Home' Trinidad and Tobago Guardian : October 18th 2015 Contents OCTOBER 18 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG13
Casual readers may be forgiven
for thinking that Jamaican-
based Supreme Ventures Ltd
is simply that country s lottery
operator. In fact, Trinidadian-
based investors have a signif-
icant stake in that company.
This ownership is held via Zodiac Invest-
ments and Holdings Ltd; this is a Trinidad
registered company, which holds a 49.95 per
cent stake in Intralot Caribbean Ventures Ltd.
Intralot Caribbean, which is registered in St
Lucia, is the legal owner of 49.9 per cent of
Supreme Ventures Ltd. Consequently, Zodiac
is the indirect owner of 24.95 per cent of SVL.
Zodiac associate, Nicholas Mouttet resigned
from the board of SVL on August 4, 2015, and
was replaced by Robert Nader.
According to SVL s press release, Nader is
the president and managing partner of Gaming
& Entertainment Management-Illinois, LLC
(dba GEM) and ARES/ICE-Jamaica. GEM is a
licenced terminal operator in Illinois, USA with
approximately 20,000 active video lottery gam-
ing terminals in a route system. ARES is active
in the Caribbean with a similar route system
Helped by lower finance costs and an
improved operational performance, SVL deliv-
ered a net profit increase of almost 63 per cent
for the six-month period to June 2015.
Let us now review its half-year results for
that period in some greater detail.
Changes in financial position
Total assets declined from the December
2014 figure of J$5.9 billion to J$5.04 billion as
at June 30, 2015.
Long-term assets fell marginally to J$2.88
billion from J$2.91 billion last December. The
bulk of this decline was recorded under dis-
posals or write-offs of video lottery terminals,
which consumed almost J$77 million. The end
of period balance moved to J$89.3 million from
J$137.4 million as at last December.Two line
items recorded increases over the six-month
period; long-term receivables moved from
J$406 million to J$484 million while deferred
tax assets advanced to J$140 million from J$98
Current assets fell to J$2.16 billion from
All components recorded declines. Inventories
contracted to J$37.6 million from J$101.7 million.
Meanwhile, trade and other receivables closed
at J$589.4 million from the year-end balance
of J$664.5 million.
In addition, cash and cash equivalents ended
at J$1.53 billion, reflecting a decline of nearly
J$700 million from the J$2.23 billion balance
last December. Partly accounting for this decline
was the almost 200 per cent increase in div-
idends paid in the half-year; this disbursement
moved from less than J$400 million in the
2014 period to J$1.19 billion in the current half-
Non-current liabilities declined to zero from
less than J$8 million as at December 2014.
Current liabilities also trended downward,
moving from J$1.85 billion to J$1.48 billion as
at June 2015. The major decline was recorded
under prize liabilities, which fell to J$143.2 mil-
lion from J$599.1 million last December.
On the other hand, and in line with its higher
profits, income tax payable rose to J$213.3 mil-
lion from J$33.2 million last year-end.
Stockholders equity contracted to J$3.56
billion from J$4.05 billion.
The major change was in the retained earn-
ings component, which fell to J$1.53 billion
from J$2.02 billion. This reduction was con-
sistent as the current dividends to shareholders
of J$1.19 billion surpassed the current period s
profit of J$705 million.
With 2,637,254,926 shares outstanding, each
share had a book value of J$1.35 (December
Revenues and profits
Half-year revenues rose by 9.9 per cent to
J$22.18 billion from 2014 half-year of J$20.19
billion. The major contributors to this increase
were lottery and pin code revenues.
Direct expenses rose by 8.3 per cent to J$19.74
billion from J$18.23 billion. This lower rate of
change helped SVL produce a gross profit of
J$2.43 billion; this result represented an
improvement of 24.5 per cent over the J$1.95
billion reported from the 2014 period.
Operating expenses, at J$1.47 billion, were
6 per cent higher than the J$1.39 billion incurred
for the six months to June 2014.
These changes allowed SVL to register profit
from operations of J$961.6 million; this rep-
resented an improvement of J$394.2 million
or 69.5 per cent over the 2014 figure of J$567.4
In line with its lower cash balances, interest
income declined to J$35 million from J$40.6
million in the 2014 period.
