Interest rate rise & fall

Interest rates on the latest issues of treasury bills by the Government of Jamaica on the 15th and 24th of January 2014 to provide funding for $1.2 billion showed mixed results.

Three offerings were available of $400 million each for duration of 28 days, 91 and 182 days. The rate on the 91 day instrument resulted in an average rate of 7.4292 percent a slight decline compared with the last issue of same duration, the rate for the 182 day instrument came out at 8.71734 percent reflecting a rise over the 8.25335 percent that obtained at the December 2013 auction, the 91 day issue resulted in an average rate of 7.5338 percent.

TBills280x150Investors received rates as high as 7.77998 percent for the 30 day T-Bill and as high as 10 percent for the longer dated instrument. Just over 11 percent of investors’ funds benefited from the higher yield for the 90 day paper buy. It was as high as 6.969 percent for the short term T Bills.

On January 15, an issue of a 28 day Treasury bill resulted in an average rate of 6.12 percent similar to the issue in December 2013 with a 6.12 percent average rate for the 28 day offer maturing in January and continues to compare favourably with the 6.2522 percent that obtained at the offer in November.

Related Posts | Interest rate eases

Lasco Financial’s marketing investment

The latest quarterly report to December 2013, shows that Lasco Finance Services pumped in funds to nearly double its promotional cost to push for a greater share of the remittance business, resulting in heightened marketing and selling cost from $111 in 2012 million to $204 million in 2013.

In the December quarter the cost was pushed to $87 million compared to just $36 million in 2012. The increase spend in this area kept profits down to $46 million versus $55 million in the December 2012 quarter and for the nine months period $136 million or 20.6 percent above the 2012 results for the similar period. Administrative cost rose by a strong 26 percent for the year to September but by the end of 2013, the rate of increase fell to 22 percent as the December quarter increased by only 15 percent to reach $47.5 million and for the nine months $144 million versus $118 million.

With the reduced spend on promotion that should flow with the completion of the World Cup promo, profit should end the year around $220 million and that would be up from $164 million in 2013 or earnings of 18 cents per share.

FX_USPound2“In pursuit of our strategic objective to increase our market share in the remittance industry, towards the end of the 2nd Quarter, we launched our Brazil 2014 promotion which lasted until December 31, 2013. This investment contributed to the more than 100% increase in selling and promotional expenses. We anticipate that the resulting rise in transactions from this awareness campaign will continue into the future periods,” management stated in release accompanying the results.

As the promotion ended, the March quarter figures should reflect much lower cost in this area and with that increased profit. Trading income in the quarter rose by a strong 42 percent to reach $176 million and for the nine months period the growth was 42.6 percent taking it to $469 million.

The financials remain strong with equity of $610 million, liabilities of only $95 million and cash of $302 million.

Lasco Financial is an IC Insider Buy Rated Stock. To view the full list, click here.

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A bigger Sagicor Bank?

Reports are circulating that Sagicor Group is in talks to acquire the RBC Royal Bank Jamaica’s operations. IC Insider understands that an official announcement could be made to the Jamaica Stock Exchange by the end of Wednesday.

From all indications, RBC operations would be absorbed into Sagicor Bank. IC Insider gathers that the deal has not yet been inked, but talks are in fact taking place that will most likely to lead to a deal.

As is the case with the acquisition of this nature, the deal would be subject regulatory approval and due diligence. No purchase price has been revealed but Sagicor will most likely acquire it for a figure that will be lower than book value that is currently around $10.5 billion as the bank’s Jamaica operations has been bleeding for some time at close to $2 billion per year based on 2013 numbers.

Sagicor150x150How much will Sagicor spend? | For the twelve months to September last year, the RBC lost $1.7 billion and $456 million between July and September according to BOJ’s data. The continued losses suggest a price around $5 billion. For the year ending October 2012, RBC reported a loss of $2 billion before tax, which was down from $3 billion in 2011. In 2012, loan losses contributed $650 million to the loss and income was inadequate to cover housekeeping expenses. Most likely the NDX in 2013, that cut interest rates, would have negatively affected the bank thus reducing the net interest margin. The bank’s biggest problem, apart from heavy loan losses, is the fixed operating cost that the income generated cannot match. It would require major loan growth to deliver the required income and that has not been growing fast enough having reached $32 billion in 2013 from $30.5 billion in October 2012.

