JSE: Thursday, 9th May 2013

May 10, 2013 by

Scotia Investments jumps $2.60

Scotia Investments jumped $2.80 to close at $26.15 and was the biggest mover on the day trading 8,805 units, all at $26 or above. Grace Kennedy had a bid of $56 closed which was higher than the last sale price and ended up with a gain of $0.55 to close at $55.55 having traded at a high of $56. Scotia Group closed at $22 up 79 cents on the day, Sagicor Life made amends for the fall yesterday by putting on 40 cents to close at $8. Lasco Financial Services gained 19 cents to close at $7.99, the stock traded at an all-time high today of $8. Carreras gained 50 cents to close at $57.

Advancing stocks continue to out-pace declining ones by more than 2 to 1 with 9 ordinary shares advancing to 4 falling.

JSEINdicesMay9J$34.1 million invested in 4,282,236 units of stocks traded on the Jamaican dollar segment of the market. US$947,000 was expended in the US dollar market in trading on Thursday.

Proven Investments accounted for 8,578,641 shares valued at US$947,939.83 in the US market. Just one trade took place in the stock, with Pan Caribbean Financial Services handling both sides of the trade. Data indicates that they did it on behalf of clients. The main market index and the All Jamaica Composite index recovered all the points lost yesterday, and more, in today’s trading.

Grace Kennedy traded 205,745 shares valued at $11.44 million between $55.55 and $56. Access Financial Services lost 10 cents in trading 1,363,200 shares valued at $9.54 million. Mayberry Investments crossed 1.316 million units which they bought for in-house purposes. Gleaner Company traded 2,073,109 units with a value of $2.49 million. The entire Gleaner trade was handled by NCB Capital markets on behalf of clients. NCB closed down 20 cents to $17.80 on 139,292 units valued $2.5 million. Sagicor Investment saw 104,521 units changing hands for $1.62 million, Proven’s 8% preference shares traded 470,377 worth $2.39 million, all traded at $5.09 up 6 cents on the day.

Bullish signs persists | There are still bullish signs being reflected in prices on the market with quite a few stocks still having bids that are higher than the last selling price.

Filed Under: JSE Main Market, Stock Market Tagged With: ,

Sagicor undervalued despite $B NDX hit

May 10, 2013 by

Sagicor Life group got hit with a billion dollar charge — the product of the Government of Jamaica’s debt swap in February. The Group exchanged $60.65 billion of GOJ securities for new securities with lower market values, lower coupon rates and extended tenors. The bond exchange resulted in “one-time” realized capital losses of $1.11 billion and lower interest will be earned on the new bonds going forward. To the end of March, the reduction in interest was $83.25 million. In addition, there was expense of $48.1 million for asset tax, which was introduced in June 2012 as stated by management in a release accompanying the first quarter numbers.

NDX effect | Despite the effects of the NDX debt exchange and increased taxes, Sagicor Group posted a net profit of $620.15 million for Q1 2013. In the first quarter of 2012, a net profit of $1.49 billion was earned. The Q1 2013 basic earnings per stock unit was $0.16 (2012: $0.40) and the annualized return on average Stockholders’ Equity was 8% (2012: 20%). Total Comprehensive Income including, net profit for the period and movements in reserves held in Equity, was $1.06 billion and the amount for 2012 was $2.04 billion. For the 2012 financial year the group reported audited profits due to Sagicor’s shareholders of $5.8 billion or $1.54 per share.

SagicorBuilding280x150The release went on further to state that the group’s insurance business performed relatively well but the banking arm faced challenges. Revenue would have been up about 9% but for the impact of the NDX. Net Premium Income, in aggregate, was 6% more than that for 2012. The Individual lines of business earned premiums up by 10% while Group Insurance and Annuity premiums were up by 3%. There was good new business across all lines in the first quarter contributing to strong growth in the in-force policies.

Investment income, before interest expense and capital gains was higher than in the prior year by 2%, including lower coupons in March on some GOJ bonds. Capital gains, for other than NDX security trades, and fair value adjustments were 28% lower than in 2012. Fees and Other Revenues were ahead of prior year by 59%, mainly influenced by higher current period unrealized foreign exchange gains from devaluation of the Jamaican dollar. The life insurance arm paid out 17 percent more on insurance claims due to higher mortality rate and growth on business.

Sagicor boasts total assets of $180 billion, with equity of $33 billion, making it one of Jamaica’s largest financial institutions. Total revenue for the quarter was $7 billion versus $7.5 billion in 2012 and for 2012 equity was $31.5 billion.

