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Positive results from Malita plc

Malita shares traded slightly higher following the news.

Malita shares traded slightly higher following the news.

Yesterday Malita plc posted their financial results, delivering improved and positive performances. Two weeks ago I wrote an article highlighting the case for investing in Malita plc, and I’m pleased to report that the company has met and arguably exceeded expectations.

Malita plc posted revenues of €7.5mln in 2017, up 7% on the previous year. Malita plc continued to receive ground rents from the Malta International Airport (MIA) and Valletta Cruise Port (VCP), as well as lease income in respect of the Open Air Theatre in City Gate, Valletta, and a penalty from Government until the completion certificate of Parliament Building in Valletta is issued.

During 2017, Malita plc reached an agreement with the Government of Malta in relation to a number of improvements to the Parliament Building amounting to €7 mln. As a result, the company has entered into a further lease agreement and is receiving additional rent as from 1 June 2017. Malita plc reported improved margins on lower administrative expenses (94.8% vs. 93.6% in 2016), which together with marginally lower finance costs, contributed to an improved performance on a normalised basis.

For financial year 2017 Malita plc also reported a significant gain on the fair value of investment property to the tune of €16.7m, being the main driver behind the yearly profit, after tax increasing to €13.0m from €6.4m a year earlier. The revaluation was mainly attributed to the Parliament Building and Open Air Theatre, which up to 31 December 2016 were measured at cost, as well as increased in fair value as a result of a downward movement of interest rates. Arguably, however, investors’ focus should be on the underlying increase in profitability from its revenue sources and cashflow generation, as opposed to getting caught up in fair value movements of properties, which in all probability will not be disposed of any time soon, if ever.

To this end, as previously reported on 29 December 2017, the Company entered into an emphyteutical deed for 28 years with the Housing Authority, to acquire sixteen (16) property sites in a number of locations across Malta, to be used by the Company for the purposes of developing 680 affordable housing units. Investors should expect a healthy uptick in free cashflow available for distribution, once these projects are completed. Furthermore, analysts and investors alike might have picked on a comment in the preliminary statement of annual results, whereby the Board of Directors are said to continue to consider and evaluate a number of potential projects, including ones with a mix of public/private participation.

Earnings per share increased to €0.0877 compared to €0.0434 in 2016, albeit mostly related to fair value movements. The Directors have recommended the payment of a net dividend of €2,744,442 or €0.01853 per share to be approved at the AGM, scheduled for 27 April 2018, and if approved paid on 4 May 2018 for those shareholders included in the shareholders register of the Company as at 28 March 2018. The level of yearly net dividends would subsequently increase by 15.4% to €4,107,036 compared to €3,557,556 in 2016, or €0.0277 per share compared to €0.024 per share.

Following the release, the shares in the company traded marginally higher, up to €0.84, albeit on low volume, offering a current net dividend yield of 3.30%. We expect dividends to continue to grow following the reflection of a full year lease increase from the parliament building as well as the eventual cashflows from the new housing projects, whose financing is already in place. In my opinion, investors should continue to buy Malita plc shares at current levels as part of their portfolio, as a low beta, dividend paying stock with exposure to the real estate sector; offering a decent capital return potential in the short to medium term.

Disclaimer: This article was issued by Simon Psaila, Financial Analyst at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as a personal recommendation/ investment advice including tax and legal advice. Analyst views to BUY, SELL or HOLD on particular stocks or instruments are related to the stock/instrument being reviewed and are not to be treated as personal recommendations to investors, which are only issued following suitability assessment.

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