#JSETKG Telkom breaks upward out of w-formation. Targeting R72 over coming weeks. pic.twitter.com/JNnPJSFwBa
— IJG Research (@ijg_research) November 13, 2014
Disclaimer: Charts are shared for interest purpose and do not constitute trading advice.
1H15 Results
Trustco (TUC) released results for the first half of FY15 ended 30 September 2014. The interim results reflect a strong operational performance with profitfor the period up 97.8% y/y. Basic EPS and HEPS rose 115.1% y/y to 18.48c and 18.35c, respectively. The board declared aninterim dividend of 2.75cps, after no interim dividends was declared in 1H13.
Operational and Segmental Highlights
Truscto previously operated under four segments, Insurance, Education, Finance and Properties, however, after acquiring Fides Bank, the company spilt into two divisions, namely Banking, which include capital loans and student loans; and Insurance.
Banking
After the acquisition of Fides the banking operations now run a portfolio of lending assets and depositsacross five branches in Namibia. Trustco managed to increase revenue for the banking division by 30.3% to N$62.1m in 1H15, while net profit after tax is up 73.4% to N$34.0m. Gross advances grew by 46% from the comparative interim period of 2013, predominantly dueto the increased demand for student loans, but also coupled with an increase insecured lending.
Insurance
Total insurance revenue increased 41.6% to N$393.7m and net profit was up a substantial 108.3% to N$94.6m.This division benefited from substantial gains in its investment portfolio. N$15.4m of fair value gains was augmented with realised gains of N$258.0m.
Investment portfolio
Net profit after tax from the investment portfolio increased 456.4% to N$86.0m which was to a large extent on account of the fair value gains as mentioned earlier. Thenet profit after tax from the investment portfolio made up more than 90% of total insurance revenue.
Namibia Insurance
The local insurance division delivered disappointing results as management decided not to increase insurance premiums for FY15 to remain competitive in the Namibian market. Net profit from the local insurance operations decreased 26.5% to N$48.2m from N$65.6m in 1H14.
Africa
Performance from the rest ofthe African operations remained a drag on revenuegrowth. The African leg of the insurance division delivered inferior results, with revenue down 63.5% to N$9.2m, and the loss after tax increasing further to N$39.6m. The decline in insurance premiums is predominantly due to the termination of the legacy business in South Africa which operated a high premiumsreceipting base, but very low margins in FY14
ValuationWe are currently reviewing our Trustco valuation model and will update our forecasts and target price accordingly.
A total of 221 building plans to the value of N$86.7m were approved by the City of Windhoek in October 2014. On a year‑to‑date basis (January to October), 2,479 plans were approved compared to 2,816 plans over the same period last year. In value terms, however, plans approved year-to-date are worth N$1,923.8m compared to N$1,920.9m for the same period in 2013, up 0.1%. This increase is mostly due to three large commercial projects that were approved by the municipality in February 2014. On a monthly basis, 80 less plans were approved than in September, more or less in line with the average of 255 plans approved per month over the last three years. The value of plans approved is down 58.7% m/m.
The 12 month cumulative number of plans approved lost some momentum during October, falling to 2,963 compared to 3,074 in September, with the year-on-year growth rate contracting by 12.2%, posting negative growth for the sixth consecutive month, as shown in the graph below. The 12-month cumulative value of plans approved totaled N$2,241.4m, up 0.6% y/y.