Maturity | The life company has reached or is close to maturity in the local market for insurance while the banking arm will need to fight hard to make any meaningful impact on Sagicor’s profits. Management is clearly seeing this, hence the decision to move into Costa Rica.

Stock outlook | The stock for the group is trading around $8 and is considered undervalued by IC Insider as earnings from ongoing operations should range between $1.60-2.00 based on existing business for this year when the one-off NDX charge is removed. Investors should note that historically the PE ratio of this stock has been much higher than for most in the market, which makes the stock a steal at current prices.

Filed Under: Company News, Company Results Tagged With: ,

Carib Cement profit mired in concrete

May 10, 2013 by

Badly financially structured, the lone Jamaican producer of cement and gypsum, Caribbean Cement Company continues to be under concrete with huge losses weighing it down and in spite of recent price increases, the company is still reporting losses as shown by the 1st quarter 2013 results. Unfortunately, when analyzed, the interim results do not shed any light as to when its fortunes will not only change for the better but when will it start making returns to its owners.

Although local sales are up from 143,316 tonnes last year to 151,862 tonnes this year, export sales was down and revenues were up to $2.646 billion aided by recent price adjustments. In 2012, revenues came in at $2.3 billion. The improved revenues helped to turn around the profit, before depreciation interest and devaluation losses, to $184.25 million up from a loss of $377 million in 2012. Even without any foreign exchange loss the company needs another 10 percent increase in revenues, net of expenses, to be somewhat safe.

Price increases | In January the company increased cement prices by 16.5 percent on average and 3 percent in April as well. Interestingly, in spite of the January increase and a 9.2 percent increase in July last year and increased volume of local sales, revenue for cement is up only 15 percent over that of 2012, well below the price adjustments. Admittedly, the decline in exports would have impacted income growth.

caribcementlogo150X150As stated by management in a release, total sales volumes declined when comparing first quarter of 2013 with the first quarter of 2012. However, domestic sales volumes, which are essential to the company’s viability, increased by 6.7%. The improvement in domestic sales was entirely due to increased market share as the overall domestic market declined. This increase in domestic sales, along with increases in selling prices and further improvements in clinker production have resulted in a $561 million improvement in Earnings before Interest, Depreciation and Tax [EBITDA] over the corresponding period for 2012.

Management went on to further state, that the negative Group equity increased to $3.44 billion and with the significant build up in clinker inventory during this first quarter as production exceeded sales, the Group could not continue to operate without the financial support of the parent company, Trinidad Cement Ltd. Management is pursuing various strategies to improve both domestic and export sales and it is proposed that a significant portion of the debt due to the parent company be converted into equity during the second quarter.

Messed up | Caribbean Cement has messed up so many times in recent years that it will take a massive change in its financial fortunes to restore investors’ confidence. The first error is that the company totally mistimed the plant expansion by not anticipating the increased in demand in the mid-2000s. As a result, they missed most of the increased demand and the expanded plant only caught the tail end of it. Secondly, the company missed a glorious opportunity in 2004, when the stock price was sky high, to raise added capital in the local market to help fund the expansion. Finally, there is no evidence that they forged the right political connections or presented a viable plan to ensure continuity in cement supply, thus opening the market to unneeded imports which severely hurt them and from which they continue to reel.

Minority shareholder to be battered | The contemplation to convert debt to equity by the parent company, could negatively affect shareholders’ value if the conversion is to ordinary shares. If the conversion is to redeemable preference shares that would be a far different proposition, as preference are quasi debt and equity.

Filed Under: Company News, Company Results Tagged With: , ,

D&G or C&WJ: to buy or not?

May 10, 2013 by
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Hi John: Should I buy more Lime stock or D&G? I already own some Lime shares. What was the last dividend paid by D&G? Thanks for your advice.

Response | That is a tough question. By the way there is no such company as Lime. Unfortunately the stock exchange has, in their wisdom, bastardized the system by trying to suggest that Cable & Wireless has had a name change but that is not so. There is no legal limited liability company such as Lime listed on the exchange.  Lime is purely a brand name and not the real company name. It seems to me that the exchange is totally confused. They have the name Lime for the company with the ordinary shares but they did not change the name of the preference shares which are still listed as Cable & Wireless. Drawing a line from what they have done, anyone not knowing the true situation would assume that there are two separate telecom companies listed, one called Lime and one called Cable & Wireless. Why JSE persists with this aberration is yet to be determined as there is no rationale for it, but then the stock exchange is doing many strange things these days. It makes one wonder if they are really serious about running a stock exchange at all.

