Local equities under pressure

Monthly Round up Report for November 2017

The MSE Equity Total Return Index extended October’s loss of

0.89%, having declined by 5.5%, to close at 8,441.921 points as turnover totalled €6.8 million, spread across 19 equities of which 15 fell, three advanced and one closed unchanged.

Bank of Valletta plc (BOV)

shares declined by €0.25 or 12.5% across the highest turnover of €3.1 million spread over 456 deals of 1.7 million shares, closing at €1.75. The local bank registered a decline in its share price for the fifth consecutive month.

The decline was due to the rights issue which was under way until yesterday. The bank offered 105,000,000 new ordinary shares to its eligible shareholders on the basis of a ratio of one new ordinary share for every four ordinary shares held, at an offer price of €1.43 per new ordinary share. Existing shareholders had the option of assigning part or all of their rights to third parties and/or to apply for additional shares.

BOV announced that the nil-paid rights issued to UniCredit S.p.A. as part of the €150,000,000 rights issue have been duly assigned. The announcement was issued following the statement in the Rights Issue prospectus that UniCredit S.p.A. had communicated its intention to the bank that it would not be exercising its rights to subscribe for its proportionate entitlement to ordinary shares, and that it reserved the possibility to assign its rights.

FIMBank plc shares followed suit having slipped by 12.1% as 432,043 shares changed ownership over 20 trades, to close $0.085 lower at $0.615.

HSBC Bank Malta plc

shares oscillated between a monthly high of €1.895 and a low of €1.84 - at which it closed, registering a 1.1% drop. The banking equity was active on 77 transactions of 260,946 shares. The bank announced that HSBC Life Assurance (Malta) Limited (HLA), a wholly-owned subsidiary of the company, has entered into a Portfolio Transfer Agreement with Lombard International Assurance S.A. for the sale of HLA’s policies of insurance governed by the Wealth Insurance Italy portfolio. As at September 30 2017, the insurance portfolio being transferred had total funds under management of circa €500 million and produced gross annual management charges of approximately €780,000 in 2016.

In the bank’s interim directors’ statement, it was stated that during the period from July 1 to November 15, 2017 it registered a decline in profit before tax compared to the same period in 2016. The report stated that although profitability was lower during the period, it remained broadly in line with management expectations, consistent with the bank’s prioritisation of risk management actions in 2017.

Revenue for the period under review was lower than in the prior period as a result of the prevailing low interest rate environment, reduction in the corporate loan book and the risk management actions which impacted non-interest income.

Andrew Beane, the Chief Executive Officer of HSBC Malta, said that 2017 is a year where the bank has consciously focused on the acceleration of risk management actions which it believes is the right short-term strategic priority to protect long-term value for shareholders.

Lombard Bank Malta plc

shares closed the month practically unchanged at €2.20 as 15 deals of 60,525 shares were struck.

The insurance and investments services provider Mapfre Middlesea plc registered a 7.2% decline in its share price, following October’s loss of 1%. The equity was negotiated across 16 transactions of 29,378 shares, closing €0.139 lower at €1.781.

In the same sector, plc shares slipped by 12.6% over three deals of 33,735 shares, to close at €0.312.

Medserv plc GlobalCapital

shares stumbled by 11% as 87,080 shares changed hands across 22 transactions, closing €0.139 lower at €1.121. The oil and gas logistics services provider published its interim report stating that earnings for the second half of the reporting year are lower than forecast due to projects both in Integrated Logistics Support and Services (ILSS) and Oil Country Tubular Goods (OCTG) commencing towards the end of the year. This will impact negatively on the current year’s results.

The second ILSS base, recently opened in Cyprus, will become fully active in the coming month. Four to five wells are expected to be drilled in the waters offshore Cyprus in the next twelve months.

Meanwhile, the second OCTG base opened by the group in Duqm, Sultanate of Oman, commenced operating this month. This was in support of a contract, the largest ever won by the Medserv group, awarded in the beginning of this year for an initial period of five years with a five-year extension option.

