Investors’ corner

Money market report 23-27 September

Central bank monetary operations

Excess short-term liquidity continued to characterise the banking sector in the week ending 27 September 2002. This week’s surplus was mainly due to maturing term deposits amounting to Lm54.5 million, net purchases of foreign currency by the Central Bank totalling Lm2.8million, direct credits of Lm10.4 million relating to payments of salaries and pensions, and a significant cumulative excess in the reserve deposit accounts which the banks are legally bound to hold with the Central Bank of Malta. This liquidity was partially mitigated by net purchases of Treasury Bills in the primary market amounting to Lm6.6 million and from a reduction of Lm4.4 million in the banks balances with the Central Bank following the clearing of cheques.

Accordingly, an auction was held by the Central Bank on Friday, 27 September 2002, where the Bank invited tenders for 14-day term deposits in order to absorb the surplus liquidity in the market. During this auction Lm64.4 million were absorbed, Lm9.9 million more than the amount which matured during the same day. As a result, outstanding term deposits increased from Lm87.5 million to Lm97.4 million. The latest auction was carried out at the weighted average rate of 3.95%, being the floor of the interest rate band of 3.95% - 4.05% at which the Central Bank conducts its weekly auctions for 14-day money.

Inter-bank market

As in the previous week, no inter-bank deals were transacted. This reflects the surplus liquidity across the whole banking sector.

Malta government treasury bills

This week the Treasury invited tenders for 91-day Treasury bills, to mature on 27 December 2002. Applications amounted to approximately Lm34.9 million, while the Treasury issued Lm13 million worth of Treasury bills. Since Lm7 million Treasury bills matured on the same day, the outstanding bills increased by Lm 6 million to Lm192.4 million.

The weighted average rate resulting from this auction was 3.9639%, which was marginally higher by 0.0016 of one percentage point than last week’s 91-day rate of 3.9623%. This rate corresponds to a price of Lm99.0214 per Lm100 nominal.

This week the Treasury will invite tenders for 182-day Treasury bills to mature on 4 April 2003. For the following week, the Treasury will receive applications for 91-day bills to mature on 10 January 2003.

During the week under review, turnover in the secondary market amounted to Lm1,481,000 which was higher than last week’s Lm198,000. This turnover consisted of a deal of Lm1,350,000 dealt outside the Central Bank and net purchases totalling Lm105,000 effected by the Central Bank in its role as a market maker.

Datatrak signs contracts worth Lm1.6 million over five years

The Datatrak Group announced that it has signed Lm1.6 million worth of contracts spread over a five-year period.

The announcement forms part of the Group’s interim financial statement, through which it also announced that turnover for the first six months of the year stood at Lm478,419, while turnover for the first eight months of 2001 has amounted to Lm353,71o.

All Datatrak’s subsidiaries had contributed to the increase in turnover. But the Group explains that it was mainly Datatrak IT and Datatrak Multimedia that reflected the major increase in turnover on the same six-month period. Datatrak Systems Ltd had also registered marginal increase in sales over the comparative period.

Loss before taxation and depreciation for the period was Lm 97,461 compared to Lm 139,092 in the eight-month period of year 2001. During the period under review Datatrak IT continued with its investment in Human Resource Development through training curriculum and the recruitment of specialised IT personnel where necessary.

New product developments

During the current period, the group developed and introduced a new Web-Based service to be used by the Local Warden System to provide the Local Councils a tool to monitor and plan local wardens logistics. Software development for an Automatic Vehicle Location (AVL) on Web-based internet system has also started and is expected to be introduced during the last quarter of the year 2002.

The service is targeted towards small business operators and private users that cannot afford the luxury of a centrally controlled GIS Software capability. In conjunction with increase in internet services on the island the AVL Web-based service is expected to stimulate further growth in sales.

Overseas markets

Following the award of a contract by Siemens last year that has been carried out to the highest specifications by Datatrak IT Services Ltd, Siemens has again awarded the company another contract for the development of a customised software solution to another UK recovery firm, Hinton.

The Libya project remains on top of the Group’s priority list. During the period various issues of technical nature have been raised and resolved. Discussions on the way forward with the project have also initiated. Should the same progress be maintained during the next period, the company will be expected to sign a preliminary contract.

During the period under review the company has gone into a Marketing Consultancy agreement with a French born Algerian to market Datatrak in Algeria. High-level meetings have been continuously held between Datatrak Officials and Algerian Investors. During the same period the Group founded a company in Algeria. Satisfactory progress has been achieved and the company is expected to achieve significant progress in coming period.

Resources have also been targeted at Nigeria and following positive feedback arising from a thorough research on market development and risk potential carried out by Datatrak MENA Ltd. on the region, Nigeria has been considered as a prospective business potential. Meetings have been progressing well and a high level of interest towards the technology by Nigerian investors is being shown.

During the end of the period under review discussions between Datatrak and Nigerian investors to form a company in the region have ensued and was agreed to meet in the very near future to finalise and set up the company as a first step towards a successful conclusion of technology transfer and know-how to the region.

Corinthia Finance announces 15c9 earnings per share

Corinthia Finance has announced 15c9 earnings per share following the release of its interim financial results.

