FosRich IPO fair value

FosRich Company is heading to the capital market to raise $200 million from sale of just over 100 million shares at $2 each. The general public have been allocated 10,070,111 units, Stocks and Securities, broker for the issue is allocated 50 million units, key partners and staff have 40,385,000 allocated to them.
Reserved shares, if not fully taken up, will be available to the general public. The issue opens on Monday December 4 and is scheduled to close on December 11 with the minimum application of 5,000 Shares.
The Board intends to use the proceeds of the invitation in order to expand the capacity of the Company to provide electrical and energy solutions to its customers and in particular, to expand its ability to provide industrial products. The Company will also pay down existing loans and pay the expenses of the Invitation.
The company has built up a name for itself by way of advertising through electronic media and will benefit further from the increased publicity that will be generated by listing.
Importantly, the company currently has interest debt of $300 million and carries a high level of inventories of just under a year’s supply. In 2014 the company booked through its equity reserves a mark down of $129 million for impairment of inventory and receivables. For the nine months to September this year gross cash flow $50 million before working capital needs and after it ended at a net outflow of $9 million. With those numbers bank financing for expansion is going to be challenging. The capital raised should go a long way in easing this constraint.
The Company major Jamaican wholesaler and retailer of a wide range of electrical, lighting and energy products, opened in November 1993 and it has operated at its flagship location 77-79 Molynes Road for over 24 years. The location serves as the Company’s headquarters and comprises a 25,000 square foot area including warehouse and office space and showrooms. FosRich currently has a staff complement of 84. Apart from its head office in Kingston, they also operates in Montego Bay and Mandeville.

Mark Croskery Managing director of Stocks & Securities brokers fro teh IPO speaking to Cecil Foster, Managing director of FosRich.

According to data presented in the prospectus the average annual growth in sales since was 15 percent and the average annual growth in gross profit over the same period was 20 percent.
Unaudited gross profit for the year to September 2017 was $360 million compared to $346 million for the same period in 2016, for an increase of $14 million. This improvement was mainly driven by improvements in selling prices, which compensated for the reduction in sales revenue by J$60 million to J$796 million compared to the same period in 2016 of J$856 million. The full year results should see the company generating sales of just over $1 billion and profit of approximately $40 million before taxation having made $31 million in pretax profit to September.
The historical record of profits are mixed with pretax profits at $42 million in 2012 rising to $60 million in 2013, in 2014 they made $43 million, just $10 million in 2015 helped by bad debt recovery of $10 million and $35 million in 2016.
The directors are, Marion Foster, Steadman Fuller, Ian Kelly, Peter Knibb and Rosalyn Campbell.
Based on estimated earnings for 2017 of $40 million the shares are priced at 20 times 2017 earnings but when viewed against 2018, that will benefit from lower interest cost and some pick up in sales, profit could reach $108 million or earnings of 22 cents per share. Based on 502 million shares in issue after the IPO, the PE would be 9, on this basis, the price could deliver a 120 percent rise in 2018. The stock is priced at just over 2 times net book value and would be one of the lower valued Junior Market company based on net asset value.

Profit at Jamaican Teas rise 58%

Jamaican Teas CEO, John Mahfood addressing the company’s last AGM in 2017.

Jamaican Teas enjoyed strong growth of 86 percent in profit after corporate taxes for the quarter to September amounting $39 million up from $21 million in the previous year.
Profit before taxation rose to $54 million compared to $44 million an increase of 22 percent. For the twelve months to September, profits after taxation is up 58 percent to $186 million after the booking of some material one off cost and income in arriving at outcome for the year.
The Group enjoyed positive performance from continued improvement in core business at Jamaican Teas with increased exports sales of 24 percent for the quarter and 26 percent for the year as well as good growth in the sales at the supermarket in Kingston for the twelve months to Sept 2017 resulting in a strong increase of 19 percent in overall group sales as sales increased by 5 percent from $342 million to $358 million, during the final quarter of the fiscal year. For the year sales revenues rose to $1.53 billion from $1.29 billion in addition the group recorded other revenues of $94 million versus $61 million in 2016 and $44 million versus $21 million in the quarter.
Although the group realized gains on investments of $60 million during the year the report shows more than $37 million in unrealized gains on investments at the end of September.
The results represent another good year for the group coming off 2016, with growth in sales and profits from continuing operations of 9.5 percent and 103 percent respectively.
FINANCIAL POSITION|Shareholders’ equity continues to expand, exceeding the $1 billion market for the first time. Quoted investments and cash stood at $304 million at the end of the quarter. Working capital amounted to $529 million and includes borrowings of $167 million while long term borrowings ended the period at $70 million.
During the year, the group acquired 43 percent of the issued ordinary shares of KIW International, the company results, assets and liabilities are consolidated in the groups’ accounts.
Subsequent to the year end the directors approved a dividend of 3 cents per share payable on December 19, on the increased number of shares in issue of 682 million units. During the year the shares were increased based on a 2 for 1 stock split with the stock price rising from $1.95 to $4.10 presently the second consecutive year with gains of more than 100 percent in the stock price.
The new fiscal year has started off very well. According to management in commenting on the post quarter sales performance, “in October 2017 we doubled our export sales while our local tea sales increased by 26 percent and our supermarket sales by 8 percent. The group’s future prospects for the remainder of the quarter look favourable.”

