In my Jan­u­ary 11, 2018 ar­ti­cle, I se­lect­ed five com­pa­nies that I thought would de­liv­er mean­ing­ful price ap­pre­ci­a­tion in 2018. As the ta­ble shows, two of these, First­Caribbean In­ter­na­tion­al Bank Ltd (FCI) and Massy Hold­ings Ltd (Massy) ex­pe­ri­enced price de­clines. The re­main­ing three se­lec­tions ex­pe­ri­enced some price ap­pre­ci­a­tion, but end­ed low­er than my tar­get­ed price.

While FCI was a sig­nif­i­cant dis­ap­point­ment, in­vestors who held that share at both year-ends re­ceived a ma­te­ri­al­ly su­pe­ri­or div­i­dend pay­ment. Just pri­or to its at­tempt to do a re­verse stock split of 30:1 and its ap­pli­ca­tion to have its shares list­ed on the NYSE, the bank made a spe­cial div­i­dend pay­ment of 12.7 US cents at the end of April 2018; co­in­ci­den­tal­ly, that pay­ment alone (equiv­a­lent to al­most 84 cents TT, at the then-cur­rent US dol­lar buy­ing rate) was iden­ti­cal to the an­nu­al price de­cline.

Af­ter ac­cess­ing mar­ket con­di­tions, FCI with­drew its ap­pli­ca­tion to di­vest an ad­di­tion­al block of shares that were owned by the par­ent and list on the NYSE. The bank’s 2018’s per­for­mance was hit by sig­nif­i­cant­ly high­er cred­it loss­es on fi­nan­cial as­sets. Even so, many of its ra­tios con­tin­ued to be strong.

Over the one-year pe­ri­od, Massy’s share price fell by $1.02 while its div­i­dend re­mained sta­ble at $2.10. More than three years ago, on De­cem­ber 30, 2016, Massy’s share price closed at $52.00. Start­ing from the 2017 base of $754 mil­lion, pre-tax prof­it at Massy im­proved to $874 mil­lion. That re­sult is still low­er than the $885 mil­lion earned for 2016 and the $922 mil­lion record­ed for 2015.

Tread­ing wa­ter is not an ex­cit­ing prospect for in­vestors. Buoyed by the prospect of be­ing ac­quired by NCBFG, GHL’s share price ap­pre­ci­at­ed by $1.07; even so, it end­ed $0.90 be­low my tar­get of $19.00. In­flu­enced by high­er prof­itabil­i­ty, cal­en­dar year div­i­dends im­proved from $0.66 to $0.67.

With the new and high­er of­fer of US$2.79 in 2019 from NCBFG, the share price has start­ed to im­prove.

With a strong Q3 re­sult, the full-year’s re­sult and con­se­quent div­i­dend are like­ly to be high­er.

Over the year, AGL’s share price in­creased by $2.65 to end at $23.40, which was not far from my tar­get of $24. Based on a strong 2017-18 re­sult, div­i­dends in­creased from $0.56 to $0.61. De­spite con­tin­u­ing in­ter­est in this grow­ing com­pa­ny, the sup­ply of shares to the mar­ket is lim­it­ed, which re­stricts price dis­cov­ery.

NGL’s share price ap­pre­ci­at­ed by $2.60 to close at $29.10. That price was $3.90 low­er than my ex­u­ber­ant pro­jec­tion of $33.00. An­nu­al div­i­dends were sta­ble at $1.50. The per­for­mance of PPG­PL, its sole share­hold­ing, is con­tin­gent on the sup­ply and price of gas and in­ter­na­tion­al prices for nat­ur­al gaso­line, bu­tane and propane.

As a foot­note to 2018, Wit­co ap­proved a 3-for-1 stock split in Oc­to­ber; as yet, this split has not been im­ple­ment­ed since its out­stand­ing shares are still shown at the 2017 num­ber of 84.24 mil­lion.

