Home' Trinidad and Tobago Guardian : October 31st 2013 Contents Today, we at Bourse, will be
reviewing the performance of
West Indian Tobacco Company
Ltd (Witco) for the first nine
months of 2013 and the nine
months results for the period
ending August 2013 of Prestige Holdings Ltd
West Indian Tobacco Company Ltd
For the nine months ending September 2013,
West Indian Tobacco Company Ltd (Witco)
Earnings per share (EPS) rose 11.6 per cent
from $3.02 to $3.37 when compared to the
same period of 2012. The board declared a
third interim dividend of $1.07 per share payable
on November 12, 2013 with an ex-dividend
date of October 30, 2013. This brought total
dividends paid for the year to $2.93 versus
$2.60 a year ago.
Witco s gross turnover and revenue increased
to $843.4 million and $669 million, a three
per cent and 4.6 per cent change, respectively,
with the local market accounting for 86 per
cent of revenue. Cost of sales fell four per cent
to $173 million, which when expressed as a per
cent of revenue showed a slight reduction in
margins from 28 per cent to 26 per cent. Gross
profit climbed to $495.7 million, representing
an increase of eight per cent year on year. In
the category of operating expenses, distribution
costs and administrative costs increased four
per cent and three per cent, respectively, whilst
other operating expenses decreased 23 per cent.
Operating profit increased 11 per cent to
$386 million whilst the operating profit margin
improved four per cent to 58 per cent for the
nine months ending September 2013. Profit
after tax increased 11.9 per cent to $284 million
which translates to a margin of 42 per cent,
higher than the 40 per cent recorded in the
Witco continues to deliver strong earnings
growth with a five-year compounded annual
growth rate of 11 per cent. With an average
dividend payout ratio of 95 per cent, the return
to shareholders wealth in the past five years
has made the Witco share one of the most
desired stocks on the T&T Stock Exchange
As seen in Exhibit 1, Witco s dividend yield
continues to be attractive despite its downward
trend as its share price has steadily increased.
Over the past five years, Witco s price increased
by $92.50 to $119 (23 October 2013), a capital
appreciation of 349 per cent.
At a price of $119.00, Witco is currently
trading at a trailing P/E multiple of 26 times
(Exhibit 2), a premium to its five-year average
of 14.9 times. YTD the price has appreciated
40 per cent to a five-year high of $119, having
started the year off at $85.
Despite the price appreciation, the dividend
yield on the stock stands at 3.5 per cent, above
the market s dividend yield of 3.0 per cent.
Given the general inelastic nature of Witco s
main product, maintaining current levels of
revenue may not pose the biggest challenge
for the company. Should there be a scenario
of stunted revenue growth for Witco, the com-
pany s ability to contain costs, which has been
demonstrated during the 9 month period, will
result in bottom line growth.
Bourse recommends a HOLD on the stock.
Prestige Holdings Ltd
For the nine months ended August 31, 2013,
Prestige Holdings Ltd (PHL) recorded diluted
earnings per share (EPS) of $0.396 relative to
an EPS of $0.53 for the comparable period of
2012. Included in these figures were losses
from discontinued operations after the company
accounted for the closure of the Barbados TGI
Friday s Restaurant and its debt financing costs.
The group s EPS from continuing operations
for the period was $0.51 versus the $0.552
reported in the prior year. The interim dividend
paid on October 14, 2013, of $0.12 brought its
12 month trailing dividend to $0.24, which is
in line with 2012 s full-year dividend.
Revenue for the period rose four per cent,
moving from $642.5 million to $671.3 million.
The group s cost of sales increased by five per
cent to $429 million. Despite the increase in
costs, gross profit rose 3.6 per cent to $242
million. The gross profit margin remained
unchanged at 36 per cent.
The group s operating restaurants expenses
increased six per cent to $140.9 million due
to higher operating and food costs. This increase
was due to the introduction of a 15 per cent
tax on imported chicken which directly impact-
ed the group s KFC and Subway brands. Overall,
operating restaurants profit experienced a mar-
ginal decline of one per cent to $55 million.
The operating profit margin declined from 8.8
per cent to 8.3 per cent. The group s net finance
costs fell 7.9 per cent to $8.9 million.
Profit after tax from continuing operations
fell 7.6 per cent to $31 million dragged down
by a $2.5 million one-time cost that was made
up of an early repayment fee of $1.68 million
on existing bonds and $865K in legal and pro-
In June 2013, PHL issued a TT$140 million
ten-year bond with a coupon rate of 6.25 per
cent, the proceeds of which were used to retire
outstanding higher-interest bonds as afore-
mentioned, settle the balance due to Main-
stream Foods for the purchase of Subway asset
and liquidate some short-term financing.
Profit for the year, inclusive of discontinued
operations, was 30 per cent lower than the
prior year at $22.5 million vs $32 million in
The $22.5 million profit recorded in the nine
months of 2013 included the costs associated
with the closure of the Barbados TGI Friday s
Restaurant for $8.7 million. Excluding this cost,
the recorded profit over the period would have
been $31 million, four per cent lower than the
As the group moves ahead, its strategic devel-
opment initiatives both locally and regionally
will continue to influence its performance in
both revenue growth and profitability. The clo-
sure of the TGI Friday s Restaurant in Barbados
is expected to positively impact PHL s prof-
itability and cash flow allowing for greater
focus on maintaining sales and managing costs
in its other markets.
Backed by strong brands, the major challenge
facing the company is the upward trend in
food cost inflation and any unforeseen costs
associated with its debt financing. The current
low interest rate environment will bode well
for the group s financing initiatives.
At the current price of $9.40, the stock is
trading at a trailing P/E multiple of 13.68 times,
a premium to its five-year average P/E multiple
from continuing operations of 10.67 times.
The dividend yield is at 2.6 per cent (Exhibit
3) with an average payout ratio of 37 per cent.
Bourse maintains a HOLD on this stock.
Investors can call Bourse at 628-9100 or visit
us at any one of our offices. Further information
is also available on Bourse's Web site at
www.bourseinvestment.com and Bourse Secu-
rities Ltd Facebook page.
We would also like to remind unitholders of
the Savinvest India Asia Fund, that Bourse will
be hosting a special Investors' Seminar on
November 13, at the Capital Plaza at 5:15 pm.
Invitations were sent via mail, however, interested
attendees may register their attendance to sem-
email@example.com or by call 628-9100.
Kindly note this seminar is restricted to SIAF
OCTOBER 2013 • WEEK FIVE www.guardian.co.tt BUSINESS GUARDIAN
Bourse Securities Ltd
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Weekly Market Review
Witco records 12%
increase in profits
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