John Jackson is acting Chairman of the group

Unilever shareholders’ pain

Unilever stock is set for huge drop on the Trinidad & Tobago Stock Exchange

Unilever shareholders face a torrid time as very poor profit result in 2017 drove the stock price vastly lower than in 2016 and the price is poised to sink even lower as profits for the year cannot support the relatively high stock price.
Unilever profit peaked in 2013 and declined each year since but the stock price kept on rising and peaking in December 2015 at $68.30. Infrequently traded, the stock has been on a slide from 2016, but limited trading and the deep fall in profit made the downward price adjustment long and drawn out as many investors don’t like taking losses, hoping that tomorrow will be better.

Profit of Unilever Caribbean has almost evaporated in 2017.

Unilever reported profit of $3 million for the June quarter or 11 cents per share and $6.8 million for the half year suggesting profit around 60 cents for the full year but the September quarter saw profit falling to just $169,000 with year to date profit of $7 million compared to $30 million for the nine months to September 2016. Full year results are unlikely to exceed the $7 million mark by much. The earnings per share which is 27 cents at September should end the year around 30 cents. The stock which last traded at $38.75, is priced at a PE ratio around 130 times 2017 earnings, the clearest indication of a huge fall in the price to come.
Profit peaked at $70 million in 2013 slipped in 204 dropped sharply to just over $40 million in 2015 and 2016 and looks set to plummet in 2017 as indicated above as revenues has fallen sharply during the year. Fortunately, the company cut back on cost in the September quarter with administrative expenses falling from $7 million to $5.5 million and selling and distribution cost was $8 million lower than in 2016.
Revenues reached a high of $588 million in 2014, dipped to $589 million in 2015 recovered a bit in 2016 to $577 million and is set to hover under $500 million for 2017, with nine months inflows of $410 million and $109 million for the quarter compared to $136 million in 2016. To be fair to the company, the impact of hurricane on some of the countries they sell to affected sales in the latest quarter, making an already bad situation worse.
Part of the austerity plan effected was a cut in dividend which was slashed from a high of $1.95 in 2013 it fell to $1.77 in 2014 then to $1.20 in 2015 and rose modestly to $1.25 in 2016.
Investors should keep a keen eye on the stock when it hits a low under $20 that it seems to be heading for as it could then present a good opportunity for recovery when the time is right.

CrediScotia buyout to boost LasFin’s profit

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Lasco Financial

Lasco Financial Services doubles its $500 million loan portfolio with the acquisition Scotia Jamaica’s Micro Finance Company Limited which trades as CrediScotia. According to a release from Lasco “the deal was executed on Monday November 13 upon the signing of the share purchase agreement.” 
CrediScotia is a wholly owned subsidiary of Scotia Group Jamaica which entered the Microfinance sector in November 2011 and currently serves its customers from its seven branches islandwide.
Jacinth Hall Tracey, Managing Director of LFSL explains that the move is part of a larger strategic plan for Lasco Financial to continue its focus on expanding its loan portfolio.
“It is a great opportunity for Lasco Financial Services. We have been developing opportunities incrementally to serve our customers who are in need of micro financing, this move immediately gives us the reach and scale as we will immediately double our loan portfolio and number of clients as well as branches across the island. This merger allows us to maximize on the synergies of both companies and will create one formidable company.
CreditScotia will become a wholly owned subsidiary of LASCO Financial Services and will continue to operate independently of the LFSL Group.

