Home' Trinidad and Tobago Guardian : July 12th 2015 Contents JULY 12 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG11
The restoration of profits
at TSTT hugely helped
National Enterprises Ltd
(NEL) report an improved
performance for its cur-
rent fiscal period, which
ended on March 31, 2015.
Let us now review NEL s overall performance
for that period.
Changes in financial position
Total assets advanced from $3.59 billion to
$3.97 billion as at March 2015, reflecting an
increase of 10.6 per cent.
The major improvement was registered
under the equity accounted investments cat-
egory, which rose from $2.33 billion to $2.68
billion. Mainly, this represented the new invest-
ment of $349.6 million in Panwest LLC; this
company is the owner of 10 per cent of Phoenix
Park Gas Processors Ltd; NEL has a one-third
stake in this entity.
Curiously, the equity accounted values in
Tringen, NGC NGL and NGC LNG all reg-
istered declines from their opening balances.
Mainly, this reflected the net effect of dividends
paid and payable exceeding current year s
earnings, as revealed in the table. (We will
expand on this point later.)
The value of financial assets declined mar-
ginally to $275 million from the previous level
of $275.7 million. The value of Home Mortgage
Bank bonds fell to $16.2 million from $18.1
million. Conversely, its investments in Clico
Investment Fund and First Citizens Bank rose.
The former rose to $22.5 million from $21.85
million while the latter advanced from $44.78
million to $45.27 million. Its Powergen s shares
were unchanged at $151.3 million.
Accounts receivable and prepayments
climbed by 97 per cent to $288.3 million from
the previous year-end s $146.3 million. The
major component was a dividend receivable
from Tringen of $111.44 million. Also con-
tributing to the increase is $7.34 million due
to its subsidiary NFM from GORTT; this rep-
resents the value of discounts "offered" by
GORTT last December.
Cash and cash equivalents fell to $463.9
million from $586.25 million. The major change
was in its short term investments, which fell
to $380 million from $513.6 million.
Total liabilities rose from $267.7 million to
last March s $476.9 million. Increase in debt
was the main contributor to this movement.
Long-term borrowings rose to $104.3 million
from $7.66 million. The main contributor was
a new Republic Bank loan for US$16.3 million,
which was used to finance the purchase of
In addition, short-term borrowings and
bank overdraft rose from $217 million to $303.7
million. The bank overdraft portion declined
to zero from $28.7 million. However, its NFM
subsidiary s revolving grain purchase facility
increased to $119.5 million from $82.9 mil-
The third component moved from $105.4
million to $184.2 million. This represents a
Republic Bank Ltd U$33.5 million facility to
help buy shares in Panwest LLC. Originally
scheduled to mature on May 19, 2015, it has
now been extended to November 19, 2015.
Stockholders equity rose to $3.4 billion
from the previous level of $3.24 billion.
Retained earnings advanced by a net of $163
million to close 2015 at $1.63 billion. The major
movements saw current year s comprehensive
income of $479.2 million boost this figure
while dividends to shareholders of $276 million
restrained the net change.
With 600,000,641 shares outstanding, each
share has a book value of $5.67 (2014: $5.39).
Income and profits
Total revenues (identical to NFM) rose by
a modest 2.7 per cent to reach $470.3 million
from 2014 s $457.9 million. Largely attributable
to a modest 0.7 per cent increase in the cost
of sales, its gross profit improved by 11.4 per
cent to $95.5 million.
Selling and distribution expenses rose by
12.3 per cent to $35.4 million from $31.5 mil-
Administrative expenses climbed to $46.8
million from the previous year s $35.5 million,
reflecting an increase of 32.1 per cent. Included
in these figures were NEL-specific expenses
of $14.1 million in 2015 versus $6.2 million for
2014; the remainder related to NFM.
These changes saw operating profit decline
to $13.2 million from $18.7 million, or by 29.2
Fortunately, finance costs fell to $7.4 million
from $10.5 million. In addition, dividend
income advanced to $18.3 million from $3.7
million. This reflects dividends from its invest-
ment portfolio, such as Powergen, FIRST, Clico
Investment Fund and its two bonds.
