Fe­lix Pereira

The Unit­ed Suri­name Hold­ing Com­pa­ny, re­ferred to by its Dutch ini­tials VSH in this analy­sis, was es­tab­lished in 1958 and cur­rent­ly op­er­ates through nine sub­sidiaries and three as­so­ciates that are in­volved in the ship­ping, trad­ing, re­al es­tate, man­u­fac­tur­ing, fi­nan­cial ser­vices and hos­pi­tal­i­ty in­dus­tries.

We start by re­view­ing its op­er­a­tions for the year end­ed De­cem­ber 2014.

Changes in Fi­nan­cial Po­si­tion

To­tal as­sets rose by 9.7 per ���cent, mov­ing from Sr$209 mil­lion as at the end of 2013 to Sr$229.4 mil­lion last De­cem­ber. This is equiv­a­lent to about TT$436 mil­lion.

The largest com­po­nent was its in­vest­ment in its as­so­ciate, which rep­re­sents its 24.63 per cent own­er­ship in As­suria; this sum ad­vanced from Sr$71.2 mil­lion to Sr$84.8 mil­lion. The com­pa­ny's share of prof­it was Sr$11.31 mil­lion, which was re­duced by a prof­it dis­tri­b­u­tion of Sr$3.68 mil­lion and boost­ed by an ad­just­ment to the reval­u­a­tion re­serve of Sr$5.95 mil­lion.

The val­ue of plant, prop­er­ty and equip­ment closed at Sr$57.3 mil­lion from Sr$55.1 mil­lion. New pur­chas­es of Sr$19.7 mil­lion were off­set by de­pre­ci­a­tion charges of Sr$6.1 mil­lion and fur­ther re­duced by dis­pos­als of Sr$0.6 mil­lion and trans­fers of Sr$10.8 mil­lion.

In­tan­gi­ble as­sets rose from Sr$571k to Sr$810k. New in­vest­ments added Sr$39k while amor­ti­za­tion charges con­sumed Sr$152k.

Fi­nan­cial as­sets rose from Sr$15 mil­lion to Sr$16.76 mil­lion. The largest com­po­nent was its in­vest­ment of 163,020 shares in N.V. Hotel­maatschap­pij Torar­i­ca, which was val­ued at Sr$11.73 mil­lion for both pe­ri­ods.

On the oth­er hand, its in­vest­ment in Suri­naamse Brouw­er­ij N.V. rose from Sr$1.99 mil­lion to Sr$3.41 mil­lion. The third largest in­vest­ment was in Self Re­liance N.V., which val­ue climbed to Sr$830k from Sr$494k.

De­spite the rise in rev­enues, the val­ue of in­ven­to­ries was sta­ble, at Sr$25 mil­lion, for both pe­ri­ods.

Trade and oth­er re­ceiv­ables rose to Sr$28.4 mil­lion from Sr$26.1 mil­lion. The largest com­po­nent, trade re­ceiv­ables, in­creased to Sr$21.7 mil­lion from Sr$19.3 mil­lion as at De­cem­ber 2013.

Cash and its equiv­a­lents rose to Sr$16.4 mil­lion from Sr$15.98 mil­lion. These bal­ances are de­nom­i­nat­ed in three cur­ren­cies. The largest por­tion of Sr$7.9 mil­lion is de­nom­i­nat­ed in US dol­lars while Sr$6.8 mil­lion is in lo­cal cur­ren­cy and the re­main­der of Sr$1.7 mil­lion is de­nom­i­nat­ed in Eu­ros.

VSH's ma­jor long-term li­a­bil­i­ty is de­ferred tax of Sr$12.15 mil­lion. Its short-term trade and oth­er payables of Sr$25.75 mil­lion was slight­ly greater than the 2013 bal­ance of Sr$25.1 mil­lion.

To­tal bor­row­ings stood at a mod­est Sr$4.1 mil­lion. The long-term por­tion was Sr$1.9 mil­lion while the cur­rent por­tion was Sr$2.2 mil­lion. Most of this debt re­lates to its sub­sidiaries, VSH Foods and Con­sol­i­dat­ed In­dus­tries Cor­po­ra­tion (CIC), in which it holds a 56.01 per cent and 59.44 per cent stake re­spec­tive­ly.

To­tal pro­vi­sions and com­mit­ments fell from Sr$5.99 mil­lion to Sr$5.34 mil­lion last De­cem­ber. These re­late most­ly to med­ical and pen­sion oblig­a­tions, de­ferred main­te­nance, re­dun­dan­cy, prod­uct war­ran­ty and dis­pos­al of waste. At as the end of 2014, the cur­rent por­tion was Sr$880.5k while the long-term por­tion was Sr$4.46 mil­lion.

