TTSE: Unilever up $1

Thursday, 18th July 2013 | Trading activity returned to what has been taking place in recent weeks on the Trinidad & Tobago Stock Exchange when the level of trading pulled back from Wednesday’s increased volume. Stocks of 13 companies traded, of which 4 advanced, 3 declined and 6 traded firm as 324,125 units valued at $3.62 million traded.

Trinidad Cement, an IC Insider pick continues to attract investors with 262,170 shares trading for a value of $238,196, while losing a cent to close at $1.15. At the end of trading, there was a bid for 176,551 units at $1.15, the offer was at $1.20 for 5,000.

Scotiabank Trinidad & Tobago enjoyed trading, much lower than on Wednesday, with just 5,349 units trading at Wednesday’s closing price of $69.97, but it had a bid for 1,400 units at $70 at the end of the day. Guardian Holdings traded 16,800 shares for $268,792, while Barbados’ Sagicor Financial Corporation chipped in with 10,000 shares valued at $62,200. West Indian Tobacco, traded 8,148 shares valued at $957,864 as the stock closed at $118, up 49 cents. Unilever Caribbean gained $1 to end the day at $55 as it traded 3,040 shares. Clico Investment Fund was the only active security on the Mutual Fund Market, posting a volume of 61,955 shares valued at $1,391,735 as it fell 5 cents to $22.46

IC bid-offer Indicator| At the end of trading, the Investor’s Choice bid-offer market sentiment indicator shows that there was 1 stock with its bid higher than the last selling price with 4 stocks having offers lower than their last selling price.

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FX: US dollar rate stable

Wednesday, 17th July 2013 | Rates for buying and selling rates for the US dollar hardly changed on Wednesday as dealers bought US$22.9 million and sold US$23.6 million on a day when the overall purchases of all foreign currencies amounted to US$25.1 million and selling amounted to US$ 25.33 million. The highest and lowest rates for the US dollar remained fairly stable with no changes to the highest selling rate and the lowest buying rate.

The Jamaican dollar closed at a selling rate of $101.81 to the US dollar and authorised dealers purchased the US dollar for 101.07.

The Canadian dollar closed at a selling rate of $97.98 some 28 cents less than on Tuesday. Authorised dealers purchased the Maple leaf currency for $95.90, up 15 cents for the day. The Pound sterling closed at a selling rate of $154.58 to a pound, slipping 39 cents while buying took place by authorised dealers at $151.92, down $1.35 at the end of trading.

Highest rates traded in buying currencies were for the US dollar $102.50, for the Canadian $98.70 and for the Pound sterling $156 while the lowest buying rates were the US dollar $83.50, for the Canadian $78.60 and the Pound sterling $124.29.

Highest rates traded in selling the currencies were for the US dollar $107 no change from the day before, Canadian $101.33 down 16 cents, Pound sterling $158 a decline of $2.23 and the lowest selling rates were the US dollar $98 up 20 cents, Canadian $94.70 an increase of $1.20 and the Pound sterling $ 149.80 up 60 cents.

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JSE: Advancing stocks = declining ones

Wednesday, 17th July 2013 | In Wednesday’s trading on the Jamaican Stock Exchange, the advance decline ratio remained even as 8 stocks advanced and 8 declined as trading took place in the stocks of only 20 companies. The trading resulted in 9.129 million units valued at $21.2 million changing hands as 2 stocks reached an all-time high, one closed at a 52 weeks low and only one closed at an all-time high at the end of trading.

Main Market | The all Jamaica Index gained 212.18 points to close at 87.749.76. The JSE market index was up by 120.52 to close at 86,702.61.

Carreras’ stock declined to $53.75 off 75 cents as it traded 54,578 units. Grace Kennedy gained 79 cents to close at $58 in trading 23,118 shares. Sagicor Life traded 260,00 shares as high as $9, the stock closed at $8.55 up by 5 cents, National Commercial Bank (NCB) closed down 40 cents to $19.10 while trading just 49,500 shares. Jamaica Money Market put on 40 cents to close at $8.50 with only 200 units trading. Scotia Investments dropped 50 cents on 1,500 units and closed at $26.01.

Junior market | The junior market index fell by 11.07 points to 803.39. Caribbean Cream traded 434,800 shares and closed down firm at $1.06. Lasco Distributors traded 6.34 million shares and closed down 6 cents to $1.45. Lasco Financial closed at $1.39 while trading 324,288 units. Lasco Manufacturing traded 1.07 million shares to close up at $1.70. Blue Power traded 7,500 shares and gained 30 cents to close at $10.30.

