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Massy rebrands

Today we at Bourse take a closer look at the two largest conglomerates listed on the Trinidad Stock Exchange (TTSE)—Massy Holdings Limited (MASSY) generating over $9 billion in Revenue yearly and ANSA McAl Limited (AMCL) with over $6 billion. Year-to-date, these two stocks combined have made up 20 per cent of the total value of shares traded on the TTSE.

MASSY HOLDINGS LTD (MASSY)
For the 9 months ending June 30th 2014 (the period), MASSY’s EPS stood at $3.74 representing a 6.3 per cent decline when compared to the $3.99 recorded in the corresponding period for 2013. Investors would have noticed MASSY’s rebranding exercise that took place largely in the past quarter. During this period, the group incurred a one-off rebranding expense of $59 million which impacted the company’s bottom-line and EPS. (Excluding this one-off expense, EPS for the period would have grown by 4.5 per cent to $4.17).
For the period, MASSY recorded a commendable 12.8 per cent (or $900 million) increase in Revenue which moved to $7.9 billion from the $7.0 billion recorded at the end of June 2013. Geographically, Trinidad and Tobago and Barbados continue to be the main contributors to MASSY’s top-line (Exhibit 1). Due to the current economic conditions in Barbados and Jamaica, revenue from Barbados contracted 3 per cent whilst MASSY has managed to grow revenue in Jamaica by 17.7 per cent. Additionally, the “Other” region which includes but not exclusive to operations in Colombia, Costa Rica and St Lucia, saw an increase of $564.1 million (moving from 0.5 per cent to contributing 7 per cent to the Group’s revenue), from the $32.1 million recorded in 2013, highlighting the importance of the Group’s geographic diversification strategy.
Operating profit increased during the period by 4.5 per cent to $582.1 million from $556.9 million when compared to the equivalent period a year earlier. Profit for the Period before rebranding costs and Income tax increased by 3 per cent reaching $617.3 million from the $599.2 million recorded at the end of June.

Strategic Initiatives and Direction
On the premise that rebranding costs have been fully expensed, MASSY is now poised to benefit from synergies created from increased brand awareness, customer loyalty and an overall more integrated group, particularly in its sales and distribution fractions.
Having successfully completed its bond issue to refinance and raise new funding in the current quarter (Q4), MASSY has positioned itself with both lower interest costs and an additional pool of cash ($500 Million) to finance future growth initiatives.

The Bourse View…
At the current price of $68.51, MASSY is trading at a trailing P/E multiple of 12.5x well below its 5-year average of 17.3x and below its closest competitor, AMCL, which is trading at a trailing PE multiple of 15.2x. MASSY’s dividend yield stands at 2.57 per cent, also higher than the 1.96 per cent yield offered by the AMCL stock. As a result of NML’s forward looking growth initiatives and diversification strategy, BOURSE maintains a BUY on the stock.

ANSA McAL LIMITED (AMCL)
For the six months’ ended June 2014, Ansa McAL Limited reported diluted EPS of $1.59 versus $1.55 during the comparable period 2013, an increase of $0.04 or 2.6 per cent. In keeping with the Group’s consistent dividend pay-out policy, the Board of AMCL approved an interim dividend of $0.30 to be paid on November 7th, 2014 with an ex-dividend date of October 22nd, 2014.
AMCL reported a marginal increase in Revenue of 0.18 per cent for 1HY14 when compared to 1HY2013 from $2.893 billion to $2.898 billion. Revenue growth was achieved in its Manufacturing, Packaging & Brewing and Insurance & Financial services sectors. However the Group’s largest contributor to total gross revenue- the Automotive, Trading and Distribution segment- experienced a fall of 1.6 per cent from $1.27 billion to $1.25 billion (See Exhibit 2).
Profit Before Tax increased by 2.1 per cent from $405m the prior period to $414m for the first half of 2014.
At the Group’s 1HY14 announcement of results, it was disclosed that various subsidiary sectors, including manufacturing and automotive, grew in line with the company’s expectations with the exception of its media segment. The media segment’s performance was attributable to an increase in content costs. The Group expects to see a recovery in the sector during the second half of the year. AMCL also added that the company’s financial services subsidiaries continue to be affected by the low interest rate environment.
The company’s local performance is largely expected to be aligned to the continued growth of the Trinidadian economy, while the Group noted that its regional businesses have underperformed due to continuing economic challenges.

The Bourse View…
AMCL is currently trading at a price of $66.30 and a trailing P/E ratio of 15.2x in line with its 5 year average of 15x. With a trailing dividend yield of 1.96 per cent, AMCL has the lowest dividend yield in the Conglomerate sector. With moderate revenue growth anticipated in the coming year, BOURSE maintains a HOLD rating on the stock.
For more information on these and other investment themes, please contact Bourse Securities Limited, at 628-9100 or email us at research@boursefinancial.com.
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