Pulse split should be 4 not 2

I sometimes wonder who advises company management. The decisions they often make, while seeming to be well intentioned, raise critical questions about what they expect the out turn to be.
Pulse Investments is a case in point. The directors propose to consider the splitting of the issued shares of the company into two units for each one currently issued.
Last year, in a hurriedly called extra ordinary general meeting, the company approved an increase in its authorised share capital and sanctioned the board proceed with a rights issue of share. This was after a resolution was belated inserted on the agenda of at the 2016 Annual General Meeting to approve a rights issue which was forced by shareholders into a postponement.
The company currently has 271,789,674 issued shares, the split would put the total up to 543,579,348 units. The company’s stock last traded on the Jamaica Stock Exchange at $8.05 and carries a PE of 6 compared to 13 for the main market.
From all indications, with the company’s PE ratio well below the general market, the company must be awaiting a greater uptick in stock price before going back to shareholders for more funds, a two for one split is not likely to do the work to get the price more in line with the market.
The problem is that Pulse is not a very liquid stock with just 271 million units issued. From my estimation the board should be considering a split in the order of 4 to 1 that would raise the issued shares to over 1 billion shares. Such a split would most likely excite the market and help move the stock upwards in price. The proposed 2 to 1 is not going to do it. With the Board Meeting is set to be held on Monday, May 22, it is not late for the directors to change their minds.

Thanks NCB but go further

This publication applauds Jamaica’s NCB Financial Group, in following the practice of some of the listed companies in Trinidad & Tobago in publishing dates for the release of regular but important information during the course of a year.
After all, the more information investors have, the more transparent and better the market in which they operate will be. The recent disclosure that Jamaica’s NCB Group made, to publish the dates in 2017, of the announcement of dividends, is a positive move for the Jamaican market, one hopes that other listed companies will follow the NCB’s lead.
While historically, the dates of dividend announcements, have usually been the same dates on which their interim results are released, investors should not have to be wondering when those dates should be, accordingly, we wish they would have gone further and also state the dates of the release of their quarterly reports for all to see.
The announcement is an enhancement of good corporate governance and good investor relations. We would however, suggest that the group restates for clarity, its dividend payment policy as well in furtherance of good governance.

Mitchell packs in CFF chair for FSC

H Mitchel 08-16Howard Mitchell has resigned from the Board of Directors and as Chairman of Caribbean Flavours and Fragrances (CFF). The only regret is that it has taken so long to be effective in light of his appointment and acceptance of a seat on the board of the Financial Services Commission. But it’s better late than never.
The question still arises though and it has to do with a matter where an investor has complained to the FSC about certain matters pertaining to CFF and its shareholdings and treatment pertaining to control of CFF by Derrimon Trading. How will the FSC handle this matter, to ensure that no one accuses it of an unfair ruling.
Back in 2008, I was approached to sit on the board of Financial Services Commission, it did not take me long to turn it down as I saw the potential for conflict. I was recently talking to two senior brokers and the issue of my recent appointment to the FSC came up. I advised them that I was not a member due to conflicts. But they indicated that they were of that view too and wondered why I was listed as a member, they never indicated if they accepted what I said but we never went much further with the issue. Suffice to say, that is indicated once I understood that I was to be appointed that is could not accept same, due to possible conflicts.
I was concerned about the late Emile George being chairman of a number of listed company boards and also chairman of the FSC. I wrote about it hoping that good sense would prevail but that was never the case.
I am aware that the issue of conflict or perceived conflict has been raised about the present FSC chair. I now note that Howard Mitchell has advised the Jamaica Stock Exchange that he resigned from the Board of Directors and as Chairman effective August 11, 2016 of Caribbean Flavours and Fragrances Limited (CFF) because of his appointment as Chairman of the Financial Services Commission and the possibility for there to be perceived a conflict of interest.
As a country we need to move to a place where such appointments should be seriously consider by both those who proposed and those of us who are asked to serve and so ensure a higher standard of governance.

No new taxes for Jamaicans

Collector of Taxes office, Constant Spring, Kingston.

Collector of Taxes office, Constant Spring, Kingston.