Lasco Financial profit jumped sharply for 2017 Q2.

As such, the acquisition will not see any disruption to the business, employees or clients, the release from Lasco stated. That will only be for a while to allow things to settle, eventually, the attractiveness of economies of scale and the savings to be reaped will be too enticing to be ignored.
The consideration was not announced but could be in the region of $500 to $1 billion.
Lasco Financial recently reported profit of that more than doubled in the September quarter, from $44 million to $100 million with the six months results showing profit of $167 million versus $102 million in 2016. The company saw revenues rising to $396 million form $272 million in the second quarter and $715 million for the half year, from $533 million in 2016. While revenues grew rapidly in the period cost were contained well below increases in revenues. For the full year to March 2017, Lasco made net profits of $192 million.
IC Insider.com forecast was for earnings of 30 cents for this year and 60 cents for the next fiscal year, but this latest move would push earnings higher with 2018/19 enjoying a full year of benefits. At the end of September Lasco had loans and receivables of $1 billion on its books and cash funds amounting to $480 million.
Lasco’s stock closed trading at $4.90 on the Junior Market of the Jamaica Stock Exchange on Tuesday.

Grace Q3 results show some progress

Grace Kennedy Head Office

Grace Kennedy results for the third quarter showed some progress with the net operating profit before other income growing an attractive 26 percent in the September quarter compared to just 4.6 percent year to date.
In the June quarter operating profit before other income declined from $977 million to $956 million and year to date $1.876 billion down from $1.96 billion. Net profit for the quarter to September, rose $568 million or 57 percent to $1.56 billion. Importantly, the result includes one off gains of $419 million, excluding this gain, profit would have been up just 15 percent.
The big question, can these gains be sustained, if not accelerated going into 2018?
An increase of $51 million resulted in net profit of $3.75 billion for the nine months period from revenues of $69.3 billion, up 4 percent or $2.6 billion over the same period in 2016 with $66.65 billion. Revenues for the quarter, ended at $22.93 billion versus $22.53 billion in 2016.
Earnings per share for the quarter came in at $1.43 inclusive of the one off gain and $3.34 for the nine months the same as in 2016 a period that had large one off gains.
The third quarter shows much progress
“We have been steadily executing our strategy and are seeing the results. We are pleased with the performance of the Group and expect to finish 2017 on a strong note. With our customers at the focus of our entire operation, innovation, convenience and new technology are shaping our view of the future and how we deliver our goods and services,” Don Wehby, Group CEO said.

Group Chief Executive Officer, Don Wehby.

“We are quite optimistic about Consumer Brands and its capacity to add value to our shareholders. We have made, at the outset, a non-recurring gain of $418.5 million on the acquisition. We expect the business to continue to do well, given its knowledgeable and competent team and the Proctor and Gamble portfolio of products,” Wehby stated.
“In 2016 a non-recurring gain was attributable to the liquidation of non-operating subsidiaries. In 2017, we recorded $455 million in non-recurring gains due to liquidation of non-operating subsidiaries and an acquisition. Without these gains, net profit would have been higher than the corresponding period of 2016 by 0.7 percent. For Q3 2017, without the one-off gains, net profit for the three months ended September 2017 would have increased by 14.6 percent over prior year,” Frank James, the group’s Finance Director said.
He added that: “Shareholders will receive a dividend of .45 cents per stock unit, bringing dividends year-to-date to $1.13, an 11 percent increase over the corresponding period.”
Management commented on the various regions and divisions within the group. According to them “The Food Trading segment, which includes operations in Jamaica, Canada, the USA, the UK and Ghana continues to perform well. Some highlights include growth in the Florida and Georgia markets for GraceKennedy Foods (USA) and expanded relationships with CostCo Wholesale and other retailers in Western Canada for Grace Foods Canada.

Some of Grace Kennedy’s products.

