Medical Disposables, OK not great

Companies are beating a hasty push to get listed ahead of the change in tax regime for junior market companies. The latest to do so is Medical Disposables & Supply Limited that hits the road with the opening of its IPO on December 13.

The Company invites Applications for up to 63,157,895 Shares in the Invitation. All Shares, including the Reserved Shares, are priced at $1.83 per Share. The Invitation will open at 9:00 a.m. on the Opening Date, Friday 13 December 2013 and will close at 4:00 p.m. on the Closing Date, Friday 20 December 2013. There are 18,096,060 Reserved Shares in the Invitation that are initially reserved for Priority Application from Staff and Key Partners 5,464,481 and Mayberry Clients 12,631,579.

Minimum fundraising | The minimum amount which, in the opinion of the Directors, must be received by the Company is $96.5 million. The offer looks interesting as there should be some initial price gains after listing even though not much is known of the company by the wider public.

Medical DisposablesCross150x150Profits | The unaudited results for the first 7 months of the Company’s current financial year to October 2013, show an 18 percent increase in revenues over the same period in the prior year, increasing to $508 million. The Profit before tax outturn was $42 million, a 127 percent increase over the same period in 2012. This puts pretax earnings around 35 cents per share with 200 million shares outstanding and a PE of 5.3 times current year’s earnings. Adjusting for tax for the period before going public, the PE ratio is around 7 times but by the following year with all the profit being tax free the PE would drop to around 5 assuming earnings are basically flat that could result in a price appreciation in 2014 around 40-50 percent.

The new shares are likely to create some dilution in per share earnings initially, as the rate of return on equity is likely to be around 37 percent for the year ending March 2014. Paying off loans, which is one of the objectives for the funds being raised, will yield a lower return on the fresh capital.

Profit before tax declined by $11.8 million in financial year 2010. The Directors consider that the Company began to realise the benefits of an expansion that was executed, as well as its new pharmaceutical distribution relationships, in financial years 2011 and 2012 when Profit before tax increased by $23.5 million moving from $7.4 million to $31 million and $19 million to $50 million in 2012.

Revenues | Revenues moved from $289 million in 2010 to $506 million in 2011, a 75 percent increase and to $724 million in financial year 2012 and increase over 2011 of 43 percent. The rate of growth in sales has slowed and profit growth is also likely to slow down. The company needs strong and sustainable growth levels to justify investors picking these shares ahead of others that are better valued currently. From all indications based on the comparative valuation of other listed stocks, investors are likely to have to wait on the market rally to deliver above average growth in the stock price in the medium term.

Finances | High receivables of $186 million, just under 3 months of sales and inventories are spots of bother resulting in high borrowings of $153 million as of March, versus shareholders’ equity of $152 million.

Medical Disposables280x150FREEThe company | The Company is a distributor of pharmaceutical products and disposable medical supplies. When it began trading, the it specialised in medical and hospital supplies and disposable items, such as surgical masks, gloves, tubes, gauze, and adhesive and other bandages. Over the years it expanded into the distribution of pharmaceuticals and health and personal care items and other consumer goods. The Company is a co-distributor of the GlaxoSmithKline Jamaica, Dr. Reddy’s, and Bunny’s pharmaceutical and healthcare product lines. It also distributes general consumer items inclusive of complementary beauty, personal care and household products. In that regard, the Company is a sub distributor for Cari-Med Limited, Kirk Distributors Limited, Consumer Brands Limited, and Smith Russell and Company Limited, among others.

The Company is centrally located in a commercial complex in the mid-town industrial area of Kingston. It currently services over 1,100 customers across the island, including pharmacies, hospitals, medical practitioners, health centres, radiology units, nursing homes, medical laboratories, clinics, health food stores, bakeries, hotels, commercial institutions, schools, spas, sports teams and walk-in customers.

Directors | The Company was founded by the Boothe family 15 years ago in Kingston. Myrtis Boothe, Managing Director, provides the Company with its strategic direction and has than 20 years of sales and distribution experience in the pharmaceutical industry.

