BB Holdings Ltd BBHLF
March 13, 2008 - 10:51am EST by
2008 2009
Price: 5.45 EPS
Shares Out. (in M): 0 P/E
Market Cap (in $M): 322 P/FCF
Net Debt (in $M): 0 EBIT 0 0

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This is the only bank I own.  BB Holdings is the holding company for Belize Bank, which has some of the craziest economics I’ve ever seen.  This is a massively overcapitalized bank with a 7% ROA, 24% ROE, 8% margin, is growing loans by 60% with little credit problems to be found and growing eps by 40%.  All this can be yours for 5.2x earnings and a 17% premium to book.




BB Holdings might ring a bell to some people, and if so the reason is probably because it used to own Carlisle Group (, a diversified services firm in the UK that was spun out of BB Holdings in 2005.  BB Holdings is controlled by Lord Michael Ashcroft, who is best known for building up ADT and selling it to Tyco in the late 90’s for about $6b.  Regrettably, he was also a director of Tyco throughout their well-documented troubles.  He’s a self-made guy and has created a ton of value for shareholders along the way.  He owns about 70% of the outstanding shares as well as a significant portion of the outstanding unsecured notes.


Belize Bank


With a mere 12 branches they have a roughly 45% market share of the Belize (population 300k) banking industry and are a major presence in Turks & Caicos.  Belize is modernizing and it’s quickly becoming a legitimate tourist destination for Americans and Canadians.  Anecdotally, I see more and more ads for Belizean resorts and vacations and keep hearing about more and more people who are vacationing there.  Why Belize?  I think for a couple reasons.  First, it’s underexplored.  People are always looking for the “next” hip spot to visit, and Belize is both exotic and accessible.  Second, it’s an absolutely beautiful country, particularly along the coast.  Google it all you want, it looks just like all the other popular Caribbean islands.  Third, it’s stable.  It’s a former British colony and the currency is pegged to the dollar.  Finally, they speak English, it’s the official language, in fact.


All these things are coming together and the tourism industry is booming.  Resorts are going up, commerce is expanding, infrastructure improving, and more housing is being built for US retirees.  Belize Bank has capitalized on the growth and residential construction, C&I, and mortgages loans are up 178%, 27%, and 30%, respectively.


Their credit is basically fine, but their NPA’s are deceivingly high at 4.5%.  This is mainly a function of operating in a developing market where borrowers just move at a different pace.  NPA’s have typically been high (> 3%) but management loss estimates, and more importantly, charge-offs, have been very reasonable.  While NPA’s are > $24m, charge-offs through the last two years are only $1m.

Other Stuff


Did I mention that BB Holdings also owns a vertically integrated Costa Rican palm oil processing company called NUMAR?  They grow palms, process them, and sell various oils.  I don’t pretend to know much (see: anything) about this business, but it’s growing earnings by 50 – 100%.  I know that’s big enough to drive a truck through, but growth seems to be accelerating as the price of palm oil keeps going up.  They are also building a small biodiesel plant and will sell fuel.


They also own an offshoring company in the British Virgin Islands.  While it’s a pretty small part of the company, earnings in 2007 quadrupled and it contributed about $.02 to eps.




Don’t you wish US banks with large construction loan exposure had a balance sheet like this?  Most of the debt is owned by Lord Ashcroft himself.

Mar FYE Q4 Q1 Q2 Q3
Cash          41.2          44.3          45.9          41.3
Deposits          94.0          95.1          59.0        119.0
Loans        508.5        542.3        597.4        716.4
PP&E          14.8          16.6          16.5          16.5
Other          39.7          38.9          34.6          41.1
Banking Assets        698.2        737.2        753.4        934.3
Cash            5.2            4.6            6.4            4.9
Other            0.6            0.7            1.3            2.5
PP&E            0.1            0.1            0.1            0.1
Numar          63.6          67.1          68.6          73.5
Assets        767.7        809.7        829.8     1,015.3
Deposits        504.8        487.9        494.3        606.1
STD            6.0            2.0              -              4.5
Int Payable            7.1            8.0            9.2            8.8
Other            6.3            5.5            4.9            8.5
LTD - Bank          12.5          62.5          12.5          12.5
Banking Liabilities        536.7        565.9        520.9        640.4
Current Liabilities            1.8            1.6            2.2            2.1
Other              -                -              1.2            1.2
LTD - Other            1.2            1.2          50.0        100.0
Liabilities        539.7        568.7        574.3        743.7
Equity        228.0        241.0        255.5        271.6

Here’s what earnings look like.  We’re already through the 3rd quarter of FY08.  They’re going to easily earn at least $1 this fiscal year and I believe high growth of 20 – 35% is reasonable for the next couple years.



2006 2007 2008E 2009E 2010E
Net Int Income            36.2            38.4            60.0            83.7          102.0
Margin 7.7% 6.9% 8.1% 7.7% 7.5%
Bank Expenses              2.1             (1.0)              8.9            10.0            11.2
Bank EBIT            34.1            39.4            51.1            73.7            90.8
Corp Overhead              6.0              4.3              3.8              4.0              4.4
Investments              7.4              9.7            18.8            20.0            20.0
Other              0.3              0.6             (3.9)             (3.8)             (4.0)
Net Income            35.8            45.4            62.2            85.9          102.4
EPS            0.59            0.76            1.05            1.45            1.73
Shares Out            60.7            59.7            59.1            59.1            59.1




Who can really say what the market should value this thing at, but I believe it’s conservatively a double or triple over the next year or two.  I don’t find myself saying that very often.  We’re talking about one of the fastest growing banks on the planet, backed by a savvy investor, and its trading at a value lower than no-growth US thrifts.  Besides illiquidity, can someone make a case for why this shouldn’t trade at 2 – 3x book value?


I dont know what Lord Ashcroft’s intentions are with this company, but being a Belize native he might be reluctant to ever sell it.  This might be his baby.  But I could see someone like Bank of Nova Scotia being interested in buying it.  I just wish it was more liquid…it hardly trades, so this is a personal account idea only.  It trades on the pink sheets under BBHLF.PK and on the AIM exchange in London.


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