Eq­ui­ty im­prove­ments

To­tal eq­ui­ty ad­vanced to Sr$181.3 mil­lion from the 2013 year-end bal­ance of Sr$162.2 mil­lion.

Both is­sued cap­i­tal and cap­i­tal in ex­cess of par val­ue re­mained steady at Sr$19.863k and Sr$240.425k re­spec­tive­ly.

Re­tained earn­ings rose to Sr$93 mil­lion from Sr$75.7 mil­lion. This most­ly re­flects af­ter-tax prof­it of Sr$20.15 mil­lion re­duced by div­i­dends of Sr$2.98 mil­lion. Mean­while, reval­u­a­tion re­serves in­creased to Sr$72.9 mil­lion from Sr$69.2 mil­lion.

Af­ter al­low­ing for non-con­trol­ling in­ter­ests of Sr$15.1 mil­lion, share­hold­ers' eq­ui­ty im­proved to Sr$166.2 mil­lion from Sr$145.3 mil­lion.

With 1,986,338 shares out­stand­ing, each share has an in­trin­sic val­ue of Sr$83.67 (De­cem­ber 2013: Sr$73.13).

In­come and Prof­its

To­tal rev­enues ad­vanced by 5.4 per cent to reach Sr$68.1 mil­lion from the com­par­a­tive 2013 re­sult of Sr$64.6 mil­lion.The ship­ping di­vi­sion pro­duced rev­enues of Sr$20.8 mil­lion, which was 21.2 per cent greater than the Sr$17.2 mil­lion de­liv­ered in 2013. The largest seg­ment, in­dus­try, de­liv­ered rev­enues of Sr$37.16 mil­lion; that re­sult was Sr$2.68 mil­lion or 6.7 per cent low­er than the 2013 fig­ure of Sr$39.84 mil­lion.

To­tal costs of Sr$52.56 mil­lion was 4.7 per cent greater than the Sr$50.21 mil­lion in­curred in 2013. Here, the most no­table change was per­son­nel ex­pens­es, which climbed by 12.2 per cent or Sr$2.77 mil­lion to Sr$25.54 mil­lion from the pre­vi­ous year's Sr$22.77 mil­lion.

On the oth­er hand, the most no­table de­cline was shown in the "pro­vi­sions" line; this line item con­tract­ed to Sr$217.9k from the pre­vi­ous lev­el of Sr$1.6 mil­lion. Some of the most promi­nent changes were: un­col­lec­table re­ceiv­ables (2014: Sr$669k; 2013: Sr$1.39 mil­lion); pen­sion (2014: mi­nus Sr$503k; 2013: ze­ro); re­dun­dan­cy (2014: Sr$72.4k; 2013: Sr$154.5k).

These changes saw prof­it from con­tin­u­ing op­er­a­tions reg­is­ter at Sr$15.57 mil­lion. This re­sult rep­re­sent­ed an im­prove­ment of Sr$1.17 mil­lion or 8.1 per cent over the 2013 re­sult of Sr$14.4 mil­lion.

The share of prof­it from its stake in As­suria climbed by 17.7 per cent to Sr$11.31 mil­lion from Sr$9.61 mil­lion. As­suria's own­er­ship of a 44 per cent stake in De Suri­naam­sche Bank N.V. (Suri­name's largest bank) al­so in­di­rect­ly ben­e­fits VSH.

In ad­di­tion, its prof­it on in­vest­ments rose to Sr$918.7k from Sr$740.1k. Main­ly, this rep­re­sent­ed the im­proved re­sults from its 12.3 per cent stake in Ho­tel Torar­i­ca, which op­er­ates three ho­tels.

These changes saw pre-tax prof­it reg­is­ter at Sr$27.8 mil­lion, which was 12.3 per cent greater than the Sr$24.75 mil­lion earned for 2013.

At the af­ter-tax lev­el, prof­it came in at Sr$22.2 mil­lion ver­sus Sr$19.6 mil­lion for 2013.

Af­ter al­low­ing for mi­nor­i­ty in­ter­ests, the prof­it at­trib­ut­able to share­hold­ers came in at Sr$20.15 mil­lion; this was 14 per cent greater than the Sr$17.68 mil­lion record­ed in 2013.

These re­sults trans­lat­ed in­to 2014 EPS of Sr$10.15 com­pared with Sr$8.90 for 2013.

Seg­ment Per­for­mance

The strong show­ing for the ship­ping seg­ment was dri­ven by in­creas­es in both break bulk/project car­go ship­ments (up by 4.3 per cent in terms of ton­nage) and car­go han­dlings (2.8 per cent greater twen­ty foot equiv­a­lent units (TEUS). Al­so, the num­ber of ves­sels han­dled rose to 258 from 239.

