Massy Holdings Limited – the group formerly known as Neal and Massy…

27 April 2015


Who are Massy Holdings Limited?

Massy Holdings Limited (Massy) were incorporated in Trinidad and Tobago in 1923. As a group Massy Holdings Limited are engaged in trading, manufacturing, service industries, and finance in Trinidad and Tobago and the wider Caribbean region.
They are one of three conglomerates listed on the Trinidad and Tobago Stock Exchange, the other two being the ANSA McAL Group and GraceKennedy Limited.

 

Financial highlights for the year ended 30th September 2014

The income and expenditure account

Third party revenue increased 14% from $9.4 billion for the year ended 30th September 2013 to $10.7 billion at 30th September 2014. Drilling down towards the bottom line profit before rebranding cost and tax increased by 8% to $890 million.
With a relatively high tax rate above the statutory rate profit after tax increased marginally from $597 million to $600 million. The moderate increase was impacted by the cost of rebranding some of the companies within the Massy group amounting to $58 million. Further costs may arise as the group continues to complete this rebranding exercise in 2015.

Earnings per share and dividend per share

Earnings per share increased by just under 2% to $5.68 per share. The moderate increase is at least in part explained by the impact of the rebranding costs in 2014, but it should also be considered that 2014 also includes the financial impact of a number of acquisitions made in the year (see comments below).
The total dividend per share increased from $1.75 to $1.90 per share an increase of 8.57%.
Growth in the share price
Looking purely at year end data Massy’s share price has grown steadily -and at an increasing rate each year- from 2010 to 2014 (2011 growth equal to 6.25%, 2012 growth equal to 11.78%, 2013 growth equal to 16.65%, and 2014 growth equal to 22.78%.)

Since 30th September 2014 the share price has steadily retreated and at the time of writing of this blog the share price stands at $63.11 per share. This represents an 8.4% fall in value since the year-end. There are no known reasons for this fall.

 

Balance sheet factors

There are a number of items that are highlighted in Massy’s balance sheet as at 30th September 2014. These are as follows:

  • The debt of the group increased from $1.3 billion to $2.5 billion as a result of a $1.2 billion bond issued by the group in July 2014 (see comment below)
  • As a result the groups debt to debt and equity ratio increased from 25% in 2013 to 38% in 2014
  • The current ratio improved from 1.40 to 1.82 at the 30thSeptember 2014
  • The group continued to make substantial investment into capital equipment with $966 million being spent in 2014 (2013: $620 million)
  • The groups cash reserves increased from $1.1 billion in 2013 to $1.6 billion in 2014
  • And as a result the net working capital of the group increased significantly from $1.435 million to $2.466 million at the 30thSeptember 2014

Other factors to consider

  • After 90 years of unbroken service to its customers, shareholders and employees the group saw for to rebrand itself from the old moniker of “Neal and Massy” to the simpler and shorter “Massy”. This rebranding is supposed to signify a “renewal and rebirth” of the group. The cost of the rebranding exercise to 30th September 2014 was $58 million
  • Distinguished Trinidadian businessman Arthur Lok Jack retired as Chairman of the board in July 2014, after serving on the board of the Massy group for over 16 years, 10 of which were as chairman. He has been replaced as chairman by Robert Bermudez
  • The group completed a number of acquisitions in the year to 30th September 2014. In the English speaking Caribbean they increased their shareholding in Massy Gas Products (Trinidad) Limited to 100% (by acquiring Air Liquide’s 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). The group also completed two transactions in Central and Latin America, acquiring 70% in two motor vehicle dealerships in Columbia (for the Kia and Mazda brands), and a 20% stake in an information technology services company in Costa Rica. The information technology company operates in eight Central American countries
  • The group continues to derive the majority of its revenue and profit from its operations in Trinidad and Tobago. Overall trading in Trinidad and Tobago contributed 53% to third party revenue, and 61% to profit before head office charges and other adjustments, rebranding costs, and tax
  • The group issued TT$1.2 billion in fixed rate bonds during the year to 30th September 2014. The bond issue has raised $700 million in long term financing which has and will be used by the group to repay existing debt and provide additional resources for new investments and acquisitions. The bond was issued in two tranches. The Series A, 10 year tranche has a coupon rate of 4%, and the Series B, 15 year tranche has a coupon rate of 5.25%. Repayment of both tranches will be made upon maturity. On subscription the Series A bonds were oversubscribed by 1.67 times and the Series B bonds were oversubscribed by 1.9 times. The yields at the time of issue were 3.66% and 5.16% respectively
  • Like many businesses based in Trinidad and Tobago Massy have experienced significant problems sourcing the necessary foreign exchange to pay overseas suppliers
  • As with other companies reporting under international accounting standards the company restated its results for the year ended 30th September 2013 in order to implement adjustments required by IAS 19. The overall effect of these adjustments was that the profit before tax for 2013 was restated from $843 million to $825 million

Subsequent to the year end

At the date of writing of this blog entry Massy have announced two significant transactions subsequent to their last reported year-end of 30th September 2014. The first (which was disclosed in their annual report for the year ended 30th September 2014) involved the acquisition of 100% of Wood Group PSN Columbia S.A, a company that engages in production, maintenance, and engineering services to customers working in oil and gas projects within Columbia.
The second announced on 10th April 2015 is for the execution of a project agreement for the establishment of a natural gas to petrochemicals complex and a 10% investment by Massy in that project. The cost of the investment by Massy is disclosed as US$30.452 million.

Key ratio analysis
In appendix one to this blog entry we have included some of the key ratios we have used in preparing this blog entry.

Closing thoughts – ready to make some investments?
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