HIGHLIGHTS
JMMBGL Q1 2023
- Earnings: Earnings Per Share of $0.044 increase from Earnings Per Share of $0.040
- Performance Drivers:
- Geographic Diversification
- Share of Profit from Associated Company
- Weaker Operating Profit
- Outlook:
- Volatile Financial Markets
- Rating: Maintained at MARKETWEIGHT
AMBL HY 2022
- Earnings: Loss Per Share of $1.50, down 200.7% from Earnings Per Share of $1.49
- Performance Drivers
- Non-Cash Mark-to-Market Losses in Investment Portfolios
- Outlook:
- Acquisition Activity
- Volatile Financial Markets
- Rating: Maintained at MARKETWEIGHT
This week, we at Bourse review the performance of Non-Banking Finance sector stocks JMMB Group Limited (JMMBGL) and Ansa Merchant Bank Limited (AMBL) for the three-month and six-month period respectively, ended June 30th, 2022. Both entities were adversely affected by volatility across global financial markets, with JMMBGL benefiting significantly from its Share of Profit from Associate Companies. How will both companies fare in the upcoming months despite the still uncertain operating environment? We discuss below.
JMMB Group Limited (JMMBGL)
JMMB Group Limited (JMMBGL) reported an Earnings Per Share (EPS) of TT$0.044 for the three-month period ended June 30th 2022 (Q1 2023), TT$0.004 higher than the EPS reported in Q1 2022.
Net Interest Income marginally increased 2.1% to TT$130.7M. Fee and Commission Income advanced 74.7% to TT$75.1M from TT$43.0M in Q1 2022. Gains on Securities Trading dipped 58.1% to TT$46.0M. Overall, Operating Revenue declined 4.5% year-on-year (YOY) from TT$308.2M in Q1 2022 to TT$294.2M in Q1 2023. Operating Expenses advanced 12.7% to TT$238.7M, while Impairment Loss on Financial Assets increased from TT$10.8M in Q1 2022 to TT$16.8M in Q1 2023. Operating Profit declined 42.4% from TT$96.3M in Q1 2022 to TT$55.5M in Q1 2023. This decline was offset by a rebound improvement in Share of Profit of Associate of TT$56.4M. Resultantly, Profit Before Tax contracted 4.5% to TT$95.3M. Taxation declined to TT$6.7M from TT$13.0M in the prior year. Overall, Profit Attributable to Equity holders stood at TT$86.0M, up 11.8% compared to TT$76.9M reported in the previous period.
Operating Revenue Contracts
JMMBGL’s Operating Revenue contracted 4.5% to TT$294.2M during the Q1 2023 period. Net Interest Income accounted for 44.7% of Operating Revenue, marginally up 2.1% from TT$128M to TT$131M in Q1 2023, attributable to growth in its loan and investment portfolios. Fees and Commissions Income (25.7% of Operating Revenue) advanced from TT$43.0M in Q1 2022 to TT$75.1M in Q1 2023, reflecting significant growth in managed funds and collective investment schemes across the Group. Foreign Exchange Margins from Cambio Trading accounted for 13.6% of Operating Revenue, increasing 52.5% from TT$26M to TT$40M in Q1 2023. However, Gains on Securities Trading declined 58.1% to TT$46.0M, as the segment was affected by volatile equity and financial markets.
Geographic Diversification Boosts Performance
The Group continues to focus on its ‘smart growth’ strategy, emphasizing on strategic revenue diversification, strong capital management and growing core activities in key business lines. JMMBGL’s 23.3% stake in associate company, Sagicor Financial Company Limited (SFC), contributed TT$565M in this quarter. According to the Group, its operations in the Dominican Republic contributed 25.0% of Operating Revenue, evidenced by its continued geographic expansion in this territory, particularly in the commercial and banking sector with the recently acquired 100% shareholding of Banco Múltiple Bell Bank SA.
In the upcoming quarters, focus on geographic diversification will remain with sharp focus on Trinidad and Tobago.
