GHL continues to improve

Published: Tuesday May 13, 2008

Guardian Holdings Limited

A welcome recovery in 2007 followed through into a strong operational first quarter performance for Guardian Holdings Limited (GHL). For the first quarter ended March 31, 2008, the Group recorded an earnings per share diluted of $0.24, compared to a loss per share of $0.99 at the end of the first quarter (1Q) of 2007. Excluding fair value losses, GHL's earnings growth was up approximately 30 per cent from $0.26 to $0.34.

The chairman commented that all operating divisions in the various geographic regions produced positive returns during the first quarter.

The core revenue source, Net Insurance Premium Revenue grew by 3 per cent from $1B to $1.1B. With the exception of 'Other Revenue', all other revenue streams experienced meaningful growth, which led to 3.9 per cent boost in Total Revenue from $1.3B to $1.4B.

A 0.7 per cent growth in Net Insurance Benefits & Claims, and a 0.9 per cent reduction in Expenses, led to a 66.5 per cent boost in Operating Profit before fair value losses to $122.4M.

A modest resurgence in the local and regional equity markets during the first three months of 2008 translated into an encouraging improvement in the Group's equity portfolio. However, the gains experienced as a result of local equities were adversely affected by the declining market value of the Group's holdings of international equities and Jamaican Government Bonds. As a result Fair Value losses were down 15.7M, although still a significant improvement when compared to the 251.1M loss in the 1Q of 2007.

After factoring in the increase in investments in associated companies, and Finance Charges, the Group closed the first quarter with a Net Profit of $50.6M from a Net Loss of $205.2M in the comparable period if 2007.

Gains from the sale of its holding of RBTT shares along with the Grupo Mundial of Panama investment should translate into a one time gain of $2.24 per share.

It is anticipated that the cash injection of $2 billion from the RBTT deal will be used to reduce some of the Group's debt burden and by extent Finance Charges. The majority of the cash however, may be used for further acquisitions or for investment in any viable investment opportunities that may arise.

At the current price of $30.75, this stock is trading at an attractive forward P/E multiple of 12.8 times. In considering the Group's operational recovery which started at the end of 2007, and the opportunities arising for GHL out of the completion of the RBTT/RBC deal, BOURSE maintains a BUY recommendation on this stock.

Republic Bank Limited

For the first half of the financial year 2008, Republic Bank Limited (RBL) produced an EPS of $3.93, a 22.8 per cent decline from the $5.09 EPS of the comparable period of 2007. Both periods included one-off gains which if excluded would paint a different picture. The first half of 2007 included a $370M gain from the sale of the Bank's shareholding in FirstCaribbean International Bank, while the first half of 2008 included an after tax gain of $82M from the allocation of shares in VISA Inc. Excluding these non-recurring items, core earnings grew by 23 per cent from $443.8M to $547.6M. The board of directors has approved a half year dividend of $1.15 per share, a 22 per cent increase over the 2007 dividend, which will be paid to shareholders on May 29, 2008.

A brief review of the company's results will reveal a 12.7 per cent decline in Profit before taxation from $1B to $879.6M, while After tax profit fell 20.5 per cent from $859M to $683.4M.
The Bank's Total Assets increased over the comparative period by 9.5 per cent, while Total Shareholders' Equity improved by 15.9 per cent.

RBL continues to prove itself to be a very competitive contender in a very lucrative local economy and has remained unaffected by the ongoing financial crisis affecting the international financial institutions and the global economy.

At the current price of $100.00, shares of RBL are trading at a forward P/E multiple of 13.7 times based on core earnings. Consistency at achieving strong operational growth, and the expectation of yet another strong financial year resulted in the share price appreciating 25 per cent since the start of 2008. BOURSE revises its recommendation at this time to a HOLD.

Trinidad Cement Limited (TCL)

Within the past two weeks Trinidad Cement Limited (TCL) released results for both financial year 2007 and the first quarter of 2008. For the year ended December 31, 2007, the Group announced a 28 per cent growth in its EPS from $0.60 at the end of 2006, to $0.77. When Cement Claims incurred by the Group's Jamaican subsidiary, Caribbean Cement Company Limited (CCCL) in both 2006 and 2007 were excluded, a smaller growth in earnings was reflected, more in the range of 10 to 12 per cent. The board of directors approved a dividend of $0.07 (2006:$0.06), which will be paid on June 20, 2008 to shareholders on record at the close of business on June 6, 2008. The Group remains prudent in terms of its dividend for the financial year 2007 as a result of the various expansion and modernisation projects currently on the table.

A buoyant construction industry, increased revenues and operational efficiencies of one of the Group's subsidiaries, Readymix West Indies Limited (RML) in 2007, contributed to TCL's year end performance. The Group's Jamaican subsidiary, CCCL also recorded an increase in profitability for the year 2007.

Total Group Revenue increased by 11.9 per cent from $1.7B to $1.9B, the highest Revenue ever achieved by the Group. Operating Profit before Cement Claims experienced a 19.1 per cent increase while a 31.9 per cent increase in Operating Profit was achieved after Cement Claims were deducted. With Finance costs remaining relatively flat, Profit before Taxation increased 53.1 per cent to $245.7M, while Profit after Taxation was up 39.3 per cent from $151.8M to $211.4M.

The good performance of 2007 did not follow through into the new year as the Group's 2008 first quarter results revealed a relatively flat year on year growth in earnings. For the three months ended March 31, 2008, the TCL Group reported a 5 per cent decline in EPS from $0.20 to $0.19.

While the RML and CCCL subsidiaries continued to do well, the Arawak Cement Company Limited (ACCL) subsidiary encountered some hurdles during the first three months of 2008. These challenges were a result of the new fuel system, which the Group anticipates will be resolved by mid 2008.

For the first quarter of 2008, Group Revenue was up 8.7 per cent from $479.6M to $521.5M. An increase in operating costs resulted in a decline in Operating profit of 5.9 per cent. while at the bottom line, Net Profit diminished by 7.4 per cent from $56M to $51.9M. Recent and ongoing expansions have resulted in a relatively high debt to equity ratio of 91 per cent.

Looking forward, the Group anticipates that both domestic and export demand for cement will remain stable. The benefits of TCL's expanded production capacity, the commissioning of the new kiln at CCCL, along with the new fuel system at AACL, are expected to bear fruit for the Group by year end 2008. Should these benefits materialise during the year, the Group is well poised to deliver a good financial performance for the year 2008, despite its flat first quarter results.

On a fundamental basis, shares of TCL are trading at a current price of $10.25 and at a forward P/E multiple of 12.3 times, At a valuation of 14 times, BOURSE maintains a BUY recommendation on this stock.


Source: Trinidad Express Newspapers
http://www.trinidadexpress.com/index.pl/article_business?id=161321865