This week, I will com­ment on the four com­pa­nies that closed their fis­cal year in Sep­tem­ber. These are Na­tion­al Com­mer­cial Bank of Ja­maica, Re­pub­lic Bank Ltd, Neal & Massy Hold­ings Ltd and Agos­ti­ni's Ltd.

Na­tion­al Com­mer­cial Bank, Ja­maica

From its clos­ing price last De­cem­ber of TT$2.16, NCBJ closed on Oc­to­ber 12, 2012 at $1.63, re­flect­ing a de­cline of $0.53 or 24.5 per cent. As at the end of its third quar­ter in June, the bank re­port­ed strong in­creas­es in many ar­eas. These in­clud­ed net in­ter­est in­come, net fee and com­mis­sion in­come and gains on for­eign cur­ren­cy and in­vest­ment ac­tiv­i­ties.

These gains were erod­ed by the se­vere re­duc­tion in pre­mi­um in­come, which con­tract­ed to J$1.4 bil­lion in the cur­rent pe­ri­od from a more ro­bust J$2.7 bil­lion last year. Over­all, the im­prove­ment in rev­enue was on­ly about J$175 mil­lion; this re­flect­ed a cur­rent fig­ure of J$26.365 bil­lion from J$26.190 bil­lion gen­er­at­ed in the 2011 re­port­ing pe­ri­od.

The bank's prof­its took a se­vere beat­ing due to the in­crease in its pro­vi­sion for cred­it loss­es, which rose to J$1.8 bil­lion from a more mod­est fig­ure of J$575 mil­lion in 2011. In ad­di­tion, staff costs rose by J$1.1 bil­lion to J$7.94 bil­lion, a sig­nif­i­cant por­tion of which re­lat­ed to its pri­or fis­cal year.

The net re­sult saw the bank re­port re­duced prof­it of J$7.4 bil­lion, down more than 20.4 per cent from the J$9.3 bil­lion re­port­ed up to June 2011. These fig­ures trans­lat­ed in­to earn­ings per share of J$3.77 for 2011 and a more mod­est J$2.98 for the cur­rent pe­ri­od. In line with these re­sults, div­i­dend pay­outs were al­so low­ered.

The com­bi­na­tion of these fac­tors has re­sult­ed in a log­i­cal drop in the com­pa­ny's share price. As­sum­ing the elim­i­na­tion or re­duc­tion of these one-off items men­tioned above, the prospects for the com­pa­ny should im­prove, es­pe­cial­ly if its last quar­ter's re­sults do not con­tain any new sur­pris­es.

Re­pub­lic Bank Ltd

Re­pub­lic Bank Ltd re­port­ed a 4.9 per cent im­prove­ment in its prof­it at­trib­ut­able to share­hold­ers for the first nine months of its cur­rent fi­nan­cial year. This re­sult­ed in im­proved earn­ings per share of $5.25 from $5.02 for the com­par­a­tive pe­ri­od in 2011. The bank's to­tal as­sets then stood at $51.4 bil­lion up from $47.3 bil­lion as at the end of Sep­tem­ber 2011.

Pre-tax prof­it im­prove­ments from out­side T&T helped dri­ve this en­hanced per­for­mance. Lo­cal­ly, pre-tax prof­its de­clined mar­gin­al­ly to $979.6 mil­lion from $979.8 mil­lion for the com­par­a­tive pe­ri­od in 2011.

In con­trast, prof­its de­rived from its op­er­a­tions in Guyana, Cay­man Is­lands and the East­ern Caribbean rose by al­most 30 per cent to $183.7 mil­lion from a pre­vi­ous re­sult of $141.8 mil­lion. Sim­i­lar­ly, Bar­ba­dos-sourced prof­its rose by a re­spectable 11.7 per cent to $97.8 mil­lion from $87.5 mil­lion for the cor­re­spond­ing pe­ri­od in 2011.