D&G | Now to the question you asked. My investment company owns shares in both Cable & Wireless and D&G. First, the last dividend paid by D&G was 20 cents in December last year and another should be paid in June or July this year. They normally pay out 80% of profits each year so the next dividend could be around 40 cents since we project about 80-85 cents earnings per share for the current year to June.

DG_logo150X150D&G’s quarterly results are expected next week and they should  have enough momentum to surprise the market and push the stock price up. I really like it as they have cut a lot of costs out of the operation with the switch of production of Red Stripe to the USA. The local market seems to be holding up well based on the last set of results released. We see further demand in the next fiscal year that should continue to move the stock price higher.

C&WJ | We still like and have great hopes for Cable & Wireless. If fact, we love turnaround companies because if we get it right and time the entry into the stock, we will make above average returns. They have been cutting costs and revenues should start rising from the new pricing strategy adopted for cell calls last year. These moves allowed them to pull in more than 250,000 new users. The revenue from those phones should be earned for the full 12 months this fiscal year instead of only part year as was the case for the 2013 fiscal. The calculations we’ve made indicate strong profits this year from increased revenues and reduced costs, the latter based on cost cutting as well as improved margins resulting from re-pricing when the interconnection rate were lowered last year.

cable&wireless280x150Our main concern in the short term is the redundancy charge that we estimate to be around $3 billion that could cause the market to react negatively when the final 2013 numbers are released in a few weeks’ time. That doesn’t really bother us, as that reaction in our estimation, will be short-lived as investors start to see major improvement in the operating results starting in the June quarter. One may want to hedge one’s bet, by buying more now but leave room to pick up some at lower prices should the market react negatively to the impact of the redundancy cost that will depress the results but won’t repeat in the new year. Not only will it not repeat, there should be cost savings from the move that will help boost profits. Either way, it’s a bit of a gamble but the price is so low now and the upside potential so great in our estimation, that there is less risk in buying now than to await the results.

Filed Under: Company News, General Business News Tagged With: , , ,

J$ slippage pumps up Mo-Bay Ice

May 9, 2013 by

Montego Bay Ice Company shed two major loss making operations last year and the move is paying off with a small operating profit in the first quarter to March. However, it was the slippage in the exchange rate for the Jamaican dollar that had a profound effect on profits. The Montego Bay based company, while reporting reduced income of $4.188 million compared to $7.7 million in 2012, recorded $3.8 million in profits before tax after picking up a nice $3.77 million in foreign exchange gains.

After taxation of $310,000, the company is reporting after tax profits of $3.49 million, well up on a loss of $372,000 in 2012. After accounting for profit that is due to minority interest in a subsidiary, the shareholders of Montego Bay Ice ended up with $2.4 million. The group principal activity is now the rental of properties and cold storage facilities as they discontinued the retailing of ice and the sale of bottled spring water in July and November 2012 respectively.

The group still has work to do to radically transform its profitability. Ignoring the gains from foreign exchange holdings, revenues were just able to cover expenses leaving less than $60,000 as surplus from what can be regarded to be normal ongoing profits.

The company has improved its cash position, now having $64.8 million in liquid funds amounting to around ten dollars per share. Hopefully, management will manage these funds well to help improve profits and not necessarily hold the bulk of it in US dollars hoping for a further Jamaica dollar slippage. Liabilities are not much, at less than $4 million and receivables are even less at $1 million.

Stock outlook | Montego Bay Ice needs to find the right business to move into to return to regular and predictable profitability so that investors can reap the benefit from their investment in the company.

The company’s shares have not traded since November 2011 and it traded $18.00 which is around book value. The real value may be twice this amount if the properties it owns were factored in at market value.

Filed Under: Company News, Company Results Tagged With: ,

TT Cement huge turnaround but…

May 9, 2013 by

Trinidad Cement is reporting a huge turn around in its fortunes in a release to the stock exchange. Revenues jumped to T$482 million up from $365 million in the first quarter of last year. Profit before tax climbed to $16.657 million from a big $85 million loss in 2012. Profit after tax amounted to $14 million versus a loss of $74.9 million before minority interest. The group has been saddled with problems which led to financial restructuring that took quite a while. Last year the Trinidad operation was closed as workers went on strike. Cement was imported from Jamaica to help fill the gap. Jamaica with its loss remains a big drag on the parent company’s operation. Last year total losses amounted to $390 million. (All currency is the TT$)

The company stated in its quarterly report that revenue for the quarter, increased by $117 million compared with the prior year as a result of higher cement sales volumes (in Trinidad and Tobago by 52 percent, in Jamaica by 7 percent and in export markets by 29 percent) and higher selling prices in most markets. Concrete volumes have also exceeded the prior year period by 10 percent. As a result of the significant expenditure made in the latter part of last year, plant performance has been more reliable and efficient with clinker production exceeding prior year by 32 percent (partially due to the TCL strike in 2012) and cement production by 21 percent.

