HIGHLIGHTS
MASSY FY 2023
- Earnings: Earnings Per Share 6.1% lower
Continuing Operations: EPS 21.7% higher, from $0.33 to $0.40
Discontinued Operations: Loss per share of $0.01
- Performance Drivers:
- Increased Revenue
- Acquisitions
- Non-Core business disposals
- Outlook:
- Geographical Diversification
- Rating: Maintained at OVERWEIGHT
This week, we at Bourse review the performance of Conglomerate sector giant Massy Holdings Limited (MASSY) for its financial year ended September 30th, 2023. Propelled by acquisition activity and continued expansion in both regional and international markets, MASSY reported improved results from continuing operations. Will MASSY continue to maintain momentum in its earnings growth? We discuss below.
Massy Holdings Limited (MASSY)
Massy Holdings Limited (MASSY) reported an Earnings Per Share (EPS) of $0.39 for the twelve-month period ended 30th September 2023 (FY 2023), 6.1% lower when compared to the EPS of $0.41 recorded in the previous comparable period. Notably, EPS from Continuing Operations improved 21.7% from 32.57 cents to 39.64 cents per share.
Revenue from Continuing Operations grew by 15.2% YoY from $12.3B in FY 2022 to $14.2B in FY 2023, driven by both organic growth and acquisition activity. Operating Profit After Finance Costs advanced 25.5% to $1.23B in the current period, relative to $976.2M in FY 2022. Share of Results of Associates and Joint Ventures dropped 79.9% to $3.7M (FY 2022: $18.8M). Resultantly, Profit Before Tax (PBT) increased 23.5% to $1.23B. Income Tax Expense rose to $395.8M (FY2022: $306M, or 29.3% higher). Profit for the period from continuing operations expanded 20.9% to $833.3M compared to $689M in the FY 2022. MASSY reported a loss on discontinued operations of $20.4M (or 1.03 cents per share) versus a profit of $85.7M (8.55 cents per share) in FY2022. Consequently, Profit for the period was $812.9M versus a prior $858.2M, down 5.3%. Massy’s Profit Attributable to Owners of the Parent stood at $764.2M, a decrease of 6.1% compared to $813.9M reported in the previous period.
Acquisitions Propel PBT Growth
Overall, MASSY’s Profit Before Tax (PBT) expanded 23.5% for the fiscal year ended September 30th, 2023.
Integrated Retail, the most significant contributor to PBT (53%), achieved double-digit growth advancing 22.6% from $534M in FY2022 to $654M in FY2023, attributable to the acquisition of Rowe’s IGA supermarkets in December 2022. The Rowe’s acquisition, according to MASSY, accounted for roughly $30M of PBT.
Gas Products, the second largest contributor to PBT (28%) expanded 12.5% from $305M to $343M. The Gas Products Portfolio (GPP) completed the year with solid PBT performance, driven by the acquisitions of Air Liquide operations in Trinidad and Tobago (T&T) and IGL Limited operating in Jamaica. According to MASSY, both acquisitions contributed PBT of $111.5M in FY2023 or roughly 32% of Segment PBT.
Motor & Machines (21.3% of PBT) grew 9.6% to $262M from $239M in FY2022, as a result of improved performance in T&T and effective cost management initiatives. Financial Services (7.0% of PBT) reported a decline of 3.5% in FY2023 to $87M, despite improving revenues from remittance services.
As stated by the Group, an additional $1.1B in Revenue and $142M in PBT were derived specifically from the three new additions during the financial fiscal year.
Margins Improve
MASSY’s profit margins improved after dipping in FY2022. Operating Profit Margin expanded from 7.9% in FY2022 to 8.6% in FY2023, as a result of revenue growth and cost containment. Similarly, Profit Before Tax Margin increased from 7.9% (FY2022) to 8.6% in the current period. This filtered into Profit After Tax Margin, which climbed from 5.6% in FY2022 to 5.9% in FY2023.
Geographic Diversification Expands
With acquisitions around the Caribbean, Latin America, and the US, MASSY’s geographic PBT contribution reflects its ongoing regional and global diversification efforts. In terms of geographic contributions, Trinidad & Tobago remains the major contributor to PBT by jurisdiction, while Guyana’s growing economy is increasing in prominence. Guyana, the second largest contributor of PBT increased marginally from 22% in FY2022 to 23% in the current reporting period, an increase of 18% YoY to $303.8M relative to $258.5M in the prior comparable period. Trinidad & Tobago (42% of total PBT) grew 5% YoY from a previous $531.9M to $559.2M in the current period. Moreover, Barbados and the Eastern Caribbean (20% PBT contribution) gained 16% to $264.2M, relative to $228.2M reported in the previous comparable period. Jamaica’s operation recorded improved results, an increase of 69%, representing 8% of PBT, from $66.7M for FY 2022 to $112.6M in the current reporting period. PBT from U.S operations increased by 416% from $13.7M, mostly as a result of recent and ongoing acquisitions. Colombia’s operations contributed the least to PBT and recorded a drop in performance by 49%.
Continuing EPS higher
MASSY’s Earnings Per Share (EPS) from continuing operations stood at $0.40 per share as at FY2023 up 21.7% from $0.33 the prior year. Continuing EPS continued an upward trend as of FY2021 exceeding pre-covid levels of $0.24 and $0.19 per share in FY2019 and FY2020 respectively. Massy’s P/E ratio from continuing operations stood at 11.2 times relatively consistent with its pre-covid level of 11.5 times in FY2019.
Total EPS (inclusive of Discontinued Operations), however, contracted 6.1% from $0.41 per share in FY2022 to $0.39 per share in FY2023, as the Group nears completion of its divestment agenda. Massy’s P/E Ratio based on total EPS remained stable in FY2022 and FY2023 at 11.5 times, up from a low of 8.2 times in FY2020.
In FY2023, Discontinued Operations produced a loss of $20.4M, primarily attributable to impairments associated with non-core real estate assets. As a result, EPS from discontinued operations recorded a loss of $0.010 in FY2023 relative to a positive $0.086 per share in FY2022. Overall, this led to the decline of the Group’s total EPS after discontinued operations in FY2023.
The Bourse View
MASSY currently trades at a market price of $4.45 with a market-to-book ratio of 1.19 times, relatively in line with the Conglomerate sector average of 1.21 times and a trailing 12-month P/E ratio of 11.5 times, below the sector average of 14.5 times. Importantly, MASSY’s P/E ratio based on continuing operations stands at 11.2 times. MASSY offers investors a trailing dividend yield of 3.6%, above the sector average of 3.0%. The Group declared a final dividend payment of $0.1268 per share payable on December 18th, 2023, to shareholders on record by December 8th, 2023. Collectively, MASSY’s total dividend payment for the current fiscal year 2023 amounted to $0.1583, a 1.0% increase from FY2022.
The outlook for the Group remains positive, with its combination of acquisitions and existing businesses creating a platform for further value accretion both organically and non-organically.
On the basis of continued revenue growth, accretive acquisition activity and relatively attractive valuations when compared to the sector, Bourse maintains an OVERWEIGHT rating on MASSY.
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