Andrew Green, Staff Reporter
SHAREHOLDERS IN the Bank of Nova Scotia Jamaica Limited (Scotiabank) have been experiencing a massive hike in the value of their shares since the company announced its annual results on Thursday.
The stock closed trading at $20.98 on Friday hitting the Jamaica Stock Exchange 15 per cent price movement limit for any one trading day. In the 12 months before that, the stock had cycled between $18.50 and $12.70.
"Investors responded very well to the results," said Jason-Craig Watson, FirstGlobal Stock-brokers equity trading manager. "They wanted something to kick-start a price movement and they got it."
Scotiabank earned a net profit of $5.5 billion on a gross operating income of $19.7 billion, for the year ended October 31, 2003. Net profit was up 41 per cent on the year before while its gross income was up 27 per cent.
"They pulled up their performance," said Kiesa Ansine, Mayberry Investments research analyst. The bank had a 26 per cent profit growth for the first nine months of its financial year. She said there was thus a substantial improvement in final quarter to boost the full-year profit performance to 41 per cent.
On Wednesday the stock lost 19 cents, and on Thursday it gained 24 cents, though the profit performance was released after the close of trading. This was followed by the $2.73 increase on Friday.
"We have not seen this kind of movement in Scotiabank shares for a long time," Mr. Watson said.
"What acted as a catalyst was the very good results combined with a big dividend," Mr. Watson said. "It was a double whammy."
The Scotiabank board of directors approved an interim dividend of 40 cents per stock unit and a special dividend of 38 cents, totalling 78 cents per share at a meeting on Thursday. This is payable on January 12, 2004 to stockholders on record at December 17, 2003.
"What we are paying as dividend for this quarter is equivalent to the total dividend we would have paid in the year 2000," said William Clarke, the bank's managing director. This dividend takes the year-to-date distribution to $1.75, a 52 per cent increase over the $1.15 paid last year
"It is an excellent dividend payment, in keeping with their policy of paying more than 44 per cent of profit in dividends," Ms. Ansine said. At the current share price of $20.98, the price to earnings ratio is 5.62, is quite low for Scotiabank, Mr. Watson said. "There is a lot of interest in the stock right now, which could push the price higher."
Based on reduction of sell orders for Scotiabank shares and the strong buying interest, Ms. Ansine said, "the basic laws of economics imply that the price will rise further."
Explaining the bank's performance over the past year, Stacie-Ann Wright, general manager and chief financial officer said, "our productivity ratio improved year-over-year, so the expenses to income was lowered, and also the tax rate was lower."
The institution also benefited from a boost in insurance premium income and foreign exchange gains, Ms. Ansine said. "The company has maintained its reputation as a blue chip investment."