De­spite these pos­i­tives, op­er­at­ing prof­it fell by 4.3 per cent to Sr$7.8 mil­lion; in 2013, the fig­ure was Sr$8.2 mil­lion. This de­cline was at­trib­uted to three fac­tors: high­er per­son­nel costs, ex­pens­es re­lat­ed to soft­ware de­vel­op­ment and ter­mi­nal ex­pan­sion.

The steel com­pa­ny pro­duces pre­fab­ri­cat­ed steel struc­tures and sup­plies the con­struc­tion in­dus­try in Suri­name and the Caribbean. Op­er­at­ing in­come fell to Sr$5.2 mil­lion from Sr$7.7 mil­lion. Weak­ened mar­ket con­di­tions, es­pe­cial­ly in the sec­ond half of the year, saw this com­pa­ny pro­duce a loss of Sr$395k ver­sus a 2013 prof­it of Sr$1.52 mil­lion.

These re­sults are com­bined with the de­ter­gents and food busi­ness, which all form the "in­dus­try" seg­ment shown above. Com­pen­sat­ing for the loss at the steel busi­ness, both the food and de­ter­gents com­pa­nies reg­is­tered im­proved per­for­mances.

VSH Foods pro­duces and dis­trib­utes mar­garine, but­ter and short­en­ing. Sales in­creased by less than 10 per cent, while favourable com­mod­i­ty prices helped prof­its, which surged by 76 per cent to reach Sr$3.37 mil­lion from 2013's Sr$1.92 mil­lion.

Con­sol­i­dat­ed In­dus­tries Cor­po­ra­tion (CIC) man­u­fac­tures in­dus­tri­al and house­hold de­ter­gents and plas­tic pack­ag­ing ma­te­ri­als. In­come de­clined by less than 1 per cent to Sr$23.1 mil­lion. Nev­er­the­less, prof­it im­proved by 7.7 per cent to Sr$4.23 mil­lion from Sr$3.93 mil­lion.

The oth­er rev­enue seg­ment com­bines sev­er­al mis­cel­la­neous items. For ex­am­ple, in­come from ter­mi­nal and agency ser­vices gen­er­at­ed Sr$1.17 mil­lion (2013: Sr$845k) and in­come from pre­vi­ous years con­tributed Sr$363k (2013: Sr$345k).

His­tor­i­cal per­for­mance, Div­i­dends and Share price

Over the past five years, VHS has ex­hib­it­ed rea­son­able growth in many ar­eas. For ex­am­ple, start­ing from 2010 rev­enues of Sr$48.8 mil­lion, this met­ric grew by 39.5 per cent over this pe­ri­od to reach Sr$68.1 mil­lion last year.

Prof­it from con­tin­u­ing op­er­a­tions grew at a less ro­bust pace, ex­pand­ing by on­ly 28 per cent from Sr$12.16 mil­lion in 2010 to 2014's Sr$15.57 mil­lion.

How­ev­er, an in­creas­ing­ly sig­nif­i­cant fac­tor in VSH's per­for­mance has been its own­er­ship of 24.63 per cent of As­suria N.V. This mea­sure, grouped un­der oth­er in­come, jumped from Sr$5.1 mil­lion in 2010 to Sr$12.23 mil­lion in 2014; this trans­lates in­to growth of 139.8 per cent! The bulk of this fig­ure re­lates to As­suria.

Dur­ing cal­en­dar 2014, VSH paid four quar­ter­ly div­i­dends of Sr$0.10 each. Based on the 2014 re­sults, a fi­nal div­i­dend of Sr$1.25 was al­so paid, thus bring­ing the to­tal div­i­dend for 2014 up to Sr$1.65.

In 2015, the quar­ter­ly div­i­dend has been in­creased to Sr$0.15. These are payable in June, Au­gust and No­vem­ber 2015 and Feb­ru­ary 2016.

As at De­cem­ber 2014, the share price closed at Sr$50.50; this re­flects a mod­est im­prove­ment over the De­cem­ber 2013 price of Sr$46.00. Based on a div­i­dend of Sr$1.65 and a share price of Sr$50.50, the yield is 3.27 per cent. On Sep­tem­ber 17, 2015, the share price had ad­vanced to Sr$70.00; this sug­gests that its half-year re­sults, like­ly to be re­leased this month, have been or were ex­pect­ed to be bet­ter than ex­pect­ed.

Even at this high­er share price, VSH's shares were still priced be­low its book val­ue of Sr$83.67.