The Jamaica Stock Exchange main market ended with modest gains on Tuesday with increased market activity but with falling stocks distancing advancing ones by 25 percent.
At the end of trading, All Jamaica Composite Index gained 470.64 points to close at 416,376.17 and the JSE Index rose 428.81 points to 379,365.82.
IC bid-offer Indicator| At the end of trading, the Choice bid-offer indicator reading shows 11 stocks ending with bids higher than the last selling prices and 2 closing with lower offers, suggesting mostly gains ahead for stocks on Wednesday.
A total of 31 securities traded including 3 in the US dollar market, compared to 27 trading on Monday with the prices of 12 securities rising, 15 declining and 4 holding firm.
Kingston Wharves traded at 52 weeks’ high during the day of $85 and Mayberry Equities traded at an intraday high of $13.25, but both fell back by the close, while Sterling Investments closed at a 52 weeks’ high of $27.60 and Radio Jamaica ended at a 52 weeks’ low of 85 cents.
Trading ended with major contraction in trading volume in the main market compared to Monday’s levels, with 9,264,518 units valued at $430,892,380 compared to 13,217,499 units valued at $228,334,356 changing hands on Monday.
Trading closed with Kingston Wharves led with 5,087,056 units and accounting for 54.91 percent of the day’s volume followed by Ciboney with 1,393,189 units or 15.04 percent of total volume traded and Carreras with 737,720 units and 7.96 percent of the day’s volume.
Trading resulted in an average of 330,876 units valued at over $15,389,014, in contrast to 528,700 shares valued at $9,133,374 on Monday. The average volume and value for the month to date amounts to 386,273 shares, valued $7,433,795 and previously, 394,228 shares, valued $6,099,986. September closed, with an average of 1,022,243 shares valued $15,752,876, for each security traded.
In the main market activity, Berger Paints rose 51 cents to end at $22.50, trading 8,578 stock units, Caribbean Cement shed 91 cents to finish at $49.09, in exchanging 23,096 shares, Grace Kennedy lost 50 cents and ended trading 19,357 shares at $61.50, Jamaica Broilers declined by $1 in trading 42,674 stock units stock units to close at $32, Jamaica Producers rose 50 cents and finished trading 17,843 units at $30, JMMB Group fell $1 and ended at $36, with 202,220 shares, Kingston Wharves dropped $7.99 in exchanging 5,087,056 stock units to closed at $75, Mayberry Investments lost 30 cents to finish at $9.20, trading 161,000 stock units, PanJam Investment grew 69 cents to $64.70,with 4,715 stock units trading, Sagicor Real Estate Fund rose $1 to end at $15, trading 47,645 shares, Scotia Group declined $1 to close at $60, trading 167,808 units, Seprod jumped $1 trading 3,600 shares, to close at $50, Sterling Investments jumped $2.60 and closed at a 52 weeks’ high of $27.60 with a mere 300 shares changing hands, Supreme Ventures rose 40 cent to end at $20.90, with 39,955 shares changing hands and Wisynco Group rose 25 cents to $9.60, trading 452,414 shares.
Trading in the US dollar market closed with 5,608 units valued at $3,002, changing hands JMMB Group 6 percent preference share traded 2,035 units to end at US$1.07, Margaritaville traded 1,298 shares at 25 US cents after rising by 1 cent, Proven Investments lost 1 cent in trading 2,275 shares to close at 21 US cents. The JSE USD Equities Index lost 3.53 points to 171.74.
6 TTSE stocks rise – Tuesday
The Trinidad & Tobago Stock Exchange, closed with the Composite Index rising 0.09 points to 1,220.82, the All T&T Index fell 0.80 points to 1,693.64, while the Cross Listed Index rose 0.14 points to 100.55.
At close, 14 securities changed hands, with the price of 6 rising, 1 declining and 7 remaining unchanged, against 15 trading on Monday.
The market ended trading of 1,593,443 shares valued $9,376,766, compared to 1,615,551 shares valued $8,764,394, changing hands on Monday.
