We are committed to providing our clients and potential investors with investment research and for this reason we are one of the few local brokerage houses that have invested in a qualified research team whose main aim is to prepare Investment Research Reports.
Our research unit forms the backbone of all investment decisions and advice provided to our clients. The team also closely follows international market developments. With respect to international equities and bonds, our research unit uses third-party reports and research provided by a number of globally renowned investment houses.
Our core research publications include weekly and quarterly market reviews together with company Investment Research Reports, following the announcement of the interim and annual financial results, Investment ratings / opinions are also prepared on initial public offerings and new bond issues launched on the local market.
Our research unit is also responsible for the compilation of the weekly newspaper columns which appear in the Business & Finance section of the Times of Malta or ‘The Business Observer’ supplement (distributed with the Times of Malta). The main aim behind this contribution is to provide adequate coverage on financial market developments and also to highlight certain important elements for inexperienced investors in order to enhance the education process.
Our independent and objective research is possible also due to our strong relationships with the companies we follow, which enables us to gain a deep understanding of their businesses and the industry environment in which they operate. The research analysts have a close working relationship with the top management of listed companies and perform regular company visits. Moreover, our research analysts attend all presentations made by listed companies including stockbrokers’ meetings held regularly by the listed companies, all Annual General Meetings and Extraordinary General Meetings.
Rating / Opinion Gradings
Our rating policy for equities is based on the expected returns to an investor (share price change and dividend income) during a specified period of time. The rating/opinion is normally reviewable every six months after the publication by the company of its periodic financial statements. Therefore the opinion may be altered if the analysts’ view of the company changes (possibly due to a change in outlook), the result of a noteworthy announcement (for example an acquisition), or a significant share price movement from the last rating. On a day-to-day basis, fluctuations in the share price do not alter the rating.
Our ratings and their respective meanings are provided below:
- STRONG BUY: total return expected to exceed 25% within the next 2 years;
- BUY: total return expected to range between 10% and 25% within the next 2 years;
- LONG-TERM BUY: total return expected to exceed 25% within the next 5 years;
- HOLD: total return expected to range between +10% and –10% within the next 2 years;
- SELL: total return expected to drop by 10% or more over the next 2 years;
- UNDER REVIEW: the previous rating, if any, is no longer in effect and should not be relied upon until a review of the company is completed.
With respect to bonds, our ratings are based on the periodic review of the company’s financial ratios mainly related to the ability of the company to meet periodic interest payments and their overall level of gearing.
Our ratings and their respective meanings are as follows:
- STRONG BUY or ACCEPT AND ADD (in the case of bond exchange offers) – The Company’s financial performance and ratios are strong. Risk is relatively low and the interest rate adequately compensates for the level of risk undertaken.
- BUY or ACCEPT (in the case of bond exchange offers) – The Company’s financial performance and ratios are good. Risk is manageable and the interest rate is commensurate to the level of risk undertaken.
- WEAK BUY or ACCEPT WITH CAUTION (in the case of bond exchange offers) – Although the Company’s financial performance is acceptable and financial ratios are reasonable, the interest rate does not adequately compensate investors for the present levels of risk/uncertainty and as such we advise taking a small exposure to such instruments.
- HOLD or REJECT (in the case of bond exchange offers) – The Company’s financial performance is weak and its financial ratios are presently acceptable. However, we are cautioning in view of certain circumstances which may lead to significantly increased levels of risk and which should be carefully assessed.
- SELL – The Company’s financial performance is weak and the company’s ratios are poor indicating a higher level of risk. Investors holding bonds in such a company should consider disposing of their holdings.
- AVOID – The Company’s financial performance is weak and the ratios are poor indicating a high level of risk. As such we do not advise taking an exposure to such a bond.
- NOT RATED – Mainly due to the lack of sufficient information/ data to analyse the company’s state of affairs, the Company is not rated.
- UNDER REVIEW – The previous rating, if any, is no longer in effect and should not be relied upon until a revised analysis of the company is completed.
Ratings/Opinions are given in good faith but without legal responsibility and are subject to change without notice. The information does not constitute advice or a personal recommendation or take into account the particular investment objectives, financial situations or needs of individual clients. Clients are recommended to seek advice concerning suitability from their investment advisor. Investors should be aware that past performance is not necessarily a guide to the future and that the price of shares, and the income derived from them, may fall as well as rise and the amount realised may be less than the original sum invested.
Rizzo, Farrugia & Co. (Stockbrokers) Ltd. provides stockbroking services, investment management and advice to private clients and institutions.