Local equities end positive year on a high

Yearly Round up Report for 2018

The MSE Equity Total Return Index extended its positive streak to four successive months, as a 0.92% increase was recorded during December 2018, pushing the overall annual gain to a solid 3.81%. The index closed the month, and the year, at 8,999.034 points, thus fully recovering the previous year’s loss of 2.63%. The positive performance was mainly driven by

MIDI plc, Malta International Airport plc, and Trident Estates plc all of which

registered gains of over 20%.

During the month of December, €8.2 million worth of shares were exchanged, bringing the total annual turnover figure for 2018 to €86.3 million, a marginal 1.91% lower from the €88 million generated in 2017. From the 24 listed equities, 12 traded in positive territory, while 11 closed lower.

The best performer of the year was MIDI plc with an impressive 91.4% price hike, to reach €0.67. This was through no coincidence, as the company’s year was dominated by developments regarding the Manoel Island project. In June, MIDI announced that it had entered into discussions with Tumas Group Company Limited to explore the possibility of establishing a joint venture with respect to this project. The official announcement, as well as media speculation regarding a potential agreement, fuelled a price rally, particularly in October. During an eventful year for the company, €4.2 million worth of shares traded across 450 transactions.

Malta International Airport plc also enjoyed a strong year, as its share price soared 23.4% to end the year at €5.80. The increase in value was a reflection of a record breaking year in terms of passenger movements within the airport, as considerable increases in aircraft movements and seat capacity, resulted in double-digit growth in passenger numbers for each month of the year. Turnover generated by the equity in 2018 was 21.6% lower than the previous year, at €9.4 million.

Trident Estates plc followed suit as just over 1 million shares changed hands during its first year of trading. The equity, which was listed on the Malta Stock Exchange in January, spiked 21% over the issue price of €1.24. This increase in value was backed by solid interim results and positive prospects from the Trident Park project, which seems to be on schedule to start operating in 2021.

The company from which Trident was spun-off, Simonds Farsons Cisk plc also traded in positive territory, with a modest 2.7% increase in value to end the year at €8.75. A total turnover of €4.1 million was generated during 2018.

The main drag on the Index in 2018 was Bank of Valletta plc as its financial results were negatively impacted by a litigation loss provision of €75 million with respect to the bank’s pending court cases. The share price sank 26.1% to €1.33 over the year, with the bulk of the losses recorded in July, when the bank announced that an appeal against the €363 million precautionary warrant against BOV had been rejected by the Italian Tribunal. As a result of the provision, the bank announced that no interim or final dividend will be recommended by the board of directors for 2018. The equity was the most liquid of the year, as it was responsible for 26.6% of total turnover at just under €23 million.

The other banking equities had quite a strong year, particularly FIMBank plc which closed 8.7% higher at $0.75, despite a 5.1% month-on-month price drop for December. Thus, the equity partially bounced back from the previous year’s loss, as positive financial results showed that the bank is still on track in its recov- ery, following drastic changes in management a few years ago. Trading volume amounted to under 3.6 million shares over 279 deals.

Lombard Bank Malta plc also posted a solid annual gain of 6.09% to reach the price of €2.44 over a turnover of almost €1 million. Last month, the company announced that it shall be publishing the financial results for 2018 and consider the payment of a final dividend on March 6, 2019.

In the same sector, activity in HSBC Bank Malta plc shares was in line with the previous year, as about €7.9 million worth of shares changed ownership throughout the year. The outcome was a marginal increase in price of 2.58% to €1.83. This contrasts with a 6.1% loss in the previous year, when the bank had been passing through a transitional period in order to change its business model, prioritising higher standards of compliance and risk management. In December, HSBC Bank Malta plc announced that it has concluded the raising of Tier 2 capital in a principal amount of €62 million via a subordinated loan from HSBC Bank plc.

On a negative note, MaltaPost plc slumped 25.5% during 2018, closing at €1.58 over a turnover of just over €0.5 million. The decrease in share price reflected unimpressive financial results. In December, the company published its statements for the year ended September 30, 2018, showing a 14.1% decrease in profit before tax to €2.62 million. Although revenue did increase by 4.5%, expenses grew at a faster pace as a result of higher operational costs.

Telecommunications company GO plc maintained a positive stance for yet another year, as it added a sizeable 11.6% to the previous year’s 8.5% gain. The equity traded heavily as €9.2 million worth of shares were exchanged. During an Extraordinary General Meeting held in December, a reso- lution was authorised to dispose of a maximum of 49% shareholding in its subsidiary BMIT Technologies plc which focuses on data centre services. The Initial Public Offering is expected to be concluded by February 2019. The price increase was also backed by positive results for 2017, as well as for the first half of 2018.

Medserv plc continued on the negative path set out during 2017, as it drifted 8.66% further lower to €1.15. Over 1.4 million shares traded throughout the year, across 253 deals.

Malta Properties Company plc was another catalyst of the MSE Index positive performance, as it climbed 18.8% in 2018, closing the year at €0.57 over a turnover of €2.1 million. Results published in March showed an 82.8% improvement in profit for the 2017 financial year, while the results for 2018 are expected to have been in line with the group’s projections for the year. The year was quite eventful for MPC, as in May the company announced that it has entered into discussions for the possible acquisition of a majority shareholding in Smart City (Malta) Limited. Discussions regarding this acquisition are still ongoing. During the third quarter of 2018, the group also finalized the deed of sale of its Sliema Old Exchange, while also entering into a promise of sale agreement for its St George’s site in Saint Julian’s.