IC bid-offer Indicator | The Investor’s Choice bid-offer market indicator, shows that bids for 5 stocks were higher with 2 stocks having an offer lower than their last selling price.

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TTSE: The day was BNSTT’s

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Wednesday, 18th July 2013 |  It was a big day on the Trinidad & Tobago Stock Exchange with 11 securities of which 2 advanced, 1 declined and 8 traded firm. But it was not the number of companies that traded that made the day big. It was the 1.2 million units valued at $23.1 million that was the real story as this market as not seen this level of trade for some time.

Trinidad Cement, an IC Insider pick continues to reflect increasing interest from investors and was a volume leader with 842,902 shares trading for a value of $978,715, increasing by a cent to end the day at $1.16. Scotiabank Trinidad & Tobago may not have been the dominant volume player with 307,502 shares, but what it lacked there was more than made up by the magnitude of the dollar value of the trade which amounted to $21,515,915. Prestige Holdings contributed 24,778 shares to the total traded with a value of $231,674, while Barbados’ Sagicor Financial Corporation chipped in with 7,162 shares valued at $44,476.02. Clico Investment Fund was the only active security on the Mutual Fund Market, posting a volume of 6,140 shares valued at $138,150 as it traded firm.

IC bid-offer Indicator | At the end of trading, the Investor’s Choice bid-offer market sentiment indicator shows that there was 1 stock with the bid higher than the last selling price with 4 stocks having offers lower than their last selling price.

TTSEJul17

FX: Big Pound move

Tuesday, 16th July 2013 | The British Pound made a big move on Tuesday as it closed up by $2.74 on average when dealers bought the currency, pushing the buying rate at the end of trading to $153.27. The selling rate climbed by $1.30 to close the day at $154.97. Authorised dealers bought £2.88 million and sold just £1.47 million. The Pound was bought as high as$156.72 which was $2.82 higher than on Monday and as low as $126.33 or $2 less than Monday’s low. Selling of the British currency took place as high as $160.23, just 6 cents less than Monday and as low as $149.20, the same as Monday. The major rate change for the Pound relates to an increase in the value of the Pound against the US dollar on Tuesday and could rise further on Wednesday as the published minutes coming out of the UK central bank’s meeting to discuss monetary policy helped pushed the British pound up against major currencies.

There was an 8 cent upward movement on both the average buying and selling rates for the US dollar. The highest and lowest buying rate for the US currency hardly changed while the highest selling rate slipped by 21 cents and the lowest climbed back by $14.30 to $97.80.  The amount of US dollar purchased amounted to US$25.37 million and US$21.98 million was sold.

The Canadian dollar closed at a selling rate of $98.26 down 36 cents from Monday and authorised dealers purchased the Canadian dollar for $95.75, which is 39 cents more than on Monday. The highest rate was $98.80, the same rate as the previous trade and lowest buying rate $78.73, just a 5 cent increase. Both the highest and lowest selling rates declined with the lowest down $1.20 to $93.50.

The total amount of currency traded was US$31.6 million while $26.5 million was sold.

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JSE: 121m Kremi shares trade

Tuesday, 16th July 2013 | Caribbean Cream was the dominant trade today as 121.14 million units were crossed by Stock & Securities for a client in two blocks of 60.5 m units each. All traded at $1.10 for a total consideration of $133.26 million. At the time of the prospectus, Scoops Unlimited was shown as owning 121,141,801 units and this would have been the block that was traded and put into two new hands. The other dominant trade was National Commercial Bank which traded 1 million units at a value of $20.15 million. The stock traded up 44 cents on the day to close at $19.50.

A total of 30 companies traded 124 million stocks with a value at $172.67 million for the day. The advance decline ratio was exactly even with 7 stocks advancing and 7 declining. The indices declined sharply as Scotia Group dropped sharply on the day.

Trades of note Main Market | The all Jamaica Index gave up what was gained yesterday and more, as the index shed 2,310.88 points to close at 87,537.58 points. The JSE market index lost 1,312.62 points to close at 86,582.09 as Carreras traded 13,280 shares between $53.90 and $54.50. The stock closed off 87 cents at $54.50. Scotia Group traded 597,000 units and lost 92 cents to close at $21.08. Jamaica Producers lost 50 cents to close at $19.50 on 56,000 units, Pan Jamaican put on 39 cents to close at $51.50 while trading 5,000 shares.