While Grace Foods (UK) experienced lower sales than projected, a bold campaign featuring Daniel Sturridge as the new brand ambassador for the food drink Nurishment, is expected to have a high impact.”
“Grace Foods Latin America & Caribbean continues to be affected by the slow recovery of corned beef sales following a ban on the sale and distribution of corned beef in several markets in March 2017. Additionally Hurricanes Irma and Maria disrupted operations on the islands of St. Maarten, British Virgin Island and Dominica. Distribution partners in those countries continue to work toward restoring normalcy to their operations.”
First Global Bank (FGB) experienced growth driven mainly by net interest income and higher gains on securities sold when compared to the same period in 2016. Lower provisions against loan losses also contributed to the favourable performance as the bank continues to focus on delinquency management. FGB’s new direction, includes branch expansion through FGB Money Link. Money Link will see 28 new mini branches being established in locations across the island by 2018.”
The Money Services segment through Grace Kennedy Money Services (GKMS) reported growth in both revenue and pre-tax profit over the corresponding period of 2016. This is due to increased transaction volumes in the remittance business most notably in Trinidad and Tobago, Cayman and Guyana.
The Insurance segment declined in both revenue and pre-tax profit when compared to the corresponding period of 2016. This outcome was influenced by reduced investment returns and increased claims activity from Caribbean territories that were affected by hurricanes in September. The potential impact of claims relating to these hurricanes is still being assessed. GK General Insurance continues to maintain a robust reinsurance programme with highly rated international reinsurers which will lessen the impact of these claims.
Grace shares closed trading on the Jamaica Stock Exchange on Friday at $42.70 and is one of the cheaper priced stock on the market with a PE ratio around 10 times 2017 earnings.

67% premium for Berger T&T

Minority shareholders of the Trinidad and Tobago listed Berger Paints are set to get a 67 percent premium on their shares, with Ansa Coatings offer of TT$6.76 for the shares.
The shares were trading at TT$4.05 on the last trading day, prior to the public announcement of the takeover by the Ansa Coatings.
On July 31, Ansa completed the purchase of 500,000 shares from Chan Ramlal Limited being 9.69 percent of the issued shares at the price of offer price. The transactions triggered an obligation by the Group to make a mandatory bid for the remaining shares at the price paid for the Chan Ramlal shares.
According to Ansa, “a consequence of the LBOH Acquisition and the purchase of the Chan Ramlal shares, ACI is the beneficial owner of 3,613,011 Shares and the registered owner of 500,000 Shares amounting in total to 4,113,011 Shares and together with the 60,606 Shares owned by Sissons Paints Limited, ANSA McAL is the deemed beneficial owner of and controls approximately 80.86 percent of the issued share capital of Berger.”
Berger Paints’ Jamaica minority shareholders were offered a negative price to that at which the stock was trading at locally, which was rejected by shareholders, holding 94 percent of the minority shares.

JSE main market ends with losses Wednesday

More stocks closed with gains than with losses, on Wednesday on the Main Market of the Jamaica Stock Exchange as 25 securities changed hands, with 12 advancing, 8 declined and 5 traded firm as 6,096,729 units valued at $100,198,639 traded.
Price movements resulted in moderate fall in the market indices at the close.
In the main activity, Barita Investments traded with a loss of 2 cents at $8.88, with 28,307 units, Berger Paints concluded trading 50 cents higher at $15, with 19,008 shares, Cable & Wireless closed with a loss of 1 cent at $1.09, with 1,256,447 shares, Caribbean Cement traded $1 higher at $33, with 14,395 stock units. Carreras concluded trading at $11.50, with 1,097,819 units, Ciboney Group settled 2 cents higher at $0.17, with 4,000 shares, Grace Kennedy finished at $43, with 32,084 shares, Jamaica Broilers finished trading with a loss of 9 cents at $18.90, with 22,921 stock units. Jamaica Producers traded 20 cents higher at $15.80, with 32,668 units, Jamaica Stock Exchange finished trading 1 cent higher at $7, with 35,412 shares, JMMB Group concluded trading 14 cents higher at $29.50, with 199,909 shares, Kingston Wharves ended trading with a loss of 50 cents at $32.50, with 3,491 units. Mayberry Investments closed with a loss of 5 cents at $5, with 1,000 shares, NCB Financial Group traded 1 cent higher at $108.01, with 279,573 shares changing hands, 1834 Investments finished 5 cents higher at $1.35, with 400 stock units, PanJam Investment concluded trading with a loss of 45 cents at $42.55, with 21,820 units, Radio Jamaica ended trading 2 cents higher at $1.15, with 3,500 stock units. Sagicor Group settled 40 cents higher at $38, with 54,460 units, Sagicor Real Estate Fund concluded trading 20 cents higher at $15.20, with 546,470 shares, Scotia Group traded with a loss of 80 cents at $51, with 502,155 stock units, Seprod finished trading with a loss of 75 cents at $29, with 103,599 units and Supreme Ventures concluded trading 50 cents higher at $13, with 426,660 shares. In the main market preference segment, Jamaica Money Market Brokers7.25% preference share ended 14 cents higher at $2.49, Jamaica Money Market Brokers7.5% preference share ended 14 cents higher at $1.85, with 399,000 stock units, JMMB Group 7.5% preference share ended at $1.10, with 1 million stock units and Proven Investments traded 45,180 units in the US dollar market unchanged at 57.51 US cents.

