The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

With many BISX -isted companies paying dividend returns that exceed bank deposit rates, the equities market offers many “good buys” for investors who have long-term money and can bear some risk, a securities analyst said yesterday.

Stefano Pral, with Royal Fidelity Merchant Bank and Trust, told Tribune Business: “What is evident to me is that many BISX companies pay dividends that exceed bank deposit rates, and if customers have long-term money and can bear some risk, the stock market offers many ‘good buys’.”

Mr Pral added: “The market indicators suggest that there is value in the stock market, and some profitable companies with high returns on equity are available at good prices, for instance low P/E price earnings ratio.”

RoyalFidelity recently released its Performance Report Card for Bahamian-listed companies for the six months ended June 30, 2014. It is intended to provide investors with a quick survey of the ‘Top 10’ Bahamian-listed stocks as measured by four separate metrics.

These include: Best Performance (as measured by increase in stock price); Best Value (as measured by P/E Ratio); Best Liquidity (as measured by Highest Dividend Yields); and Strongest Overall (as measured by Best Return on Equity).

Colina Holdings (CHL) was ranked number one as the ‘Best Performer’ based on ‘Highest Capital Appreciation’ from January to June 2014, with an appreciation of 50 per cent.

Fidelity Bank (FBB) ranked second at 28 per cent; Arawak Port Development Company was ranked third with an appreciation at 21 per cent; while First Caribbean (CIB) and Premier Properties ranked fourth and fifth, respectively, with an 11 per cent appreciation during the period.

Colina Holdings (CHL) again ranked number one in the companies that provide the ‘Best Value’, as represented by the lowest price earnings multiple (P/E Ratio), its own standing at 7.3 from January 1 through June 30.

FamGuard Corporation was ranked second with a P/E ratio of 9.1; Fidelity Bank was third with a P/E ratio of 11; and Arawak Port Development Company (APD) and FINCO (FIN) ranked fourth and fifth respectively with a P/E ratio of 11.1
 Mr Pral said CHL, FamGuard and FBB stocks appeared to be priced attractively based on their Price/Earnings Ratios and the fact that both CHL and FBB also appear on the ‘Best Performance List’ for price appreciation.

Dividend-paying stocks are also an important part of the local market. However, Mr Pral stressed that liquidity in BISX was generally low, and that investors might hedge this illiquidity by purchasing stocks that offer a high dividend yield.

With regards to the companies that provided the ‘Best Dividend Yields’ during the period, Commonwealth Brewery (CBB) ranked number one at 5.59 per cent; JS Johnson (JSJ) ranked second at 5.57 per cent; Colina Holdings (CHL) ranked third at 5.48 per cent; FamGuard (FAM) ranked fourth at 4.80 per cent; and Bahamas Waste (BWL) ranked fifth at 4.76 per cent.

“Since most investors do not trade stocks actively, and generally employ a ‘buy and hold’ strategy”, Mr Pral said it was vital that investors identify companies that were fundamentally strong. He used Return on Equity (ROE) as a proxy for strength and profitability.

The companies he ranked as the ‘Strongest Overall’, as represented by the Return on Equity (ROE), from January 1 to June 30, 2014, were led by Commonwealth Brewery (CBB) with a 32 per cent ROE. Commonwealth Bank ranked second with a 25 per cent (ROE); Fidelity Bank (FBB) and JS Johnson ranked third and fourth respectively with a 24 per cent ROE; and FINCO (FIN) was ranked fifth with a 17 per cent ROE.

Mr Pral said his analysis was just a snapshot for the six months ending June 30, 2014.

“A company appearing on all four tables ought to be shortlisted for further review and evaluation prior to making an investment decision. Investing is both a science and an art - judgment is a critical factor, never mind what the numbers say. For investors seeking higher returns than bank deposits, who are willing to assume more risk, it makes sense to pay attention, to the stock market,” said Mr Pral.