Earlier this year I stated that government’s $1.5 billion tax plan could be funded from ongoing revenues but others thought otherwise. 2016 fiscal data showed savings on the cost side particularly interest cost reduction and increase revenues that were running above budget.
Based on developments on the fiscal operations this fiscal year, it seems that government was well on the way to enjoying a bumper reaping in 2016/17 fiscal year of higher revenues and lower interest cost that seemed adequate to meet the proposed tax break of the tax free $1.5 billion.
With the first quarter revenues and expenditure in the data is confirming what I was saying and is indicating that the naysayers are far from as informed as some would want the public to believe. What the early data is suggesting is that the economy seems to be performing better than in recent past and more importantly, that there was no need for any new taxes for this fiscal year and none will be needed to fund the rest of the personal tax break to be effected in 2017/18.
The simple reason is, savings on interest cost, with lower interest rates on government debt and an 11 percent rise in revenues over the 2015 intake, equal to an 8 percent increase above budget for the current fiscal year, will translate to $46 billion in added revenues and interest savings over the planned amounts. That will be more than enough to fund the increase tax break to come and to do without the NHT special payment. But that is not all if positive economic growth continues into 2017 revenues will rise some more probably with an additional $30 billion.
What the data is showing, is that the country has been failing from lack of thinking outside familiar territory.

High return on time investment

Participants at the JEF session, being addressed on the benefits of the equity market in Jamaica by John Jackson in May.

Participants at the JEF session, being addressed on the benefits of the equity market in Jamaica by John Jackson in May.

I spent years attentively observing financial markets, but more so the local stock market. Nonetheless, when asked to speak on developments and opportunities in the markets, I still have to spend considerable time preparing the presentation and infusing it with new and updated information as well as historical data from many years past, to help make a point clear.
During the preparation process, one also has to be mindful of mandated time constraints, as well as the attention span of audiences or participants and so choices have to be made as to what’s in and whats out.
When I was asked by the Jamaica Employers’ Federation, JEF, to present an outline of a paper for their annual convention, I decided to suggest a topic that covered the capital market as a place for investors and entities seeking to woo investors to part with their money for a time, in exchange for the promise of future gains. Having achieved consensus and presentation prepared, my concern was, what was the interest of the attendees? I had no idea really. The JEF convention posed the problem that the session ran concurrently with others and covering two aspect of the market was challenging without knowing the audience’s interest. I decided from the start of the presentation to find out where the interest of the group laid. So although I did quite a bit on what it means for companies to go public, the bulk of an estimated 200 or so participants were interested in investing in the stock market. Many were either new to it, or fairly new and they wanted the information I had to offer. At the end of my presentation there were many questions and still more, after the session ended.
While I had a fair idea of how attendees felt, it is not always possible to categorically define the collective response. So when I received the comments below from the JEF, I felt that the many hours spent in preparation, delivered a great return on my investment.
JEFRE: JEF CONVENTION 2016
The Executive of the Jamaica Employers’ Federation and the Convention Director, use this medium to express sincere appreciation to you for your contribution to the success of JEF’s Thirty- fourth (34th) Annual Business & Workplace Convention and Exhibition 2016, which was held at the Montego Bay Convention Centre, in St. James, between May 26 and 29, 2016, under the theme: “Empower People …. Energize Business”.
From the feedback received, your presentation on the topic: “Personal & Business Enrichment: The Equity Capital way for a Richer Future”, at a Concurrent session, was very well received and from the feedback, your content, perspective and engaging delivery style enhanced our participants’ knowledge and surpassed their expectations.
Thank you for your invaluable support and we certainly hope that we will have the honour of working with you again in the staging of another World Class learning event.
Yours sincerely,
Brenda V. Cuthbert (Mrs.)
CHIEF EXECUTIVE OFFICER

Where are the 1834 Investments results?