IC bid-offer Indicator| At the end of trading, the Investor’s Choice bid-offer indicator reading closed with 4 stocks ending with higher bids than the last selling prices and 5 with lower offers.
Stocks closing with gains| Clico Investments rose 1 cent and ended at $19.51, with 51,806 stock units changing hands, JMMB Group rose 2 cents to $1.72, after exchanging 7,500 shares, Republic Financial Holdings closed with a gain of 1 cent to end at a 52 weeks’ high of $103.76, after exchanging 435 shares, Sagicor Financial gained 5 cents and ended at $7.75, with 47,760 stock units changing hands, Trinidad & Tobago NGL finished trading 8,097 shares after rising 5 cents and settled at $29.25, and West Indian Tobacco closed with an increase of 6 cents and completed trading at $88.50, with 12,526 units.
Stocks closing with losses| Guardian Holdings shares fell 29 cents and completed trading of 128,540 units at $16.60.
Stocks trading with no price change| Angostura Holdings ended at $15.75, with 312 stock units changing hands, First Caribbean International Bank completed trading at $8.40, with an exchange of 70,220 units, First Citizens settled at $32.65, after exchanging 4,457 shares, Grace Kennedy ended at $2.70, with 1,251,820 stock units changing hands, Massy Holdings closed at $47, after exchanging 5,240 shares, One Caribbean Media concluded trading at $12.11, after exchanging 115 shares and Scotiabank completed trading of 75 units at $64.94.
Prices of securities trading for the day are those at which the last trade took place.
Modest price changes for TT stocks – Monday
The Trinidad & Tobago Stock Exchange, closed with the Composite Index rising 0.04 points to 1,220.73, the All T&T Index added 0.20 points to 1,694.44, while the Cross Listed Index lost 0.02 points to 100.41.
At close, 15 securities changed hands, with the price of 5 rising, 3 declining and 7 remaining unchanged, against 15 trading on Friday.
The market ended trading of 1,615,551 shares valued 8,764,394, compared to 519,519 shares valued $3,980,716, changing hands on Friday.
IC bid-offer Indicator| At the end of trading, the Investor’s Choice bid-offer indicator reading closed with 5 stocks ending with higher bids than the last selling prices and 4 with lower offers.
Stocks closing with gains| Ansa Merchant Bank added 2 cents and ended at $38.02, after exchanging 100 shares, Prestige Holdings gained 1 cent and settled at $7.54, with 1,800 units changing hands, Republic Financial Holdings rose 5 cents and ended at 52 weeks high of $103.75, after exchanging 3,715 shares, Trinidad & Tobago NGLclosed with a gain of 2 cents and closed at $29.20, after exchanging 9,743 shares and West Indian Tobacco gained 44 cents and settled at $88.44, trading 23,251 units.
Stocks closing with losses| Clico Investments closed with a loss of 1 cent and completed trading at $19.50, with 7,426 stock units changing hands, Massy Holdings closed with a loss of 5 cents and ended at $47, after exchanging 36,376 shares and Trinidad Cement shed 15 cents and ended at $2.75, after trading 1,100 shares.
Stocks trading with no price change| Angostura Holdings completed trading at $15.75, with 120 stock units changing hands, Calypso Macro Index Fund traded 2,000 units to close at $15.82,First Citizens closed at $32.65, after exchanging 601 shares, Grace Kennedy completed trading at $2.70, with 1,500,000 stock units changing hands, National Flour settled at $1.60, trading 27,404 units, Sagicor Financial completed trading at $7.70, with 1,900 stock units changing hands while Scotiabank settled at $64.94, trading a mere 15 units.
Prices of securities trading for the day are those at which the last trade took place.
All Jamaica hits record 418,000
Jamaica Stock Exchange All Jamaica Composite index hit the 418,000 mark in trading on Monday, as it gained 1,044.42 points to reach a record 418,000.53. The JSE Main Index rose 951.59 to a record 380,845.80 with 14 minutes of trading elapsing.