If the deal goes through, it would create a combined banking group with assets of nearly $150 billion, loans of $40 billion and revenues around $12 billion.

Sagicor would enjoy significant cost savings from a merger of both entities as some of the branches overlap and should lead to closure of some and expansion of others. Head office operations would result in major cost savings as well, once the two are fully integrated. This would not be the first time that Sagicor Bank have entered in merger arrangements having absorbed Manufacturers Merchant Bank and Trafalgar Development Bank some years ago.

Sagicor Jamaica is a IC Insider Buy Rated Stock. To view the full list, click here.

Related posts | Buy Rated stocks coming inMarked changes for Buy Rated stocks | Sagicor cuts dividends

JSE: Declines over power gains

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Tuesday, 28th January 2014 | The Jamaica stock market saw a sharp reversal to Monday’s positive advance decline ratio with 14 stocks falling in price compared to only 5 that went up of the 29 securities that traded. Trading resulted in 5,570,700 shares changing hands valued at $8,124,125.54. Carreras and Caribbean Creams traded at 52 weeks low and Proven Investments traded at an all-time high.

The JSE Market Index dropped 286.54 points to 79,567.50 and the JSE All Jamaican Composite dipped 434.65 points to 81,104.25.

Main market winners | On a day when winners were hard to find, the main market had 3 of the stocks that recorded gains with the US dollar market having one. Berger Paints traded just 2,749 units but gained 5 cents to end at $1.85; Grace Kennedy exchanged only 1,800 units as the price closed at $57 for a $2 gain; Hardware & Lumber with 5,000 gaining 8 cents to close at $8.08; Proven Investments US dollar ordinary shares gained a cent to close at a new all-time high of US$0.16.

JSEIndicesJan28Losers | Stocks trading down include Caribbean Cement with 83,478 units closing 24 cents down at $5.01; Carreras with 49,567 shares closing down a cent at $33.99; Jamaica Money Market Brokers 10,000 shares at $7.40, down by 9 cents; Kingston Wharves with 8,600 units to close down 54 cents at $5.56; National Commercial Bank 93,182 units closing down 20 cents at $17.80; Radio Jamaica 11,330 shares to close down by 38 cents at $1.52; Scotia Group lost 10 cents to end at $20.50 as it traded 47,270 units; Supreme Ventures had 3,204,847 units changing hands at $2.20, down by 10 cents.

Firm traders | Stocks trading unchanged include Cable & Wireless 290,000 units closing at 22 cents; Desnoes & Geddes 8,175 units at $5; Sagicor Group 37,200 shares at $8.50; Sagicor Real Estate X Fund 9,265 units at $6.50; Scotia Investments with 60,000 shares at $25.

Trading of preference shares saw Jamaica Money Market Brokers 7.50% exchanging 100,000 units at $2 and the 8.75% traded just 10,000 shares at $3 while Proven Investments 8% swapped 16,204 units at $5.10.

The JSE Junior Market Index declined by 0.89 points to close at 774.45 as the majority of securities that traded declined with only one advancing.

Junior market winners | Medical Disposables, the sole security to close on the junior market with a gain had 227,616 units trading to close at $2.10, up 5 cents.

Losers | Caribbean Cream traded 610,000 to close at 85 cents but lost 8 cents; General Accident Insurance 27,000 shares but closed down 3 cents at $1.85; Lasco Distributors exchanged 171,160 units to close a cent down at $1.42; Lasco Financial Services had 83,750 units changing hands and shed 4 cents to close at $1.35 and Lasco Manufacturing exchanged 363,000 units, down 1 cent at $1.33.

Firm traders | Caribbean Producers Jamaica traded 10,000 to close unchanged at $2.70. Eppley was the other stock to close unchanged but with a miniscule volume.

IC bid-offer Indicator | At the end of trading the Investor’s Choice bid-offer indicator had only 8 stocks with bids that were higher than the last selling prices and 2 stocks with offers lower.

TTSE: Manipulated close or what?

Tuesday, 28th January 2014 | The official records of the Trinidad Stock Exchange will reflect no stock recording a change in price today and the indices all remaining unperturbed at the end of trading.

