Home' Trinidad and Tobago Guardian : August 17th 2014 Contents As at the end of August
12, 2014 the All T&T
share index closed at
1,987.61. This was 6.11
points lower than the
1,993.72 at which it
closed on December 31, 2013. While there
have been some significant gains by a
few stocks, there have also been some
interesting declines, particularly in recent
Among the stocks that have recently
lost their previous buoyant mood are
Massy Holdings Ltd, One Caribbean
Media Ltd and Scotiabank T&T Ltd.
Massy Holdings Ltd
Massy Holding Ltd (MASSY), formerly Neal
& Massy Holdings Ltd, has recently gone
through a comprehensive exercise to rename
and rebrand the group, which had mostly
grown via acquisitions.
On July 1, 2014, consumers awoke to the
stunned realisation that Massy Stores had
replaced one of their favourite supermarkets,
Hi-Lo Food Stores Ltd. This change to a long-
cherished brand was part of a thorough
rebranding that was conducted through the
While it may make business sense in the
long term, the short-term reactions to the
rebranding have been mixed and somewhat
confusing. Consumers would need a little time
to become accustomed to the new name.
The cost of the exercise was initially esti-
mated at "tens of millions" of dollars, which
will seriously impact the group s third quarter
Massy s share price started the year at
$60.01, mostly progressing in a positive direc-
tion until it reached $68.95 on June 30, 2014.
The price peaked at $69.62 on July 9, 2014.
At that level, it drifted sideways and downward
before closing at $69.25 on July 31. It then fell
through the $69.00 mark and ended at $68.50
on August 12.
Coinciding with the rebranding exercise,
the company also formally transitioned to a
new chairman, with Robert Bermudez replacing
Arthur Lock Jack, who served for ten years,
which included the turbulent acquisition and
streamlining of Barbados Shipping and Trad-
The announcement of its third quarter
results last weekend showed that the full cost
of the rebranding exercise was slightly more
than $59 million. With 97,751,252 shares out-
standing, the cost per share of this exercise
Shareholders expect that this value would
be recouped and exceeded from higher levels
of cross-selling and other related synergies of
Top-line revenues to June 2014 expanded
by 12.8 per cent to $7.96 billion from $7.05
billion for the first nine months of 2013.
Operating profit margins declined to 7.32
per cent from the previous period s 7.9 per
cent. EPS, primarily due to the rebranding
costs, declined to $3.74 from $3.99 for the
comparative 2013 period.
Excluding the rebranding and head office
costs, pre-tax profits from its local operations
rose by 6.0 per cent. Its Guyanese ventures
delivered a 3.9 per cent improvement, while
its Barbados subsidiaries suffered a 14.2 per
cent contraction in pre-tax profits. Though
relatively small, the Jamaican companies reg-
istered a robust 60.8 per cent increase in pre-
The cost of the rebranding was concentrated
under two main segments, integrated retail
and head office and adjustments. Sums allo-
cated to the former were given as $18.67 million
while amounts allocated to the latter were
reported at $21.8 million.
On July 30, 2014, Massy s borrowing costs
were consolidated and significantly lowered.
This occurred via the issue of two new bonds
totalling $1.2 billion, which will replace its
existing debt and give it fresh capital to fund
new acquisitions, including the new joint ven-
ture with Mitsubishi Corporation.
Lower borrowing costs and improved brand
awareness, now under the stewardship of a
new chairman, should help the company report
a reasonable result for the full year ending in
September and beyond.
One Caribbean Media Ltd
Similar to Massy Holdings, One Caribbean
Media Ltd s share price started the year at
$18.50 and moved up steadily, reaching $20.50
on May 7; a mere 12 days later, on May 19,
it was quoted at $22.50.
Much of this price increase was probably
fuelled by anticipation that the mid-year World
Cup activities would significantly boost earn-
ings. On July 8, the price spiked to $24.96.
