BOV strong results dented by litigation provision

The MSE Equity Total Return Index erased the previous week's minimal 0.006% loss as it closed 0.094% higher at 8,729.893 points. Activity was spread across 18 equities, of which five fell and nine gained ground. Turnover more than doubled from the previous week's €1.2 million, to €2.8 million.


Bank of Valletta plc (BOV) shares closed in the red for the third consecutive week. The banking equity oscillated between a multi-year low of €1.50 and a weekly high of €1.70, but ultimately closed €0.10 or 5.9% lower at €1.60. BOV shares were negotiated across 136 deals of 398,418 shares.


This negative performance was reflected by the bank's interim financial results published on Tuesday, which showed a profit before tax of €13.5 million, down from €67.8 million for the corresponding period last year. The decrease in profit is wholly attributable to a litigation loss provision of €75 million that the group has decided to set aside in the current financial reporting period. In fact, operating profit, which does not account for this litigation provision, increased by almost 43% over the previous year, to €84.2 million.


The litigation provision is being made in the context of changing circumstances affecting three material litigation cases which the bank is currently involved in, mainly the case concerning the bankruptcy of the Deiulemar Group. Although the legal advice furnished to the board remains that the bank has strong legal defences on the merits of the case, the board has resolved to recognise a provision to reflect a higher probability of an eventual outflow of funds in connection with the case. This figure may be reassessed should further developments so require, in which case the market shall be informed.


The strong financial results are partly due to the fact that the group recorded an improvement in all its revenue streams. Interest margin rose by 8% to €79 million, while commission income grew by 21% to €40 million. These improvements are in line with the bank’s strategy to diversify its revenue sources. From the financial position point of view, the group remains highly liquid, with cash and short-term funds amounting to €3.5 billion. Customer deposits stood at €10 billion as at the end of June, as retail customer deposits grew while international corporate deposits decreased in line with the bank’s strategy. Capital ratios remain satisfactory, as the Capital Adequacy Ratio stood at 19.8%, while the Common Equity Tier 1 ratio stood at 16.8%, compared to 19.4% and 16.1% respectively registered in December 2017. The bank also announced that the board of directors decided not to declare an interim dividend and has also expressed its intent not to recommend a final cash dividend for financial year 2018.


Malta International Airport plc shares were the main drivers for this week's gain, having rallied by 9.6%, to close at yet another all-time high of €5.70. The local airport operator's shares witnessed 39 trades of 127,063 shares and closed €0.50 higher at €5.70.


HSBC Bank Malta plc shares erased the previous week's 0.5% loss, having advanced by 1.1% over 19 transactions of 81,658 shares, closing at €1.89. The bank will announce its interim financial results on Monday.


The insurance and investments services provider Mapfre Middlesea plc recouped from the previous week's 1.5% decline, having appreciated by2% across three trades of 2,306 shares, to close €0.04 higher at €2.


GO plc shares erased the previous week's 0.6% increase, having slipped by €0.04 or 1.2%, as 3,700 shares changed ownership over two transactions, closing at €3.38. The telecommunications services provider announced that its board is set to meet on August 10, 2018 to discuss the group’s interim unaudited financial statements for the first half of 2018.


GO's spin-off Malta Properties Company plc (MPC) extended the previous 2.1% increase, having advanced by 4.1% as 414,870 shares changed ownership over 13 deals, to close at a one-month high of €0.51.


On Wednesday, the board of MPC approved the group’s interim unaudited financial statements for the six-month period ended June 30, 2018. Profit after tax was up to €501,818 from €447,047.


This upturn was mainly driven by a 6.2% improvement in rental income to €1.6 million as a result of the completion of new developments, as well as inflation. The long term lease agreements that the group has with its tenants secure levels of revenues for the foreseeable future, while additional developments should increase revenue even further.


This was partially offset by a 10.7% rise in administrative expenses to €529,045. This was driven by growth in the group’s operations and the planned redevelopment projects being undertaken. Finance costs on the other hand were lower at €307,528 following a decrease in bank charges.