The Junior Market has moved modestly by 8.44 to 3,423.64.
The main market pulled back slightly with 22 minutes of trading passing, with the All Jamaica Composite Index at 417,968.53 and the JSE Main Index at 380,816.64 in a relatively quiet trading session so far.
Review of 2018 stock market forecast
“ Assessment of the market, suggests that 2018 could be a grand year, with overall price gains likely to be in excess of 40 percent”, a quote from IC Insider.com in February, this year.
“Based on projected earnings for 2018, the average PE ratio suggests that main market stocks should grow by 26 percent. Falling interest rates could add another 20 percent to gains during the year, bringing overall gains in excess of 40 percent.”
“Technical readings of the market have the main market heading initially to around 390,000 points or 23 percent ahead of the December close, for the all Jamaica Index, before resistance sets in and then moving much higher, later on’ the IC Insider.com forecast for 2018 stated.
With almost three more months to go, before the year ends, the main market is broken through the 390,000 points mark to be up 31.7 percent for the year to date, there seems no stopping it for now.
The report in February stated that the main market was caught in a wedge formation, trading just below the upper end of channel that can be traced to late 2015. The wedge could hold the market in consolidation mode for a short time, a month or two, before breaking out, most likely to the upside.
IC Insider.com projects that many of the main market heavy weights will find it tough to repeat the strong gains they enjoyed in 2017, if that is the case, their impact on the market index is likely to be less than for 2017. Another factor that could make a repeat of 2017 tough, is the movement of interest rates. Last year, Treasury bill rates fell 29 percent from 6.56 percent to 4.83 percent, that level of decline, is unlikely to happen in 2018, even as some of the decline in the latter part of 2017 is yet to be fully reflected in the prices of stocks to date and should positively affect prices in 2018. IC Insider.com is forecasting rates on 182 days Treasury bill hitting 3 percent by the end of the 2018 first quarter. Treasury bill rates in 2018 at 1.7 percent, have fallen more sharply than in 2017.
The original piece stated that “there are a number of other factors at play that are set to impact the market. Increasing employment is taking place with the highest number of persons employed in the country’s history. Attendant with that is the sharp fall in unemployment from more than 16.3 percent in 2013, to just over 10 percent in 2017. The annual net employment is growing around 30,000 persons per year and that could rise as the economy gains steam. This will mean more spending and increased tax collection for government. Alpart resumption of Alumina production is a big positive for the overall economy, for increased government revenues and more demand for local goods and services, some of which are provided by listed companies. The tourism sector is enjoying strong growth, apart from increasing foreign exchange intake for the country, will have direct impact on Jamaica Producers and Sagicor X Fund. Jamaica seems to be going through a construction boom with several new buildings under construction, Caribbean Cement and Berger Paints should benefit considerably from such developments.”
“More listings on the stock market will result in increased fee income for JSE and brokerage houses, from increased trading volumes.”
The TOP 10 stocks include a few surprises while there are others that sit just outside the top stocks that investors may still want to keep a keen eye on. Investors should be looking beyond 2018 as medium term gains beyond 2018 could be strong for stocks that will benefit from current developments, long term.
The TOP 10 selection is selling well below the average PE of the Main market of the Jamaica Stock Exchange at just over 6.3 versus nearly 12 at the end of 2017.
Barita Investments moved more into fee based income and that is working well for them, with sharp growth, while net interest income stagnates. The prospects for continued strong growth in fee income continues with more investors seeking better returns than in the fixed interest market. The company should see a change in ownership soon and that could see a more aggressive approach to management that could optimize returns from exiting business and newer lines. Unrealized gains on investment ought to be factored into its earnings in valuing the stocks and that would boost its value considerably, the market is not paying attention.
Berger Paints is set to be a big winner with increasing sales coming from a buoyant construction sector resulting in increased profit and what IC Insider.com expects to be a healthy dose of dividend payments. It could become the next Carreras from a dividend yield standpoint but with growing profits. The company will benefit from lowering of overhead cost which was evident in 2017.