Junior market | 12 stocks in the junior market traded as most of the stocks recorded moderate increases and the junior market index moved up by 7.03 points to 814.46. Caribbean Cream, fresh from its first quarterly report to the stock exchange which showed improved profit in the last quarter to May, traded 121.145 million units and closed at $1.06. AMG Packaging traded 200,000 units but remained firm at $4. 25, Blue Power traded 38,172 units to close at $10. Lasco Distributors has struggled to hold the higher prices it recently traded at and fell back to $1.50 while exchanging 155,517 shares. Lasco Financial is doing a little better having traded at a new all-time high during the day at $1.41 but closed at $1.40, the same close as Monday’s, as 227,500 units changed hands. Lasco Manufacturing traded 190,288 shares and gained a mere cent up to $1.66.

Market intelligence | The Cable & Wireless stocks on offer are now down to under 29 million shares at 15 cents. Gleaner has over 1.24 million units on the bid at $1.16 but there are 6.4 million units on offer at $1.50. RJR still has a bid for 4.9 million units that was at $1.23 and has seen the bid moved to $1.30.

IC bid-offer Indicator | At the end of trading, the Investor’s Choice bid-offer market sentiment indicator shows that bids for 5 stocks were higher with 2 stocks having offers lower than their last selling price.

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Mining & Agriculture dent GDP badly

Data from the Statistical Institute of Jamaica (Statin) is confirming what Jamaicans already know — the economy suffered a decline in the first quarter of 2013. According to the government body charged with the collection and compilation of data, the economy declined by 1.3 percent in the first quarter of 2013 compared to the similar quarter of 2012. The sectors that made a big dent to the economic performance were Agriculture, Forestry & Fishing industry which declined by 11.4 per cent, Mining & Quarrying industry which fell by 9.1 per cent. These of course were not the only sectors to suffer reduced output.

The report indicated decreased output in both the Goods Producing and Services industries which fell by 4.5 per cent and 0.1 per cent respectively. Continued macroeconomic challenges in the economic environment as well as the lingering effects of Hurricane Sandy, which affected the island in October 2012, were the factors posted by Statin for the poor performance of the sectors and the negative economic performance in the first quarter.

Jamaica_coat_of_arms_280X150The Manufacturing sector declined by 1.6 per cent but there was improved performance in the Construction industry which grew by 0.7 per cent. There was mixed performance within the Services industries. Increased output was recorded by Transport, Storage and Communication (0.6 per cent), Finance and Insurance Services (0.2 per cent), Real Estate, Renting & Business Activities (0.4 per cent) and Other Services (0.1 per cent). Industries that experienced lower levels of output were Electricity & Water Supply (-3.0 per cent), Hotels and Restaurants (-2.3 per cent) and Producers of Government Services (-0.1 per cent). The Wholesale & Retail Trade, Repairs, Installation of Machinery & Equipment remained unchanged.

When compared with the fourth quarter of 2012, the real value added declined 0.5 per cent. Both the Goods Producing and Services industries recorded lower levels of output. The Goods Producing industries declined by 1.4 per cent while the Services industries declined by 0.2 per cent.

TTSE: TCL continues up

Tuesday, 16th July 2013 | The total amount of trading took place in 9 securities of which 3 advanced, 1 declined and 5 traded firm on Tuesday as 1,172,484 units crossed the flo0r of the Trinidad Exchange with a value for $3 million.

Jamaica’s National Commercial Bank traded 677,000 shares, for a value of $812,217. IC Insider’s buy rated Trinidad Cement exchanged 448,600 shares for $515,890 as the stock continues to gain closing at $1.15 with a bid at $1.17 for 152,000 shares and the offer at $1.31 for 50,000 units, an indication of more gains ahead. Trinidad’s Scotiabank enjoyed 11,945 shares switching ownership with a value of $835,791, while Angostura Holdings added 3,000 shares valued at $27,169, losing 4 cents to close at $9.06. Clico Investment Fund was the only active security on the Mutual Fund Market, posting a volume of 28,636 shares valued at $644,310. Ansa Merchant Bank Limited enjoyed the day’s largest gain, increasing 7 cents to end the day at $38.60 as 550 units traded.