For the year so far, Re­pub­lic's share price has im­proved by a mar­gin of 13.6 per cent to $109.49 as at Oc­to­ber 12, 2012, from the price of $96.39 at the start of the year. Typ­i­cal­ly, there is a rel­a­tive­ly strong de­mand for these shares ac­com­pa­nied by a com­par­a­tive­ly low­er lev­el of sup­ply.

Now that it ap­pears al­most cer­tain that Cli­co's shares in Re­pub­lic Bank will be trans­ferred to an in­ter­me­di­ate hold­ing en­ti­ty (or trust) to set­tle li­a­bil­i­ties due to the for­mer Cli­co EF­PA pol­i­cy­hold­ers, one might spec­u­late how this would play out in the mar­ket.

On the one hand, there could be an ini­tial­ly large num­ber of "trust hold­ers" who sim­ply want to sell their units as quick­ly as pos­si­ble. This de­vel­op­ment could damp­en the price of the units and al­low long-term in­vestors to ac­quire ad­di­tion­al units (or shares) in the trust at favourable prices.

An­oth­er con­sid­er­a­tion is that, al­though Re­pub­lic Bank is like­ly to con­tin­ue pay­ing (at least) $4.00 per share in an­nu­al div­i­dends, the full amount of this div­i­dend can­not be passed on to the trust hold­ers.

The sim­ple rea­son for this is that the trust must deduct some lev­el of ad­min­is­tra­tive ex­pens­es, even if it is on­ly to record a div­i­dend re­ceipt (from Re­pub­lic) and then to dis­trib­ute their own "div­i­dend" to unithold­ers twice per year. An­oth­er cost would be the ex­pens­es of hav­ing about five (or more) trustees or di­rec­tors.

Sim­ply be­cause of these ad­min­is­tra­tive costs, in­vestors would usu­al­ly be bet­ter off own­ing RBL's shares di­rect­ly in their own name. An­oth­er mat­ter for spec­u­la­tion is whether the trust, by a sim­ple ma­jor­i­ty vote, can be al­lowed to dis­band it­self and dis­trib­ute RBL shares di­rect­ly to for­mer EF­PA pol­i­cy­hold­ers. Cer­tain­ly, this seems to be a more eq­ui­table and ef­fi­cient route. (But, then again, gov­ern­ment de­ci­sions tend to be more about con­trol than about ef­fi­cien­cy.)

Neal and Massy Hold­ings Ltd

The share price of Neal & Massy Hold­ings Ltd im­proved from $45.99 at De­cem­ber 31, 2011 to $48.25 as at Oc­to­ber 12, 2012 or by 4.9 per cent. Dur­ing the cur­rent year, the share price was as low as $40.06 as at Jan­u­ary 30, 2012 and, even as re­cent­ly as ear­ly Ju­ly, one could have been bought this share for $43.00. This price volatil­i­ty might be seen as a re­flec­tion of in­vestors' un­cer­tain­ty about the ro­bust­ness and sus­tain­abil­i­ty of the group's re­cov­ery ef­forts.

In the first quar­ter, which end­ed on De­cem­ber 31, 2011, earn­ings per share im­proved from $1.15 in the pri­or pe­ri­od to $1.24. The sec­ond quar­ter's re­sults al­so showed im­prove­ment, but by a less ro­bust mar­gin; earn­ings per share ad­vanced from $1.12 to $1.15. This brought earn­ings for the half-year pe­ri­od to March 2012 up to $2.39 from last year's $2.27. The di­rec­tors were al­so con­fi­dent that the pos­i­tive prof­it tra­jec­to­ry would show more am­ple re­sults in the sec­ond half of the fis­cal year.

On that ba­sis, they in­creased the in­ter­im div­i­dend to $0.45, from $0.43 last year.

