The ugliness of Wigton demands action

Wigton inadequate disclosures in the quarterly report.

The capital market got a huge body blow with the release of Wigton Windfarm quarterly results for the first quarter to June that suggests a bright future outcome but the reality is vastly different.
Analysis of the results and historical data show clearly that investors have been unwittingly, duped into believing that the earnings of the company had blasted off sharply from 5.5 cents reported for the 2019 fiscal year, but nothing could be further from the truth. The directors’ report accompanying the June quarterly results is just inadequate, as it does not clearly communicate what investors can expect for the rest of the year. There is just very limited historical information to go by to help.
The company posted positive results for the June quarter, with profit jumping 109 percent from $175 million to $366 million with modest foreign exchange gains, resulting in earnings per share of 3.3 cents.  IC’s computation puts full year’s earnings at 7 cents for the year assuming revenues grow 6 percent for the year.
Revenues rose 6 percent to $833 million for the quarter with gross profit rising from $606 million to $641 million. Other income comprising $34 million in foreign exchange gains moved from $60 million to $68 million. Importantly, finance cost fell sharply from $358 million to $147 million while administrative expenses edged slightly higher to $79 million from $78 million. The data is showing revenues in the first quarter of 2018 as 32 percent of the full year’s earnings. The next three quarters earned 68 percent or an average of 22.5 percent. If the similar development takes place this year, then earnings in the balance of the year will be just above that for the first quarter, as fixed costs will reduce quarterly profit considerably from that reported in the first quarter.
Going forward, there will be added cost ongoing cost associated with the listing, including listing fees, registrar services for the more than 31,000 shareholders, production of the annual report and annual general meeting as well as additional staffing.
Directors have a responsibility to communicate critical information to investors so that they can properly interpret the financial information presented and not having to guess exactly what is placed before them.

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The Wigton’s June quarterly report falls far short of what is expected of a company of its size and with so many shareholders. The quarterly shows that production of energy grew 2.9 percent to 55,331,319 KWH but the directors stated that they expect to produce 169 Giga Watt Hours the average over the past three years. There is no mention of how the first quarter’s production, relates to the full year’s output. There is no mention of seasonality in the report. In fact, a review of the prospectus provides no information about seasonality, a critical bit of information that is missing. “If the company’s business is highly seasonal, IAS 34 encourages disclosure of financial information for the latest 12 months, and comparative information for the prior 12-month period, in addition to the interim period financial statements. [IAS 34.21]”
The shocking discovery is the composition of directors and shareholders of the company. People in authority should avoid conflicts of interest. The big question is, on what basis was the Wigton’s prospectus approved with a board member of the Financial Services Commission shown as a director of the company and subsequently a shareholder? Judges cannot oversee cases involving themselves, to do so, would be a huge conflict.

Wigton profit to help light up JSE

Wigton stock could spike on Wednesday.

Profits drive stock prices like nothing else. The Jamaica Stock exchange should see a big hike at the close of trading as a number of companies release some excellent results days before the main earnings season for the half-year ends.
Some main market companies are reporting big gains in earnings after the market closed on Tuesday and these could push prices up on Wednesday. Wigton Windfarm posted positive results for the June quarter, with profit jumping from $175 million to $366 million with modest foreign exchange gains, resulting in earnings per share of 3.3 cents that should translate to over 10 cents for the year. Revenues grew 12 percent at Kingston Wharves to $3.8 billion, over the corresponding period in 2018 and net profit attributable to shareholders increased by 40 percent to $1.2 billion. For the June quarter, net profit rose 54 percent to $729 million on revenues that rose 12 percent to $19.7 billion. Importantly, Kingston Wharves reported earnings of 51 cents per share for the second quarter (annualized $2 per share) and 82 cents for the half-year.
Jamaica Producers increased second-quarter revenues by 12 percent to $5.4 billion over the 2018 period and net profit attributable to shareholders increasing 52 percent to $399 million.

