Local market up 30.1% in the first quarter of 2004

Did anyone think that the local market would reach these levels within the first three months of 2004? I doubt it. However, it has happened, and it proves that if an investor has the patience to wait for a recovery, the recovery will come and losses recovered or profits made. Equity investments are for the long term, and although companies’ results are of utmost importance this is not always reflected in the market price immediately. Markets are pushed up by investors’ sentiment, take for example, the Maltacom shares, up to a few months ago when the price was much lower than it is today, very few investors wanted to buy them. Investors reacted so quickly when the board of directors was informed by the government that it would start the ball rolling to sell its equity holding. But we all knew this was bound to happen shortly, infact the Chairman of Maltacom had already announced the government’s intention to go ahead with the sale of these shares. I would say that this is the main reason why the share price shot up, not because investors suddenly realised that the company was doing well and the market price was not reflecting the company’s performance. Good performers and bad performers. So, the best performer was Maltacom plc, which was up 66.67% in the first quarter, having only been up 6.6% during 2003.On 30th March 2004, the company announced that the Maltacom Group has recorded a profit before tax for the year ending 31st December 2003 of LM20.6million as compared to Lm13.5million in 2002.The operating profit before exceptional items was at Lm15.3million as compared to LM13.7 million. The company results show an exceptional item of Lm6.4million, which has boosted the profits for 2003. We will need to see how the market reacts to these results and any further news on the sale of the government’s shares. The next best performer in the first quarter was Bank of Valletta plc, with an increase of 38.78%, after having falling 12.81% last year. The market price now does more justice to the performance of the bank and we now await the interim results for the six months ending 30th March 2004. HSBC had another spectacular run, up nearly 28% in the first quarter having been up 42% last year and having paid an equally spectacular dividend. Having reached the Lm7.00 mark on the last day of trading this quarter, investors will be eager to see the way forward. Investors continued to be attracted to this equity following the announcement of the increase in the bank’s and its subsidiaries profits for the year ended 31st December 2003 of 23.8% over 2002. Clearly, investors’ sentiment for this equity has been good, now will investors take profits and jump ship or will they wait till the price reaches its all time highs? The market price of Malta International Airport has also had a good first quarter, up 27.14% with the price reaching 95 cents, but retrieving to 89cents on the last day of trading of this quarter. This was a breeder for the investing public who had been waiting for the privatisation of one of the government owned companies for so long. The company has made various press announcements that it intended to expand the business but no firm commitments have yet been made. Investors will be keeping a close eye to see if these projects will materialise. FIMBank plc also had a good performance, particularly in the last few days of the quarter after the Bank’s announcement of the results for 2003, and the acquisition of 38.5% in Global Trade Finance Private Ltd. The price was up 18.28% in the first three months after having fallen 25% last year. Clearly, the fact that last year the company’s results registered an impairment reversal of USD 554,865, against impairment losses of USD 9.9million in 2002, will help investors regain confidence in this equity. The share price of Plaza Centres was up 23.33% in the first quarter recovering last years drop of 14% .The Company announced that profits on ordinary activities before tax for the financial year ending 2003 were Lm 349,663 as compared to Lm345, 564 in 2002. During the first quarter, Lombard Bank plc announced that it had registered a profit before tax of LM2.183 million for the financial year ending 31st December 2003 covering a 15 month period, an increase of 56% over 2002.On an annualized basis, the bank improved its pre-tax performance by 24%.The share price during 2004 increased by 15.68% as compared to an increase of 1.37% during 2003. Simonds Farsons Cisk plc was the other positive performer, with the share price up 5.56% in the first quarter, after having had a very positive 2003 when the price had gone up by 34%. During the quarter the company announced that it had entered into a preliminary agreement with Law.Quintano & Co. Ltd for the acquisition of the assets of its food importation business. Through the media it was also announced that the company will expand its business operations. The market losers during the first quarter were Suncrest plc down 51.92%, Global Financial Services Group plc down 14.38%, Sun Tumas Holdings down 9.64%, Middlesea Insurance plc down 6.17% and International Hotels Investments plc down 4.76%. In January 2004, Suncrest announced in the company results, that the company had registered a loss of Lm361,113 for the year ended 31st October 2003, as compared to a loss of Lm309,179 in 2002. The fall in the share price was a result of one deal of 900 shares during March. During the period the European Investment Bank issued the first local bond denominated in Maltese Lira. This is a first for Malta to have a AAA rated bond listed on the Malta Stock Exchange, and investors reacted positively to this issue. The demand for bonds remains high. All in all, a very positive first quarter which has surely encouraged investors to look again at the local market, especially when one compares this performance to that of the international bourses, that had a rough first quarter following the terrorist attacks and unclear economic and market indicators. Readers should remember that past performance is no guarantee to future performance and that the value of investments can fall as well as rise. Jesmond Mizzi is Chairman & Managing Director of Jesmond Mizzi Financial Services Limited, which is licensed by the MFSA to conduct Investment Services.Email: [email protected] This article does not intend to give investment advice and the contents therein should not be construed as such. Readers are encouraged to seek professional advice regarding their personal financial situation.