The first quarter of the year came to an end last Friday and it is very positive to note that a total of €28.8 million worth of trades were transacted across the equity market during the first three months of 2019, representing an increase of 23.5 per cent over the comparative period in 2018. The first three months of 2019 was also the busiest quarter since the second quarter of 2006 when a value of almost €57 million traded across the equity market. Excluding the exceptionally high activity during the three successive quarters between the end of 2005 and the first half of 2006 (when the Maltese equity market was at the peak of its second bull market), the value of equity market trades never exceeded €28 million in any quarter since then.

Following the end of the first quarter and given the strong volumes that passed through the equity market this year, it is important to understand the main contributors to the increased volumes during the past three months and to analyse the overall performance of the equity market. A comparison to the performance and activity during the same period last year also raises some interesting observations.

Coupled with the heightened activity, the Maltese equity market also registered a positive performance during the past three months with the MSE Equity Index advancing by 4.3 per cent. The upturn in the MSE Equity Total Return Index was only marginally higher at 4.5 per cent. However, this discrepancy should widen further during the second quarter of the year given the significant number of dividend distributions in the next three months, including the very high dividends from GO plc and Mapfre Middlesea plc. Four companies registered strong double-digit gains during the first quarter of 2019 (namely International Hotel Investments plc, GO plc, Mapfre Middlesea plc and Malta International Airport plc) while three companies experienced a double-digit decline in their equity (namely Trident Estates plc, HSBC Bank Malta plc and MaltaPost plc).

The most actively traded equity was Malta International Airport plc as €5.7 million worth of shares changed hands representing almost 20 per cent of the overall equity market volumes during Q1 2019. More interestingly is the fact that activity in MIA shares more than doubled compared to the first three months of last year when just over €2 million had traded. This strong increase in volumes materialised notwithstanding the continued upturn in the share price as the equity advanced by a further 13.8 per cent during the past three months following the 23.4 per cent rally in 2018. This is a clear example of the efficiency of the market as the equity is responding to the strong financial performance of the airport operator as the company reported an increase of a further 25.4 per cent in pre-tax profits to just over €47 million. The market may have also been positively surprised by the 28.6 per cent increase in the final dividend per share which is being recommended for shareholders’ approval during the upcoming annual general meeting scheduled for May 15. 

GO plc was the second most actively traded equity as €4.1 million worth of shares changed hands which is also significantly higher compared to the value of GO shares that traded in Q1 2018 of €1.5 million. The sharp increase in the activity in GO was also coupled with a strong increase in the share price which rallied by 23.7 per cent to €4.90 after briefly touching the €5.00 level. GO’s equity is now trading at its highest levels in over 12 years and the market mainly responded to the huge dividend of €0.55 per share (this includes a special interim dividend of €0.41 per share for the 2019 financial year emanating from the partial sale of BMIT Technologies plc) as well as to the positive financial performance of the group as adjusted EBITDA grew by almost 10 per cent to €72.2 million when excluding the costs related to a staff voluntary retirement scheme. 

Another main contributor to the increase in equity market volumes during the past three months was BMIT Technologies plc. The equity started trading on the Regulated Main Market on February 18 and since then just over €3.3 million worth of shares changed hands which represents 11.5 per cent of the overall equity market volumes. The share price of BMIT closed the quarter at the €0.52 level representing an increase of 6.1 per cent over the IPO price of €0.49. The equity had briefly touched a high of €0.58 on the first day of trading. The company recently published its 2018 financial statements showing a pre-tax profit of €6.97 million (+9.6 per cent). Investors now await details on the progress being achieved by the company in its business plan ahead of the completion of the new data centre located in Żejtun next year.

Although Bank of Valletta plc was the third most actively traded equity during the first quarter of 2019 with €3.9 million worth of shares changing hands, this represents a significant decline from the heightened activity in the first quarter of last year when €9.9 million worth of BOV shares traded. Following the 26.1 per cent decline in the share price during 2018, the equity added 3.8 per cent during the first quarter of the year to the €1.38 level after dropping to a new multi-year low of €1.235 with the market responding positively to the publication of the annual financial statements as no further litigation provisions were accounted for.

