Scotiabank earnings per share up, CCN profits soar

Scotiabank T & T Limited
Results for the quarter ended January 31, 2003.

Scotiabank (SBTT) posted an increase in net interest and other income of 13.0 percent for the quarter ended January 31, 2003, largely due to increases in net interest income. 
In 2003, this figure reached $134.2 million, while in 2002 the corresponding figure was $118.8 million. Non interest expenses grew by 8.1 percent to $62.2 million in 2003 from $57.6 million incurred in 2002.  Loan loss expenses were down by $1.9 million in the first quarter of 2003 compared to the same period in 2002, indicating improved credit control. Earnings before taxes rose 17.7 percent in 2003 to $72.0 million over the $61.2 million made in the corresponding quarter in 2002.  After tax profit was 28.5 percent higher, at $51.3 million for the first quarter of 2003. In 2002 the same figure was $40.0 million.  This improvement was owed in part to a lower provision for taxes, which was down by 2.7 percent.  This was due to the decrease in corporation taxes which we had predicted would bode well for SBTT. The asset base of the bank grew by 0.9 percent to $7.271 billion, and the annualised return on average assets rose 25.9 percent to 2.8 percent. The annualised return on average equity was 5.1 percent higher at 24.9 percent.
 
Indicative of current low interest rate conditions in the money market, deposits declined by $45.1 million in the first quarter of 2003.  Conversely, loans increased by $44.8 million, so increased net interest margins are a possible explanation for these good results. Earnings per share reached 43.7 cents in the first quarter of 2003, a 28.5 percent improvement over the 34.0 cents recorded in the similar period in 2002. The directors have resolved to pay a first interim dividend of 17 cents per share on March 31, 2002 to registered shareholders as at March 10, 2003. We are projecting earnings for 2003 of $1.85 and a total dividend pay out of 75 cents per share.  At the current price of $21.30, the forward P/E is 11.5, and we believe this an attractive investment for all investors given the trends in the market. 

Caribbean Communications Network Limited
Results for the Year Ended December 31, 2002

Caribbean Communications Network Limited (CCN) released very impressive results for the year ended December 31, 2002.  The group achieved sales of $146.167 million, an increase of 9.61 percent over the 2001 figure of $133.356 million. 

Cost of Sales increased from $101.775 million in 2001 to $110.065 million in 2002, an increase of 8.15 percent. Gross profit moved from $31.581 million in 2001 to $36.102 million in 2002, an increase of 14.31 percent. Operating profit increased from $21.572 million in 2001 to $24.470 million in 2002, an increase of 13.43 percent. The Group achieved a profit before tax of $26.057 million, an increase of 18.00 percent over the 2001 figure of $22.083 million.  The main contributors to this better performance included $2.149 million in negative goodwill compared to $0.716 million in 2001. Also contributing was the increase in share of profit from associated companies, from $0.612 million in 2001 to $3.156 million in 2002. This was a direct result of the acquisition of 20 percent of The Nation Corporation. However, finance costs increased from $1.336 million in 2001 to $4.205 million in 2002.  At the end of the year the Group was able to retire $31 million in long term borrowings bringing the total down to $26 million.

The yen swap which the group provided, $3.975 million at the half year, declined to $1.9 million at the end of the year. Taxation moved from $8.565 million in 2001 to $7.674 million in 2002, a decrease of 10.40 percent.  The effective tax rate declined from 38.79 percent in 2001 to 29.45 percent in 2002. 

Overall profit attributable to shareholders improved from $14.093 million in 2001 to $18.874 million in 2002, an increase of 33.92 percent.  Fully diluted earnings per share increased from 31? in 2001 to 41? in 2002. The Board of Directors has approved a final dividend of 14? per share which, together with the interim dividend of 6? per share, brings the total dividend for the year to 20? per share. This is an increase of 66.67 percent over the 2001 figure of 12? per share. This share is trading with a dividend yield of 6.04 percent, the highest in the market.

We believe that this Group is poised for further growth because:

1. Cost cutting efforts by the group;
2. Lower interest cost from the interest rate swap and lower debt (full year in 2003);
3. The group’s dominance in its markets;
4. The lower corporation tax; and
5. The expected buoyancy in the local economy.
Therefore at the current price of $3.31 and using the 2002 earnings per share of 41 cents, this share is trading at a PE of 8.07 which is a considerable discount to the market.