Net foreign exchange gains rose to J$3.7 mil-
lion from J$1.1 million.
Finance costs fell to J$2.9 million from J$9.9
million in the first half of 2014. SVL has now
reduced its debts to a nominal figure of J$7.2
After including other gains of J$17.9 million
(2014: zero), pre-tax profit registered at J$1.02
billion; this was 69.5 per cent greater than the
comparative 2014 result of J$599.2 million.
Tax allocation rose from J$166.3 million to
the current period s J$310.3 million. This result-
ed in SVL reporting an after-tax profit of J$705
million versus J$432.9 million for the first six
months of 2014, reflecting a 62.9 per cent
This result translated into EPS of J$0.27
The two major segments that generate the
most profit are lottery and pin codes.
Lottery revenues rose by 7.7 per cent while
its profit contribution soared by 45.2 per cent.
The robust improvement in profit can be attrib-
uted to a reconfiguration of the Cash Pot game;
previously, this game design allowed payments
in excess of the designed liability of 72.22 per
cent. During this period, the highest jackpot
payment of J$395 million (almost TT$22 million)
was hit on May 27, 2015.
Pin code revenues advanced by 33 per cent
but its profit contribution declined by almost
35 per cent. Since November 1, 2014, this activ-
ity has been conducted by its subsidiary, Big
A Track 2003 Ltd. The lower profitability may
be attributable to one-off transitional costs.
The sports betting segment initiated a
rebranding and upgrading exercise which is
expected to allow it to improve its contribution
to the bottom line.
Dividends, share price and prospects
In the first half of 2015 SVL paid dividends
totalling J$0.45. On March 20, a dividend of
J$0.27 was disbursed and this was followed on
May 27 by a payment of J$0.18.
On September 2, 2015, shareholders received
a dividend of J$0.10. A board meeting, sched-
uled for November 5, 2015, will also consider
the payment of another dividend, probably an
amount of J$0.10 in early December.It seems
very likely that the total dividend for calendar
2015 could then be J$0.65.
SVL s share price closed at J$1.82 on January
5, 2015. From that base, the price rose steadily,
barring occasional pull-backs. On May 11, 2015,
it closed at J$3.93 and then peaked at J$4.09
on September 7, 2015. It was recently traded
Using a projected calendar dividend of J$0.65,
the recent price of J$3.65 gives investors an
extremely high yield of 17.8 per cent.
Can this level of dividends be sustained? In
the short-term, the answer is probably yes.
Even if we project a full year EPS of J$0.60,
the likely dividend pay-out will probably exceed
its current earnings; this can easily be funded
by using some of its retained earnings.
We might further project a year-end share
price of J$4.00. If that price were attained,
then the capital appreciation for the year would
be J$2.18. Combining this appreciation with
the anticipated dividend of J$0.65 we get a
total gain of J$2.83 over the one-year period.
When that gain is related to the opening
price of J$1.82, we would derive an annual gain
(dividend and capital appreciation) of 155.5 per
cent. For external investors, even if the currency
might have depreciated marginally, that is a
very respectable one-year return!
For a company that has no debt, has built
up substantial retained earnings and essentially
operates on a cash basis, this strategy can work
for a long time. This arrangement keeps
investors interested and helps support the share
Any future major capital projects can prob-
ably be easily funded by its international part-
ners and significant shareholders, Intralot/Zodi-
ac (49.9 per cent owner) and GTECH (0.603
per cent owner), at favourable rates and terms.
SVL s operations might remind us of how
the local companies Witco and Unilever func-
SVL continues to be a defendant in two
cases brought against it by some of its founders.
These matters involve the forward sale of shares
in SVL and the claimants are Epsilon Global
Equities and Talisman Capital Alternative
Investment Fund joined with EGE Ltd.
Both matters were previously settled in the
company s favour in the Jamaican courts; they
were subsequently moved to and re-tried in
the Florida (USA) courts, where SVL also won
dismissals. Currently, both matters are under
appeal and final decisions (expected in SVL s
favour) should be forthcoming before the end
of the year.
Lottery fever boosts Supreme
Ventures' half-year results
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