But that would be hiding the real truth of what really took place for the 13 securities that traded today with one stock recording a gain and 5 stocks closing down in price compared to their last selling prices on Monday. There was no change to the market indices as the Composite Index remained at 1,195.73, the All T&T Index at 2,020.18 and the Cross Listed Index at 48.81. A total of 219,809 shares changed hands with a value of $3,933,490.

Gainer | The only stock to record a gain for the day is National Enterprises with a volume of 27,954 shares being traded for $510,274 and the price gained 5 cents to end at $18.30.

TTSEJan28Decliners | Angostura Holdings traded 47,764 shares for a value of $513,463 to close down 25 cents at $11.75; Clico Investment Fund exchanged 106,378 shares valued at $2,394,308 as the price dropped by 25 cents to close at $22.50; First Citizens Bank traded 2,150 to close down 72 cents at $41.66; Readymix WI closed at $21 a new 52 weeks low as the price was down 99 cents as 800 units changed hands; Scotiabank exchanged 1,712 units at $73.11, down a cent and West Indian Tobacco fell to $118 down by $2 with only 250 units trading.

Firm Traders | The main stock to traded unchanged in price include First Caribbean International Bank that contributed 25,917 shares with a value of $168,461 to close at $6.50, while Trinidad Cement added 5,034 shares valued at $11,578, closing at $2.30.

IC bid-offer Indicator | At the end of trading the Investor’s Choice bid-offer indicator had 4 stocks with bids that were higher than the last selling prices and 5 stocks with offers lower.

39% hike for NCB dividend

The Board of Directors of National Commercial Bank (NCB) announced a 39 percent hike in the latest dividend that has been declared. The banking group will be paying the interim dividend of 32 cents per ordinary stock unit on February 20, 2014 to stockholders on record as at February 7, 2014. Last year, NCB’s first dividend for the year was 23 cents that was paid in March and on May 24, 16 cents per share.

NCB also reported earnings for the first quarter to December indicating that operations are back to normal coming out of 2013 when profits were negatively impacted by the government debt swap. Profit after tax came out at $2.856 billion versus profits of $2.786 billion and for the September 2013 and $1.778 billion after writing off some large one-time expenses. Earnings per share amounted to $1.16 and should reached around $5 for the year, barring any major negative developments.

NCB_TheAtrium280x150Total revenues climbed by 15 percent to $13.75 billion compared to $11.967 billion.

While net revenues grew from $9.16 billion to $10.47 billion, expenses grew from $5.78 billion to $7.34 billion resulting in reduced operating profit of $300 million. A $301 million gain from on acquisition of a subsidiary counter balanced the reduced operating profit. Bad loan provision was down from $563 million to $390 million, but policy holders cost climbed by a billion dollars with the acquisition of Advantage General Insurance Company.

Looking forward, loans grew 27 percent or $31.8 billion to $148 billion from December 2012 and deposits were up 10 percent to $194 billion.

Related posts | NCB ill-fated IPO cost $680m | NCB cuts dividend 75% | NCB recovers from NDX hit

JSE: Advances more than declines

Monday, 27th January 2014 | The prices of 10 stocks gained and 5 declined as 27 securities traded on the Jamaica stock market resulting in 4,095,869 units changing hands valued at just $8,124,126.

Three stocks closed at 52 weeks high at the end of trading. The improved gain to loss ratio was visible in the main market indices moving up as JSE Market Index gained by 217.41 points to close at 79,854.04 and the JSE All Jamaican Composite advanced by 329.79 points to 81,538.90. The JSE Junior Market Index, however, declined by 4.47 points to close at 775.34.

Main market advancers | Stocks advancing include Cable & Wireless with 1,940,868 units to close up 2 cents at 22 cents, a new 52 weeks high; Caribbean Cement also closed at a new 52 weeks high with 7,583 to end at $5.25 up by 65 cents; Jamaica Broilers 55,518 units, the price gained 3 cents to end at $4.77; Sagicor Investments 4,700 shares at $16.67, up by $1.06; Sagicor Real Estate X Fund 32,735 units at $6.50, up 20 cents; Scotia Group 100,768 units to close at $20.60, for a 10 cents gain; Seprod gained 20 cents to close at $10.80 with 2,000 shares.

JSEIndicesJan27Proven Investments US dollar ordinary shares traded 15,500 units at a new 52 weeks high of US$0.15 as it gained 1.7 US cents.