Also in the property sector, Malita Investments plc fully recovered the previous year’s losses, as it increased by 7.32%, to reach a price of €0.88. Trading volume amounted to 4.3 million shares across 388 transactions.

Its peer, Tigne’ Mall plc however, was dominated by selling pressure throughout 2018. Despite a late 4.89% upturn in December, the equity ultimately settled at €0.965, translating to an overall loss in value for the year of 11.39%. This was quite similar to 2017, when the equity declined 8.49%. Investor participation was somewhat unimpressive as €1.1 million worth of shares were exchanged across 125 transactions.

Plaza Centres plc recorded no price movement during December, and thus it closed the year 6.42% lower at €1.02. In terms of trading, an annual turnover of €1.6 million was generated.

The only non-mover for the year was Main Street Complex plc, which was admitted to the Malta Stock Exchange at the end of May, and closed unchanged from the original issue price of €0.65. Turnover for the first seven months of trading totalled €271,596 over just 37 trades.

The worst performing equity for the year was Loqus Holdings plc as a 7.1% December gain was not enough to overturn earlier contractions, ultimately settling at an annual plunge in price of 57.1% to €0.075. Trading activity was characteristically low for the equity, as the annual turnover figure was just shy of €59,000.

The least liquid equity however, was in the insurance industry, as €51,500 worth of GlobalCapital plc shares changed hands over the 12-month period. Although the equity traded mostly in negative territory for the second half of the year, it did manage to turn things round in December, rallying 23.88%, albeit on very thin volume. On a year-on-year basis, the closing price of €0.332 translates to a 6.41% increase. In December, the company announced that further to an announcement issued back in March, it has now submitted an application for a Rights Issue which shall be rolled out during 2019, subject to regulatory approval.

Its peer, Mapfre Middlesea plc partially recovered the previous year’s losses with an 11.7% price surge to €1.99. Annual turnover was much higher than its industry counterpart, as over €1.3 million worth of shares traded across 191 deals.

In December, retail conglomerate PG plc published its unaudited financial statements and interim directors’ report for the six months ended October 31, 2018. During the period, the group recorded an increase in turnover of 5% to €51.2 million compared to the same period last year, driven by improved turnovers both in the PAMA Shopping Village and in the PAVI Shopping Complex, as well as through rental income. Thanks to such increases, the group has managed to offset the impact of the temporary disruption in its franchise operations due to the fact that the Zara Sliema outlet was closed for expansion and refurbishment. The store has now been reopened since November 28, 2018. In spite of this, the equity closed the year at €1.33, translating to a 2.2% monthly loss, and an overall annual loss of 5%.

RS2 Software plc issued an interim Directors’ Statement in December, highlighting the company’s developments and achievement during the third and fourth quarter of 2018. The directors stated that the Group has successfully executed its business strategy, rolling out its services to more clients in the managed services business while also maintaining the revenue lines from the licensing segment. The statement also outlined positive developments in Europe, America and the Asia-Pacific region. The statement sparked an impressive 21.74% December price hike to €1.40. This however was not enough to recapture the €1.54 price level of the previous year, thus still registering a 9.09% annual loss in value over a turnover of under €4.7 million.

Trading in Grand Harbour Marina plc was somewhat limited, as 274,708 shares traded throughout the whole year over just 24 trades. The outcome was an 8.26% dip in price to €0.70.

Santumas Shareholdings plc, which was the best performer in 2017, closed 5.33% lower than the bonus issue-adjusted price of €1.50 in 2018. Trading volume amounted to 170,791 shares over 44 trades.

International Hotel Investments plc

surrendered the previous year’s marginal gain, as it edged 1.12% year-on-year, to a price of €0.62. A turnover of €2.4 million was generated across 324 transactions.

The corporate debt market saw the introduction of six new issues in the main market this year, while another seven issues were listed on the Prospects MTF market. While no new issue in either the main or the Prospects market closed the year in negative territory, the largest gain was recorded by the 4.85% Melite Finance plc Unsecured 2028, as it advanced 6.97% to €106.97. On the other hand, the 5.1% 6PM Holdings plc € Secured Bonds 2025 posted the largest fall in price as it closed the year at €100.99. In July, the MFSA terminated the suspension of trading in the bond, which had been previously placed for failure to publish its financial statements. Following the termination of the suspension, at one point the price touched the €91.50 mark before recovering to a more modest loss of 5.17%.

Yields in the sovereign debt market increased over the year, as 24 issues traded lower, while only nine headed north. Total turnover was a significant 47.3% lower than the previous year, as it amounted to just under €213 million. The most liquid issue was once again the 2.1% MGS 2039 (I), despite a reduction in annual turnover to almost €35 million, from the previous figure of over €57 million. The bulk of the losses were registered in issues which mature between 2021 and 2034, while all longer-dated issues posted gains. The worst performer was the 6.6% MGS 2019, sinking 5.83%, to close the year at €104.50 as it approaches maturity.

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