Sep 2008 Financial News

GHL Releases Half Year Results

Sep 17, 2008

Guardian Holdings Limited
Results for the Half Year Ended June 30, 2008

Earnings Per Share
Guardian Holdings Limited (GHL) for the Half Year Ended June 30, 2008, reported a diluted Earnings Per Share (EPS) of $2.56 compared to a diluted Loss Per Share (LPS) of $0.81 in HY07. According to the Chairman, this excellent outcome was made possible by the strong operational performance of all of the Group’s business units and by the disposal of the Group’s strategic investment in Grupo Mundial in Panama and its entire shareholding in RBTT Financial Holdings Limited.

Financial Highlights:
• Net Insurance Premium Revenue, up 5.9 per cent or $128.3 million to $2.3 billion
• Realised and unrealized gains from the sale of the Group’s investment in Grupo Mundial totalled $349.4 million
• Fee and Commission Income, down 4.6 per cent or $2.9 million from $61.9 million to $59.0 million
• Total Revenue, up a significant 28.0 per cent or $772.2 million to $3.5 billion
• Net Insurance Benefits and Claims, up a minimal 1.1 per cent or $17.9 million to $1.7 billion
• Operating Profit (before fair value losses), up an outstanding 375.3 per cent or $635.9 million from $169.4 million to $805.4 million.
• Fair Value Loss of $133.0 million compared to a Loss of $249.8 million in HY07. Approximately 50 per cent of this Loss was attributable to the decline in the share price of the Group’s holding of Royal Bank of Canada (RBC) shares. GHL received over 2 million RBC shares from the RBTT/RBC acquisition, of which approximately 50 per cent was sold. The Group intends to dispose of the remaining RBC shares by the end of the year. The other 50 per cent of the Loss was as a result of declining market values of other securities held in the Group’s investment portfolio.
• Operating Profit of $672.4 million compared to an Operating Loss of $80.3 million in HY07
• Share of Profits of Associated Companies, down an outstanding 47.8 per cent or $9.0 million to $9.9 million
• Profit After Taxation of $568.1 million compared to a Loss After Taxation of $184.3 million in HY07

Dividends
In light of these results, the Directors approved an interim dividend of 15 cents per share as well as a special dividend of 25 cents per share as a result of the benefits derived from the disposal of the Group’s investments in Grupo Mundial and RBTT Financial.

Outlook and Recommendation
The welcome recovery in GHL’s First Half performance when compared to previous results is certainly promising. The proceeds from the disposal of the two investments previously mentioned permits the Group to realign its investment portfolio and to retire debt and thus reduce finance charges. It is anticipated that the GHL’s continued focus on operational efficiency will allow for future growth and expansion of the Group.

The shares of GHL last closed at a price of $24.57. At the current price and forecasted EPS of $3.10 for fiscal 2008, this share is trading at a price to earnings multiple of 7.9 times. Additionally using a multiple of 11 times and the forecasted EPS, GHL has an expected return of approximately 39 per cent or a Target Price of $34.10. The Group continues to have a strong Balance Sheet with a Net Asset Value per share of $20.20 which translates into a market to book ratio of 1.22 times at the current price. We continue to recommend a BUY on this share.


Nancy Chen
WISE Equity Research Team