Mayberry sees signs of a rebound
Published:Friday | December 11, 2020 | 12:17 AM
Mayberry Invest-ments Limited has haemorrhaged nearly a billion dollars at the bottom line this year, but CEO Gary Peart is upbeat, based on the company’s report of third-quarter earnings that, while smaller than last year’s, were positive.
The brokerage was $332 million in the black for the third quarter, down 25 per cent year-on-year, but still $956 million in the red over nine months ending September, mostly due to write-downs on its large equity investments amid a stubborn bear market that has been unable to shake its COVID infection.
For a better take on the results, Peart opted to look back two years.
“We still believe that it is a good performance, because when compared to 2018 it is up over 50 per cent,” he said, regarding the third-quarter performance,
“We are happy for the result, but we still have some more work to do,” he told the company’s shareholders on Tuesday at their annual general meeting.
In its earnings report, Mayberry Investments said the quarter was characterised by reduced fees and commissions, lower dividend income and foreign exchange gains, and lower unrealised gains on investment.
“This was counterbalanced by improved net interest income, higher trading gains and higher other income,” the report noted.
Year to date, Mayberry has seen a near $1.5-billion reversal in profit, which spun from $539.3 million over nine months to a loss of $955.7 million. The impact on its comprehensive income was even more dramatic – shifting from positive $5.7 billion to a loss of $7 billion – a shift the company said was due to a reduction in financial reserves, following a decline in the prices of stocks in its equity portfolio.
Peart told shareholders that comprehensive loss must be read against the backdrop of the 2018 performance, while asserting it would recover as market conditions change.
“We had massive comprehensive income of $4.31 billion (in third-quarter 2018),” he said. “Both for the third quarter last year and this year, we’ve seen the market perform in a similar way – being basically flat, with over $100 million to $200 million in losses. I think going forward, we expect to see that loss revert to a small profit as we go along.”
He notes that the Mayberry stock, which trades under the symbol MIL on the market, is below its $8.29 book value and that Mayberry was only one of two listed companies in that position. When a stock is trading below book value, it implies there is room for the stock price to grow and is likely, but not necessarily, a bargain for market investors.
After closing last year at about $9, MIL has lost over 25 per cent of its value year to date, closing down Wednesday at $6.74. Comparatively, the market is currently down 24.3 per cent.
“The fact that the Mayberry stock is trading at about 30 per cent less than its net book value means that, at this time, Mayberry is a good buy,” Peart asserted.
The brokerage closed the quarter with a lighter balance sheet, its securities portfolio having shed nearly $8 billion of value over the course of the past year, and is now down to $18.3 billion, while its capital base has shrunk from $20 billion to $13 billion.