Projected growth for the period 2018 to 2020 remains strong for both business segments based on drilling projects and work over programs already contracted and expected to come to fruition in the coming three years, buttressed by an additional two new geographic markets by year 2018 in line with the group’s strategy.

The food and beverage supplier Simonds Farsons Cisk plc registered a decline in its share price after seven consecutive gains - having slipped by 9.2%, closing €0.89 lower at €8.76. The Board announced that at a meeting held on November 9, 2017, the Board of the Planning Authority (PA) voted against the recommendation of the Planning Directorate for the approval of permit for the creation of a business park along Mdina Road, Mriehel that consisted of International Grade A offices with landscaped courtyards and a naturally ventilated multi-level car parking facilities. The development was earmarked to complement the reha- bilitation of the old brew house that sought to restore and convert the industrial space and included a visitor centre experience with supporting food and other retail outlets, flexible workspace and additional amenities.

In view of the significant uncertainty caused by the indicative decision of the PA, the Board determined that it had no option but to put into abeyance the plan to spin-off the company’s shareholding in Trident Estates plc and the subsequent listing of Trident on the official list of the MSE. Accordingly, Trident has requested the Listing Authority of the MFSA to defer consideration of a prospectus submitted in this regard.

GO plc shares registered a decline after four consecutive gains having edged 1.8% across 60 trades of 174,830 shares, closing €0.066 lower at €3.53.

Malta International Airport plc (MIA) shares fell by €0.10 or 2.1% as 84,397 shares changed hands across 56 deals, to close at €4.65. MIA announced that it recently signed a new concession agreement with Dufry, the world’s leading travel retailer, for the operation of the terminal’s duty free store on Level 1 covering the period between January 2019 and December 2026. The reconceived area will occupy around 1,400 square metres.

In another announcement, the local airport operator reported that from April until the end of October the total amount of passenger movements amounted to 4,249,321. This translates into an increase of more than 600,000 passenger movements over the same comparable period in 2016.

Growth in passenger numbers in the summer months was observed in parallel with an upturn of 13.3% in aircraft movements and an increase of 16.1% in seat capacity, mainly stemming from an enhanced flight schedule for the season.

The top drivers of passenger traffic to MIA were the United Kingdom, Italy, Germany, France, and Spain. Growing by 9.6% over last year, the UK accounted for 1,025,055 passengers, which is almost a quarter of the airport’s total traffic for summer.

In its interim directors’ statement, the company announced that during the period under review (1 January 2017 – 30 September 2017), the financial position of the company has remained sound and its performance is superior to 2016.

The turnover for the first nine months of 2017 was €63.1 million, an increase of 13.7% compared to the first three quarters of 2016. Total expenditure increased by €24.1 million, while the profit for the period January to September 2017 increased by 25.2% to €21.4 million. The company further stated that it remains optimistic that the last quarter will follow the positive trend registered so far and is expected to exceed the financial targets as announced last July.

International Hotel Investments plc (IHI) shares fully erased

October’s 0.8% gain having declined by 4.8% in November as 32 transactions of 278,264 shares were executed, closing at €0.581. In its’ interim directors’ statement, the company announced that it is on course to register a record operating profit in its business for the year 2017, driven by a solid underlying performance in all its hotel operations in Europe and beyond. Revenues and operating profits are up on 2016, and ahead of budgets.

MaltaPost plc

shares increased by a further 2%, after registering a 5% rally in October. The local postal operator’s shares were active on 5,000 shares across three deals, closing €0.041 higher at €2.12.

The supermarkets and retail owner PG plc recorded a 3.3% loss in its share price. The equity was active on 24 deals of 150,353 shares, to close €0.05 lower at €1.45. The board will be convening on December 20, 2017 to approve the Interim Unaudited Financial Statements for the sixmonth financial period from May 1, 2017 to October 31, 2017.

