Barita Investments had a decent nine months’ performance to June this year, with profit of $156 million versus $77 million in 2013. Profit had dipped for the June quarter from that of 2013 by just under 50 percent. The net result was earnings per share of 35 cents.
With those results investors would be forgiven if they felt that full year’s earnings would be closer to 50 cents per share than the 16 cents they reported. That company reported a loss in the September quarter of $66 million down from a profit of $24 million in 2013, pulling full year results to $71 million compared to $63 million in 2013.
Major contributors to the final quarter’s loss, are increased taxation of $26 million, with a loss before tax of $40 million. Investment impairment resulted in $42 million hit against profit while securities and foreign exchange trading ended up in losses and dividend income fell by $19 million. Net interest income dropped sharply as well, by 60 percent to $45 million while administrative cost was up 17 percent. Barita also picked up a loss of $10 million from an investment in an animated development company GSW Animated Ltd. Barita’s investment in the company is $28 million, for 11.84 percent interest.
For the full year interest expense rose 21 percent but income fell marginally, while income from fees, commission and securities trading were the only areas to show growth. Cost was kept pretty tight with only a 4 percent rise.
In 2013 Barita took a big hit on its investment portfolio when it swapped Government bonds for lower yielding ones, resulting in a write off of capital gains on their holdings. Interest rates rose between 2013 and mid 2014 resulting in a squeeze on interest margins. Some of the reduction on the interest income side was made for by a switch to foreign exchange holdings to benefit from the devaluation of the local dollar. Revaluation of the Jamaican dollar in the September quarter would have negatively affected return in this area. The local dollar slipped in the December quarter which should benefit them. Economic measures being pursued by the Jamaican government along with the sharp drop in oil prices will lead to greater stability or possible some revaluation of the local dollar in the months ahead. This will likely result in a portfolio shift that will improve net interest income. The local stock market is showing signs of improved interest and if this continues, trading income will improve for 2015 and the large investment impairment hit should not occur. The end result is that the company should enjoy better results in 2015.
Of import is the higher level of profitability, shown in comprehensive income statement, with gains of $242 million excluding revaluation gains on property. The increased comprehensive income resulted in the capital base of the company rising to $1.67 billion from $1.4 billion at the end of the 2013 fiscal year. Total assets being managed is $13.6 billion.
Barita should be seen a good play on the revival of the local stock market which is going to happen at some time in the near future, exactly when is unsure at this time, based on valuation and performance of companies it may not be far off.
The company’s stock is listed on the Jamaica Stock Exchange and last traded at $2.18 with net assets of $3.75 per share. Profit may have slipped in 2014 but that is not an indication of a permanent slippage as such the stock remains BUY RATED based on it low price and the potential for higher earnings ahead.
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[…] Barita Investments profit after tax dropped 21 percent to $46 million for the quarter ending December 2014 compared to the similar period in 2013, from total revenues of $345 million and net operating revenues of $177 million. In 2013, the company that is involved in stockbroker and fund management reported net operating profit of $165 million but increase expenses helped to pull down profit for the quarter. Interest Income contributed $230 million to revenues, 15 percent below the prior year, while related interest expense remained flat at $168 million. Barita is suffering from a mixture of assets priced for shorter periods than the funds clients’ invest with them. According to Chairman Rita Humphreys, “in an environment where interest rates have decreased, our liability costs have been similarly reduced resulting in our interest expense decreasing to prior year levels. However, with our investment portfolio comprising of approximately fifty percent variable instruments, our interest income has decreased at a faster rate. This has resulted in a significant contraction in our margins resulting in a recorded net interest income of $62 million, approximately 36 percent down from prior year.” Fees and Commission income rose 65 percent above prior year to $38 million, with improvement coming from the subsidiary Barita Unit Trusts. Additionally, trading gains were 600 percent above prior year at $48 million compared to only $8 million in 2013. Depreciation of the Jamaican resulted in translation gains of $21 million down from $29 million prior year. “Staff and administrative expenses contributed to a 16 percent increase in operational costs when compared to the same period last year. Staff costs increased by 10 percent which was triggered primarily by additional human resources and remuneration adjustments. Administrative costs were 25 percent higher than last year, with the main contributors being financial support for our charity arm the Barita Education Foundation and client support expenses,” the report to shareholders stated. Interest rate developments, with Treasury bill rates continuing to fall and the change in the method relating to the repo business could put further pressure on income for a while. At the end of the quarter fair value reserve amounted to $107 million which could be realised in subsequent quarters and thus boost earnings. Falling T-Bill rates should result in gains in longer term Jamaican fixed interest rates securities and pickup in interest now seen in the Jamaica stock exchange is likely to hand Barita increased fee income during the balance of 2014. […]
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[…] Gains| Stocks gaining with last traded prices, at the end of trading in the main market are, Barita Investments concluded trading with 18,000 shares changing hands to close with a gain of 7 cents at $2.25. Berger […]
[…] selling prices and only 3 with offers that were lower. In trading, after a long period of drought, Barita Investments closed with 6,729,389 shares changing hands with as the price ended at $2.07 after trading as high […]