MASSY’, AGL Decline | 09.12.2024

HIGHLIGHTS

MASSY FY2024

  • Earnings: 
    • Earnings Per Share 13.5% lower
    • Continuing Operations: EPS 16.3% lower, from $0.40 to $0.33
  • Performance Drivers:
    • Revenue Growth
  • Outlook:
    • Geographical Diversification
  • Rating: Maintained at OVERWEIGHT 

AGL FY2024

  • Earnings:
  • Earnings Per Share (EPS) 14.8% lower from $4.12 to $3.51
  • Performance Drivers
    • Revenue Growth
  • Outlook:
    •  Growth from Acquisition Activities
  • Rating: Maintained at MARKETWEIGHT

This week, we at Bourse review the performance of two members on the Trinidad & Tobago Stock Exchange (TTSE), namely Massy Holdings Limited (MASSY) of the Conglomerate sector and Agostini Limited (AGL) of the Trading Sector, for their respective fiscal years ended September 30th, 2024 (FY2024). Despite increased revenue, both MASSY and AGL saw a decline in profitability. Can both companies make a turnaround in the upcoming months? We discuss below.

Massy Holdings Limited (MASSY)

Massy Holdings Limited (MASSY) reported Earnings per Share (EPS) of $0.33 for the fiscal year ended September 30th, 2024 (FY2024), 13.5% lower than an EPS of $0.39 reported in FY2023.  EPS from Continuing Operations slipped 16.3% from $0.40 to $0.33 per share.

Revenue from Continuing Operations grew 11% YoY, from $14.2B in FY2023 to $15.7B in FY2024. The company would have benefitted from YoY increase on revenue of 19% and 10% from the Gas Products and Integrated Retail segments, respectively. Operating Profit after Finance Costs contracted 17% to $1.02B, while Operating Margin declined from 10% to 8%. Share of Results of Associates and Joint Ventures increased by $115.2M, from a prior $3.79M.  Profit Before Tax (PBT) fell 8% to $1.14B.  Income Tax Expense grew to $426.9M (FY2023: $395.8M, or 8% higher). Profit for the period from continuing operations amounted to $708.3M, 15% lower compared to $833.3M in the prior period.  MASSY reported a profit from discontinued operations of $4.14M versus a loss of $20.4M in FY2023. Consequently, Profit for the period fell 12% to $712.4M compared to $812.9M from the prior period. Overall, Profit Attributable to Owners of the Parent stood at $660.6M, a decline of 14% compared to $764.2M reported in the previous period.

Segment Performance Lower

Integrated Retail, the largest contributor to PBT (60.8%), expanded by 5.6%, from $653.9M in FY2023 to $690.3M in FY2024, driven by the successful launching of new products and continued strong performance of Rowe’s IGA, according to the Group.

Gas Products, the second-largest contributor, accounted for 31.3% of PBT, rose by 3.7% from $343.2M to $355.8M, owing to increase revenue from Trinidad operations, and coupled with full-year impact of the IGL Saint Lucia acquisition.

Notably, Motor & Machines, (20.1% of PBT) fell 13% to $227.7M from $261.6M in FY2023, impacted by macroeconomic challenges in Colombia and bad debt provisioning, according to the Group.

Financial Services represented 6.6% of PBT, fell 12.9% in FY2024 to $75.5M, relative to $86.6M in the prior period.

Margins Decline

Despite a 11% increase in Revenue, MASSY’s profit margins were comparatively lower, relative to the previous reporting period. Operating Profit Margin fell from 8.6% in FY2023 to 6.5% in FY2024. Profit Before Tax Margin dipped to 7.2% in FY2024, down from 8.7% a year earlier. Profit after Tax declined by 4.5% in the current period relative to 5.9% in FY2023.

According to the Group, the decline in profitability, resulted from increased provisioning for bad debts, higher investments in the creation of the IHC, full-year interest costs on acquisition financing and one-off legal expenses – reflecting the Group’s long-term focus on value-creation and sustainable initiatives for continued growth.  YoY Expected credit losses jumped by $102.8M (+174%) and Finance Costs rose by 34% ($291.7M: FY2024).

Geographic Diversification Trends

MASSY’s geographic Profit before Tax reflects its ongoing regional and international diversification efforts, with acquisitions around the Caribbean, Latin America, and the US.