TCL equity remains strong with nearly TT$700 million, working capital is tight with it being a little more than one to one.

Management concluded their statement as follows: The Trinidad and Tobago market has recorded very strong demand and it is anticipated this will continue. While there was declining demand in Jamaica and Barbados, it is hoped that with a post IMF agreement in the former, and general elections in the latter, growth will return to these markets. In addition, growth being experienced in Guyana and Suriname and the initiatives by the Group in the pursuit of additional export markets, plant efficiency and cost containment are likely to contribute to the continuation of the good results for the coming months.

Stock outlook | The group is still loaded with debt with finance charges of $65 million in the quarter, an increase over the $51 million paid in 2012. With such cost and principal repayment there is little room to slip as debt servicing is a large part of income. The debt to equity ratio seems well out of line and the call ought to be for them to go to the stock market for fresh long term capital.

Filed Under: Company News, Company Results Tagged With: ,

Caribbean Cream over by 1,177 shares

May 9, 2013 by

The latest IPO to hit the Jamaican market, Caribbean Cream producers of the Kremi brand of ice cream, was oversubscribed by 1,177 units at the close on May 1, 2013.

The application for listing on the stock exchange is now before them and a decision is expected by Monday after which listing should commence. No listing date as been determined as yet, the broker informed IC Insdier.com, but the view is that trading could commence in the stock towards the end of next week.

A total of 387 applications covering units valued J$75,714,000 were received and processed for this Initial Public Offering (IPO). Of this number, 386 applicants covering 72,713,623 units received 100% of the total allotment requested.

The offer was for the subscription of 75,713,623 ordinary shares at the price of $1.00 per share. Applications in the public pool of up to 2,500,000 shares, received 100% allotment and one applicant over 2,500,000 shares was allocated 2.5 million shares plus approximately 0 .998446% of the excess.

Stock outlook | Investor’s Choice analysts project earnings per share of 17 cents for the year ended February 2013 and 39 cents for the 2014 year. The stock is likely to struggle at the issue price for a while with the less than robust reception to the issue. The annual results should be out soon, which should help the stock price once more financial data is released to the public.

Filed Under: Company News, General Business News, Initial Public Offers Tagged With:

ForEx: Wednesday, 8th May 2013

May 9, 2013 by

Rates up in trades

The average buying and selling rates inched up on Wednesday for the US and Canadian dollar. It took less for the public to buy  the Pound, while authorized dealers also paid less for the British currency than yesterday on average on a day when there were more purchases of foreign exchange by authorized dealers than by the general public for all the major currencies. Purchases in the foreign exchange market amounted to $40.278 million and $37 million were sold, with the average selling rate for the US dollar inching up to $99.0324 from $99.0056 on Tuesday. Purchases took place at an average of $98.5543 compared to yesterdays $98.5034.

ForExSummaryMay8The Canadian dollar changed hands at $97.2189 and was sold at $98.585 compared with yesterday’s $96.446 buying and $97.9598 selling. The Pound sold today for $153.6649 compared to Tuesdays $153.7841 and was bought at $150.8328 with yesterday’s trade working out at $151.1563. On both days the level of buying of pounds and Canadian dollars were well in excess of sales.

This is the first day since the start of last week that the rate of the US has actually moved against the Jamaican dollar.

The highest rates today were $104 selling for the US dollar, the same as Tuesday, and buying $99.95 versus $99.20 on Tuesday. On the low, the US dollars were bought for $81.16, the same as yesterday, and sold at a low of $97.20. Yesterday the lowest sale was at $83.26 and the purchase at $81.16.

ForExDEtailsMay8

Filed Under: FX Market, Stock Market Tagged With: ,

JSE: Wednesday, 8th May 2013

May 9, 2013 by

Low levels of trade

The total volume of shares trading today amounted to 1,445,101 units valued at over $9,519,690. Cable & Wireless was the volume leader with 711,901 units (53.12%) followed by Mayberry Investments with 119,220 units (8.90%) closing at a price of $2.05 and Barita Investments with 100,000 units (7.46%) as the stock closed at $3 having fallen 20 cents.

