PHL Improves, AGL Dips | 04.03.2024

HIGHLIGHTS

PHL FY2023

  • Earnings:  Earnings Per Share increased 57.7% to $0.90 from $0.57
  • Performance Drivers:
    • Revenue and Earnings Growth
    • Lower Finance Costs
    • Higher Margins
  • Outlook:
    • New Restaurant Openings / Regional Expansion
  • Rating: Assigned as OVERWEIGHT

 

AGL Q12024

  • Earnings:
  • Earnings Per Share (EPS) 4.2% higher from $0.96 to $1.00
  • EPS inclusive of one-off non-cash adjustments: 67% lower from $3.01 to $1.00
  • Performance Drivers
    • Mixed Segment Growth
    • Lower Margins
  • Outlook:
    •  Growth from Acquisition Activities
  • Rating: Maintained at MARKETWEIGHT

This week, we at Bourse review the financial performance of Prestige Holdings Limited (PHL) for its fiscal year ended November 30th, 2023 (FY2023) and Agostini’s Limited (AGL) for its three months ended December 31st, 2023 (Q12024). PHL’s performance benefitted from increased revenue growth and higher profitability margins, while AGL’s profitability was impacted by the non-recurrence of significant one-off, non-cash gains in the prior comparable period.   Can both companies continue to improve results in the upcoming months ahead? We discuss below.

Prestige Holdings Limited (PHL)

Prestige Holdings Limited (PHL) reported Diluted Earnings per Share (EPS) of $0.90 for the financial year ended November 30th, 2023 (FY2023), a 57.7% increase from $0.45 recorded in FY2022. Revenue increased 20.3% from a previous $1.12B in FY 2022 to $1.33B in FY2023. Cost of Sales increased 20.0%, while Gross Profit rose 25.8% from the prior period to $454.0M. Other Operating Expenses and Administrative expenses increased 8.3% and 34% respectively. Other income declined 59.5% to $0.9M. Resultantly, PHL reported Operating Profit of $101.8M in contrast to $72.5M in FY2022. Finance Costs fell 3.1% to $18.2M. The Group recorded a Profit Before Tax (PBT) of $83.6M, relative to $53.7M recorded in FY2022. Overall, PHL reported Profit Attributable to Owners of the Parent Company of $56.0M, comparative to $35.5M in the prior comparable period (+57.7%).

Revenues Higher

PHL’s total revenue advanced to $1.3B in FY2023 from $1.1B in FY2022, driven by a combination of new and existing store sales. The Group noted that its restaurant locations increased to 134, inclusive of 5 new locations introduced in FY2023 (4 Starbucks locations in T&T and 1 Starbucks location in Guyana). Looking ahead, PHL has signalled its intent to continue with its investments to expand and/or enhance its physical footprint through new store introductions and existing store remodels. The Group disclosed plans to introduce two additional Starbucks locations in Guyana during 2024, as well as new stores in Trinidad.

Margins Improve

PHL’s Gross Profit Margin increased to 32.8%, remaining within its recent historical range of 32-33%, demonstrating some combination of pass-through pricing power and effective management of input costs. Operating Profit Margin advanced from 6.6% to 7.7% in FY2023, while Profit Before Tax (PBT) margin improved from 4.9% in FY2022 to 6.3% in FY2023. Improvements in Operating and PBT margins likely reflect the Group’s efforts at expanding its Starbucks restaurants, which should provide healthy profitability margins for PHL relative to its other restaurant brands.

PHL posted a Basic Earnings per Share of $0.91 for the twelve months ended November 30th, 2023, 57.7% higher than TT$0.58 in FY2022. The Group’s Price-to-Earnings (P/E) multiple advanced from 10.8 times to 11.3 times in the current reporting period, relatively attractive compared to the current banking sector average of 16.2 times.