Prices of securities trading for the day are those at which the last trade took place.

Sagicor Group reports solid results

Sagicor Group climbed 23% for the year to September.


Sagicor Group continues to deliver reasonable growth in profit albeit from a modest increase in assets that grew 4 percent over the twelve months to September to reach $363.26 billion.
But things were not a great in all aspects of the group as the overall bottom-line growth would suggests. While the Individual Lines segment, generated profits that more than doubled that of the 2016 period, rising by 105 percent, the Employee benefits segment, delivered just 21 percent better returns than in 2016 but investment and commercial bank suffered moderate decline in profit of 2 and 6 percent respectively, while other operations turned a profit of $289 million into a loss of $197 million.
Profit for the nine-month period climbed 23 percent to $9.08 billion, than the $7.39 billion recorded last year while it grew modestly by percent 9.3 percent to $3.43 billion. Revenues for the nine months rose 18 percent to $53.53 billion and for the quarter it jumped by a strong 42 percent to $23.18 billion 2016 from $16.3 billion in 2016. The earnings per stock unit are 88 cents for the quarter and $2.34 for the year to date compared to $1.89 for last year. For the 2016 the group earned $2.90 per share which should end up around $3.50 per share by year end and importantly, even higher in 2018.
The big rise in cost has been changes in insurance and annuity liabilities moving from $2.6 billion in the 2016 quarter to $8.3 billion and from $10.8 billion to $13.3 billion in the September quarter.
Sagicor traded on Tuesday on the Jamaica Stock Exchange and ended at $37.60.

Supreme Ventures jacks dividend to $844M

Supreme Ventures has pushed up the dividend payment fresh after the major changes in ownership and recent board changes to $844 million.
The new board declared an interim dividend of 14 cents per share payable on December 4, 2017 to shareholders on record as at November 20, 2017 and a special dividend of 18 cents per share to be paid on the same day as the interim dividend. The ex-dividend date will be November 16. On august 9, a dividend of 16 cents was paid and 14 cents per stock unit was paid on May 31.
The new directors who were appointed to the board effective October 23, following increased ownership by Mayberry West Indies Limited to 8.56 percent, Bamboo Holdings of 1.2 percent and Mark Berry to 1.05 percent of the company are Ansel Howel, Christopher Berry, Gary Peart. Paul Hoo former chairman of the boards resigned as the company’s chairman on the 4th of November.

38% more taxes by Jamaican businesses

Increased taxes pushed inflation in April.

Jamaica’ business sector paid 39 percent more taxes to government than projected, for the year to September, with $23 billion collected in corporation taxes resulting from a $6.5 billion increase ahead of forecast.
For the 2017 fiscal year, $16.4 billion was raked in, to September while $52 billion in corporate taxes was paid by the business sector for the full twelve months. Special Consumption taxes on local goods rose 50 percent above forecast with a $5 billion increase while local GCT grew 6 percent or $2.6 billion and travel tax jumped 26 percent or $2 billion above the amounts budgeted earlier in the year. Tax on interest fell $2 billion below forecast to $5 billion and was the only major area of underperformance

Jamaica’s Ministry of Finance newest office building

Revenues for the government of Jamaica continues to outperform forecast with inflows rising $15 billion more than the amount projected, bringing the half year take to $262 billion.
Expenditure underperform projections by $3 billion as interest cost fell $2 billion and the wage bill fell $1 billion.
Government operations ran at a deficit of just $620 million in September, but for the year to date, a surplus of $5 billion. Interestingly, the capital expenditure that have struggled to keep pace with forecast, is down by just $144 million with $18.3 million having been spent. The primary surplus, one of the major target under the IMF agreement, came in at $62 billion or $17 billion better than planned.