Firm traders | The main stocks with the last traded price remaining unchanged include Carreras with 11,978 units at $34; Kingston Wharves  8,575 units at $6.10; National Commercial Bank 8,930 units at $18; Supreme Ventures 1,008,700 units at $2.30.

In the preference section, Jamaica Money Market Brokers 7.50% had 292,000 units at $2 and 8.75% with 40,000 units at $3 and Proven Investments 8%, 35,200 shares at $5.10.

Decliners | Scotia Investments trading only 3,340 units to close at $25, for a decline of a $1.50.

Junior market advancers | Lasco Financial Services 289,314 shares at 1.39 up 2 cents and Lasco Manufacturing 132,120 shares to close at $1.34 up 8 cents.

Firm traders | Only one stock, Caribbean Flavours was unchanged with 38,243 shares, the price closed at $2.50.

Decliners | Three stocks declined including Medical Disposables with 21,000 shares, closing at $2.05, off by 5 cents; Lasco Distributors 31,790 shares at $1.43, down 2 cents and Paramount Trading 2,000 units with the price slipping 35 cents to $3.20.

IC bid-offer Indicator | At the end of trading the Investor’s Choice bid-offer indicator had 8 stocks with bids higher than the last selling prices and 4 stocks with offers that were lower.

TTSE: Investors cleaned out NCB shares

Monday, 27th January 2014 | Investors cleared out all the National Commercial Bank shares on offer in Monday’s trading on the Trinidad Stock Exchange. This seems a strong acceptance of the improved quarterly results reported by the banking group after trading hours on Thursday. The bank’s shares accounted for 97 percent of the stocks that traded.

Activity amounted to 1,958,441 shares changing hands valued at $3,250,095 with trading in 10 securities of which 3 advanced, 3 declined and 4 traded firm.

Two of the market indices declined while one remained unchanged. The Composite Index declined by 0.64 points to close at 1,195.73, the All T&T Index fell by 1.30 points to 2,020.18 and the Cross Listed Index remained at 48.81.

Gainers | Clico Investment Fund advanced by 11 cents to end at $22.75 with a volume of 3,210 shares valued at $73,028. Republic Bank added 8,109 shares valued at $944,897 with the price increasing by 29 cents $116.52; Scotia Bank traded only 624 units but the price inched up by 2 cents to $73.12.

Firm traders | National Commercial Bank was the volume leader with 1,901,965 shares changing hands for a value of $1,901,965 with price closing at $1; Jamaica Money Market Brokers closed at 49 cents with 18,500 shares trading for $9,065 and Guardian Holdings traded 4,294 units at $14.

Losers | Angostura Holdings fell by 50 cents to close at $11.00 as 1,000 units traded; National Flour Mills contributed 15,500 shares with a value of $14,830 to close a cent off at 95 cents; First Citizens Bank lost 4 cents in closing at $42.38 with 3,891 shares traded.

IC bid-offer Indicator | At the end of trading the Investor’s Choice bid-offer indicator had only 3 stocks with bids that were higher than the last selling prices and 5 stocks with offers lower.

GOJ’s program for reduction & growth

The principal objective of the Government of Jamaica’s programme is to reduce the national debt and raise the sustainable growth rate of our national output.

The governor of the Bank of Jamaica, Bryan Wynter, stated in a recent address at a JMA’s 2014 Economic Forum, that the Government has committed to implementing revenue, expenditure and debt management measures to ensure that the debt goes down in relation to GDP. This commitment entails the achievement of annual primary surpluses of 7.5% of GDP over the life of the programme. The governor went on to outline other measures that are to be put in place to achieve the main objectives.

“With this,” he stated, “the borrowing need of the Government has fallen sharply, which is leading to a steady reduction in the debt to GDP ratio to below 100% by 2020. Government intends to make the current fiscal responsibility framework stronger by developing binding fiscal rules. This will increase transparency, lock in the gains of fiscal consolidation and ensure that budgets will be sustainable even beyond the end of the four-year IMF agreement.

Image courtesy of arztsamui/FreeDigitalPhotos.net

Image courtesy of arztsamui/FreeDigitalPhotos.net

“A central plank of the programme is the implementation of structural reforms aimed at creating an environment supportive of economic growth. One of the main structural reforms to which the Government has committed is the improvement of the tax system, including tax administration.

“Fiscal incentives legislation was also passed in December which overhauls and simplifies decades of tax law to the advantage of productive businesses.