PG plc was another equity that experienced a strong increase in trading activity with almost €1.9 million worth of shares changing hands compared to just over €0.5 million in the first three months of 2018. The share price gained just over 5 per cent during the first quarter of 2019 to a level of €1.40. PG’s financial year-end is April 30 and the annual financial statements are published in August.

The most actively traded equity was Malta International Airport plc

Possibly the major surprise in the first quarter of the year was the 24.2 per cent rally in the share price of International Hotel Investments plc on activity of €1.35 million worth of shares. IHI is one of the companies that has yet to publish its 2018 annual financial statements. The investing public awaits further news regarding the proposed St George’s Bay development but in the meantime the company successfully raised an additional €20 million (IHI’s 12th bond issue since the company’s listing on the MSE in the year 2000) for part-financing the redevelopment of the Corinthia Grand Astoria Hotel Brussels as well as its share of an investment in a mixed-use real estate project located in Moscow comprising a Corinthia branded hotel as well as residential apartments earmarked for resale.

Mapfre Middlesea plc was the third best performer in Q1 2019 with a share price appreciation of 18.6 per cent to €2.36 as the market reacted positively to the declaration of another high ordinary dividend of €0.0978 per share as well as a special dividend of €0.08696 per share.

The weakest performer during the first quarter of the year was MaltaPost plc with a decline of 20.9 per cent to the €1.25 level after partially recovering from a four-year low of €1.20, possibly in reaction to the September 2018 annual financial statements published in mid-December showing a 13.7 per cent decline in pre-tax profits to €2.64 million. The decline in the equity, however, came about on weak volumes as just over €110,000 worth of shares traded in the past three months. 

HSBC Bank Malta plc experienced a 12.6 per cent decline in its share price on activity of almost €1.5 million worth of shares. The equity had already eased to the €1.74 level prior to the publication of the 2018 financial statements on February 19, but extended its decline towards the €1.60 level as the bank reported a 22.6 per cent drop in pre-tax  profits to €38.6 million and a decline of just over 50 per cent in the final net dividend to €0.012 per share. 

The equity of Trident Estates plc remained particularly volatile from one period to another and shed 11.3 per cent during the past three months on relatively weak activity valued at €0.3 million. The company’s financial year ends on January 31 and the financial statements are normally published by the end of May. Investors will await an update on the development of the Trident Park project including the success or otherwise in signing up with any anchor tenants ahead of the completion of the project which is expected to materialise in early 2021.

During the next four weeks the annual reporting season for those companies whose financial year closed on December 31 will come to an end. Apart from Tigné Mall plc which is expected to publish its financial statements today, there are a further eight companies that will be issuing their financial statements by April 30. Some of these companies have yet to announce the date of the publication of their financial statements. Meanwhile, the annual general meeting season commences next week with the meeting for shareholders of Lombard Bank Malta plc on April 11. All companies with a December 31 financial year-end must convene an AGM by the end of June and therefore it will be a busy coming period for those who regularly follow the local capital market. Institutional and retail investors ought to attend AGMs since such meetings provide an opportunity to question the directors and executive management of the various companies on their business strategy and to seek an update on the financial prospects for 2019 and beyond. Company executives also need to become more forthcoming in the provision of such information which assists all types of investors and ultimately leads to more activity in the company’s shares on the secondary market.

www.rizzofarrugia.com

 

Rizzo, Farrugia & Co. (Stockbrokers) Ltd, ‘Rizzo Farrugia’, is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the company/s herein mentioned before its publication. It is based on 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. Rizzo Farrugia, its directors, the author of this report, other employees or Rizzo Farrugia on behalf of its clients, have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent, and may also have other business relationships with the company/s. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither Rizzo Farrugia, 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. 

© 2019 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved.

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