Monday, June 23, 2008

A rude awakening

Published: Monday June 23, 2008

The RBTT Deal

As former RBTT shareholders begin receiving consideration for their RBTT shares commencing today, small investors are in for a rude awakening as they seek to encash their RBC share certificates.

It was stated in the Directors' Circular issued by RBTT Financial Holdings Limited prior to the approval of the Amalgamation, that "...RBTT, through its wholly-owned stockbroking subsidiary, West Indies Stockbrokers Limited, will facilitate trading in RBC Common Shares in order to permit such sales on a real time basis..." Through a recent advertisement in the print media, the investing public has been made aware of the availability of a facility being offered by the investment house referred to in the Directors' Circular, through which former RBTT shareholders will be able to convert their RBC shares into cash.

Using the collar price of US$48.98, an RBTT shareholder owning 100 shares will be entitled to 5 shares in RBC. A preliminary calculation utilising only the fixed portion of the fees of the advertising brokerage firm (excluding commission fees) suggests that the former RBTT shareholder who now possesses 5 RBC shares could be paying over 10 per cent of his shareholding in fixed fees to the investment house. On the other hand, an RBTT shareholder owning 500 RBTT shares (25 RBC shares) could be paying out approximately 2.2 per cent of his shareholding in fixed charges. This further emphasises the disadvantage the small shareholder faces when trying to encash the RBC shares being received.

The question that should be most pertinent in the minds of former RBTT shareholders at this point in the process is, what alternatives exist? The Circular also stated that "Other stockbrokers, operating in Trinidad and Tobago and in other regional markets, may also offer similar services." RBTT shareholders can expect other Brokers to provide a similar facility for monetising their RBC shares.

Bourse Securities Limited is currently finalising the details including cost structure that will apply to holders of RBC share certificates wishing to sell their RBC shares in the foreign market in which it is listed. This service will allow former RBTT shareholders to easily convert their RBC share certificates into cash. Utilising the facilities of an internationally recognised Broker, Bourse will be able to offer the investor a very competitive package for encashing his RBC shares.

Shareholders are advised to shop around in the brokerage community to get the best value for encashment.


After culminating the 2007 financial year on a very impressive note, the ANSA McAL Group of Companies (AMCL), revealed a less notable performance for the first quarter of the 2008 financial year. For the three months ended March 31 the Group produced marginal growth in its EPS of 1.5 per cent from $0.67 to $0.68.

The Financial Services Sector reported a weaker year on year performance. A significant one-off gain in the first quarter of 2007 due to the sale of a regional investment contributed to the Sector's less favourable first quarter 2008 performance. Additionally, slow demand for advertising in the Media Sector also affected AMCL's performance during the first three months of the year.

A healthy 15.6 per cent increase in Third Party Turnover was recorded as this component increased from $1.1B to $1.3B. Operating Costs proved to be an obstacle for the Group as Operating Profit experienced a marginal 6.5 per cent increase from $202M to $215M.

The Group succeeded in keeping its Finance Costs under control as this component fell by 1.8 per cent to $28.5M, while Share of results of Associated Companies fell slightly from $2M to $1.6M.

Profit before taxation moved up 7.6 per cent year on year to $188.2M. The Group was disadvantaged by a 23.8 per cent increase in its effective taxation rate from 21 per cent to 26 per cent which resulted in an insignificant 0.4 per cent increase in Net profit for the period to $138.6M.

In first quarter of 2008 the Group attributed a smaller percentage of Profit for the period to Minority Interests (15.4 per cent in the first quarter of 2008 vs 16.1 per cent in the first quarter of 2007) which gave way to a 1.3 per cent improvement in Profit Attributable to Equity holders from $115.7M to $117.2M.

The chairman of AMCL advised that all Sectors with the exception of the Financial Services Sector and the Media Sector reported results significantly ahead of 2007. Also reflected in his statement was the fact that the Group has already begun to witness in the second quarter, a reversal of the trends that were experienced in the Financial Services and Media Sectors during the first three months of 2008.

Despite a slow start to 2008, this quarter's results is being matched against a very strong first quarter 2007 performance which as boosted by a one time gain. Exhibit 1 illustrates the Group's historical EPS trend. As is evident in the graph, the first quarter has typically been one of the weaker quarters while the Group has developed a long standing history of a stronger second half of the financial year. Barring any major unforeseen obstacles, this year is expected to continue along this trend as the Group anticipates achieving all its 2008 targets.

At the current price of $59.30 there is still significant upside potential in this stock. As such BOURSE maintains a BUY recommendation.

Source: Trinidad Express Newspapers

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