NEL s major source of income is its share
of after-tax profit from equity accounted
This line item rose by 188.2 per cent to
$456.3 million from 2014 s $158.3 million.
The largest movement was TSTT s contri-
bution, which recovered from a loss of $226.1
million in 2014 to register a profit of $108.6
million. Also, NGC NGL s profit increased to
$72.3 million from $58.7 million. In contrast,
Tringen s profit declined to $156.6 million
from $192.4 million.
At NGC LNG, the current year s profits of
$109 million were 23.5 per cent lower than
the $133.4 million recorded for 2014. Mean-
while, its recent investment in Panwest LLC
produced a dividend of $9.8 million after a
These changes saw NEL deliver a pre-tax
profit of $501.5 million versus $189.5 million
After taxes and other comprehensive income,
the profit attributable to shareholders registered
at $480.4 million; this compares favourably
with the $190.3 million reported for 2014.
These results translated into 2015 EPS of
$0.80 versus $0.32 for 2014.
As noted earlier, NEL seems to be "milking"
the retained earnings from its energy-related
companies to help boost its current earnings.
This is a rational strategy if capital investment
in those companies is not starved and there
is a realistic expectation that the markets for
those companies various products can recover
in a reasonable time frame.
This strategy, hopefully a short-term one,
helps boost current results which, in turn,
allow NEL to pay a reasonable dividend, mostly
to the government and many minority share-
For example, Tringen, which paid a current
dividend of $97.8 million, is now scheduled
to pay an additional $111.44 million in divi-
dends. We can compare those total dividends
with its reduced current year s profit of $156.6
TSTT did not pay a dividend in the 2014-
15 periods, due largely to its restructuring costs
in 2014. However, its fiscal year also ended in
March 2015 and there is a reasonable expec-
tation that based on its current results, NEL
will receive a dividend for that period.
Dividends and share price
For its fiscal year ended March 2015, NEL
paid or declared a total dividend of $0.50; this
compares with $0.46 for 2014, when its EPS
was only $0.32. The final dividend of $0.27
will be paid on August 14, 2015.
If you were a long-term investor, you could
have bought a share of NEL at about $10.00
in early December 2010. That price rose to
$13.55 on December 9, 2011. Thereafter, the
price bounced around in a narrow range before
breaking through the $16.00 mark in mid-
July 2013. This mostly upward trajectory con-
tinued and the price peaked at $19.10 on June
11, 2014. From that level it began a slow descent
before closing at $17.42 on December 31, 2014.
This downward trend continued into 2015 and
the price closed at $17.10 on June 26, 2015.
The release of these results helped boost the
price slightly with recent trades occurring at
At that price, the dividend of $0.50 gives
investors a yield of 2.91 per cent. In addition,
that price reflects a lofty P/E multiple of 21.5
times its 2015 EPS of $0.80. That high P/E
multiple limits the prospect for significant
short-term price appreciation.
With Cable and Wireless shareholding in
TSTT effectively "suspended", NEL is hunting
for a viable and accommodating new partner
for that company.
How likely is it to see the complete sell-off
of TSTT without having a NEL shareholder?
If so, how will NEL be allowed to reinvest
the proceeds from that sale? Much would
depend on the policies of any new government
that takes shape after September 7.
With Digicel preparing to do an IPO on the
NYSE, will NEL be allowed, purely to hedge
its bets, to invest in that entity?
The current chairman is eager to expand
NEL outside of its core investee holdings,
which were largely government imposed. Some
efforts have started with Phoenix Park (via
Panwest LLC) and Powergen, among the most
In order to fully implement any diversifi-
cation plan, NEL will certainly need fresh cap-
ital. The current structure of its balance sheet
gives it significant leeway to increase its debt
load. In addition, as a state enterprise, it would
definitely need some broad ministerial guide-
lines as to which areas to target and which to
One advantage of the judicious use of debt
is that it can boost shareholders returns.
Let s see if the current or next chairman
will be allowed such autonomy.
to profit boosts
NEL's 2015 results
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