West Indian Tobacco has a bid at $117.51 for 20,869 shares. The offer is at $118 for a mere 691 units. Unilever has a bid at $54 for 22,980 units, the offer is 43 units at $54.14.

IC bid-offer Indicator | At the end of trading, the Investor’s Choice bid-offer market sentiment indicator shows that bids for 1 stock were higher with 4 stocks having offers lower than their last selling price.

Conversely, Angostura Holdings Limited suffered the day’s sole decline, falling $0.04 to end the day.

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IPO: What or who is Eppley?

The English dictionary has no such word, much less the meaning for ‘Eppley’ and a Google search has it as a little-known surname. However, it’s a name that will be on investor’s minds over the next couple of weeks as the company seeks to raise $82.6 million as a prelude to listing on the junior market of the stock exchange. The shares are clearly not meant for the average investor due to the small number of shares on offer and the price of $377 per share, which is the same as the net asset value of the shares, represented primarily by liquid assets. The shares are also priced around 10 times earnings before tax.

Who are they? | Although the public knows nothing about Eppley, it was established in 1973 and has been operating for some time under the name, Orrett and Musson Investment Company Limited. The Company is also an affiliate of General Accident which provides the Company with the necessary infrastructure to monitor and manage its investments plus ancillary administrative services. In consideration for these services, General Accident receives an incentive based fee, which is calculated as 20% of the Company’s average return on equity that is greater than 12% per annum.

The Directors, who are associated with the Musson group as directors or executives, are Nigel A. L. Clarke, Melanie Subratie, Nicholas Scott, Sharon Donaldson, Jennifer Scott, Maxim Rochester, Keith Collister, Alexander Melville and Byron Thompson.

The offer opens on Monday, 22 July 2013 and is scheduled to close on Monday, 29 July 2013 with 218,999 shares offered to the public of which 145,999 are Reserved Shares. Applications from the general public is at a minimum of 20 shares and multiples of 10 thereafter.  If any of the Reserved Shares in any category are not subscribed by the persons entitled to them, they will be available for subscription by the other Reserved Share Applicants, and thereafter, by the general public.

The proceeds are expected to be used to expand the capacity of the Company to provide credit facilities and to pay the expenses of the Invitation, which the Directors believe will not exceed $7.5 million. There will be no liquidity for these shares as the float is far too small.

EppleyNigelClarke150x150Business profile | The Company manages a portfolio of loans, leases and other forms of commercial credit. In so doing, it provides a variety of credit products to corporate and professional customers, including insurance premium financing — the company’s main line of business, lease financing arrangements for equipment (mostly motor vehicles for commercial and professional clients), commercial loans, and other forms of credit.

Insurance premium financing involves the financing of insurance premiums for personal and commercial insurance contracts, generally for periods of less than a year. Leasing involves the provision finance leases and commercial lending involves a variety of loans products that in most instances differ in structure or collateral from loans the Directors consider to widely available in the marketplace.

The Directors anticipate that commercial lending and leases will comprise an increasing share of the Company’s business following the Invitation.

Eppley aims to provide more attractively priced credit to its clients with better service than what is currently available in the marketplace. It aims to do this by maintaining a lean and efficient organizational structure, making fast investment decisions based on common-sense credit standards, and exercising strict confidentially and privacy in its dealings.

The Company’s business strategy is to deliver high and consistent risk-adjusted returns to its shareholders. It believes that commercial credit offers more attractive risk adjusted returns than other available fixed income investment alternatives, including Government of Jamaica debt. The Company stated that the vast majority of its aftertax earnings will be distributed to shareholders as cash dividends subject its Dividend Policy. The policy may be revised by the Board from time-to-time with the distribution being not less than 50% of its after-tax earnings.

Eppley’s numbers | The Company’s average return on operating assets, which provides an indicator of the rates at which it is able to lend, has fallen from 28% in 2008 to 15% in 2012. This reduction occurred at a slower pace that the reduction of interest rates in Jamaica. At the same time, the Directors note that the average cost of the Company’s operating liabilities, an indicator of the rates at which it is able to borrow, had not declined as rapidly. As a consequence, the average net income spread has tightened from 15% in 2008 to 8% in 2012.

eppleytype150x150The Company has restructured its balance sheet moving way from greater reliance on debt financing to a greater use of equity funding. The restructuring involved repaying related party assets and borrowings subsequent to the last audited report at the end of 2012, as well as actual or planned conversion of some loans from related parties into equity.

