SIL reports 56% decrease in first quarter net profit

Sterling Investments Limited (SIL) for the three months ended March 31, 2023, reported an 18% decrease in total revenue to $29.88 million compared to $36.59 million recorded for the corresponding period in 2022.

One contributor to this was a decline in total interest income. Total interest income declined 9% from $39.64 million in the first quarter of 2022 to $35.97 million in the first quarter of 2023. SIL noted, “This was the result of the maturity of a bond within the portfolio which was not replaced. Management intentionally refrained from purchasing new assets, and instead opted to be patient and remain liquid, with the goal of purchasing assets at higher yields in the future.”

Total expenses for the period soared 1378% to total $14.02 million (2022: $948,881) for the quarter ended March 31, 2023. This was mainly due to impairment loss on financial instruments of $1.58 million relative to a gain of $168,254 for the corresponding quarter in 2022.

Operating profit recorded for the period closed at $15.85 million relative to a profit of $35.64 million booked for the prior year.

Pretax profit amounted to $15.86 million (2022: $36.17 million), reflecting a 56% decline.

There were no tax charges (2022: nil) booked for the first three months and as such, net profit amounted to $15.86 million, relative to 2022’s first quarter net profit of $36.17 million.

Earnings per share for the period amounted to $0.04 relative to an EPS of $0.08 in 2022. The trailing twelve months earnings per share amounted to $0.05.  The total number of shares used in the calculations amounted to 432,664,459 units. Additionally, SIL’s and SILUS stock price last traded at J$2.90 and US$0.02 as at the end of trading on May 12, 2023 with a corresponding P/E of 55.61x.

“Management anticipates that the unrealized gains will increase as inflation and interest rates decline. Similarly, interest expense is likely to be near its peak and should decline at the end of the current hiking cycle. Management maintains that shareholders will benefit in the medium and long term from the high-quality US$ assets in the portfolio and the steady stream of US$ dividend income it produces”, as per SIL.

Balance Sheet Highlights:

As at March 31, 2023, the company’s assets totaled $1.74 billion, 17% less than $2.10 billion a year ago. This resulted mainly from a decline in ‘Investment Securities’ which closed at $1.69 billion, $370.29 million less than the $2.06 billion booked as at March 31, 2022. SIL noted, “This reflected the broad-based, systemic downward market movements occurring in the global capital markets. The decline has presented a wide array of attractive buying opportunities for the company.”

Shareholder’s equity as at March 31, 2023, stood at $1.22 billion compared to $1.43 billion in 2022. The book value per share as at March 31, 2023 amounted to $2.85 (2022: $3.34). The decline stemmed from lower market prices for the assets in the investment portfolio relative to March 2022.


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