WCO delivers again
Today we at Bourse are covering a short review of 2012 performance and outlook on West Indian Tobacco Company Limited and Prestige Holdings Limited.
West Indian Tobacco Company Limited
For the financial year ended December 31st 2012, West Indian Tobacco Company Limited (WCO) Earnings per share (EPS) rose 21 per cent to $4.16. The Board declared a final dividend of $1.22 per share payable on 26th April, 2013. This brought the total dividends paid for the year to $3.82 versus $3.18 a year ago.
WCO's Gross turnover and Revenue increased to $1.11B and $868M, a 10 per cent and 14 per cent change respectively. Cost of sales rose 11.2 per cent. However, the Cost of sales margin remained relatively flat at 28 per cent. Gross profit climbed to $621.1M, a 15 per cent rise year on year. In the category of Operating expenses, Distribution costs and Administrative costs increased 29 per cent and 6 per cent respectively whilst Other Operating expenses decreased 13 per cent.
Operating profit increased 19 per cent whilst the Operating profit margin improved 2 per cent. Profit after Tax surged 21 per cent to $350M.
For the past four years WCO's cigarette prices have increased. However, due to the nature and elasticity of WCO products the volumes of cigarettes sold have remained stable. On 11th February 2013 WCO increased prices by a further 4 per cent. WCO's entire product range was expected to increase on average by $1. The Managing Director attributes WCO's continued performance to its successful planning and marketing strategy. He acknowledges that WCO is a fast-moving consumer goods company and is prepared to make changes deemed necessary to remain competitive. In an attempt to ensure the company's success, management continues to redesign existing brands to meet consumer demands.
At a price of $90.01, WCO is currently trading at a trailing P/E multiple of 21.6 times, a premium to its 3 year average of 17.7 times. YTD the price has appreciated approximately 4 per cent. Despite the price appreciation, the dividend yield on the stock stands at 4.33 per cent, one of the highest in the local market, but the lowest in the last 5 years for WCO. BOURSE recommends a HOLD on the stock.
Prestige Holdings Limited
For the audited twelve months ended November 30th 2012, Prestige Holdings Limited (PHL) recorded diluted Earnings per share (EPS) of $0.676 relative to an EPS of $0.113 for FY 2011. Included in these figures were losses from discontinued operations. The Group's EPS from continuing operations for FY 2012 was $0.699 versus the $0.606 reported the prior year. The Board has recommended a final dividend of $0.12 per share, which once approved by shareholders, will bring total dividends payable for FY 2012 to $0.24. This proposed final dividend would be paid on May 27st 2013.
Revenue for the year rose 28 per cent, moving from $669.7M to $856.8M. The Group's cost of sales fell 25 per cent to $541.9M. Gross profit surged 33 per cent to $314.8M. The Gross profit margin improved from 35 per cent to 37 per cent.
The Group's Operating restaurants expense increased 30 per cent to $181.9M. Overall, Operating restaurants profit increased 24 per cent to $72.5M. The Operating profit margin declined from 8.8 per cent to 8.5 per cent. The Group's Net Finance cost increased 36 per cent to $12.7M.
Profit after tax from continuing operations climbed 16 per cent to $43M. Profit for the year inclusive of discontinued operations stood at $41M (includes the loss on the closure of TCBY) versus $7M in 2011 (includes the final loss on the Dominican Republic exit).
As the Group moves ahead, operations both regionally and locally can influence how it performs in terms of both revenue growth and profitability. Since the acquisition of Subway on 1st December, 2011, two new Subway restaurants were built, bringing the total number of restaurants to 42. It is expected that this brand will continue to grow in sales and profitability. Given the instability of the Jamaican economy, it can be anticipated that the T&T operations will continue to outperform its regional counterparts. However, the difficult labour market as well as food cost inflation remains major challenges to the industry. PHL will need to place emphasis on maintaining sales and managing expenses to ensure the Group meets its targets.
At the current price of $9.25, the stock is trading at a trailing P/E multiple of 13.23 times, a premium to its 3 year average P/E multiple from continuing operations of 10.95 times. The dividend yield is at 2.59 per cent. BOURSE recommends a HOLD on this stock.