Jamaica Broilers continues to grow organically and from new business being acquired. Growth will continue as the Haitian market deliver greater returns form a growing market while the poultry demand in Jamaica continues to grow.
Caribbean Cement will benefit from lower operating cost, increased sales and a planned cut in financing of the lease which is said will cut hundreds of millions of dollars out of it cost that could come close to $2 per share per annum.
Palace Amusement Company, currently enjoying sell out cinemas with block buster hit, is one of those unusual choices. It enjoys minimal trading but it could surprise on the upside if all goes well. Growth in the economy and increased employment will help to boost patronage going forward and will aid in profit growth as well.
JMMB Group put out outstanding Q3 results with a 39 percent increase in profit and strong gains in revenues, auguring well for 2019 outcome.
The growth potential remains strong and investors in the stock will reap rich rewards down the road. Just one stock that requires patience. By the way fees and commission income jumped an impressive 71 percent to $512 million in the quarter and 53 percent in the nine months, over the similar period in 2016 and should continue to do so going forward.
Radio Jamaica continues to disappoint with below expected revenues and profit. It could return to favour but needs to generate more income from advertising. This is one to accumulate for a payoff down the road.
The other three stocks, Sterling Investments, Grace Kennedy and Sagicor Group are undervalued and could deliver some decent returns to patient investors.
Below the TOP 10 are strong candidates to deliver decent returns this year and beyond, the list includes NCB Financial that is on a strong growth trajectory and recently listed Wisynco Group that should generate earnings around $1.10 for the 2019 fiscal year that starts in July.
Gwest’s share issue response inadequate
The response by GWest the issue of preference shares is inadequate and they still have a number of questions to answer about the issue and the lack of disclosure in the prospectus and the audited financial statements.
The openness of directors with their investors is critical in cementing trust between them. A prospectus is a contractual invitation to the public to purchase shares in the offering company. It requires that full disclosure of all material information is made, so that prospective investors can make rational decisions pertaining to the shares being offered for sale. Any rational person reading GWest prospectus would come to the conclusion that the only matter agreed on at the extra-ordinary meeting of November 27 was that which was disclosed in section Page 45 of the prospectus which list details of the “Recent Capital Restructuring of the company to be as follows”:
“At an extraordinary general meeting the shareholders of the Company approved the following actions in respect of the capital structure of the Company: The re-registration of the Company as a public company in accordance with the Companies Act, adopting new Articles of Incorporation for that purpose:”
a)”The increase of the authorized share capital. (b)The subdivision of each Share”
“The disapplication of any pre-emption rights, howsoever arising, for the purposes of the issue of new Shares for subscription. The conversion of all fully paid Shares to stock on issue.”
There is no mention of the issue of any other type of share. Any decision to issue other shares should have been disclosed in this section if a meeting took place before the date of the prospectus.
The fact that it was not, is the clearest sign that there was inadequate disclosure of important and material information and that the issue of preference shares after, should not stand before approved by a meeting of the new owners.
The vast majority of Junior Market companies have limited administrative staff, as such all the skill set to properly run them are not in their employ. The end results is that mistakes are made and will continue to be made. Recognizing, that most of them don’t have the knowhow of running a public company, the JSE created the creature called a Mentor, but not even that seems to be adequate to fill the breach.
According to the company in a release to the JSE, “Sections 18 and 19 in the November 2017 GWEST Prospectus specifically disclosed that shareholders loans were to be converted to preference shares, thereby reducing the servicing cost to the Company: Shares in the capital of the Company are under the control of the Directors, as expressly provided for in the Articles of Incorporation.”
That is nonsense. The prospectus only has 16 sections, with the last (section 16) being signed by the directors.
Section 11 contains projections along with supporting notes that were reviewed by Ernst and Young who signed their report on November 28.