Over this year’s first half, the company issued Lm4,000,000 6.75 per cent Bonds 2012 with a nominal value of Lm100 per bond at par and €10,000,000 6.50 per cent bonds 2010 with a nominal value of €100 per Bond at €97 per bond.

Following the application of the over-allotment option, the bonds allotted by the company amounted to Lm6,289,900 6.75 per cent bonds 2012 and €14,273,700 6.50 per cent bonds 2010.

The proceeds derived from both issues were advanced to the parent company, Corinthia Palace Hotel Company Limited, for the purposes set out in the Offering Memorandum dated 11 March 2002.

During this period, the company’s revenue amounted to Lm553,675. This was generated from interest receivable on loans advanced by Corinthia Finance to its parent company (Lm541,772) and bank interest receivable (Lm11,903).

Interest payable on the bonds in issue and the amortisation of the discount on the issue of the Euro Bond, amounted to Lm521,548. The company incurred Lm7,602 by way of administrative expenses. After deducting taxation amounting to Lm8,584,the profit for the period amounted to Lm15,941.

Two Farsons bond issues this month

Simonds Farsons Cisk will be offering the general public the opportunity to subscribe to two bonds issues this month.

One bond will be for the amount of Lm1,500,000 6.25% Bonds 2006-2008, while the other will total Lm3,000,000 6.6% Bonds 2010–2012. Both bonds are being issued at a nominal value of Lm100 per bond issued at par.

In the event of over subscription, the company has said it is to reserve the option to increase the amounts in issue by an aggregate of Lm1,500,000 in either or both of the bonds.

Holders of the SFC 6% (Net) Preference shares 2001-2003, which are being redeemed on 22 October, will be given the opportunity to subscribe and exchange their holdings of preference shares for the new bonds.

Other applications will be subject to a minimum of Lm500 and multiples of Lm100 thereafter.

Copies of the offering memorandum and application forms are available from branches of all local banks, from licenced stockbrokers and financial intermediaries.

Subscription lists for the general public will open on Thursday 17 October and close on Wednesday 23 October or earlier in the event of an over subscription.

The managers and registrars of the issue are HSBC Bank Malta whilst the sponsoring stockbrokers are Azzopardi Stockbrokers and Curmi & Partners Ltd.

IHI sees profits soar despite tourism adversity

International Hotel Investments has announced pre-tax profits of Lm1,422,993 for this year’s first half, compared to Lm971,434 registered during the corresponding period last year.

On a consolidated basis, turnover during the period had increased by nearly Lm4.8 million from just under Lm2 million over the same time frame last year.

The substantial increase in turnover reflects the performance of the Corinthia Alfa Hotel in Lisbon, Portugal and that of the Corinthia Nevskij Palace Hotel in St Petersburg, which were acquired in August 2001 and January 2002 respectively.

As a result, an operating profit of Lm137,569 for the period under review was achieved, representing an improvement of Lm483,625 over the amount (before an exceptional item) registered last year over the same period.

IHI has achieved such results in the face of the downturn in business following the tragic events of 11 September 2001.

Income of Lm64,430, net of goodwill amortisation amounting to Lm10,975,was earned from the Group’s 20 per cent investment in its associated companies, CHI Limited and Quality Project Management Ltd.

IHI explains that these interim financial statements reflect the lower revenues and operating profits associated with the seasonality of the hospitality industry, which is characterised by low revenues and returns during the winter months.

The net profit for the period under review includes unrealised gains on exchange differences amounting to Lm1,827,446,resulting from the movement of foreign currencies against the reporting currencies of the Group companies.

During the period under review the Group issued 1,417,207 Lm1 Ordinary Shares. As a result the Lm8,000,000 Rights Issue of December 2001 was fully subscribed.

Announcing the results, IHI added that it expects better results for the second half of the year.

Globe cuts costs, contains loss

GloBAl Financial Services Group plc – formerly Globe Financial Management plc – has generated a turnover of Lm438,015 for the six-month period up to the end of last June. This represents a decrease of Lm342,641 or 44% when compared to the same period for the previous year.

Christopher J. Pace, chairman, said that the past few months have seen the world’s stock markets hit new lows, despite hopes for betterment. "Malta has been no exception to this worldwide phenomenon, and though it is tempting to see the difficulties in an entirely local context, it should be remembered that the factors which affect our stock market are intertwined with those now affecting stock markets internationally."

The next few months will see the finalisation of the merger between GloBAl Financial Services Group plc and the Malta operations of British American Insurance, which include BUPA Agencies Ltd. "This will give us a more diversified source of income, leaving us less dependent on stock market conditions," Mr Pace said. The group plans to launch several new products, tailoring these to the requirements of the current investment climate. One such was launched with considerable success in July.

Cost-cutting measures that began last year have yielded significant results, reducing the group’s loss over this period to Lm68,709 after tax. A comparison of administrative expenses with this period over the same period last year shows that savings of more than Lm100,000 have been made.

The group continues to hold net assets of more than Lm2.6 million, mainly in quoted financial assets and property.

"Investor sentiment, as is to be expected, has not been good. The bad news coming from all quarters has been somewhat discouraging for those who had hoped for an upswing in the latter few months of this year. We do know, however, that this is not a permanent state of affairs, and that these things are cyclical. The silver lining in this particular cloud is that interest rates are expected to be cut even further, which should give a boost to the world economy," Mr Pace said.