The directorship includes, Winston Boothe (Chairman), Myrtis Boothe (Chief Executive Officer), Kurt Boothe (General Manager), Nikeisha Boothe (Marketing), Dr. The Hon. Vincent M. Lawrence O.J., Dr. Dahlia McDaniel and Sandra Glasgow.

Use of proceeds | The proceeds of the offer is slated for expansion of the company’s existing product ranges, expansion into new product ranges and underserved niche markets, retirement of bank debt and directors’ loans and balances and pay for the expenses of the IPO, estimated not to exceed $9 million.

Short term gains are possible, but longer term growth and increased profits will come from the quality of management’s execution of the strategies and the maintenance of good relations with suppliers and customers. The suppliers, whom they represent, is critical as a loss of any major ones could negatively affect profitability in the short to medium term.

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Caricom imports drop

Imports from the Caricom region fell during January to August 2013 by 11.8 percent or US$80 million to US$599 million compared to US$680 million spent in the comparable 2012 period.

The decline of US$91 million to US$403 million for “Mineral Fuels, etcetera” was the main contributor to the decrease. “Food” valued at US$117 million increased from US$103 million in the corresponding 2012 period. Imports of “Beverages & Tobacco” and “Chemicals” were valued at US$28 million and US$17 million respectively in the 2013 period, compared to US$26 million and US$20 million respectively in the comparable 2012 period.

The value of Jamaica’s total exports of goods to CARICOM fell marginally by US$1 million to US$44 million during the review period.

During the eight month period, Jamaica narrowed the trade deficit by US$79 million to US$555.0 million, below the US$634.4 million recorded for the same period in 2012.

Related posts | Big drop in trade deficit | CARICOM balance narrows sharply

Imports fall and deficit narrows

The trade deficit for the year to August 2013 continues to narrow as imports fell 7.4 percent to US$4.123 billion compared to US$4.455 billion in the similar 2012 period. Helping to contribute to the improved position is a lower decline in export earnings of 2.8 percent to US$1.1 billion. The trade deficit improved to US$3.026 billion, compared to US$3.326 billion in the same period for 2012 for a US$300 million savings.

Imports | There was a general downward trend in the value of imports for all but three of the commodity groups. “Mineral Fuels, etcetera” with the highest value for this period, accounted for US$1,467.6 million, as it here was a fall of US$270.2 million or 15.6 percent. Imports of “Machinery & Transport Equipment”, also declined from US$616.3 million in 2012 to US$595.9 million.  “Misc. Manufactured Articles”, declined by US$31.7 million to US$279 million, a fall of 10.2 percent, as there was a decline in the imports of furniture, footwear, apparel and photographic apparatus. “Beverages and Tobacco” valued at US$52.6 million moved down from US$54.4 million in the corresponding 2012 review period.

ImportonCube150x150FreeHowever, “Food” increased US$16.2 million to US$651.9 million compared to the 2012 period. The increase was a result of increased importation of ‘cereal & cereal preparations’, ’vegetables & fruit preparations’, and ‘miscellaneous edible products and preparations”, valued at US$549.5 million. The commodity group “Chemicals” increased by US$27.6 million or 5.3 percent compared to the US$521.9 million recorded in the similar 2012 period.

Traditional domestic exports | Earnings from major traditional commodities to August decreased by US$36.5 million or 6.3 percent to US$545.2 million compared to the same period in 2012, resulting from a US$44.3 million decline in the exports of “Manufactured” goods.

There was a decrease in the export of goods classified under “Manufacture” with earnings accounting for US$90 million, which fell below the US$134 million in the comparable 2012 period. “Mining and quarrying” rose by 1.2 percent to US$437 million as a result of increases in ‘Alumina’ and ‘Bauxite’.

The “Agriculture” sector saw receipts moving from US$16 million in the 2012 period to US$18.5 million during the 2013 review period. “Coffee” increased by 17 percent to US$14.6 million. “Citrus” earned US$3 million, a rise of 99.0 percent over the US$1.5 million recorded for the similar 2012 period.