The extraordinary meeting at which the change in share capital was approved was said to be held on the November 27. According to the resolution, the directors were given authority to issue, to allot such Cumulative Non-redeemable Preference Shares at such subscription price per Preference Share as the Directors of the Company or such Committee may deem fit, the same to be allotted to shareholders of the Company who have invested in the capital of Company (in cash or in kind) with the understanding/pursuant to agreement(s) that such investment(s) will be recognized as shareholder loans or by the issue of preference shares, in each case on terms and conditions determined by the Directors of the Company, subject always to the Articles of Incorporation of the Company”.
Having given the directors the authority to determine the terms and conditions of the preference shares, GWest in releasing information of the above resolution has not presented the minutes of the meeting of the directors that agreed on the terms. The fact that the extraordinary meeting did not set out the terms of the issue of the shares is even more reason why it should have been fully disclosed in the prospectus.
The company refers to 18 and 19 but it appears they mean notes 18 and 19 of section 11 that deals with the projections. What does the section say about the preference shares?
Note 18. “Borrowings| This relates to the NCB Term Loan and shareholders’ loans converted to preference shares.”
“NCB Term Loan| The terms of this loan for $350 million, include a repayment period of eight years payable in equal quarterly installments and an interest rate of 11.5% per annum.”
“Preference Shares| 50% of shareholders’ loan will be converted to non-redeemable preference shares with interest at 10% per annum. The remaining 50% will remain as shareholder’s loan with no fixed repayment with interest at 10% per annum for the J$ amounts and 4% per annum for the US$ amounts.”
Note 19. “Shareholders’ Loan| This amount relates to funds advanced by the shareholders. It is assumed that outstanding balances will continue to attract interest at the prevailing rates of 15% and 4%, respectively for J$ and US$ funds. However, once the IPO is completed and the Company becomes publicly-listed, it is assumed that the interest rates will be reduced to 6% and 2% for J$ and US$ denominated loans, respectively on the remaining balance not converted to preference shares. With respect to the J$ denominated balance, the interest rate is assumed to increase annually by 1%, with a cap at 10% by 2022. The Directors are of the view that these rates are more in line with arm’s length rates prevailing within the market.”
Nowhere in the prospectus is there any reference to a meeting called to approve the issue of any shares other than ordinary shares and the terms of those shares. Under no stretch of the imagination could assumptions included in a financial projections be regarded as disclosure of an agreement to issue shares or that a resolution was already passed to do so. Earlier in the prospectus it is made clear that futuristic statements are just that, as they may not be achieved. That the company withheld pertinent and material information from the new investors even when they had a number of occasions to do so, is glaring and concerning. That the Jamaica Stock Exchange sees nothing wrong with what has transpired is plain shocking, even more shocking is that they did not ensure that proper and full disclosure of the information was included in the relevant part of the prospectus.
The directors cannot over ride, the company’s act that requires that all changes in share capital of a company be approved by shareholders at a general meeting. From all indications this was not agreed to before the prospectus was published, in which case it appears that the new shareholders would have to approve it at a general meeting.
To compound the problem, the preference shares were issued to connected parties to the company. That alone should have alerted all concerned that all decisions should be properly executed.
Of note, the Audited accounts to March 2018, made no mention of the issue of additional shares that were issued or to be issued. It is the norm in auditing, that minutes of meetings are made available to the auditors and the directors have a responsibility to ensure that the financial statements are accurate. The directors need to state if the audited accounts correctly disclose all relevant information pertaining to the share capital. They need to state why they all signed the Prospectus with no mention being made of the resolution to modify the share capital indicating full details of the resolution.
What date did the directors meet to determine the terms of the preference shares and why were those terms not disclosed in the prospectus for all to see?
The Jamaica Stock Exchange requires that they should be advised in advance of any meeting of directors called to alter the share capital of a company and after the meeting the outcome of the meeting is to be communicated to them as well. There are no indications that the directors complied with this section of the Stock Exchange rules.
The handling of this matter is not the way to properly operate in the capital market.