RS2 Software plc (RS2)

shares registered a decline for the fourth month, having slipped by 7.3% over 83 deals of 318,319 shares, closing €0.119 lower at €1.521. RS2 published its interim director’s statement in which it stated that in 2017 the group continued the implementation of its strategy in terms of geographical expansion and the development of the managed services business.

It further stated that, both offices in Asia and the US are fully operational and working to support the core team in Malta in terms of development and project delivery. The strategy of the group is to develop these offices to be extended arms to the European operation and will have four main tasks to perform, namely core development, local and custom development, managed service operation, and sales and marketing.

Over the past year, the group has continued to build its strong network to implement its global acquiring strategy partnering with Fintech companies and local banks in various jurisdictions throughout Europe, Middle East, Asia Pacific and North America in order to provide banks, PSPs and Multinational merchants using BankWORKS as one single platform to process their businesses around the globe. The group managed to form an alliance with a large corporation that provides 42% of the global travel market to offer their client processing services and consolidation of their business.

The group is diligently working on securing multi-million Euro processing deals for its managed services company in different regions. These deals could be closed by end of Q1 and Q2 2018.

The report concluded that overall, the group’s revenue for 2017 remains stable and comparable to 2016. Despite the group’s continued global expansion in the current year, it expects to maintain, and possibly marginally improve its profitability, over the prior year. The board sustains its confidence in the group’s strategic business model and development, its underlying technology and product BankWORKS, the resulting revenue pipeline and the global expansionary and growth targets. Furthermore, sales pipeline across the different regions and across the two business lines is very healthy and conducive to successfully implementing the group’s expansion strategy.

Loqus Holdings plc

announced that the board approved the financial statements for the year ended June 30, 2017 and resolved that they be submitted for the approval of the shareholders at the forthcoming AGM. The group registered a profit of €484,014 (2016: €268,549). Revenue decreased from €3.893 million in 2016 to €3.476 million in 2017. The adjusted earnings per share increased from 2016 to 2017 from €0.08 to €0.015 respectively. The I.T. equity was not active in November.

In the property management sector, Plaza Centres plc shares dropped by 8.8% as five trades of 24,450 shares were negotiated, closing at €1.011. Malta Properties Company plc shares slipped by 7.7% as 30 trades of 195,169 shares were struck, to close at €0.468.

MIDI plc shares advanced by 7.8% over 22 deals of 515,400 shares, closing at €0.345. The company announced that its revised Masterplan for the restoration and redevelopment of Manoel Island has been submitted to the Planning Authority (PA) for its consideration and to the Environmental and Resources Authority (ERA) for Environmental Impact Assessment evaluation. A period of public consultation will now commence with both the PA and the ERA.

In the same sector, Tigne Mall plc shares increased by 1% across four transactions of 22,800 shares, to close at €0.97. Meanwhile, Malita Investments plc shares closed unchanged at €0.751 as 16 trades of 104,700 shares were negotiated.

In the corporate bond market turnover amounted to €7.6 million spread across 49 issues of which 18 appreciated and 25 declined. The 6%

Pendergardens Developments plc Secured € 2022 Series II

headed the list of gainers having increased by 3.8%, closing at €109, while the 5.75% IHI plc Unsecured € 2025 was the worst performer, having declined by 2.75%, to close at €106.

In the sovereign debt market 26 issues were active of which gainers amounted to 12 and fallers stood at 14 as turnover totalled €18.7 million. The 2.1% MGS 2039 (I) was the most active issue having witnessed a turnover of €7.3 million, to close 0.3% higher at €101.27. This article, which was compiled by Jesmond Mizzi, Managing Director of Jesmond Mizzi Financial Advisors Limited, does not intend to give investment advice and the contents therein should not be construed as such. The Company is licensed to conduct investment services by the MFSA and is a Member Firm of the Malta Stock Exchange and a member of the Atlas Group. The directors or related parties, including the company, and their clients are likely to have an interest in securities mentioned in this article. For further information, contact Jesmond Mizzi Financial Advisors at 67 Level 3, South Street, Valletta, or on Tel: 21224410, or email jesmond.mizzi@jesmondmizzi.com