Non-Traditional Exports | Earnings to August fell by US$14 million to US$489 million. Contributing to the decline were “Beverages & Tobacco” that fell by 37.4 percent or US$14 million to US$23.4 million. The sub-commodity ‘Alcoholic Beverages (excl. Rum)’ was responsible for this fall. This subcategory declined by 49.7 percent, moving from US$30.7 million to US$15.4 million in the current 2013 review period. ‘Tobacco’ fell by 73.4 percent. On the other hand ‘Non-Alcoholic Beverages’ increased to US$8 million, up from US$6.6 million in the comparable 2012 period, a rise of 19.7 percent.

The commodity “Other” fell marginally by 1.3 percent to US$345.3 million due to the fact that ‘Mineral Fuel, etcetera’ fell. “Crude Materials” rose mainly due to increased earnings from ’Limestone’ and ‘Other Crude Materials’. ‘Limestone’ moved from US$1.5 million in the similar 2012 review period to US$2.5 million, an increase of US$1 million. ‘Waste and Scrap Metals’ fell, moved from US$16.4 million in January to August 2012 to US$15.5 million in the comparable 2013 period.

“Food” recorded an increase, moving from US$96.0 million to US$99.4 million. Contributing to this increase was Yams’, one of the major export earner valued at US$15.8 million compared to US$11.9 million in the corresponding period.

Related posts | Big drop in trade deficit | Non-Traditional exports up

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Profit drops on falling sales at Salada

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Profits did not percolate at Salada as the company reported a loss in its 4th quarter with revenues from all sources falling sharply to $152 million from $183 million and from $716 million to $634 million for the year to September.

The decline comes after the company reported robust sales and profits in the first quarter of its fiscal year to December 2012. Sales were up 27.5 percent in the December 2012 quarter and may have been a major reason why Salada suffered declines in sales thereafter, as the trade seemed to have stocked up on supplies, thus cannibalising sales in subsequent periods.

Profit after tax fell to a loss of $7 million for the quarter versus a profit of $41.8 million in the last quarter of the 2012 fiscal year. For the full year, profit fell from $153.4 million to $108 million in 2013. Early in the 2013 calendar year, the company adjusted prices downwards to try and combat declining volumes.

Salada_logo150x150The reduced performance was evident from early in the year as revenues fell and profits followed. In the March quarter, sales revenues were down by 15.6 percent and 19.6 percent in the June quarter but accelerated further to 24 percent in the September quarter for the main business, excluding sales for its new subsidiary, Mountain Peak, which started sales in the fourth quarter.

Interestingly, 2013 is the first year that revenues have been down since 2010, when revenues fell just over a percent, and the second year since 1997 when revenues fell 13 percent. Gross profit, which fell a sharp 31 percent in 2013 have hardly fallen year over year since 2003 except for a 16 percent decline in 2010 and a marginal decline in 2005. In the past year, gross profit margin fell to 56 percent from a high 86 percent in 2012. The gross profit levels have fluctuated over the years and 70 percent seems to be the range that the company has aimed for in recent years.

Cost rise | Compounding the issue is the start-up of the Roberts business lines, which contributed to the reduced profit. While revenues fell, spend on selling and promotion climbed by a third to $43.7 million and administrative cost edged up 6.4 percent. On the other hand, finance income nearly doubled from $17.28 to $34 million as gains from foreign currency contributed $20 million. Operating profit fell sharply to $91.4 million from $208 million in 2012. Expenses for 2013 includes cost for Mountain Peak without the full benefit of sales from that operation to fully cover cost. The new subsidiary contributed approximately $4 million in sales and contributed $17.5 million of losses to the year’s performance.

SaladaMountainPeak150x150The cost of inventories utilised in production amounted to $391 million versus $386 million in 2012.