Gleaner & RJR execs signing merger agreement earlier in 2015

Gleaner & RJR execs signing merger agreement earlier in 2015

The rules of the Jamaica Stock Exchange require, listed companies to submit quarterly interim financial report within 45 days of each quarter. In the case where a company opts to release an audited account within 60 days of the year-end, they can opt in lieu of a quarterly report within 45 days.
1834 Investments Limited (formerly The Gleaner Company Limited) did not release the usual December quarter report as such investors have been deprived of important information on the company. The stock exchange has fallen down badly on this one in not requesting it. No good reason has been given why it was not released.
Apparently the exchange regulatory arm expected that the 15 months report to March this would have been released to let the matter go away but it has not. First out of the block towards the end of May, 1834 Investments advised the Jamaica Stock Exchange that the Audited Annual Financial Accounts for March, 2016 will be late and unavailable for publication by May 30, 2016. 1834 anticipates that it should be available for publication on or before June 30, 2016. Bad news for investors and bad news for the capital market. The matter gets worse, the end of June has now gone and with July well advanced but there are no results released and no advisory on the JSE website or in the newspapers as to the new deadline. Nearly seven months have elapsed since the last report was released.
In the past several companies have changed their year end, as recently as late last year Desnoes & Geddes and Access changed their but provided investor with results for all relevant quarters, but the Gleaner Company who changed theirs to March from December did not do so.
It is well past the time for the Jamaica Stock Exchange act to protect the investing public.

$1m for 2016, $1.5m in 2017

Minister of Finance Audley Shaw should announce a $1m plan for 2016 and $1.5m for 2017 in his budget presentation today.

Minister of Finance Audley Shaw should announce a $1m plan for 2016 and $1.5m for 2017 in his budget presentation today.

The promise by the JLP to make earnings of PAYE individuals up $1.5 million, tax free has undergone much discussions as to the feasibility for it to be funded. Few commentaries have focused on the growing revenues of the government and the reality that revenues tend to increase in line with nominal GDP growth.
At the same time, interest cost on the government debt, will decline as interest rates fall, notwithstanding the increased amount in the budget this time around for interest. The increase is to accommodate the interest on the Petrocaribe Fund debt which will be recovered from the Fund.
Interestingly, former Prime Minister Bruce Golding and an active participant in the 2016 election campaign for the JLP gave a speech in April in which he suggested that the implementation should be done to maintain simplicity and equity in the system. He made two proposals. The more important one was for an across the board threshold of $1 million. It would appear that Golding was testing the waters for a modification in the $1.5 million plan at least initially, that would have affected only some on the PAYE system.
Jamaicans should get the news that for 2016 the PAYE threshold will be $1 million, with it going to $1.5 million during 2017. It is unclear if the $1.5 million will be across the board or not. But with tax reform to be implemented probably in 2017, it seems as if it will be an across the board threshold.

Where are Gleaner’s Q4 results?

Glnr 2IC Insider,
I get the impression that the Jamaica Stock Exchange (JSE) no longer balances shareholder interests with listed companies’ interests. Here’s what I mean.
1. Duke Corporation (PriceWaterHouse) failed to pay the Scotia Group’s dividend on April 15th, and claimed that they notified the public via print and electronic media on April 14th. They further claim that they notified the JSE at the same time. Up to today, no such notice has appeared on the JSE website.
2. Supreme Ventures announced a directors’ meeting for April 28th to consider a dividend payment. Despite the JSE rules requiring companies to inform the public of the result of such meetings, with 48 hours, so far, nothing has appeared on the JSE website about it.
3. Gleaner should have published 2015 results up to December, but chose to change their financial to March 31st (i.e. 5 quarters for 2015). No problem, but does that change eliminates their responsibility to publish information for the quarter ending December 2015? What could possibly justify shareholders being kept in the dark about the company’s financial information from October 2015 to March, 2016 – which will not be seen until the end of May, 2016?
A concerned investor.
IC Insider’s Comments
Your views are well founded. For example the issue of the non-reporting of Gleaners December quarterly result was discussed with the stock exchange. The RMOD department gave some flimsy excuse for not requiring it. The JSE rules require either audited accounts within 60 days of the year-end or quarterly report within 45 days of each quarter. Since Gleaner had shifted the year-end then the rules require that they must submit the quarterly to December within 45 days. Discussions were also held with the General Manager of the exchange who agreed that the quarterly is required. To date shareholders are still in the dark on the financial data. Why the Gleaner never saw it wise to keep their shareholders informed by releasing the data, is a big puzzle. After all, other companies in the past that changed year-ends have release the 4th quarter results. As recently as December, last year Access released theirs having changed their year-end to March.
There seems to be a failure in the system to appreciate that the maintenance of the integrity of the system is paramount to protecting investors while at the same time sending a clear message that the system works and can be relied on. Quite a bit of what is allowed to take place is inimical to the growth and development of the capital market.

