Sep 2006 Financial News

Fortress Releases Nine Months Results

Sep 12, 2006

All Figures Quoted In Barbados Dollars Unless Otherwise Stated

Fortress Caribbean Property Fund (CPF) reported a 7.87 per cent increase in its Net Asset Value from $1.27 in 2005 to $1.37 in 2006 for the nine months ended June 30, 2006. Total Assets of the Fund grew 63.64 per cent to $108.109 million with Property Investments making up 72.46 per cent of Total Assets. The increase in Total Assets was attributable to significant increases in Cash, Deposits & Marketable Securities (78.76 per cent); Available for Sale Securities (226.29 per cent); Real Estate Development (470.67 per cent) and Property Investments (33.13 per cent).

Total Revenues increased 24.62 per cent to $5.275 million. The major component of this was Net Rental Income which rose 29.36 per cent to $4.822 million and contributed 91.41 per cent to Total Revenue. Interest Income also showed a noteworthy increase as it grew 26,235.11 per cent from $0.002 million in 2005 to $0.426 million in 2006. Revenue for this period also included Fair Value Gains of $0.214 million; a 45.86 per cent drop in Gain on Available for Sale Items to $0.254 million and a 75.27 per cent drop in Other Income to $0.009 million.

Total Expenses rose by a bigger margin than Total Revenues, namely 51.28 per cent to $2.307 million. The major contributor to Total Expenses was Interest Expense which rose 45.92 per cent to $1.353 million and made up approximately 58.65 per cent of Expenses. Also contributing to the rise in Total Expenses were increases in Fund Management & Adviser Fees (68.93 per cent); Professional & Other Fees (44.91 per cent) and Office & Administrative Expenses (62.66 per cent).

Despite the comparable increase in Total Expenses to Total Revenue, Net Profit grew 30.99 per cent to $2.586 million. There was no growth in Earnings Per Share (EPS) however as during the period 22.3 million new shares were issued. Hence, the outstanding share capital for the comparable period in 2005 was that much less than that of 2006. As a result, CPF’s EPS dropped 16.67 per cent from 6 cents in 2005 to 5 cents in 2006.

Given these results we are revising our forecasted year end EPS to $0.12. At the current market price of TT$4.90, CPF is currently at a high price/earnings ratio of 13 times. Its market to book value is approximately 1.15 times. The Managers of the Fund expect it to grow slowly over the next two years due to the developmental status of the Fund. However due to the cooling of the property market in the US which could impact the Caribbean coupled with the growing supply of developments, we currently recommend a HOLD on this share.

Sreshtha Tewari
WISE Research Team