JMMBGL’s trailing Earnings Per Share (EPS) increased from TT$0.19 in Q1 2022 to TT$0.26 in Q1 2023, as The Group’s trailing 12-month Price-to-Earnings (P/E) ratio fell from a peak of 15.9 times in Q1 2020 to 8.9 times in Q1 2023. The Group continues to grow earnings through a combination of both organic means and acquisition activity.
The Bourse View
At a current price of $2.30, JMMBGL trades at a price to earnings ratio of 8.9 times, below the sector average of 21.9 times. The stock currently has a trailing dividend yield of 2.1% relative to the Non-Banking Finance sector average of 3.9%. The Group noted that its operating environment was affected by rising inflation and increased interest rates, which – if persistent – could affect gains on securities trading. On the basis of increasing geographic diversification, but tempered by lingering economic uncertainties and financial market volatility, Bourse maintains a MARKETWEIGHT rating on JMMBGL.
ANSA Merchant Bank Limited (AMBL)
AMBL reported a Loss Per Share (LPS) of $1.50 for the six-month period ended 30th June 2022, (HY 2022), in stark contrast to the Earnings Per Share (EPS) of $1.49 reported in the previous period.
Total Income declined 47.2%, from $539.9M in HY 2021 to $285.3M in HY 2022. Total Expenses increased 10.4% YoY, to $418.7M. Resultantly, Operating Loss stood at $133.4M in HY 2022, relative to an Operating Profit of $160.8M in the prior comparable period. Taxation expense increased to $4.5M. Overall, a Loss Attributable to Shareholders of $128.8M was reported, relative to a Profit of $127.7M in HY 2021.
PBT Contracts
AMBL recorded a consolidated loss before tax of $133.4M for the six-month period ended 30 June 2022, versus a profit before tax of $160.8 million for the same period last year, largely driven by non-cash mark-to-market losses in their investment portfolios.
The Insurance Services segment, comprising of TATIL and TATIL Life led losses among the segments reporting a loss of $151.0M, versus a profit of $111.5M in HY 2021. This was attributable to volatile financial markets and non-cash mark-to-market losses in their investment portfolios, primarily in TATIL Life. According to AMBL, the agreement to acquire 94.2% of Colonial Fire & General Insurance Company Limited (Colfire), is expected to receive regulatory approval ‘in the near term’. This transaction is anticipated to increase the Group’s market share in domestic general insurance.
Banking Services PBT dipped $69.2% YoY, from $72.5M to $22.3M in HY 2022. The Group is continuing its efforts to make Ansa Bank Limited, the first digitally enabled commercial bank, which will further enhance its rapid loan and customer growth trajectory.
The Mutual Funds segment reported a loss of $18.7M during the period, compared to a profit of $11.2M in HY 2021. Operating Income generated by this segment contracted 30.8%, likely affected by lower investment income and elevated unrealized losses on investments, with expenditure increasing 212.2% YoY.
AMBL posted a Loss Per Share (LPS) of $1.50 in HY 2022, down from an Earnings Per Share (EPS) of $1.49 in the prior comparable period resulting in its trailing 12-month EPS to fall from $3.00 to $0.59 in HY 2022. This translated into the Group’s Price-to-Earnings (P/E) multiple which expanded from 13.8 times to its current elevated level of 71.4 times in HY 2022.
The Bourse View
AMBL is currently priced at $42.13 and trades at a price to earnings ratio of 71.4 times relative to the Non-Banking sector average of 21.9 times. The stock currently offers investors a trailing dividend yield of 2.9%, below the sector average of 3.9%. The Bank Group announced an interim dividend of $0.20, to be paid on October 7th, 2022 to shareholders on record by September 23rd, 2022. AMBL continues to focus on investments in acquisitions, information technology and strategic projects across the financial services sector, allowing for organic and inorganic growth across the businesses. On the basis of acquisition activity, but tempered by currently volatile financial markets, Bourse maintains a MARKETWEIGHT rating to AMBL.
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