Executive chairmen are dangerous

BruceDisturbing news is coming from the Gleaner this morning and it is not the terrible bombing in Brussels. The concern flows from a report that former Prime Minister Bruce Golding is slated to be appointed executive chairman of the National Housing Trust.
Mr. Golding has some major assets and may well be able to make his wealth of knowledge in government and in is personal business contribute in a significant way to the fortunes of the Housing Trust.
If news item is correct, the decision would not a good one and it is not based on competence. Good corporate practise suggests that executive responsibilities should never be merged with that of head of the board. There are a number of good reasons for this separation. There must always be someone to appeal to when things may not be going well in aspects of the business. When someone has a problem with the top executive, to whom does he or she appeal?
Separation is even more critical when it comes to governmental appointments, where many of the board members are political appointments with party interest being placed ahead of the national interest, as such boards are often just another arm of the party. The developments re Outameni operation that was acquired by the NHT is one such case in point that when executives or chairmen have too much power how that it can be inimical to the interest of an organisation..
One hopes that the new report is not true as it would be a really terrible move by the new Prime Minister.

Poor Carib capital market regulation

FSCAnyone with more than a passing interest in the Caribbean capital markets must be concerned at lax nature of how the system is regulated, in spite of having the oversight bodies in the form of the Financial Services Commissions in the region.
The glaring case of the abuse of power exercised by the Trinidad Cement board in the handling of the company’s right issue earlier this year, stands out as a clear case for regulatory action to protect investors. In this matter the company failed to properly inform shareholders of a strong improvement in the profit of the a for the first quarter and made it worse with Price Waterhouse Coopers signing a report that gave the impression that there was no profit for the quarter.
In Jamaica, we have a Financial Services Commission (FSC) that is said to be the regulator for the financial entities not regulated by Bank of Jamaica, much is lacking from them, their inaction in matters of critical import makes one wonder what taxpayers money given to them is really being used for?
When it comes to the FSC, one is reminded of a police station located across from a house of crime but does nothing, unless the neighbours complain about it. Here is a case be it small. One of the FSC regulated entities is late with its 2015 results, the company issued a statement to the stock exchange to say they would be late in releasing the audited statements and the audited figures would be released on December 4. They also had the lateness of the audited accounts in 2014, with December 5th being the promised date. Now the public is being told that Barita Investments Limited (BIL) the entity involved has advised that the Audited Financial Statements for the financial year-end 2014/2015 will be submitted to the Jamaica Stock Exchange (JSE)on or before December 29, 2015. That is a major shift in the time frame. No reason was given in the notice on the stock exchange site. The investing public has a right to know the reason for the lateness. The FSC that regulates the market, should be interested in knowing what the reasons are as well, but there is not even a peep out of them?
IC Insider spoke with Mrs Rita Humphries, Chairman of the company on Wednesday December 9, about the issues affecting the release and subsequently, the last posting was made on the JSE website. According to the Chairman, there were issues relating to reconciliation of a few accounts which required adjusting entries to be made. Barita had them reconciled and the auditors needed to go through the information and transactions to satisfy themselves that the end result is correct. Additionally, the auditors advised of none receipt of confirmation from clients some of which had already been sent on to the auditors we are advised. Last year the audit was held up by a difference of opinion between the auditors and the Barita over the issue of fully providing for the value of shares Barita held in Scotia Group on the basis the auditors said was the impairment of the investment. This was after they fully provided for the value of Barita’s investment in National Commercial Bank shares.
All this bring one back to the glaring errors in the audited accounts for Knutsford Express audited accounts for 2014 and 2015 for which there have been no request for revision of the reports, why? Are these regulators really serious in protecting investors? Take the most recent case of tTech. The prospectus for the company’s shares, made no mention of subscribers being asked to pay the JCSD fees. One day before the issue opens, a note is placed on the JSE website that the fee is to be paid by subscribers, even as the prospectus states that investors would not be paying any more than the $2.50, the shares were offered to the general public at. The JSE clearly did not intervene to prevent a chaotic situation from happening with some applicant including the fee and others did not as they were unaware of it. Thankfully, the management and brokers were sensitive to the issue and agreed to refund those who paid.
The FSC and the Stock Exchange police the system when companies are going to the public to raise money, but what happens after, very little? Goodyear was delisted from the JSE, shareholders got two payments form liquidation of the assets but about three years after, no information but there are no regulators dealing with the issue anymore, leaving many small investors to fend for themselves. That is not good enough.