The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian stock market will generate a minimum 10 per cent return for investors in 2013, a leading investment banker said yesterday, adding that some listed equities had seen “significant price increases” of up to 69.5 per cent year-over-year.

Michael Anderson, RoyalFidelity Merchant Bank & Trust’s president, told Tribune Business that this year would see a continuation of the recovery begun in 2012, with the BISX market generating total returns of between 3-4 per cent for the first six weeks of 2013 alone.

Noting that the price/earnings (PE) ratios for some leading stocks, such as Cable Bahamas and Colina Holdings (Bahamas), were around half their historical values, Mr Anderson said stock market recovery was being driven by a combination of improved company earnings and renewed investor confidence, as more flooded into equities in search of higher returns.

“It’s not hugely ambitious to think we will get 10 per cent returns for the year, and probably higher than that,” Mr Anderson told Tribune Business. “We’ve seen significant price increases in equities. I suspect 2013 will be a great year for the equity market.

“It’s nice to see things finally correcting themselves. We’re starting to get to where the price of a stock is in more normal trading range. They were so undervalued, what we’ve seen is a run-up to more normal territory.”

Higher total returns than 10 per cent were possible, Mr Anderson explained, due to the equities market’s performance over the first six weeks in 2013.

The Bahamas International Securities Exchange’s (BISX) All-Share Index, which measures just share price movements, was up 2-3 per cent since January 1, and Mr Anderson said: “If you took dividends into account, that number would probably be closer to 3-4 per cent.”

He also based his estimate of a 10 per cent average total return, combining both share price appreciation and dividend yields, on an improved showing by financial services stocks - which account for the bulk of BISX’s market capitalisation - in 2013.

These equities, banks and insurance companies, were forecast to deliver improved year-over-year earnings because provisions for non-performing loans were likely to reduce in 2013, given that most bad credit had already been provided for.

“I think 2012 was the start of the recovery, and 2013 will be the continuation of the recovery, so absent any shocks I expect prices to increase and the market to grow in 2013,” Mr Anderson said.

“We will see more normal growth in earnings that drives 10 per cent growth at the end of the year.”

Data provided to Tribune Business shows that numerous BISX-listed stocks have enjoyed ‘double digit’ year-over-year growth in their share prices.

AML Foods leads the way, its share price having increased by 69.49 per cent between February 19, 2012, and the same date this year. Its stock has risen from $1.18 to $2 per share, aided perhaps by the company’s share buy back programme, but also possibly by its recent rapid expansion. Combined with a 3 per cent dividend yield, AML Foods has generated a 72.49 per cent return for investors over the past 12 months.

Just behind was Fidelity Bank (Bahamas), with a 52.9 per cent share price appreciation, combining with a 5.91 per cent divided yield to produce a 58.81 per cent return.

Also enjoying big share price recoveries were FINCO and Cable Bahamas, of 43.49 per cent and 35.48 per cent respectively, while FOCOL, Commonwealth Bank and Doctors Hospital also generated ‘double digit’ share price appreciation.

At the other end of the scale, just four BISX-listed stocks have generated negative returns for their investors over the past 12 months - CIBC FirstCaribbean International Bank (Bahamans), the Bahamas Property Fund, Bank of the Bahamas International and ICD Utilities.

The latter has been the worst BISX performer, generating a negative 10.96 per cent return based on its declining share price.

Mr Anderson told Tribune Business that seven to eight listed BISX stocks now had more ‘Buy’ orders than ‘Sell’ orders for them, indicating that the previous seller ‘overhang’ or surplus had been eliminated.

“There’s not enough shares coming to market, so people are able to choose the price they sell at, unlike a year ago when buyers were able to choose the stocks they wanted,” he said.

Warning that investors would now have to pay higher prices than those stocks were currently trading at if they wanted to ‘buy in’, Mr Anderson said “a lot of money” was being attracted to the greater yields offered by equities due to the low interest rate environment for bank deposits and absence of fixed income alternatives.