Finances | The company recently declared a dividend of 40 cents per share payable in December which will amount to $41.6 million payment and is likely to reduce the cash on hand at the end of the year of $196 million. Amount due from customers is down from $150 million in 2012 to $90 million at year end but inventories rose to $251 million from $217 million in 2012. The company has current liabilities of just $75 million compared to current assets of $539 million at the end of September and shareholders’ equity stands at $700 million.

Related posts | Salada June profits down | Salada’s stock price may be stuck

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Sexiness no, performance yes

Cargo Handlers is by no means a sexy company but what it lacks in sexiness is made up from performance.

For the year just ended to September, the company out of Montego Bay reported revenue increase of 31 percent over 2012 and a 32 percent increase in profit to reach $95 million, an increase on the $64.6 million in 2012 which was up 24 percent on 2011. In the year just concluded, profit was negatively affected by a million dollar charge for damaged cargo compared to $356,000 in the prior year, administrative cost rose just over 20 percent to $13.8 million and other operating cost was up at a much faster pace at 28 percent to reach $74.75 million.

Return on equity rose from 64 percent in 2012 to 75 percent in 2013 with equity being $137 million at year end and $72 million at the end of 2012. Dividend paid during the year amounted to $63.3 million almost twice the $36 million paid in 2012.  The 2013 payment is 74.5 percent of profits or a return on the stock price of $12 at the start of the fiscal year of 14 percent. The high level of payout may have been tied to the higher tax that was applied to dividends starting in April this year rather than a decision to effect a permanent increase. In 2012, the payout ratio was just under 56 percent or 96 cents per share.

CargoHandlers280X150The audited financial statements indicated by way of a note that by resolutions dated 19 December 2012 and 17 February 2013, the Board of Directors approved the payment of interim dividends in the amounts of $0.68 and $1.00 per share respectively. In the prior year, resolutions dated 15 December 2011 and 2 July 2012 approved interim dividend payments of $0.64 and $0.32 per share respectively. Based on the simplicity of the operation, there is hardly any need to stock pile cash. As such investors can expect a healthy payout each year, thus providing a good source for income.

The company ended up with cash of $131 million at the end of the year and total current assets of $150.7 million and current liabilities stood at only $20 million. The company owes related parties $30 million and related parties owe them $25 million at the end of September.

Stock outlook | Profits may have grown well in the year just ended with some of the increase flowing from the change in value of the local currency. How much gains can be expected going forward is unsure. Suffice to say, the stock looks like a reasonable income provider.

Related posts | Profits up at Cargo Handlers | Cargo Handlers profits up 38%

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Profit jumps 39% for Scotia Invest

Profit for Scotia Group’s subsidiary Scotia Investments jumped 39 percent in the October quarter to hit $572 million from $411 million earned in 2012 driven by strong growth in non-interest income, which contributed $490 million for the quarter, up $175 million or 56% above the corresponding quarter last year. Non-interest income, which includes fee income, securities trading gains and net foreign exchange trading income, was $1.64 billion for the year, an increase of $351 million or 27% compared to 2012.

In spite of the $230 million direct loss incurred from the National Debt Exchange (NDX) earlier in the year, the investment house was able to report profits of $1.99 billion for the full year, up $71 million from $1.92 billion earned in the previous year. Earnings per share (EPS) for the year was $4.71 compared to $4.54 for last year, putting the stock value at only 5.5 times 2013 earnings including the one off NDX loss and with prospects for higher profit in 2014, it looks even cheaper.

The Return on Average Equity (ROE) stood at 17.28 percent, down from 18.8 percent last year.

scotiabanklogo150x150Revenues | Total Operating Income, comprising net interest revenue and other income, was $4.46 billion for the year, up 8% above the $4.13 billion recorded last year and for the quarter $1.22 billion, up 18% from the $1.03 billion recorded for the corresponding quarter last year.

Net Interest | Net interest income, after impairment losses for the year, was $2.81 billion, marginally down by $23 million compared to last year and was $729 million for the quarter, $10 million above the similar period last year.