The Bourse View

PHL trades at a current market price of $10.32, up 11.0% year-to-date. The stock trades at a trailing 12-month P/E ratio of 11.5 times, below the trading sector’s average of 16.1 times. The Group announced a final dividend of $0.30 per share to be paid on May 29th, 2024, to shareholders on record as of April 26th, 2024. Cumulatively, PHL is paying a Total Dividend of $0.45 for FY2023, 40.6% higher than the $0.32 paid in FY2022. The stock offers investors a trailing dividend yield of 4.4%, above the sector average of 3.5%. PHL continues to effectively navigate the current environment, with cooling inflationary pressures and recent price hikes (Starbucks, KFC) likely to support future margins and profitability. On the basis of consistent revenue growth, improving profitability margins, ongoing new restaurant openings and relatively attractive valuations, Bourse upgrades its rating on PHL to OVERWEIGHT.

Agostini’s Limited (AGL)

Agostini’s Limited (AGL) reported an Earnings Per Share of $1.00 for the three months ended December 31st, 2023 (Q12024), a decline of 66.8% relative to $3.01 reported in the previous comparable period. Excluding a one-off, on-cash gain in AGL’s Q12023 results, Earnings Per Share would have amounted to $0.96.

Revenue expanded 6.8% to $1.36B from a previous $1.28B. Operating Profit rose 3.7% to $160.7M, compared to $155M in Q12023. Finance Costs climbed 62.5% to $15.5M, $5.9M higher than previously reported in Q12023. Resultantly, Profit Before Taxation fell 48.9% from $284.4M to $145.3M.  Taxation Expense grew from $42.3M in Q12023 compared to $40.7M in Q12024, with AGL’s Profit for the Period amounting to $104.5M compared to $242.1M (56.8% lower).  Overall Profit Attributable to Owners of the Parent edged lower by 66.7% to $69.3M from $207.8M reported in the prior period. Excluding the impact of the one-off gain, AGL noted that profit attributable to shareholders would have increased by approximately 5%.  

PBT Lower

For the current fiscal quarter, Q12024, AGL’s Profit before taxation fell by 48.9% to TT$145.3M, a result obfuscated by the extraordinary one-off gain in FY2023. At the segment level, Fast Moving Consumer Goods (FMCG), which accounted for 64.4% of PBT, grew 4.5% year-on-year.  Pharmaceutical & Health Care, (32.5% of PBT) improved 1.6% from $46.4M in Q12023 to $47.2M in Q12024. Energy, Industrial and Holdings contributed the least to PBT (3.1%), experienced a significant drop in performance by roughly 97%, driven by the non-recurrence of FY2023’s extraordinary gain. AGL also noted that the segment’s performance would have been impacted by the discontinuance of its Agostini Contracting Division. The Group disclosed developments related to its Consumer Products business, including the commencement of a new distribution centre in Guyana and Aranguez (T&T).

Margins Decline

AGL’s Operating and Profit Before Tax margins fell year on year to 11.8% and 10.7%, respectively. Operating Profit Margin slightly contracted from 12.2% in Q12023 to 11.8% in Q12024, remaining above the Group’s average OP margin for the past five (5) reporting periods of 11.1%. Profit Before Tax Margin slid 10.7% from a previous 22.3%, again influenced by the one-off gain in the prior comparable period.

AGL’s 12M Trailing EPS amounted to $3.30 in Q12024, a decline of 32.5%, compared to $4.89 in Q12023. The Group’s Price-to-Earnings (P/E) multiple experienced double-digit growth to 20.7 times from 10.2 times in the prior corresponding period, still relatively elevated compared to its 5-year historical average of 14.4 times and the current trading sector average of 16.1 times.

The Bourse View

AGL currently trades at a price of $68.27 at a trailing PE ratio of 20.7 times, relative to the Trading Sector average of 16.1 times. The stock offers a dividend yield of 2.2%, below the sector average of 3.5%.  

AGL’s revenues continue to trend positively through both organic and inorganic means. According to the Group, one if its key objectives in FY2024 is the effective integration of its several acquisitions over the past few years.   On the basis of increased revenue growth, and acquisition activities but tempered by relatively elevated valuations, Bourse maintains a MARKETWEIGHT rating on AGL.

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