Local market up 30.1% in the first quarter of 2004

Did anyone think that the local market would reach these levels within the first three months of 2004? I doubt it. However, it has happened, and it proves that, if an investor has the patience to wait for a recovery, it will come and losses recovered or profits made.

Equity investments are for the long term and, although companies' results are of the utmost importance, this is not always reflected in the market price immediately. Markets are pushed up by investors' sentiment.

Take, for example, the Maltacom shares. Up to a few months ago, when the price was much lower than it is today, very few investors wanted to buy them. Investors reacted so quickly when the board of directors was informed by the government that it would start the ball rolling to sell its equity holding.

But we all knew this was bound to happen shortly. In fact Maltacom's chairman had already announced the government's intention to go ahead with the sale of these shares.

I would say that this is the main reason why the share price shot up, not because investors suddenly realised that the company was doing well and the market price was not reflecting the company's performance.

Good performers and bad performers

So, the best performer was Maltacom plc, which was up 66.67% in the first quarter, having only been up 6.6% during 2003. On Tuesday, the company announced that the Maltacom Group has recorded a profit before tax for the year ending December 31, 2003, of Lm20.6 million as compared to Lm13.5 million in 2002.

The operating profit before exceptional items was at Lm15.3 million, compared to Lm13.7 million. The company results show an exceptional item of Lm6.4 million, which boosted 2003 profits.

We will need to see how the market reacts to these results and any further news on the sale of the government's shares.

The next best performer in the first quarter was Bank of Valletta plc, with an increase of 38.78%, after having falling 12.81% last year.

The market price now does more justice to the bank's performance and we now await the interim results for the six months ending March 30, 2004.

HSBC had another spectacular run, up nearly 28% in the first quarter, having been up 42% last year and having paid an equally spectacular dividend. Having reached the Lm7 mark on the last day of trading this quarter, investors will be eager to see the way forward.

Investors continued to be attracted to this equity following the announcement of the increase in the bank's and its subsidiaries' profits for the year ended December 31, 2003, of 23.8% over 2002. Clearly, investor sentiment for this equity has been good; now will investors take profits and jump ship, or will they wait till the price reaches its all-time high?

The market price of Malta International Airport has also had a good first quarter, up 27.14% with the price reaching 95c, but falling back to 89c on the last day of trading of this quarter. This was a breather for the investing public, who had been waiting for the privatisation of one of the government-owned companies for so long.

The company has made various press announcements that it intended to expand the business but no firm commitments have yet been made. Investors will be keeping a close eye to see if these projects will materialise.

FIMBank plc also had a good performance, particularly in the last few days of the quarter after the bank's announcement of the 2003 results, and the acquisition of 38.5% in Global Trade Finance Private Ltd. The price was up 18.28% in the first three months after having fallen 25% last year.

Clearly, the fact that last year the company's results registered an impairment reversal of US$554,865, against impairment losses of US$9.9 million in 2002, will help investors regain confidence in this equity.

The share price of Plaza Centres was up 23.33% in the first quarter, recovering last year's drop of 14%. The company announced that profits on ordinary activities before tax for the financial year ending 2003 were Lm349,663 as compared to Lm345,564 in 2002.

During the first quarter, Lombard Bank plc announced that it had registered a profit before tax of Lm2.183 million for the financial year ending December 31, 2003, covering a 15-month period, a 56% increase over 2002.

On an annualised basis, the bank improved its pre-tax performance by 24%.

The share price during 2004 increased by 15.68% as compared to an increase of 1.37% during 2003.

Simonds Farsons Cisk plc was the other positive performer, with the share price up 5.56% in the first quarter, after having had a very positive 2003 when the price had gone up by 34%. During the quarter the company announced that it had entered into a preliminary agreement with Law. Quintano & Co. Ltd for the acquisition of the assets of its food importation business. Through the media it was also announced that the company will expand its business operations.

The market losers during the first quarter were Suncrest plc, down 51.92%, Global Financial Services Group plc, down 14.38%, Santumas Holdings, down 9.64%, Middlesea Insurance plc, down 6.17% and International Hotels Investments plc, down 4.76%.

Last January, Suncrest announced that it had registered a loss of Lm361,113 for the year ended October 31, 2003, compared to a loss of Lm309,179 in 2002. The fall in the share price was a result of one deal of 900 shares during March.

High demand for bonds

During the period the European Investment Bank issued the first local bond denominated in Maltese lira. This is a first for Malta to have a AAA-rated bond listed on the Malta Stock Exchange, and investors reacted positively to this issue. The demand for bonds remains high.

All in all, a very positive first quarter, which has surely encouraged investors to look again at the local market, especially when one compares this performance to that of the international bourses, that had a rough first quarter, following the terrorist attacks and unclear economic and market indicators.

Readers should remember that past performance is no guarantee to future performance and that the value of investments can fall as well as rise.

Mr Mizzi is chairman and managing director of Jesmond Mizzi Financial Services Limited, which is licensed by the MFSA to conduct investment services. This article does not intend to give investment advice and its contents should not be construed as such. Readers are encouraged to seek professional advice on their personal financial situation. E-mail: jmizzi@jmfs.net.