This is the fifth in a series of six articles, published between October 1 and 6, in support of the Bermuda Stock Exchange World Investor Week Quiz Challenge. Each article has a question embedded. Find the question and send your answer to firstname.lastname@example.org. Those with six correct answers will be entered into a draw to win a grand prize of a $2,500 Bermuda securities portfolio.
Investors in local stocks are having a good year, with The Royal Gazette/BSX Index up by 30 per cent through yesterday.
The increase has been driven by double-digit surges in the value of two of the Bermuda Stock Exchange’s three largest companies by market capitalisation: Butterfield Bank and Ascendant Group.
The local index has comfortably outperformed the S&P 500 Index of the biggest US companies, which was yesterday up by about 8 per cent for the year to date.
However, there have been mixed fortunes among BSX issuers with only one company outside the top two, Bermuda Press (Holdings), recording a double-digit stock price increase so far, while five of the 13 domestic main board companies have fallen by varying degrees.
This year’s gains for the index follow a rise of 14.5 per cent for the full year 2017 and gains of 47.8 per cent in 2016.
The biggest climber for this year to date, by some distance, is Ascendant, owner of power utility Belco, AF Holdings and Inventure, with a gain of 68.5 per cent.
The company is making progress with the urgent business of replacing ageing and inefficient generators, most notably with the green light from regulators to build a new power station.
But the biggest catalyst for Ascendant’s stock price came from a $15-per-share takeover bid from TFC Utilities, a US-based company.
Although the Ascendant board flatly turned down the offer, it did shine a light on the fact that the group has been trading at less than half of its book value for many years.
The stock started the year at $9.79, got a boost from news of the takeover bid, and has continued climbing to $16.50. Even at this price, it is trading at two-thirds of its book value.
As can be seen under the “Price Book” column in the BSX daily trade report, published daily by The Royal Gazette, in print and online, 12 of the 13 domestic companies listed on the BSX, as of yesterday’s close, were trading at a discount to their accounting valuation.
Another factor for Ascendant’s potential shareholders to consider is the company’s aggressive share buy-backs. In May, the company announced its intention to repurchase one million of its 10.2 million shares outstanding.
This is good for investors in at least two ways. First by reducing the number of shares outstanding, it means that each share represents a larger slice of the company ownership pie. Second, it improves liquidity, meaning that any investors looking to sell some shares know there is a buyer ready to snap them up in the form of the company itself.
Other BSX-listed companies have their own share buy-back programmes, including insurer BF&M, telecommunications group One Communications, financial-services firm LOM Financial and Bermuda Press (Holdings), which owns this newspaper as well as commercial printing, real estate and retail interests.
Butterfield is by far the largest domestic issuer on the BSX, with a market capitalisation of almost $2.8 billion, as of the close yesterday. As such it has an outsize influence on the index. It started the year at $37.50 and has gained 36 per cent since to close on $51 yesterday.
The bank also has US-listed shares trading on the New York Stock Exchange.
It has expanded through a series of acquisitions and its revenue and earnings are on an upward trend. This year Butterfield completed its acquisition of Deutsche Bank’s Global Trust Solutions business, which has locations in Cayman, Guernsey, Switzerland, Singapore and Mauritius.
Bermuda Press has gained 10.5 per cent this year so far, having recorded a fifth successive year of profitability in 2017 and a strong first half in its current fiscal year. Another boost for investors was this year’s 40 per cent hike in the quarterly dividend, from five cents to seven cents.
That equates to an annual yield of 4.1 per cent for BPHL, a factor that can add meaningfully to an investor’s returns. Other consistent dividend payers with yields above 4 per cent are insurers BF&M (5.25 per cent) and Argus (4.57 per cent).
Any issuer’s dividend history going back many years can easily be checked on the BSX’s website, www.bsx.com, by clicking on the Listed Issuers tab and finding the company’s page among the domestic issuers.
In the same place, annual reports and financial statements are available where a prospective investor can peruse the numbers to gauge whether they think that a dividend is likely to be raised or decreased in the future.
Name the wholly-owned subsidiary of BSX-listed Devonshire Industries that is a household name in Bermuda.
Rounding off the list of companies to have recorded share price gains in the year to date are Somers, the financial-services holding company and owner of Bermuda Commercial Bank, which has gained 5.2 per cent for the year, and Argus Group, which is up by 2.3 per cent.
The share prices of Polaris Holding Company, owner of Stevedoring Services, the operator of Hamilton docks, and One are flat for the year, while stock price falls have been seen by BF&M (-2.8 per cent), Watlington Waterworks (-14 per cent), Bermuda Aviation Services (-27.3 per cent), West Hamilton Holdings (-32.3 per cent) and Devonshire Industries (-35.3 per cent).
• For more information on any BSX issuer, visit www.bsx.com. Full details of the BSX WIW Quiz Challenge are in the PDF attached to the online version of this article at www.royal gazette.com