Vi­sion 2022

In­vestors do not nor­mal­ly set one-year tar­gets for their hold­ings. Of course, spec­u­la­tors and traders might have goals that are mea­sured in hours, days, weeks or months, de­pend­ing on the mar­kets in which they op­er­ate. In­di­vid­ual in­vestors may have medi­um-term goals rang­ing from three to sev­en years while in­sti­tu­tions of­ten deal in time-frames of 10, 20, thir­ty years and longer.

I con­sid­ered us­ing 2024 as a tar­get, since that co­in­cides with An­gos­tu­ra’s 200th an­niver­sary; per­haps, by that time, there will be less turnover in its ex­ec­u­tive suite and prof­its might be more ro­bust?

No­tably, the Cli­co In­vest­ment Trust, which was cre­at­ed on Oc­to­ber 31, 2012, is due to dis­trib­ute the 40,072,299 shares in RFHL held by the Cli­co In­vest­ment Fund hold­ers on Jan­u­ary 2, 2023. A fur­ther con­sid­er­a­tion for se­lect­ing 2022 is that GraceKennedy Ltd will cel­e­brate its 100th an­niver­sary. Al­so, Guyana’s en­er­gy pro­duc­tion should be in full swing. My fi­nal rea­son is that 2022, un­like 2019 and 2020, is not an elec­tion year.

Agos­ti­ni’s Ltd

One of the less­er known side ef­fects of the CLF/Cli­co de­ba­cle is that it left Agos­ti­ni’s Ltd with­out sup­port for a rights is­sue, which was sup­posed to help fund the 2008 pur­chase of Hand Arnold Ltd. In sub­se­quent years, AGL was able to ex­tri­cate it­self from this un­re­li­able de­pen­dence and al­lied it­self with stronger com­pa­nies, most no­tably, Vic­tor E Mout­tet Ltd (VEML) and cre­at­ed a strong al­liance with Bar­ba­dos-based God­dard En­ter­pris­es Ltd (GEL).

Via Smith Robert­son, AGL has a deep phar­ma­ceu­ti­cal pres­ence while its re­tail arm, Su­per­Pharm, op­er­ates sev­er­al phar­ma­cies. Its dis­tri­b­u­tion pres­ence, which was en­larged by the GEL as­so­ci­a­tion, cre­at­ed Caribbean Dis­tri­b­u­tion Part­ners Ltd (CD­PL). That en­ti­ty is now go­ing through a pe­ri­od of more se­lec­tive ac­qui­si­tion and greater in­te­gra­tion.

My tar­get price for AGL is $35.00 to $40.00, like­ly sup­port­ed by an­nu­al div­i­dends of $1.00.

GraceKennedy Ltd

GKC is main­ly fo­cussed on busi­ness­es in the field of food and fi­nance. Its re­mit­tance busi­ness, in which West­ern Union holds a 25 per cent stake, is con­sis­tent­ly its most prof­itable seg­ment. It has food fac­to­ries in Ja­maica, USA and UK.

In 2018, on the JSE, the share price peaked at J$75.00 (about TT$3.75) while div­i­dends grew from J$1.10 to J$1.35. Its div­i­dend pay-out rate is typ­i­cal­ly less than 30 per cent. Per­haps, it might be con­sid­er­ing a spe­cial div­i­dend in 2022 to mark its 100th an­niver­sary?

In the first quar­ter of 2019, the com­pa­ny will move in­to its new head­quar­ters. In prepa­ra­tion for its cen­ten­ni­al, GKC has ini­ti­at­ed mea­sures that will en­hance its or­gan­i­sa­tion­al de­sign and stream­line its cost struc­ture and busi­ness process­es.

My 2022 tar­get price range is TT$6 to TT$7; at cur­rent ex­change rates, this would equate to about J$120 to J$140. An­nu­al div­i­dends should trend clos­er to J$2.20.

Guardian Hold­ing Ltd

Un­der the guid­ance of soon-to-be ma­jor­i­ty share­hold­er, NCBFG, GHL will con­tin­ue to grow its in­sur­ance and in­vest­ment arms. Even­tu­al­ly, this ac­qui­si­tion could form the ba­sis for fur­ther con­sol­i­da­tion in the in­sur­ance sec­tor as new leg­is­la­tion man­dates high­er cap­i­tal re­quire­ments. Per­haps, there are some can­di­dates un­der ac­tive con­sid­er­a­tion?