“To kick-start growth, the government has started to implement catalytic, strategic, public-private investments. Already, the government has initiated production in six agro-parks, aimed at import substitution. The objective is to develop a total of nine such parks by the end of 2014.

“The GOJ is also committed to improving the competitiveness of the economy through legislative and administrative changes. Additionally, amendments to the Companies Act were passed which streamline the business registration process through the use of a multi-purpose registration instrument. A bill to modernise our bankruptcy rules, the Insolvency Bill, was also tabled in Parliament.

“The Government is in the process of establishing a Port Community System to electronically integrate and streamline export and import procedures. It is also moving to establish more flexible work arrangements and improve access to skills training. Furthermore, initiatives to achieve energy diversification and conservation are in progress.

“Supporting these reforms will be the preservation of a stable macroeconomic environment through sound monetary and fiscal policies. Inflation is expected to decline over the medium term towards our long-run objective. This decline in inflation, in conjunction with a more competitive exchange rate, will foster increased price competitiveness of Jamaica’s exports of goods and services.

“Lower inflation will also allow Jamaican businesses to finance investments at lower interest rates. The reduction in fiscal deficits and the public debt will make more resources available to the productive sector and will complement Bank of Jamaica’s thrust to maintain single-digit inflation.

“The Government also committed to undertaking reforms which will increase the efficiency and competitiveness of the financial system and credit market. You may have seen in the media recently, where we committed to a timetable for raising the cap on investments in foreign securities from 5% of assets to at least 25% by end-2015 and removing it by end-2016, unless extraordinary circumstances require a reassessment. The drafting of Jamaica’s Omnibus Banking statute, which includes regulations to give consumers increased protection and to underwrite the regulatory basis for agency banking, is far advanced.

Investing600x250“We are confident that we will be successful with the December test both with respect to the structural benchmarks and the quantitative performance criteria. More importantly, the Government is already looking ahead to the coming fiscal year with a view to crafting policies and commitments aimed at further improving the business climate in Jamaica and securing stronger growth.

“The economy began its recovery during the September quarter, registering growth of 0.5 per cent. We expect that growth of a little under 1.0 per cent will materialise for the fiscal year, in line with our projections.

“As the economy stabilises, the fiscal and external balances improve and the debt ratios are brought down towards sustainable levels, we should see the Government being able to address more effectively important social and developmental issues such as education and training and crime and social peace.”

Related posts | Ministry confirms deficit wipe out | Major cost input for production in 2013 | 2013 inflation 9.7%, worse than 2012

Ministry confirms deficit wipe out

The Ministry of Finance is now confirming the Investor’s Choice forecast that the fiscal year deficit to March 2014 will be effectively wiped out due to the revenue measures put in place earlier in 2013.

The Ministry, in a review of its operations and the economy to October 2013, indicates that the deficit is now “projected at 0.1% of GDP or $1.28 billion, a significant improvement on the 0.5% of GDP budgeted”. The deficit was originally projected at $8.046 billion and would have been down from a deficit in 2013 of $54.6 billion.

The estimated fiscal deficit of 0.1% of GDP is the lowest since Fiscal year 1995/96, when Central government operations generated a fiscal surplus, the ministry in their review states.

The projected improvement will emanate from the reduction in interest costs below the amount originally budgeted.

Image courtesy of cooldesign/FreeDigitalPhotos.net

Image courtesy of cooldesign/FreeDigitalPhotos.net

The paper went on to state that “In spite of new tax measures that were implemented in 2013, there has been revenue shortfall. In an attempt to partially address the issue the Tax Administration Jamaica (TAJ) and Jamaica Customs Agency (JCA) have stepped up their administrative and operational activities, in an effort to keep collections in line with budget for the remainder of the year. While the actions are anticipated to yield positive results, they are not expected to be sufficient to reverse the revenue shortfall up to the end of October 2013. Within this context, the GOJ identified expenditure restraint measures of 0.5% of GDP, equivalent to $6,944.7mn, which will serve to ensure that the primary surplus remains on track with the programmed 7.5% of GDP target in the EFF. These adjustments will be reflected in Supplementary Estimates to be tabled in Parliament for approval in the final quarter of FY 2013/14.”

Related posts | Fiscal deficit improvement continues | November worse month for revenues

Image courtesy of cooldesign/FreeDigitalPhotos.net