Operating expenses | Total operating expenses for the year were $1.66 billion, representing an increase of 21% or $291 million over last year. The increase was mainly due to staff related costs and other operating expenses as a result of the inflationary increases. Total operating expenses for the quarter were $447 million, 16% above the same period last year.

Balance sheet | Balance sheet assets remained static year over year at $73.7 billion at the end of October, compared to $73.87 billion in 2012 but off-balance sheet assets under management climbed 16 percent to $119.39 billion over last year. The stability in the assets seems in keeping with the concept of shifting out of the repo business thus reducing the risk to the company and putting investors into funds managed by the company. In keeping with this “the Scotia Premium Money Market Fund grew over 260% during the year to $5.15 billion,” management concluded while there was a reduction in Repurchase agreement liabilities from $45.68 billion in 2012 to $44.87 billion at the end of 2013. Shareholders’ equity stood at $12.49 billion as at October 31, 2013, an increase of $1.12 billion compared to last year.

Outlook | Had the company not suffered losses as a result of the NDX debt exchange, earnings for the year would have exceeded $5 per share, with the last quarter earnings hitting $1.35 and further growth very likely this coming year. IC Insider projects earnings to be in the $6 range.

Scotia Investments is an IC Insider Buy Rated stock

Related posts | Q3 profits up at Scotia Investments | Scotia Investments one time dent

Derrimon not over by much

Derrimon Trading Company, the Junior Market’s latest IPO was oversubscribed having closed on the morning the issue opened. Data released by the broker to the issue Mayberry Investments indicate that there was just a relatively small over subscription. The broker confirmed today that the company has completed all applications in respect of the Initial Public Offering.

The bases of allotment | Board Reserved Applications, Employee Reserved Applications, Mayberry Clients Reserved Application and Key Partners Reserved Applications were fully allocated and the Public pool receives the first 50,000 shares in full and amounts and approximately 77.622% were allocated for excess amounts applied for over 50,000 units.

The amount of shares that were available to the general public was only 8,568,486. The amount suggests that the level of oversubscription did not exceed 1.7 million units.

Related Posts | Derrimon Trading, high risk low returns

Scotiabank named Bank of the Year

Kingston, November 29, 2013 | Scotiabank was today named the Bank of the Year in Jamaica by The Banker magazine, a Financial Times publication. Scotia Bank is an IC Insider Buy Rated Stock.

“Scotiabank is pleased to be recognized as Bank of the Year for maintaining a strong track record of delivering superior results,” said Jacqueline Sharp, president and CEO. “This award is a testament to the hard work and dedication of our exceptional employees in helping our customers discover opportunities in a changing world.”

The Banker selects winners based on their ability to deliver shareholder returns and gain strategic advantage. The magazine is the world’s longest running international banking magazine, recognized as a leading source of information on finance and investment around the globe.

ScotiaMobile280x150“Scotiabank has had a proud presence in the Caribbean for close to 125 years and today we have the largest presence of any financial services company in the region,” said Bruce Bowen, Scotiabank’s Senior Vice President for the Caribbean Region. “We have achieved our success by helping our customers discover what’s possible with their finances.”

Scotiabank’s Caribbean operations have been recognized with numerous awards year for their strength and stability as well as products and services, including:

  • Best Bank in Jamaica 2013 – Euromoney Magazine
  • Best Consumer Internet Bank 2013 – Global Finance
  • Best FX provider 2013 – Global Finance
  • Best Emerging Markets Bank – 2013
  • Bank of The Year in the Caribbean from LatinFinance;
  • And in 2012, The Banker named Scotiabank Global Bank of the Year and Bank of the Year in the Americas.

About Scotiabank  | Scotiabank has been in Jamaica since 1889 and is the premier financial institution in the countrywith just over 2,000 employees and 34 Branches Island wide. Scotiabank is a subsidiary of Scotiabank Group which offers a diverse range of products and services including personal, commercial, and small business banking; wealth management; insurance; and mortgages. The Group is an award winning institution having been named on numerous occasions as the Bank of the Year and Best Bank in Jamaica by international financial publications – the Banker, Latin Finance, Euromoney, and Global Finance magazines. The Scotiabank Group has $389 billion in assets (as at Oct 31, 2013). For more information please

Related post | Scotia reports record profit

Jamaica trade improves with US

Imports from the United States of America fell by US$212 million during the 2013 period to August with total imports valued at US$1.33 billion, compared to US$1.49 million in the 2012 period. Goods from the United States represents 32.2 per cent of Jamaica’s total import bill, compared to 33.4 per cent in the 2012 period.

