Not quite the summer lull

The summer season is normally characterised by weak trading volumes across the local stock market. It is now mid-way through the third quarter of the year and an analysis of the trading activity during the past seven weeks reveals that it is not quite the summer lull that one was used to in the past.

Activity across the equity market amounted to a total of just over €12 million since July 2. Although this represents a decline over the record levels of last year when nearly €15.4 million had traded during the same period, the equity market activity during the past seven weeks is well above the average over the past eight years. Moreover, last summer was characterised by a number of large trades in selected equities during the summer months which boosted the overall equity volumes in the third quarter of 2017.

Bank of Valletta plc was the most actively traded equity during the past seven weeks with a total value of €3.35 million, representing an increase of 24 per cent over the activity during the same period last year and accounting for almost 28 per cent of the total volumes across the equity market. Unfortunately, BOV’s share price was the worst performer in recent weeks with a decline of 11.5 per cent following the publication of the interim financial statements on July 31.

Although the provision for potential litigation claims of €75 million which overshadowed an otherwise strong operating performance may have surprised many investors, the decision by the directors not to declare an interim dividend was possibly the major factor that impacted investor sentiment. Moreover, the directors already confirmed that no final cash dividend will be declared once the 2018 financial statements are published in the first quarter of 2019.

BOV is generally always one of the most actively traded equities since it is the largest company listed on the regulated main market and has the highest number of shareholders totalling around 20,000. Incidentally, during the first seven weeks of the third quarter of 2017, it had ranked in third position due to the very high level of trading activity in Malta International Airport plc (€3.02 million) and Tigné Mall plc (€2.97 million). In fact, the downturn in activity across the equity market compared to last year is mainly attributable to the significant decline in activity in Tigné Mall plc as well as lower volumes in RS2 Software plc and MIA. Despite the 37.5 per cent decline in trading volumes in the equity of MIA compared to the same period last year, it is worth highlighting that it ranked as the second most actively traded equity during the past seven weeks with a value of €1.88 million representing 15.6 per cent of the total volumes across the equity market. MIA’s equity was the best performer since the start of Q3 as it advanced by 13.5 per cent.

The rally in the share price of MIA followed the publication of the interim financial statements showing a record profit after tax of €13 million and the upward revision to passenger projections and financial targets for 2018.

On July 26, MIA stated that following the 16.3 per cent increase in passenger movements during the first six months of 2018, it is now expecting passenger movements to grow by 13 per cent over 2017 to reach yet another record of 6.77 million. This represents an additional 270,000 passenger movements over the initial forecast at the start of the year. MIA now anticipates that its total revenue will surpass €90 million in 2018. This would represent a growth of 9.3 per cent compared to the previous record revenue of €82.4 million in 2017. Likewise, Ebitda is expected to exceed €53 million (+9.1 per cent over the €48.6 million in 2017) and net profit is projected to amount to over €29 million (+20 per cent over the €24.2 million in 2017).

The equity market activity during the past seven weeks is well above the average over the past eight years

Meanwhile, it is also interesting to note the sizeable increase in activity in various equities, most notably, PG plc (+€0.77 million), Simonds Farsons Cisk plc (+€0.65 million), MIDI plc (+€0.64 million) and Malta Properties Company plc (+€0.41 million).

Trading activity in the shares of HSBC Bank Malta, GO plc and PG all exceeded the €1 million mark in recent weeks. While in the case of GO this represents a marginal increase of 0.6 per cent over the comparable period last year, on the other hand the volume in HSBC is more than 11 per cent higher compared to last year while that in PG is significantly higher.

PG’s share price had first reached its all-time high of €1.50 in late September 2017 but subsequently drifted lower since December 2017 to a low of €1.25 in June 2018. Since then, however, it has steadily recovered to the €1.37 level.

During the past few weeks, trading activity in MIDI plc amounted to €0.72 million. Following the 36 per cent increase in the share price during the second quarter of the year, the equity advanced by a further 11.3 per cent in recent weeks to reach a fresh all-time high of €0.53. The announcement on June 21 that it entered into preliminary discussions with Tumas Group Company Ltd to explore the possibility of establishing a joint venture with respect to the development of Manoel Island continued to ignite investors’ interest for this equity.

The equity of Farsons also experienced a considerable increase in trading activity as a value of over €737,000 worth of shares traded. The share price continued to recover from the low of €6.50 in early June and traded up to the €7.40 level representing an increase of 7.3 per cent in the past seven weeks and a rise of over 13.8 per cent from its recent low.

The summer season is also characterised by the interim reporting period for most companies listed on the MSE since they have a December financial year-end and, as such, their June interim results must be published by the end of August. While several companies have already issued their interim financial statements starting off with Mapfre Middlesea plc on July 20, many other companies will be publishing their financial results over the next few days. Moreover, the annual financial statements of PG plc as at April 30 will also be published next week in what will be among the busiest weeks in terms of reporting.

Apart from the publication of the financial statements by most companies, there were also some other important announcements during the past few weeks.

Malta Properties Company plc reported that one of its wholly-owned subsidiaries entered into a promise of sale agreement (valid and effective for up to three years) with Mercury Exchange Ltd for the sale and transfer of the St George’s Exchange (including its surrounding land) for €13.75 million. Moreover, MPC also confirmed that it entered into the final deed of sale on the Sliema exchange for €5 million. Meanwhile, investors await further details regarding the discussions with Dubai Holding for the possible acquisition of its 91 per cent shareholding in SmartCity (Malta) Ltd. These recent announcements would have contributed to the increase in trading activity which amounted to a value of over €500,000 in recent weeks.

The most notable development was possibly the confirmation on August 10 that the National Development and Social Fund acquired 21,651,746 shares in Lombard Bank Malta plc from Cyprus Popular Bank Public Co. Ltd (initially announced in March 2018) following the completion of all the conditions contained in the Share Purchase Agreement, including the approval of the Malta Financial Services Authority and the European Central Bank. The website of the MSE reported this off-market transfer to have taken place at a price of €2.2109 per share for a value of just over €47 million.

The steady growth in market activity in recent years is a positive development for all investors and stakeholders and should lead to an increased level of participation from many other investors who may realise that the local market is gradually becoming more liquid. This improved marketability could be stemming from the extension of trading hours on the Borża as from the first half of 2017 as well as the added focus by several market participants who previously shunned the local capital market.

Rizzo, Farrugia & Co. (Stockbrokers) Ltd, “Rizzo Farrugia”, is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the company/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. Rizzo Farrugia, its directors, the author of this report, other employees or Rizzo Farrugia on behalf of its clients, have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent, and may also have other business relationships with the company/s. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither Rizzo Farrugia, nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.

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