HIGHLIGHTS
JMMBGL 3M 2022
- Earnings: Earnings Per Share of $0.039 increase from Earnings Per Share of $0.017
- Performance Drivers:
- Recovery in Financial Markets
- Outlook:
- Long-term growth of Associate Company
- Economic Uncertainty
- Rating: Maintained at NEUTRAL
AMBL HY 2021
- Earnings: EPS 292.1% higher from $0.38 to $1.49
- Performance Drivers
- Improved Investment Income from rebound in financial markets
- Higher profits in operational segments
- Acquisitions
- Outlook:
- Continued robust growth
- Economic Uncertainty
- Rating: Maintained at NEUTRAL
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 nine-month period respectively, ended June 30th, 2021. Both entities benefitted from a recovery in financial markets with higher levels of profitability and an improvement in Investment Income. Can momentum be sustained despite the still uncertain operating environment? We discuss below.
JMMB Group Limited (JMMBGL)
JMMB Group Limited (JMMBGL) reported earnings per share (EPS) of TT$0.039 for the three-month period ended June 30th 2021 (Q1 2022), TT$0.022 higher than the EPS reported in Q1 2021. Operating Revenue increased 37.3% year-over-year (YOY) from TT$224.4M in Q1 2021 to TT$308.2M in Q1 2022. Operating Expenses advanced 27.1% to TT$210M, while Impairment Loss on Financial Assets increased marginally from TT$7.5M in Q1 2021 to TT$10.8M in Q1 2022. Resultantly, Profit Before Tax expanded 100.4% to TT$98.9M. Overall, Profit Attributable to Equity holders stood at TT$76.3M, up 122.8% compared to TT$34.2M reported in the previous period.
Operating Revenue Increases
JMMBGL’s Operating Revenue expanded 37.3% during the Q1 2022 period with each segment showing improvement. Net Interest Income accounted for 41.7% of Operating Revenue, growing 17.6% relative to the prior period. Gains on Securities Trading also played a crucial role in JMMBGL’s performance, increasing 87.9% to TT$109M as the segment likely benefitted from robust advances across equity and financial markets. Foreign Exchange Margins from Cambio Trading accounted for 8.5% of Operating Revenue, increasing 13.0% over the period.
Earnings Per Share Recovers
JMMBGL’s earnings per share of $0.039 in Q1 2022 was impressive relative to the significantly depressed levels of Q1 2021. When compared to a more ‘normal’ fiscal Q1 2020 period (calendar quarter ended March 2019), earnings still grew a commendable 30% supported by favorable markets and the contribution from its 22.85% stake in Sagicor Financial Company Ltd. (SFC). Ongoing economic and financial market normalization could support the growth prospects of JMMBGL, as they continue to grow their asset base (up 6% YOY).
The Bourse View
JMMBGL is currently priced at TT$2.14 and trades at a trailing P/E ratio of 11.4 times compared to the Non-Banking Financial Sector average of 11.3 times. The stock offers investors a trailing dividend yield of 1.7%, above the sector average of 1.2% and announced a dividend of J$0.60 (TT$0.02) payable on September 9th 2021. JMMB’s 22.85% stake in Sagicor Financial Corporation (SFC) contributed TT$14.19M to Profit before Taxes as the Group remains confident in both the short and long-term value of the acquisition. Notwithstanding this confidence, the carrying value of the SFC investment remains considerably higher than the market value of the shares (based on publicly traded prices). Group CEO Keith Duncan acknowledged the likelihood of uncertainty in the period ahead, brought about by new COVID-19 variants and slower-than-anticipated vaccination rates. On the basis of stabilizing financial markets, but tempered by the emergence of new viral strains and uncertainty in the financial space, Bourse remains NEUTRAL on JMMBGL.
ANSA Merchant Bank Limited (AMBL
AMBL reported an Earnings Per Share of $1.49 for the six-month period ended 30th June 2021, (HY 2021), 292% higher than the $0.38 reported in the previous period.
Total Income grew 21.9%, from $443M in HY 2020 to $539.9M in HY 2021. On the other hand, Total Expenses contracted 4.5% YoY, to $379.1M. Resultantly, Operating Profit stood at $160.8M, increasing 248% or by $114.6M from $46.2M in HY 2020, on account of a recovery in mark-to-market gains across the Group’s investment portfolios. Taxation expense increased from $13.6M to $33.1M in this period.
Overall, Profit Attributable to Shareholders increased from $32.5M to $127.7M, a 292% improvement over the comparable periods.
Operational Segment PBT Recovers
AMBL’s Insurance Services segment (57.1% of Profit Before Tax or PBT) reported a profit of $111.5M in HY 2021, versus a loss of $7.2M in HY 2020. This was primarily attributable to financial market recovery. The Group expects TATIL to facilitate a platform for continued growth for the Insurance Segment in subsequent periods, supported by the recent acquisition of Trident Insurance Company Limited in Barbados.
Banking Services, which accounted for 37.2% of PBT, recorded an increase of 33.7% from $54.2M to $72.5M. The Group’s commercial banking acquisition of Bank of Baroda was rebranded as Ansa Bank Limited, and officially began operations on March 1st 2021, with the aim of becoming the first fully integrated digital bank in T&T.
The Mutual Funds segment reported PBT during the period of $11.2M compared to a loss of $10.3M in HY 2020. Total Assets in the segment were relatively stable across comparable periods (HY’21: $717.2M vs HY’20: $715.2M). AMBL has added additional personnel resources to this segment, in an effort to drive growth.
EPS Recovers
For the second quarter of 2021, AMBL posted an EPS of $1.49, up 292.1% from $0.38 in the previous year, reflecting improved profitability and favorable markets. The fall in the EPS in HY 2020 was primarily linked to the economic and social impact from the Pandemic. The Group reported a Profit Before Tax of $160.8M, 248.1% greater than $46.2M recorded in HY 2020 as economic activity slowly resumes. Over the comparable periods, EPS remained relatively stable and however, fell short in HY’18 to $1.18 and HY’2020 to $0.38. At the end of HY 2021, the decrease in EPS slowed, highlighting some recovery over the course of Q2 2021.
The Bourse View
AMBL is currently priced at $41.00 and trades at a price to earnings ratio of 13.7 times relative to the Non-Banking sector average of 11.3 times. The stock currently offers investors a trailing dividend yield of 2.3%, above the sector average of 1.2%. The Bank Group recommended an interim dividend of $0.20 per share with a record date of 22nd September, 2021 and payment date on 7th October, 2021.
The gradual easing of COVID-19 restrictions across Trinidad and Tobago could support earnings recovery for AMBL, with the resumption of economic activity potentially leading to eventual loan demand. AMBL’s Ansa Bank subsidiary, over time, could prove a valuable addition with significant headroom for growth in a traditionally profitable industry. The outlook for the remainder of 2021, however, remains uncertain, with new variants of COVID-19 causing concern. On the basis of recovering financial markets and acquisition activity, but tempered by an uncertain operating environment, Bourse maintains a NEUTRAL rating on AMBL.
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