There were 12 advancing stocks compared to 7 which declined but the market indices shows otherwise as all indices that were affected by trading declined except for the junior market index which rose marginally. Unlike yesterday when no stocks in the junior market traded, the 5 that traded included General Accident with 91,580 units being the highest volume and Lasco Financial traded a higher amount in dollars that General Accident with the former trading $187,583 versus $153,791 for the latter.

The JSE Market Index declined by 440.13 points (0.52%) to close at 83,824.52. The JSE Select Index declined by 28.23 points (1.23%) to close at 2,263.66.  The JSE All Jamaican Composite declined by 774.85 points (0.93%) to close at 82,508.01. The JSE Junior Market Index advanced by 2.01 points (0.32%) to close at 622.76. The JSE Combined Index declined by 418.47 points (0.49%) to close at 85,288.11.

JSEINdicesMay8Grace lost 50 cents to close at $55 although the bid was at $56 at the close, having traded 24,645 shares. Pan Jam with 300 shares trading gained $2.70 to close at $53. Scotia group shed 77 cents to close at $21.21 with 21,564 units having traded. NCB lost 80 cents to close at $18 in trading 94,952 shares

5 stocks in the junior market and 5 in the main market closed with bids above the last sale price, which means higher prices ahead. In the junior market. Caribbean Producers bid is 2 cent higher than the last selling price of $2, Access is 15 Cents higher than the last price of $7, Honey bun is just a cent over the $4 the stock last traded at and Lasco Distributors is 5 cents more than the last sale price of $9.60.

In the main market, Ciboney, D&G, Grace and Jamaica Producers and Kingston Properties are all higher than the last sale price of their stocks.

Other Stocks to Watch |  Lasco manufacturing, General Accident, Carreras, Scotia Investments, Sagicor Life, Scotia Group, and Seprod.

Filed Under: JSE Main Market, Stock Market Tagged With: , ,

Mayberry profit bleeds from NDX

May 9, 2013 by

Mayberry Investments

Containment in expenses and a slight boost in income helped Mayberry to record an operating profit of $158 million over the $104 generated in the first quarter of 2012.

But a one-off hit to the profit of $337.3 million arising from the NDX debt exchange, plunged the operations into a loss of $178 million before a tax credit of $87 million and share of associated profits of $24 million rescued it somewhat. However, not even those credits could save it from an overall loss of $67.7 million compared to a profit last year of $113 million. Revenues net of revaluation gains or losses came in at $473 million in the quarter up from $452 in 2012 which includes the above trading gains.

The company made increased profits from trading gains which rose to $117.9 million up from $36.4 in the similar quarter of 2012. During the quarter Mayberry sold 12,073,214 units of shares in Access Financial Services Limited, for a total of $69 million, which reduced their total shareholdings to 38%. The sale of Access would have contributed a large portion of the trading gains. Net foreign exchange gains helped in boosting the top line with an increase from $9 million to $40 million. So did dividend income which moved up from $15 million to $34 million while fees and commission fell from $70.6 million to $19.4 million this year. Gains on investments fell to a loss of $11 million from nearly $3 million gain the year before.

NDX continuing effects | Mayberry will feel the effects, for a quarter or two of the lower interest rates that the new government bonds carry. The net interest income for the first quarter reflects some of the interest income compression. Although, the big write-off of investment gains is not expected to repeat any time soon, if at all, the boost in income of the gain on sale in investment and the FX gains may not recur to the same degree. This applies to the FX gains as the local currency has been revaluing since mid-April. Mayberry’s fair value reserves at the end of the quarter amounted to negative $326 million up from the $142 million at the end of December last year. The company, in a release accompanying the quarterly report, stated that $230 million of the amount is due to the fall in stocks prices on the local exchange. Some of this would have been reversed as some prices have rebound since the end of the quarter.

Financial Position | The balance sheet shows contraction in assets, which are down from $23.7 billion at March 2012 and $20.77 billion in December to $19.5 billion at the end of the 2013 quarter. A decline in the investment portfolio of $5.5 billion countered by a decline of $5 billion on the liability side for securities sold under repurchase agreements accounted for the bulk of the change since March 2012.

Mayberry stock traded last at $2.05 per share after the release of the results as investors seem to be focusing on the results excluding the impact of the one off NDX charge.

This one needs watching | The performance of the local stock market could change their fortune considerably both from a fee income and capital gains standpoint.

Filed Under: Company News, Company Results Tagged With: ,