A peek into the non-banking sector
This week, we at Bourse take a look at the non-banking sector of the Trinidad and Tobago Composite Index (TTCI), the second largest sector of the stock market. This sector rounds up the top-three sectors by market cap on the TTCI. As our readers may recall, the largest sector, Banking and third largest, Conglomerates were both covered in previous articles by Bourse.
The non-banking sector of the Trinidad and Tobago Composite Index (TTCI) is the second largest sector of the TTCI and is currently valued at TT$21.4b, a 5-year high. It accounts for 19 per cent (Exhibit 1) of the total market capitalisation and is comprised of six companies. The six companies are: ANSA Merchant Bank Ltd (AMBL), Guardian Holdings Ltd (GHL), Jamaica Money Market Brokers (JMMB), National Enterprises Ltd (NEL), Sagicor Financial Corporation (SFC) and Scotia Investment Jamaica Ltd (SIJL).
The non-banking sector has been on an uptrend over the past 5 years with the non-banking Index increasing by 39 per cent over the period. Over this period, the sub-index has been driven primarily by significant price increases in NEL (ᛏ118 per cent) and JMMB (ᛏ97 per cent).
NEL’s share price has more than doubled in value over the past five years with a price appreciation of 118 per cent to $17.99 as at October 17, 2013. NEL’s market cap accounts for 50 per cent of the non-banking sector and 10 per cent of the TTCI market. Its market cap has grown in value from TT$4.9b in 2009 to TT$10.8b as at October 17, 2013. GHL is the second largest non-banking sector by market cap, accounting for 16 per cent, followed by AMBL at 15 per cent.
As at October 17, 2013, the weighted average market P/E of the TTCI was 18 times (Exhibit 2). The non-banking sector had the second highest P/E in the market of 16.8 times. Manufacturing I had the highest sector P/E at 22 times followed by banking at 19 times.
Non-banking sector, the highest for yield…
As seen in Exhibit 3, the non-banking sector has the highest yield in the market with a level of 3.4 per cent. NEL, the largest in the sector by market cap, offered the highest yield in the sector at 4.1 per cent.
SFC leads in Value
Year-to-date as at October 17, 2013, SFC was the value leader in the Non-Banking sector with 9.96m shares crossing the exchange valued at $63.4m in a total of 721 trades for the period. Its share price has increased by 3 per cent to $7.25. The strongest price appreciation occurred during the month of September when SFC’s share price appreciated by 6.6 per cent from $6.85 to a high of $7.30.
JMMB sees largest
price appreciation YTD…
Year-to-date (as at October 18, 2013), Jamaican Money Market Brokers Ltd (JMMB) experienced the strongest price appreciation in the sector with its share price increasing by 43 per cent to TT$0.73. For first quarter ended 30 June 2013, JMMB delivered an Earnings per share (EPS) of J$0.46, compared to the J$1.39 reported for the preceding year. Net profit for the Group was J$832m which was 59 per cent less than the J$2.04b recorded in 2012. The 2012 profit included a one-off gain of J$1.57b from the acquisition of the Capital & Credit Financial Group (CCFG).
Net interest income surged 20 per cent to J$1.18b and was attributable to positive results from its investment portfolio and cost of funds. The Net interest income margin rose from 38.6 per cent in 2012 to 40.9 per cent. Other operating revenues, namely from gains on commission income, securities trading and foreign exchange margins, also reflected increases of 56.4 per cent, 124.3 per cent and 150.7 per cent and respectively.
Operating expenses increased by 34.8 per cent to J$1.13b largely due to increased operating costs within the Group as well as those associated with JMMB’s acquisition initiatives.
On September 30, 2013, the International Monetary Fund (IMF) approved a $30.6m disbursement to Jamaica. This approval was on the basis that the country has done well in implementing conditions to strengthen its fiscal position with the goal of a debt to GDP ratio of 96 per cent by 2020 from the current level of 142 per cent.
Following this positive note for the Jamaican economy, JMMB confirmed its 100 per cent ownership of Trinidad-based Intercommercial Bank Ltd and Intercommercial Trust & Merchant Bank Ltd (IBL Group) on October 8, 2013. As the Group’s first commercial bank, the addition of the IBL Group fulfils JMMB’s initiative to broaden its business lines and diversify regionally with the JMMB brand present in Jamaica, Dominican Republic and Trinidad and Tobago.
While the IBL Group contributed a J$25.5m loss to JMMB in the quarter ending June 2013 due to additional loan loss provisions, JMMB expects this loss will be recovered as the IBL Group adopts JMMB’s governance policies.
The market has responded positively to these developments as evidenced by the 46 per cent jump in JMMB’s share price to TT$0.73 in the 14 trading days of October alone (Exhibit 4). At a price of $0.73, BOURSE recommends a HOLD on this stock.
Relative to the TTCI, the non-banking sector is trading at a lower multiple of 16.8 times and presents some opportunity for returns with the highest yield in the market at 3.4 per cent. Given the low interest rate environment, the local equity market remains a key investment choice as investors look to dividend stocks for higher returns.
For more information, investors can call Bourse at 628-9100 or visit us at any one of our offices. Further information is also available on Bourse’s website at www.bourseinvestment.com and Bourse Securities Ltd Facebook page.