Following the local equity market’s positive performances in 2015 (+33 per cent) and 2016 (+4.5 per cent), the MSE Equity Price Index drifted 2.63 per cent lower in 2017 as 12 equities’ share prices declined. These included double-digit losses by seven companies, mainly involved in the financial services sector, namely Bank of Valletta plc, Mapfre Middlesea plc, Fimbank plc and Global Capital plc. Only seven equities performed positively in 2017, with four of these registering double-digit gains.

The five main highlights cha­racterising the Maltese equity market in 2017 were: (i) the MSE Total Return Index’s launch; (ii) the trading hours extention; (iii) PG plc’s initial public offering (IPO); (iv) the largest ever corporate ac­tion with Bank of Valletta’s €150 mil­lion rights issue; and (v) the delisting of 6pm Holdings plc’s equity.

The Malta Stock Exchange introduced the MSE Total Return Index on July 31, 2017. The ‘old’ MSE Share Index, which was renamed the MSE Equity Price Index, is a price return index which captures changes in the prices of the index components. The new MSE Total Return Index is also weighted ac­cording to market capitalisation but it takes into consideration the price fluctuations of the index components (namely all the shares on the MSE Official List) as well as dividends these companies pay. The MSE Total Return Index is based on the assumption that all dividends are reinvested in the index.

The performances of both indi­ces were almost identical in the second half of the year since few companies pay dividends between July 1 and December 31. On the other hand, the MSE Total Return Index had risen by 2.5 per cent in the first half of 2017 compared to 1.4 per cent for the MSE Equity Price Index as various companies distribute dividends after their respective annual general meetings in the first six months of the year. The overall performances for 2017 show a decline of 1.5 per cent for the MSE Total Return Index versus a drop of 2.6 per cent for the MSE Equity Price Index.

An important development in 2017 was the extension of the  MSE’s trading hours. As from April 18, 2017, these doubled from three hours per day to six hours. In my view this ought to have been one of the factors that contributed to the sharp increase in trading activity in 2017. The total value of equity market activity in the past 12 months amounted to €87.98 million – an increase of 13 per cent over the previous year and the highest level of activity since 2006. The increase in activity was particularly evident during the second half of the year.

Another major development for the equity market was the IPO of PG plc – the first IPO since that of Tigné Mall plc in 2013. The offer of 27 million shares at €1 each was made by Paul Gauci and the de­mand from the investing public was overwhelming. As trading started on the secondary market on May 4, the share price rallied by 29 per cent within the first five days on very high levels of trading acti­vity. PG ranks as the second best performing equity in 2017 with a gain of 40 per cent. PG’s financial year end is April 30, and on December 20, the company published its interim financial statements, while a few days earlier it also distributed its maiden dividend in line with its commitment at the time of the IPO.

BOV’s €150 million rights issue was also an important highlight. After the conclusion of the rights issue, the bank’s market capitalisation increased to over €900 million. BOV is now by far the largest company on the MSE, so any movements in the bank’s share price have a much larger impact on the equity indices that are used to track the performance of the MSE.

BOV’s equity had a mixed year, and between January and April 2017 it registered four consecutive monthly gains, reaching an over nine-year high of €2.27 by early May. However, as the bank’s plans for the issue of new shares through a rights issue started to become clearer, the share price registered monthly declines for six consecutive months between May and No­vem­ber 2017 until reaching a near three-year low of €1.74 on December 5, 2017. The equity closed the year at €1.80, representing an overall yearly decline of 13.9 per cent.

6pm Holdings plc’s shares were delisted in July 2017 following the takeover of Idox plc earlier in the year. In August, 6pm announced that the publication of its 2016 annual report was delayed, and its bonds were suspended from trading. Though the annual report was eventually published, the bonds remained suspended as the 2017 interim financial statements were never issued. The serious shortcomings indicated in the annual report, including the re­state­ment of the financial statements of previous years, instigated Idox plc to write to bondholders stating that 6pm will continue to honour its financial obligations through a guarantee provided by Idox.

On a more positive note, the double-digit gains by Simonds Farsons Cisk plc and Malta International Airport plc should be very welcoming news for shareholders.

The MSE Equity Price Index drifted 2.63% lower in 2017 as 12 equities’ share prices declined

Farsons’s equity reached an all-time high of €9.69 in early November 2017 as the company continued to generate record results (partly reflecting the impressive tourism numbers in 2017) and ahead of the much-awaited spin-off of the pro­perty company Trident Estates plc.

But in a very surprising an­nounce­ment on November 9, Farsons announced that the Planning Authority board had voted against the Planning Directorate’s recommendation for the Trident Business Park permit to be approved.

The following day, Farsons an­nounced that following this unexpected development, it had put into abeyance is plan to spin-off the company’s shareholding in Trident Estates plc and the subsequent listing of Trident on the MSE Official List. Farsons’s share price sank by 12 per cent following these two announcements. In a subsequent turn of events, Farsons issued another announcement on December 7 informing the market that the Planning Authority board had unanimously approved the business park permit. Subsequent to this announcement, Farsons de­clared a net interim dividend of €1.2403667 per share on December 20, 2017, which will be settled ‘in kind’ through the distribution of the shareholding in Trident. As such, shareholders of Farsons as at close of trading on December 19, 2017, will soon be receiving one share in Trident for every share held in Farsons (identical to the spin-off process of Malta Properties Company plc from its previous parent company GO plc).

Despite the 10 per cent decline in the last few weeks of the year, the equity of Farsons was the third best performer in 2017 with a gain of nearly 22 per cent.

The share price of MIA surged by over 16 per cent in 2017 as the airport operator continued to register successive record passenger movements amid a booming tourism market, which also had a positive impact on the company’s financial performance. The share price of MIA registered an all-time high of €4.80 in late October 2017 before partially retreating to end the year at €4.70. It is also worth highlighting the very high level of trading in the shares of the airport operator. During the past 12 months, a total of 2.78 million shares changed hands for a value of €11.98 million – the second most actively traded equity after BOV, and representing 13.6 per cent of the overall activity across the equity market.

Subsequent to the eventual listing of the 30 million shares in Trident Estates plc due on January 30, 2018, investors should expect another two corporate actions in the coming months.

At Fimbank’s annual general meeting on May 11, 2017, the bank obtained approval from shareholders to carry out “one or more rights issues over a period of three years to raise in aggregate a minimum of USD100 million”. The resolutions were approved, and shareholders now await details and timing of the first rights issue. Following the strong gains registered in 2015 (+21 per cent) and 2016 (+41.8 per cent), Fimbank’s share price plunged by 22.4 per cent in 2017, possibly in anticipation of the upcoming capi­tal raising exercise.

Likewise, Global Capital plc, which ranks as the weakest performer in 2017 with a decline of 23.9 per cent, had convened an extraordinary general meeting in May 2017 to conduct a €15 million rights issue subject to the approval of the Listing Authority.

However, on December 28, the company issued a further an­nounce­ment explaining the background behind the postponement of the rights issue (now expected in the second half of 2018) until the required capital underpinning its renewed business strategy has been adequately defined in the light of the evolving business and regulatory environment.

Another important corporate action that should take place in 2018 is the long outstanding resol­ution to the change in the largest shareholder of Lombard Bank Malta plc. The indicative timelines published in the first half of 2017 revealed that a share purchase agreement should have been sign­ed by July 24. Unfortunately, Lombard Bank Malta plc has not yet provided an update to the market on the ongoing sale of shares, and one hopes that the market will soon be updated on the new envisaged milestones.

Following the success of PG plc, 2018 should also see other IPO’s being launched on the main market.

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