Trinidad & Tobago, the largest geographical contributor to PBT (38%), fell 8% YoY from $559.2M to $512.0M. Guyana’s share of PBT (24%) grew by 6%, from $303.8M in FY2023 to $321.6M in the current reporting period. Colombia’s operations contributed 4% to PBT, an increase of 37% year on year from a prior $34.8M. Barbados & the Eastern Caribbean (21% of PBT) advanced 8% to $286.6M, relative to $264.2M in the prior reporting period. Notably, Jamaica’s operations recorded improved results, (10% of PBT) increased by 23%, from $112.6M for FY2023 to $138.0M in the current reporting period. PBT from U.S.A. operations (3%) fell 39% from $70.9M to $43.5M, primarily driven by the integration efforts of existing acquisitions. Of importance to note, PBT outside of Trinidad & Tobago grew from 52% in FY2020 to 62% in FY2024, as the Group seeks to transform their operations in pursuit of hard currency growth.

The Bourse View

At a current price of $3.84, MASSY trades at a trailing P/E of 11.5 times, below the Conglomerate Sector average of 13.5 times.   Notably, MASSY’s P/E ratio based on continuing operations stands at 11.6 times. The Group declared a final dividend of $1.36 per share payable on December 20th, 2024, to shareholders on record by December 5th, 2024. The stock offers investors a trailing dividend yield of 4.4%, above the sector average of 3.3%.

MASSY experienced revenue growth, however, its profitability margins contracted in FY2024. The Group remains focused on capitalizing on the synergies derived from its acquisition integration initiatives and is committed to transforming into an Investment Holding Company (IHC). It expects to fully reap the benefits of this integration by the end of fiscal year 2025.  On the basis of continued revenue growth, accretive acquisition activity and fairly attractive valuations when compared to the sector, Bourse maintains an OVERWEIGHT rating on MASSY.

Agostini’s Limited (AGL)

Agostini’s Limited (AGL) reported an Earnings Per Share of $3.51 for the fiscal year ended September 30th, 2024 (FY2024), a decline of 14.8% relative to $4.12 reported in the previous comparable period. Excluding a one-off net gain in AGL’s FY2023 results, Earnings Per Share would have amounted to $3.20. As a result, the EPS would have increased 9.6% year-on-year.

Revenue climbed 8.7% to $5.09B from a previous $4.68B. Operating Profit rose 8.9% to $517.8M, compared to $475.4M in FY2023. Finance Costs grew 45.3% moving to $71.3M, relative to $49.1M reported previously in FY2023. Resultantly, Profit Before Taxation fell 7.0% from $487.4M to $453.4M. Taxation Expense increased from $122.8M in FY2023 compared to $130.0M in FY2024, with AGL’s Profit for the Year amounting to $323.4M compared to $364.6M (11.3% lower). Overall Profit Attributable to Owners of the Parent edged lower by 14.9% to $242.3M from $284.9M 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 10%.  

PBT Lower

For the current fiscal year, FY2024, AGL’s Profit before taxation fell by 7.0% to TT$453.4M, a result impacted by the extraordinary one-off gain in FY2023. At the segment level, Fast Moving Consumer Goods (FMCG), which accounted for 48.8% of PBT, grew 2.7% year-on-year.

Pharmaceutical & Health Care (PHC), (44.9% of PBT) improved 6.5% from $191.4M in FY2023 to $203.8M in FY2024. According to AGL, the acquisition of Aventa was a key milestone in the Group’s growth strategy, broadening its Pharmaceutical and Health Care operations beyond the English-speaking Caribbean. Over the last 4 years, PBT from the FMCG and PHC segments have almost doubled as a result of acquisitions, both locally and regionally.

The Energy, Industrial, and Holdings segment had the smallest impact on PBT (6.2%) and saw a substantial decline of about 64.9%, primarily due to the absence of the one-time gain from FY2023. AGL mentioned that, without this gain, the performance of this sector would have improved by 15%, fuelled by strong results from Rosco Procom and better performance in Guyana operations.

Margins Mixed

AGL’s Operating Profit Margin slightly advanced from 10.1% in FY2023 to 10.2% in FY2024, remaining above the Group’s average OP margin for the past five (5) reporting periods of 9.4%. Profit Before Tax Margin slid to 8.9% from a previous 10.4%, again influenced by the one-off gain in the prior comparable period.

The Group’s Price-to-Earnings (P/E) is currently at 18.0 times from 16.5 times in the prior corresponding period, still relatively elevated compared to its 5-year historical average of 15.1 times, however still below the current trading sector average of 18.7 times.

The Bourse View

AGL currently trades at a price of $63.17, offering a dividend yield of 2.4%, below the sector average of 5.5%. The Group announced a final dividend of $1.13 per share payable on February 14th, 2025, to shareholders on record by January 17th, 2025.

AGL’s revenues continue to trend positively through both organic and inorganic means. The Group stated that, although recent regional acquisitions have increased AGL’s geographical diversification, Trinidad and Tobago will remain a key market with significant growth opportunities. On the basis of increased revenue, and continued acquisition activities but tempered by relatively fair valuations, Bourse maintains a MARKETWEIGHT rating on AGL.

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