The Company’s cash and deposits were $115.5 million higher on 30 April 2013 compared to 30 April 2012. In keeping with its business strategy, Eppley began its lease operations late in the first quarter of 2013 and recorded lease receivables of $18.7 million as at 30 April 2013.

Eppley’s net investment income declined to $14.9 million in the 4 months ended 30 April 2013 compared to $16.1 million in the 4 months ended 30 April 2012. This was a result of increased holdings of lower yielding cash and marketable securities in the period. The Company’s other operating income increased significantly, mainly as a result of foreign exchange gains on its holdings of hard currency. As a result, its profit after tax increased from $7.0 million in the 4 months ended 30 April 2012 to $12.1 million in the 4 months ended 30 April 2013.

Listing of the shares on the stock exchange will provide visibility for the Company and opens it up to borrow cheaper funds than if they were a non-listed company. Listing will also improve the return on equity as there will be no taxes for 5 years on profits.

IPO outlook  | This one looks like a medium term investment but due to the listed number of shares, investors may want to acquire some in the IPO to ensure that they have them well ahead of when profits start to grow.

Kremi up, hardly out of the blocks

Caribbean Cream’s 49 percent jump in revenues in the first quarter to May this year, melted down to just 24 percent in pre-tax profits as costs rose above the growth in inflows. The situation for the February quarter was even worse as a 48 percent increase in sales delivered just $1.5 million in profit, a collapse from $18.6 million in 2012. Profit after tax rose to $11.7 million, up from $5.4 million, thanks to a roughly $6 million turn around in taxation.

Costs rise faster |  In the May quarter, direct labour cost climbed 69 percent to $11.4 million, electricity moved up by 86 percent, water jumped 106 percent to $1.2 million, machinery depreciation was up 117 percent. There were savings in packaging cost, down 53 percent to $725,000, factory rental was down by 44 percent to $1 million. IC Insider understands that the company underwent some major changes in how some aspects of the operations are done. The company used to purchase certain items from Scoops Unlimited, but this operation is now taken over, hence costs are structured differently than in the prior year period. The acquisition of their own warehouse means reduction in rental but a rise in finance cost. There was also a price adjustment in March for the products to help cover the increased production cost.

KremiBanner600X250Admin cost | Administrative cost was fairly well contained having increased far less than sales. The increase most likely would have been partially impacted by added costs to facilitate the IPO which occurred in the quarter. As such legal and professional fees were up nearly $1 million and audit and accounting fees by $1 million. Utility cost were down as well as depreciation but these may be due to reallocation of charges to direct expense instead of administrative expenses as was shown in the prior period. Interest and finance cost also showed an increase of $1 million. There was also a loss of $937,000 on disposal of fixed asset. The growth in profits before tax would be 36 percent if the loss on fixed asset is excluded. With the increased level of revenue, far more would have been expected under normal circumstances. The next quarter will be the true test when one-off costs should not recur.

Caribbean Cream’s rapid sale growth is phenomenal and looks as it can continue for a while yet. This is the aspect that many investors should be looking at as the company expands its customer base and captures market share with good products at competitive prices. As sales continue to rise rapidly, cost is likely to grow at a much slower pace thus helping to boost profits at a rapid pace.

CaribbeanCreamgrowth

At the end of May, current assets stood at $131 million up from $102 million at the end of February. Increased cash which stood at $65 million and a $24 million reduction in inventories were the factors giving rise to current asset change. Current liabilities on the other hand stood at $75.66 million a decline from February’s $126 million as the amount for payables was cut from $100 million to $64 million. Borrowed funds stood at $81 million, just a bit lower than the amount due at February.

Capital spend | The company spent $100 million on capital prior to the IPO but more is to be spent as new cold room machinery is to be installed later this year. Management states that this will cut cost and increase efficiency in freezing the product.

Valuation | The stock is selling at roughly 30 percent of sales. This compares with AMG Packaging at 100 percent of sales, Blue Power 50 percent and Jamaican Teas is around 100 percent of sales. The PE on forward earnings for 2014 is only 2 and there is much room for the stock price to move upward.

Management | The report containing the results show signs of some management weakness that they need to correct. In the investment world, communication is key. The changes in the operations and the resulting changes in the line items of costs should have been addressed in the directors’ report to shareholders. Costs that were of a one-off nature should have been highlighted so that investors could get a clearer picture about ongoing costs and profits. Instead, investors have to dig into the numbers making assumptions that really should not be necessary.