Home' Trinidad and Tobago Guardian : February 8th 2015 Contents During the month of Jan-
uary, we have seen
some interesting price
volumes in at least one
stock and significant
price slides in two
National Flour Mills Ltd:
NFM s share price rose from $1.15 last
December to $1.39 as at January 30, 2015,
reflecting an appreciation of 20.9 per cent.
This movement suggests that investors are
expecting strong year-end results, probably
accompanied by a higher dividend. This
upward momentum continued into the early
trading days of this month, closing on February
4 at $1.45.
We recall that, in its third quarter narrative,
the company cited that it anticipated favourable
(that is, lower) commodity prices for the last
quarter. In addition, NFM was continuing to
experience improvements in operational effi-
At that time, a year-to-date profit improve-
ment of 17.5 per cent was reported.
Recent print advertisements for multiple
key positions indicate that NFM seems to be
focussing on the right areas.
Investors are probably now more tolerant
that the periodic "gifts to the nation" dis-
counting programme may no longer be a seri-
ous problem, at least from a cash flow and
At a broader level, those actions continue
to tarnish many observers views of state enter-
prises; consequently, there are several investors
who ignore those types of companies. Perhaps,
in vain, they hope that these enterprises will
eventually graduate to majority or full private
Flavorite Foods Ltd:
Over the one-month period, the share price
of FFL did not change. However, on January
8, the price slipped to $4.50 with only 1,000
shares changing hands. Less than a week later,
on January 14, 749,378 shares were traded at
$4.80, which was the same price at which it
A subsequent newspaper announcement
confirmed that Stone Street Capital Ltd (SSCL)
was the buyer of 740,349 of those shares. This
purchase increased its stake in FFL to 7,006,764
shares, which represented 90.1 per cent of the
In the context of a January 2014 share price
of $8.21, third quarter EPS of $0.19 and with
the benefit of hindsight, do any of the sellers
feel that they "gave away" their shares?
Consider a few more figures: the Q3 EPS
of $0.19 was a huge improvement over the
$0.06 recorded for the comparative period in
2013 and was accompanied by a small increase
in revenues. Another statistic is that, as at
September 2014, total equity was $42.5 million;
consequently, the book value of each share
However, the book value is often not the
best measure of a company s true worth. A
different and more comprehensive type of val-
uation, such as, intrinsic value can yield a
much higher figure.
Now that Stone Street has gone past the
90 per cent ownership mark, is it required,
under the Securities Industry (Take-Over) By-
laws, 2005 §26 (1), to make a mandatory offer
to the remaining shareholders?
If so, then this offer will have to include,
among other requirements, outlining the
detailed basis for arriving at an offer price.
Alternatively, is SSCL hoping to acquire the
remainder of the company on an ad-hoc basis
as small and indifferent shareholders need
cash and decide to sell?
At least one institutional shareholder, T
Geddes Grant Pension Fund Plan, which owns
5.5 per cent, is not likely to sell its stake in
this small but growing company, for "peanuts".
In all likelihood, SSCL wants to complete
the 100 per cent takeover of FFL and make
it a private company. At some point, they will
have to decide how much they are willing to
pay for the remaining 9.9 per cent of the com-
pany that they do not yet own.
As at last Wednesday, some shareholders
were offering to sell their shares for $5.50
while bids remained stubbornly at $4.80. Who
will blink first? Is there a middle ground?
Let s see how this story unfolds.
Angostura Holdings Ltd:
AHL s share price gained 18.37 per cent to
end January at $15.98 from its starting price
The share price peaked at $16.00 on January
28, before some weakness was displayed. Per-
haps, the run-up in the share price was too
swift and the market is now adjusting to a
lower price point?
In its report for the third quarter ending
September 2014, strong progress was shown
in its non-alcohol operations, while its alcohol
business displayed both lower revenues and
There is no new information in the public
domain that might have contributed to this
price surge. AHL closed its fiscal year last
December and its audited results are expected
to be released sometime in March.
Still scheduled for the end of February, the
"final agreement" between the government
and CL Financial remains a huge variable for
both the pricing and valuation of AHL and,
as we shall soon see, Republic Bank Limited.
Republic Bank Ltd:
RBL s share price drifted down to $118.74
from its December 31 level of $119.74. Its steep-
est decline was noted on January 28, when it
fell by $0.68 cents to end the day at $118.90.
