in 2008 - an increase of 6.5 per cent over the 2007 figures. Actual passenger statistics for the first quarter of 2008 indicate a growth of 22.3 per cent in passenger departures over the corresponding period last year. The CEO stated that new carriers will begin operating to Malta in 2008, namely EasyJet, Vueling, Norwegian Air Shuttle and Volareweb. Moreover, MIA have identified other destinations that are considered underserved but which have good potential to attract new business to Malta. In order to accommodate the increase in passenger throughput, MIA is currently extending the air terminal to improve the security function and increase the retail floor space within the departure area. Improvements to the arrivals area are also planned to take place in the coming months. MIA also announced that with effect from March 1 it took over the running of the car park after it successfully negotiated the termination of the concession from the previous operator.
GO plc: GO's share price performance continued to disappoint many investors as it shed a further 4.3 per cent in the first quarter of 2008. Activity in the company's shares remained subdued with only 404,000 shares changing hands for a value of €1.2 million. On January 18, GO announced that it was evaluating the possibility of acquiring shareholding of a Greek telecoms company. This was confirmed by a further announcement on January 29 in which it was stated that GO together with its majority shareholder Emirates International Telecommunications (Malta) Ltd (EITML), acquired a 21 per cent shareholding in ForthNet for a cash consideration of €93.8 million. Moreover on March 7, ForthNet announced that it submitted a binding offer for pay TV operator NetMed NV. Shortly before the publication of GO's 2007 full-year results on February 27, the share price edged up to €3.12 and regained its 2007 year-end level of €3.145 by March 10 on increased demand probably to gain entitlement to the net dividend of €0.1165 per share. The company's financial statements for 2007 were impacted by a series of one-off items. The group reported a pre-tax profit of €27.6 million as the continued decline in fixed-line turnover was offset by growth in mobile, broadband and TV services. GO continued to generate a strong level of free cash flow with cash and cash equivalents as at December 31, 2007 rising to €81.5 million. As the equity turned ex-dividend, GO's share price dropped back towards its 2008 low of €3 and continues to trade around this support level.
Rizzo, Farrugia & Co. (Stockbrokers) Ltd (RFC) are members of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It contains public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC may have or have had a relationship with or may provide or has provided other services of a corporate nature to companies therein mentioned. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC, nor any of its directors or employees, accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.
© 2008 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved.
http://www.rfstockbrokers.com