Exports to the USA on the other hand, were valued at US$545 million, or 49.7 per cent of total exports of all goods from Jamaica. At the end of the 2013 review period, the trade deficit with the USA moved down to US$785 million, compared to US$997 million in the similar period in 2012.

Related posts | Big drop in trade deficit

Scotia reports record profit

Scotia Group Jamaica (Scotia Group) today reported record profit for the year to October 2013 of $11.92 billion compared to $10.58 billion for the same period last year. The banking group best other year was in 2009 when they reported $11.15 billion, but reported lower profits since until 2013.

It’s ironic that the group is enjoying one of their best year after having taken an almost $400 million hit when they participated in the government debt swap program. For the last quarter to October, net profit was $3.22 billion, $160 million above the previous quarter ended July, 2013 and $595 million above the quarter ended October 2012.

Earnings per share (EPS) for the year was $3.70 compared to $3.26 for the same period last year. The company reported $1 per share in earnings in the October quarter. Return on average equity was 16.88 percent, up from 15.56 percent last year.

Total operating income rose to $41.37 billion, a 6 percent increase over $39 billion generated in 2012.

scotiabankBuilding150x150Net interest income | Net interest income, after impairment losses for the period, was $22.85 billion, up $740 million or 3.35 percent when compared to the same period last year. Loan loss expense increased by $168 million when compared with prior year.

Other revenue | “Other revenue for the twelve months was $11.39 billion, up $2.28 billion or 25 percent compared to 2012. This was due primarily to increased insurance revenue, fee and commission income, as well as higher gains on our foreign currency trading and investment book. Net fee and commission income increased 10 percent, due to increased account and transaction volumes in our retail and commercial portfolios, as well as, growth in our mutual funds and unit trust business” the company stated.

Expenses | “Salaries and staff benefits reflect a reduction of $126 million this year, as it includes a higher actuarially determined net credit of $1.19 billion in relation to our defined benefit pension, group life and health plans. The salaries and staff benefits expense, excluding the post retirement credit, increased by $1.06 billion or 12.22 percent year over year” the company reported. Other operating expenses grew much faster than income at 26 percent to reach $7.14 billion in the year.

Credit quality | “Non-performing loans at year end totalled $4.49 billion, reflecting a decrease of $60 million from prior year, and a decrease of $209 million from the previous quarter ended July 2013 as recoveries increased during the period. Total NPLs now represent 3.29 percent of total gross loans compared to 3.65 percent last year and 3.51 percent as at July, 2013. The Group’s aggregate loan loss provision as at October 31, 2013 was $4.5 billion, representing 100 percent coverage of the total nonperforming loans,” the Group’s management stated.

Balance sheet | Total assets increased year over year by $31 billion or 8.68 percent to $389 billion at October as the Group enjoyed growth in loan and deposit volumes over the period. Loans grew by $12.3 billion to close at $134.8 billion. Cash resources increased by $22 billion primarily as a result of the growth in deposits. Total customer liabilities (deposits, repo liabilities and policyholder’s funds) grew to $296 billion, an increase of $23 billion over last year.

Capital | Total shareholders’ equity grew to $72.8 billion, $5.2 billion above prior year.

Scotia Group has maintained its Buy Rated status as IC Insider projects earnings for 2014 to end up around $4.50. The stock, priced under $18, is already very cheap based on 2013 earnings. With the recently announced dividend of 40 cents per share, the yield is over 9 percent.

Related posts | Scotia Group moves up in spite of NDX New additions to Buy Rated stocks | Dividends galore coming |