RBL s first quarter results to December 2014
reveal improvements in both net interest
income and other income. Its diluted EPS
improved to $1.84 from $1.80 for the com-
parative period in 2013. The bank has expressed
some caution about its prospects for the
remainder of the year, citing economic chal-
lenges locally as well as in Barbados and the
After being stalled by legal action, RBL
secured a legal victory in mid-December. This
action has allowed RBL to re-start its acqui-
sition efforts for HFC Ghana Bank Limited.
The lower share price could be explained
by the prospects for slower local and regional
growth and, to some extent, the protracted
pace of acquiring HFC Bank.
However, there may be another factor that
is lurking in the background. This, of course,
is the sale of the RBL shares currently owned
by Clico interests.
Subject to the government signing a new
agreement with CL Financial, the apparent
stated intention of the Minister of Finance is
to sell those Clico-owned shares to local insti-
tutional investors, which might now be broad-
ened to include regional institutions.
Is there a "floor" below which the Minister
of Finance will not consider selling these
Six years ago, there might have been some
merit in FCIB wanting to buy RBL at $130.00
per share. Now, much has changed and the
rationale for that lofty price may no longer
Many of the institutions, who will be offered
an opportunity to buy additional shares in
RBL, already own some shares in the bank.
The price of acquiring those "old" shares was
probably much lower than the current market
In addition, an institution, such as the UTC,
is normally prevented from owning more than
10 per cent of any company. On the other
hand, the NIB may have a little more flexibility.
Certainly, all institutional investors have to
justify the price they are willing to pay for
what will amount only to a "large minority
interest" in RBL. These institutions may now
be "told or instructed or cajoled" to buy shares
in a particular company.
Normally, that is not the way that invest-
ment decisions are made! Despite their minor-
ity status, there is also likely to be some "jock-
eying for board seats or representation".
Given these variables, it seems quite likely
that RBL s share price will continue to slide
until we have greater clarity on the CLF agree-
ment and the procedure to be used for selling
the former Clico shares in RBL (assuming that
option will still be pursued.)
Trinidad Cement Ltd:
During January, 493,560 shares in TCL
changed hands with the price falling to $2.25
from its opening level of $2.50. The share price
closed at $2.30 on February 4.
For the nine months to September 2014,
TCL reported some progress in revenues, EBIT-
DA and net finance costs. Unfortunately, taxes
and non-recurring charges compressed profits.
EPS for the period declined to 24.4 cent from
28.2 cents in the comparative 2013 period.
Resulting from the company s inability to
pay its current debts, the accounts were vig-
orously restated. These then showed current
liabilities of $2.39 billion vastly exceeded its
current assets of $0.875 billion.
At tomorrow s special meeting, the two
main items proposed are (a) that the (20 per
cent) restrictions on share ownership and
transfers be removed and (b) the election of
Attorney-at-law, Sarah M Baboolal as a direc-
tor, representing the National Insurance Board.
The former CEO of TCL, Dr Rollin Bertrand,
has penned two missives to the newspapers.
The earlier contribution purports to show how
Cemex might increase its shareholding in TCL
to about 50.5 per cent by buying 160 million
new shares, which are expected to be the sub-
ject of an upcoming Rights Issue. The main
purpose of this Rights Issue is to pay off debt
of about US$50 million.
Dr Bertrand s basic assumption is that out
of the possible 166 million new shares to be
offered via the rights issue, very few local
investors will buy the amount of their enti-
tlement. On what information does he base
this assertion? Is he speaking for the union
representatives and the institutional investors,
such as NIB and UTC? I think not!
In a later submission, published in last Sun-
day s Business Guardian, he comments on a
Web cast hosted by the chairman of TCL on
Monday January 26, 2015.
Among other things, Dr Bertrand reports
that the TCL chairman observed that TCL is
"financially weak" and would benefit from
being controlled by Cemex. Dr Bertrand asserts
that Cemex is "financially weaker" and refers
readers to Cemex s financials on their Web
Dr Bertrand s passion about wanting to keep
TCL as a local or Caribbean-owned company
Realistically, he must remember that, for
many years, while TCL had (and still has)
majority local ownership, he and his lieutenants
had ample opportunity to do a better job of
running the company (and, equally important,
forging a more mature relationship with
The OWTU has also weighed in on the
upcoming meeting. While supporting man-
agement s dismissal of some key executives,
it is not in favour of removing the 20 per cent
limit on share ownership, fearing that such
action would lead to a takeover by Cemex.
Are we now blaming our apparent mana-
gerial incompetence on a foreign entity?
Let us now see how this meeting proceeds...
FEBRUARY 8 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG11
We have seen some interesting price appreciations, unusual volumes in
at least one stock and significant price slides in two shares.
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