The board has resolved to determine the extent of any dividend distribution for 2018 at the end of the year, and thus no interim dividends were declared.


In an announcement issued on Thursday, MPC reported that its wholly owned subsidiary, SGE Property Company Limited has entered into a promise of sale agreement with Mercury Exchange Limited for the property known as Saint George’s Exchange, in Triq San Gorg, Saint Julian’s.


The property is currently occupied by GO, resulting from a deed signed in 1998. The consideration for the sale of the property is €13.8 million. As part of the deal, Mercury Exchange Limited will transfer a 303 square metre site below road level at Triq San Gorg to GO for a nominal amount of €100.


The property management company, MIDI plc registered a 1.2% loss in its share price, as one trade of 250,000 shares was executed, closing at €0.48. Meanwhile, Malita Investments plc shares increased by 1.7% across 19 deals of 225,525 shares, to close at €0.885.


Trident Estates plc shares extended the previous week's 1.5% increase, having advanced by 0.8%, as 10 trades of 28,576 shares were concluded, closing at €1.33.


Medserv plc shares added to the previous 1.7% decrease, having declined by €0.03 or 2.7%, to close at €1.10. The oil and gas logistics services equity witnessed nine transactions of 33,050 shares.


Simonds Farsons Cisk plc shares closed unchanged at €7.50, despite having traded at a weekly low of €7.40. The food and beverage supplier's shares were active on 10 deals of 35,994 shares.


RS2 Software plc shares erased the previous 0.8% increase, having slipped by 1.7% as 3,234 shares were executed across five transactions, closing at €1.19. Meanwhile, Loqus Holdings plc shares, rallied by 56.7% as 4,000 shares changed hands over one trade, to close at €0.094.


Grand Harbour Marina plc shares traded flat at €0.75 on two deals of 28,400 shares. The board of the company is scheduled to meet on August 24, 2018, to consider, and if thought fit, approve the company’s half-yearly report for the first half of 2018.


International Hotel Investment plc shares erased the previous 0.8% slip, having advanced by 3.2% across six trades of 9,964 shares, closing at a four-week high of €0.65.


The retail and supermarkets owner PG plc registered a 0.8% increase in its share price as 275,700 shares changed ownership over eight transactions, closing at €1.34.


Tigne Mall plc shares traded flat at €0.95 on four transactions of 18,158 shares. The company registered a 7.2% increase in profit after tax for the six months ended June 30, 2018, driven by higher rental revenue and lower finance costs. During the period, the company registered an improvement in liquidity as cash and cash equivalents were up to €1.6 million.  The directors anticipate this level of activity to be maintained throughout the second half of the year.


The board has also declared an interim net dividend payment of €0.0128 per share, payable on August 31, 2018 to all shareholders on the register as at August 17, 2018.


In the same sector, Plaza Centres plc shares closed unchanged at €1.04 for the second consecutive week, as two trades of 20,000 shares were negotiated.


In the corporate bond market activity amounted to a turnover of €1.8 million and was spread over 42 issues, of which 11 gained ground and 18 fell. The 4.5% Medserv plc Unsecured € 2026 was the best performer, having increased by 2.5%, to close at €102.50, while the 5.75% IHI Unsecured € 2025 headed the list of fallers, having declined by 1.9%, closing at €106.


Investors shied away from the local sovereign debt market as all 24 active issues closed in the red amounting to a turnover of €4.3 million. The 2.1% MGS 2039 (I) was the most liquid issue having witnessed a turnover of €812,351- the long-dated issue recorded the highest loss of 1.8%, to close at €100.


This article which was compiled by Jesmond Mizzi Financial Advisors Limited, does not intend to give investment advice and the contents therein should not be construed as such. The Company is licensed to conduct investment services by the MFSA and is a Member of the Malta Stock Exchange and a member of the Atlas Group. The directors or related parties, including the company, and their clients are likely to have an interest in securities mentioned in this article. For further information contact Jesmond Mizzi Financial Advisors Limited at 67, Level 3, South Street, Valletta, or on Tel: 21224410, or email

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