The price then held at $25.00 until July 17.
The company s half-year results to June
2014 was signed on July 18, published in the
print media on July 19, and then posted on
the stock exchange s Web site on July 24. What
does this time line say about investors having
"fair access" to pertinent information?
For investors who rely solely on the TTSE s
Web site for their information, they would
have received a rude shock as OCM s share
price had already tumbled down to $23.38 on
July 18. Since then, the share price has drifted
sideways and was quoted at $23.30 on August
12.Of course, most investors now know that
OCM s results were seriously and negatively
affected by difficulties being faced by its sub-
sidiaries in Barbados and the Eastern
The strong results earned in T&T, about
which nothing was said in the chairman s
comments, were more than sufficient to over-
come these negatives; this resulted in EPS for
the six months to June 30, 2014 edging up to
$0.58 from $0.57 for the comparative 2013
Most of this improvement came in the sec-
ond quarter, when EPS advanced to $0.34
from $0.30 in the half-year to June 2013.
The interim dividend was maintained at
$0.27 per share.
Scotiabank T&T Ltd
Traditionally, SBTT s share price has tended
to move at a snail s pace, but almost always
in a positive direction. This year seems to be
a notable exception.
SBTT price started the year at $72.55 and
by January 17 was quoted at $73.12, perhaps
signalling unrealistic optimism. Less than three
months later, on April 22, the price was down
to $70. The price declined by a further $1.00
to $69.00 on July 4, but by the end of July
it had reached $66.74. On August 8, SBTT s
share price closed at $63.50, further slipping
to $63.49 on August 12, 2014.
Investors may well ask: "What is causing
this steady decline in the price of this share?"
To find the source(s), we need to step back a
bit.In its first quarter, which ended on January
31, 2014, SBTT reported after-tax profits of
$144.26 million; this result was 1.6 per cent
greater than the $142 million earned for the
same period in 2013.
The results for the six months to April 2014
were published in the press on May 29, 2014.
These revealed that, for the six-month period,
after-tax profit had declined by $20.1 million
to reach $249.75 million (2013 half-year:
Relating the first quarter s profit ($144.3
million) to that earned in the second quarter
($105.5 million), we see that the decline was
When we look at the segment analysis, we
observe that the largest decline was recorded
under the "corporate/commercial and mer-
chant banking" column. This sector reported
$80.9 million in pre-tax profits for the six
months to April 2014; this result reflects a
37.5 per cent contraction from the $129.5 million
earned for the same period in 2013.
The narrative accompanying the results
states in part: "Net Interest Income this quarter,
as compared to last year, was negatively
impacted by the continued low interest rate
environment driven by record levels of liquidity
and the effects of the Mortgage Market Ref-
erence Rate (MMRR), which was implemented
by CBTT two years ago."
Some measures that are good for the con-
sumer are not always good for the banker and
One way that the banks are dealing with
this challenge is to place greater emphasis on
introducing additional fees, which, though
sometimes small, are very reliable sources of
income. Perhaps, selective implementation of
some Islamic banking or Credit Union ideas
may not be too far off?
Both Republic Bank Ltd (RBL) and First Cit-
izens Bank Ltd (FCB) have several subsidiaries
and only publish consolidated interim financial
Nevertheless, RBL reported an increase in
its net interest income for the nine months
to June 2014.
In the case of FCB, they reported a small
decline in net interest income for the same
nine-month period to June.
Both FCB and RBL achieved higher after-
tax profits of $478 million and $902 million
respectively, for their most recent nine-month
The continuing decline in the price of SBTT s
shares could suggest that its results for the
third quarter ending July, which are likely to
published in the last week of August, could
show further evidence of reduced earnings.
Given its lower half-year result, it seems
nearly impossible for SBTT to restore its current
year s profit to the same level as that reported
for 2013. Even in these tough times, it is unlikely
that SBTT will reduce its quarterly dividend
AUGUST 17 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
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