My tar­get price range for GHL is $30 to $40, pos­si­bly ac­com­pa­nied by an an­nu­al div­i­dend of $1.00 or greater. NCBFG needs steady and in­creas­ing div­i­dends to help ser­vice its debt, in­clud­ing to for­mer GHL key share­hold­ers.

Massy Hold­ings Ltd

Massy op­er­ates in mul­ti­ple in­dus­tries, has five ma­jor dis­tinct di­vi­sion­al group­ings, which in­cludes 66 com­pa­nies and op­er­ates in at least four­teen coun­tries. Is this size and com­plex­i­ty con­ducive to out­stand­ing man­age­ment con­trol and in­vestor un­der­stand­ing? Could a case be made for se­lec­tive shrink­ing and greater fo­cus on few­er in­dus­tries and com­pa­nies?

Read­ers will note that I have used a wide range, $80 to $120, as my tar­get price. This is be­cause I ex­pect a high­er price can be at­tained with a more fo­cussed ap­proach to growth and the stream­lin­ing of its op­er­a­tions. No com­pa­ny can be a top per­former in all its spheres of en­deav­our. Per­haps, par­tial di­vest­ments on the TTSE might be a so­lu­tion? In­vestors ap­pre­ci­ate prof­its and are less im­pressed by un­wieldy, sprawl­ing size.

A cost­ly re­brand­ing ex­er­cise seems to have pro­duced mixed re­sults. Re­brand­ing seems to work best when prod­ucts or ser­vices are sim­i­lar. Even so, its deep in­vest­ment in Guyana and the even­tu­al com­mis­sion­ing of the DME plant will cer­tain­ly lift prof­its and im­prove its ac­cess to for­eign ex­change. An­nu­al div­i­dends should im­prove, ini­tial­ly to $2.50.

Re­pub­lic Fi­nan­cial

Hold­ings Ltd

Re­cent sig­nif­i­cant ac­qui­si­tion an­nounce­ments, nei­ther of which has been con­clud­ed, should pro­pel RFHL to the top of the bank­ing and fi­nan­cial ser­vices hi­er­ar­chy in the Eng­lish-speak­ing Caribbean.

Per­haps, of more long-term con­cern is whether or not it can main­tain its in­de­pen­dence from gov­ern­ment and qua­si-gov­ern­ment en­ti­ties. We have al­ready seen the re­cent­ly cre­at­ed Na­tion­al In­vest­ment Fund (26.13 per cent share­hold­er) ap­point two di­rec­tors to its board. Oth­er state al­lied (re­al or per­ceived) share­hold­ers in­clude NIB (18.42 per cent), First Cit­i­zens As­set Man­age­ment (2.07 per cent), UTC (1.49 per cent) and Cen­tral Bank (0.48 per cent).

In the con­text of GORTT own­ing 64.43 per cent of First Cit­i­zens Bank, which is small­er and less prof­itable, is there a plan to merge the two en­ti­ties to form one su­per-na­tion­al state-con­trolled bank­ing group? Al­so, when cur­rent CIF unit hold­ers, who col­lec­tive­ly own 24.66 per cent, re­ceive shares in RFHL on Jan­u­ary 2, 2023, what por­tion of those shares might even­tu­al­ly end up with qua­si-gov­ern­ment en­ti­ties?

Are these some of the fac­tors that might be keep­ing RFHL’s share price at cur­rent lev­els?

De­spite these queries and un­spo­ken un­cer­tain­ties, I be­lieve that the cur­rent board will be able to re­sist en­croach­ments on its busi­ness plans.

In four years, the an­nu­al div­i­dend could be clos­er to $5 while its price should be com­fort­ably high­er than $150.

Dis­ci­plined in­vest­ing is one key to fi­nan­cial flex­i­bil­i­ty…

In the next ar­ti­cle, we will re­view the 2017 re­sults for As­suria NV.