Curmi & Partners

Life at the MSE

Article by David Curmi 

What’s going on on the Malta Stock Exchange recently?  Suddenly it has burst into life with some relatively large movements in share prices.  

Midi plc has been the leader in this respect climbing a staggering 18% in the last few trading sessions.  The stock has doubled to €0.66 since the beginning of the year.  The prime factor behind this move has been the report in this newspaper earlier in the week indicating that an agreement had been reached whereby Tumas Group would be taking over the Manoel Island Project.  Midi had flagged on the 21 June that it was in talks with the Tumas Group “to explore the possibility of establishing a joint venture with respect to the development of Manoel Island”.  The indication given in the Times article appeared to indicate that Tumas would be paying some €100m for a 60% stake.  At this stage one can only view this as speculation, until it is confirmed or otherwise, however it is important to note that in Midi’s financial statements Manoel Island appears to be valued at purchase cost plus refurbishment costs such as those on the Fort.  This implies that the company’s net asset value will rise very substantially from its current level of €0.41(Financial Statements 2017).  This must be very welcome news for shareholders of Midi plc generally.  Although a gem of an asset is being sold, Midi appears to be on the verge of receiving significantly more cash than the company’s accounts indicate hence the substantial uplift in value.  What is done with this cash is the next important step that shareholders should look out for?  I can presume that there will be many potential uses for this cash, the most obvious one being Midi’s share of the cost of the possible development of Manoel Island.   Another would be the paying out of a special dividend to shareholders.  I am sure that the board of directors would be considering this seriously especially since shareholders have not seen any significant cash return on their investment so far. 

 Go plc 

On the 3rd October Go announced that it will be carrying out an IPO for its subsidiary, BMIT Technologies.  BMIT is the old Bel Med business that focuses on providing customers with data related services such as hosting and cloud services.  The board of Go indicated that they would be seeking to dispose of up to 49% of BMIT, raising “up to €49m”, thereby valuing the business at approximately €100m.  Whilst the company announcement indicated that the BMIT Group made a pre tax profit of €4.1m in 2017, according to the accounts of BMIT the directors also expected “a significant level of earnings will be generated throughout the forthcoming financial year” i.e. in 2018.  Since the announcement, and perhaps from a few days before too, the price of Go moved up 16%. In the 3rd October announcement the company indicated that the sale would help generate liquidity for the company “that will be applied to deliver returns to its shareholder”.  I expect some clarity on the intended use of proceeds should be forthcoming in the near future as the company outlines its strategy.  Go’s track record in generating returns from its investments is patchy with Forthnet proving a big disappointment for the company whilst its investments in BMIT and Cablenet of Cyprus are expected to provide significant returns. 

BOV plc

BOV has gone through a torrid time this year.  Its share price has reflected this.  Having traded up to €1.90 earlier this year, the shares are languishing at €1.35.  This is now below the price at which rights issue was conducted almost one year ago.  The main reason for this move is the issue that the bank has with the Torre Annunziata court case.  This has led the bank to shut off its dividend for all of 2018 and to take a significant €75m provision in its accounts.  The Torre Annunziata case probably displays all that is wrong with the justice system.  On the face of it, BOV does not appear to be at fault yet the chances are that the bank may be forced to come to a settlement in order to make this go away.  This is not a pleasant outcome for shareholders but in the long run it may be seen as the cheapest and quickest solution to this ugly case.  The alternative may be a long drawn out case with an uncertain outcome and a regulator forcing the bank to raise even more capital.  A quick settlement may be attractive in this context.

The information presented in this commentary is solely provided for informational purposes and is not to be interpreted as investment advice, or to be used or considered as an offer or a solicitation to sell/buy or subscribe for any financial instruments, nor to constitute any advice or recommendation with respect to such financial instruments. Curmi and Partners Ltd. is a member of the Malta Stock Exchange, and is licensed by the MFSA to conduct investment services business.