The re­lease of the group's third quar­ter re­sults to June 2012 on Ju­ly 30, 2012, pro­vid­ed more sol­id ev­i­dence that the group had, in­deed, "turned the cor­ner" and now seemed to be on a sus­tain­able path. These re­sults re­vealed an 84 per cent im­prove­ment in quar­ter­ly prof­it, as rep­re­sent­ed by earn­ings per share of $1.01 from $0.55 in the same pe­ri­od last year. This re­sult boost­ed cu­mu­la­tive earn­ings per share up to $3.40, which re­flect­ed an im­prove­ment of 20.6 per cent over the $2.82 re­port­ed for the com­par­a­tive pe­ri­od in 2011.

(It is in­struc­tive to note that its quar­ter­ly re­sults were re­leased with­in four weeks af­ter the close of the ac­count­ing pe­ri­od. Usu­al­ly, good news tends to be dis­sem­i­nat­ed far more quick­ly than poor re­sults, which re­quire more ex­pla­na­tions, "dress­ing-up" or "spin".)

With the dis­trac­tion of sell­ing the Al­mond prop­er­ties large­ly be­hind it, among oth­er things, the com­pa­ny's fourth quar­ter's re­sults are ex­pect­ed to show a con­tin­u­a­tion of the trend set in the third quar­ter. In­vestors should ex­pect to have these fi­nal re­sults in the ear­ly part of De­cem­ber.

Agos­ti­ni's Ltd

The price of Agos­ti­ni's Ltd's shares start­ed the year at $13.56 and closed on Oc­to­ber 12, 2012 at $16.00. This re­flect­ed a year-to-date im­prove­ment of 18 per cent. Helped by con­tin­u­ous de­mand and less than op­ti­mal sup­plies, the share price has moved steadi­ly up­ward for the en­tire year thus far.

For the six months pe­ri­od end­ing on March 31, 2012, the com­pa­ny's rev­enues rose by 5 per cent to $685.5 mil­lion. This was ac­com­pa­nied by a 13.5 per cent im­prove­ment in prof­it at­trib­ut­able to share­hold­ers, which moved to $37.1 mil­lion from $32.7 mil­lion for the com­par­a­tive pe­ri­od in 2011. Earn­ings per share saw an im­prove­ment of 12.5 per cent or from $0.56 last year to $0.63 cur­rent­ly. On the ba­sis of these im­proved re­sults, the in­ter­im div­i­dend to share­hold­ers was in­creased from $0.15 to $0.18.

Pri­mar­i­ly due to low­er sales in its con­sumer prod­ucts seg­ment, both sales and prof­its for the third quar­ter saw de­clines. In the case of sales, these fell to $306 mil­lion from $313 mil­lion in the third quar­ter of 2011. Mean­while, prof­it at­trib­ut­able to share­hold­ers fell to $13.5 mil­lion from $15.2 mil­lion last year. Over­all, year-to-date earn­ings per share showed a mod­est im­prove­ment to $0.86 from $0.82 in the nine months to June 2011.

In Ju­ly, the com­pa­ny launched a new brand of UHT milk, which is im­port­ed from Ger­many. Ini­tial re­sponse has been pos­i­tive and sales of this item would help the fourth quar­ter's re­sults. The com­pa­ny has in­di­cat­ed it would be in­tro­duc­ing new prod­ucts to the mar­ket on a reg­u­lar ba­sis over the next 18 to 24 months.

These new prod­ucts are ex­pect­ed to help de­liv­er stronger sales and en­hance prof­it per­for­mance. It is this prospect, cou­pled with the ex­pec­ta­tion of bet­ter re­sults from its tra­di­tion­al busi­ness­es, that seems to be dri­ving de­mand for these shares.

It is ex­pect­ed that ei­ther NCBJ or Re­pub­lic Bank would be first to an­nounce their full-year fi­nan­cial re­sults on or about the end of Oc­to­ber or ear­ly No­vem­ber.

Af­ter a short in­ter­val, Neal and Massy, then Agos­ti­ni's should de­clare their re­sults some­time in ear­ly De­cem­ber.