Massy Group & ANSA McAl: A Conglomerate Comparison

27 May 2015


Who are Massy Holdings Limited and the ANSA McAL Group?

Both Massy Holdings and the ANSA McAL Group are Trinidadian conglomerates with extensive experience and interests in a wide and diverse array of local and regional businesses.

ANSA McAL can trace its roots back to 1881 when the Alston Group came into existence. In 1969 the Alstons Group merged with McEnearney to form McEnearney Alstons Limited. The name ANSA McAL was adopted in 1992 after the merger of the Alstons and the McEnearney Alstons Group.

Massy Holdings Limited has also been part of the Trinidadian business landscape for many years. The companies Neal Engineering and Massy Limited merged to create Neal and Massy Limited in 1932, and the group continued to use this name until 2014 when the name was changed to Massy Holdings Limited.

Both Massy Holdings and ANSA McAL are listed on the Trinidad and Tobago stock exchange. Massy Holdings prepares its accounts to the 30th September each year while ANSA McAL prepares its accounts to the 31stDecember.

What exactly is a conglomerate?

A conglomerate is a single company that controls or has shareholdings in a number of different unrelated and diverse businesses.

The income and expenditure accounts – side by side

All figures in this blog entry are derived from the financial statements of Massy Holdings Limited and the ANSA McAL Group. As such all the figures are (unless otherwise stated) presented in thousands of dollars.

Although Massy Holdings turnover is substantially higher than ANSA McAL’s ($10,703,801 versus $6,105,443), Massy Holdings has a significantly less attractive gross profit percentage (28% against 38%).

With higher operating and overhead costs Massy Holdings achieves a net profit margin of 5.61%, significantly below that of ANSA McAL at 13.14%
In 2014 ANSA McAL recorded profit attributable to ordinary shareholders of $684,865 against $555,003 for Massy Holdings.

Despite recording higher profits key profitability ratios are better for Massy Holdings because it utilises less capital to achieve its profit and because it has a smaller share base than ANSA McAL. In this respect compare the following key ratios:

Better income and expenditure performance isn’t everything

Because ANSA McAL has a much larger share base than Massy Holdings, a superior income and expenditure performance does not translate into a better earnings per share or dividend yield.

In comparative terms we have:

ANSA McAL’s higher PE ratio could imply that the market price for its share is in comparative terms overpriced in relation to that of Massy Holdings.

A tale of two balance sheets – does size matter?

In balance sheet terms ANSA McAL is considerably larger than Massy Holdings. Total assets of $13,116,695 and shareholders’ funds of $5,769,729 are significantly above those of Massy Holdings ($9,849,228 and $3,988,910 respectively).

However Massy Holdings uses its balance sheet more efficiently than ANSA McAL managing to turn over inventory five times a year (ANSA McAL manages three times a year), having a shorter operating cycle of 106 days (ANSA McAL achieves 129 days), and perhaps of most significance a fixed asset turnover ratio of 5.41 times a year (ANSA McAL actual of 3.70 times a year).

Gearing – or in other words debt

In the year ended 30th September 2014 Massy Holdings refinanced.

After the issue of a new fixed rate bond in the amount of $1.2 billion the debt of the group increased from $1.3 billion to $2.5 billion. The issue has raised $700 million in long term financing which will be used by the group to retire some of the older more expensive debt, and the balance will be used to for new investments and acquisitions.

As a result Massy Holdings has a significantly higher debt to gearing ratio and less attractive interest cover than ANSA McAL.

In comparative terms we have:

Weighted average cost of capital (WACC)

WACC measures the effective cost of capital from all sources (debt and equity) of a company.

ANSA McAL (2.09%) has a slightly lower WACC than Massy Holdings (2.71%). This gives rise to an assumption that ANSA McAL is able to raise funds at cheaper rates than Massy Holdings.

Taxation

Both Massy Holdings (27.91%) and ANSA McAL (24.73%) have effective tax rates that are close to the statutory rate of 25% suggesting that both adopt relatively cautious tax planning strategies.

Growth by acquisition versus organic growth
In comparative terms Massy Holdings has been much more aggressive in pursuing a strategy of growth by acquisition.

In the year ended 30th September 2014 they increased their shareholding in Massy Gas Products (Trinidad) Limited to 100% (by acquiring 43% stake in the company for $291 million), and acquired a majority shareholding in Consolidated Foods Limited (the largest chain of supermarkets in St. Lucia). They also completed two transactions in Central and Latin America, acquiring 70% in two motor vehicle dealerships in Colombia (for the Kia and Mazda brands), and a 20% stake in an information technology company in Costa Rica.

In the year ended 30th September 2015 (and as at the date of writing of this blog entry), Massy Holdings have made two further acquisitions. First they have acquired 100% of Wood Group PSN Colombia S.A (this is a company that engages in the production, maintenance, and engineering services to customers working in the oil and gas arena in Colombia, and secondly on the 10th April 2015 they executed a project agreement for the establishment of a natural gas to petrochemicals complex taking a 10% investment in that project.

In the same two accounting periods (and as that date of writing this blog entry) ANSA McAL have made no significant acquisitions.

Supporting Analysis

If you’re interested in getting the Key Performance Indicators that were used in today’s analysis, let us know and we’ll email the data to you.

Closing thoughts – ready to make some investments?

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