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ANSA provides satisfactory results

ANSA Mc AL Company Limited

For the nine months ended September 2012, ANSA McAl Company Limited (AMCL) reported diluted earnings per share of $2.22 on par with the last year.

For the period under review, the Group's top line increased 10 per cent from $3.76b to $4.14b. Operating Profit fell 2.8 per cent from $652m to $634m resulting in a 2 per cent decline in the Operating Profit Margin. However, AMCL benefited from the 30 per cent decline in Finance Costs from $83m to $58m, a consequence of the long term debt (RBC bond) that was repaid. Share of Results of Associates and Joint Venture Interests went up 15 per cent from $14m to $16m. Profit before Taxes increased by 1.6 per cent from $583m to $592m. Of the $453m Profit after Tax reported, Equity Holders of the Parent received the largest portion, $382m or 84 per cent with Minority Interests receiving the remaining $71m.

Overall, the Group's segments performed satisfactorily. Profit before Tax for the Manufacturing, Packaging and Brewing segment and the Automotive, Trading and Distribution segment both experienced declines of 2 per cent and 1 per cent respectively. Despite the decline, the Manufacturing, Packaging and Brewing segment remains the chief contributor to Profit before Tax, accounting for 46 per cent (Exhibit 1). However, the Insurance and Financial Services segment reported an 8 per cent increase from $129m to $140m. AMCL's Media, Services and Parent Company segment reported an increase of 5 per cent from $98m to $103m (Table 1). Within the Group's Insurance and Financial Services segment, the positive growth in performance was a reflection of a 28 per cent increase in EPS recorded by ANSA Merchant Bank Limited.

At the end of half year 2012, AMCL reported an EPS decline of 15 per cent over the prior year. However, the strong Q3 performance has reversed this position and the Group is now on par with the previous year's nine months EPS. Historically, AMCL usually has excellent final quarter results mainly attributable to the Christmas season. It is anticipated that potential Christmas sales will boost profitability in all segments especially the Manufacturing, Packaging and Brewing segment. As such, AMCL should continue to engage in rigorous marketing and advertising to ensure the top line is maintained or improved. Also, the Government's plan to stimulate the construction sector and expand housing stock would serve to further enhance AMCL's future profitability.

At a current price of $66.01, the Group is trading at a 19 times P/E multiple. The dividend yield on the stock stands at 1.70 per cent. BOURSE recommends a HOLD on the stock.

ANSA Merchant Bank Limited

ANSA Merchant Bank Limited (AMBL) reported a Basic Earnings per Share (EPS) of $1.40 for the nine months ended September 30th 2012, which is 28 per cent higher than the $1.09 for the corresponding period last year.

For the comparative period, AMBL's Income increased by 15.4 per cent while Expenses increased by 13.7 per cent, the net result of which boosted Operating Profits by 20 per cent to $149m. AMBL's Profit after Tax grew 30 per cent to $120m. This performance can be credited to the positive impact of the insurance business sectors due to more proficient management of claims cost and expenses, specifically that of the Life Insurance Company.

Overall, the profitability in AMBL's segments improved with the exception of the Banking sector which experienced a 12 per cent decrease in Profit before Tax. This was mostly attributable to the 33 per cent increase in Total Expenses. The Mutual Funds segment experienced a 23 per cent rise in Total Income leading to an 18 per cent increase in Profit before Tax from $4.4m to $5.2m. The Group's Life Insurance sector had the most prominent improvement with Profit before Tax increasing from a loss of $23m to $2m. This improvement was driven by the improved investment performance of Tatil Life Operations. Within the General Insurance sector, TATIL's favourable claims experience resulted in a 17 per cent decrease in Total Expenses leading to a 26 per cent growth in Profit before Tax from $51m to $64m (Exhibit 2).

This quarter AMBL intends to finalise the acquisition of the Barbados-based Consolidated Finance Company Limited (CFC), an enterprise which is expected to create synergies for the company. Despite the falling interest rates in the economy, AMBL and its subsidiaries have sustained a healthy balance sheet position, found opportunities for growth and have remained competitive as a non-bank financial institution. Taking into consideration the sluggish economic environment the Group should attempt to manage expenses and engage in rigorous marketing directed on promoting new products and increasing sales.

At a current price of $37.00 AMBL's stock is trading at a trailing P/E of 14.9 times (Exhibit 3). Compared to its 4 year average of 14.8 times, AMBL is fairly valued. Investors are receiving a dividend yield of 2.3 per cent on the stock. In light of the aforementioned, Bourse recommends a HOLD on the AMBL stock.

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