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For the half-year, JP posted profit due to the group’s shareholders of $629 million compared to $415 million with revenues that rose from $9.3 billion to $10.16 billion. PanJam Investment reports net profit attributable to shareholders of $3.055 billion for the June quarter, up from $982 million in 2018 and $3.95 billion for the six months from $1.8 billion in the 2018 period.
PanJam results benefited from investments gains and gains from the sale of shares in an associated company. Productivity Business Solutions posted a rise in profits toUS$724,000 in the June quarter compared to a profit of $372,000 in 2018 and a profit of US$184,000 for the six months to June.

NCB solid stock for the future

NCB Financial Group (NCB) produced net profit of $21.3 billion for the nine months to June 2019 with profit attributable to stockholders of $20.7 billion, a marginal increase of $87 million over 2018.
For the quarter to June, NCB reported $8.3 billion in profit attributable to shareholders inclusive of $2.3 billion resulting from the increased value of the near 30 percent interest NCB owned in Guardian (GHL) before acquiring majority shares, during the quarter. Results include the consolidation of two months of GHL’s income coupled with the gain from revaluing the shares that NCB held in GHL previously, as an associated company.
For the nine months ended June, net operating income rose 22 percent to $63 billion from $51.6 billion in the prior year while it increased 28 percent to $24.5 billion in the June quarter over 2018.
Banking and investment activities netted $55.8 billion, up 13 percent over the $49.4 billion for the comparative 2018 period and for the quarter the enlarged group produced $21 billion compared to $18 billion in 2018. A 14 percent growth in our loan portfolio helped in pushing net interest income to $32.4 billion or 27 percent over $25.4 million generated in 2018. For the quarter, net interest income grew to 30 percent to $12.4 billion.
Net fee and commission income rose from $4 billion in 2018 to $5 billion for the June quarter and from $11.7 billion to $13.4 billion for the nine months period. Gains on foreign exchange trading declined sharply from $11.4 billion to $8.7 billion for the nine months period and from $4.2 billion in 2018 to $2.8 billion for the June quarter.
The net result from insurance activities grew 218 percent over the prior year to $7.2 billion from $2.3 billion in the prior year nine months period. For the quarter, net income tripled the $1.15 billion in the 2018 June quarter to reach $3.4 billion in 2019. “One of our Jamaican life insurance subsidiaries benefitted from improved spread performance and changing mortality assumptions, resulting in a significant contribution to the net profit. The consolidation of GHL’s insurance activities contributed 45 percent of net insurance revenues reported for the third quarter,” the group directors reported in their commentary to shareholders.
Operating expenses including loan and securities losses accounted for $46 billion, an increase of $13 billion or 41 percent over the prior nine months in 2018. “The consolidation of GHL and an additional quarter of Clarien’s results in the current reporting period contributed to 43 percent of this increase,” the group reported.
Impairment losses on loans and securities increased by 166 percent to $3.65 billion from $2.46 in the nine months and from just $941 million in the June 2018 quarter to $1.7 billion in the 2019 period.
Total assets grew with the acquisition of majority shares in GHL to $1.6 trillion, an increase of $635 billion or 68 percent over the prior year. “The consolidation of GHL, net of adjustments, added $517 billion in assets to the Group’s portfolio. The Group’s loans and advances, net of provision for credit losses, stood at $412 billion, an increase of $50.5 billion or 14 percent over the prior year, attributable to strong growth in our Jamaican portfolio along with the consolidation of GHL’s $14.6 billion of loans and receivables” the NCB directors report stated.
Customer deposits reached $509 billion at the end of June, an increase of 10 percent or $45 billion over the prior year. Policyholders’ liabilities increased from $39 billion in June 2018 to $422 billion due to the consolidation of GHL. Investment Securities and Reverse Repurchase Agreements Investment securities, including pledged assets, and reverse repurchase agreements amounted to $780 billion. This portfolio grew by 106 percent or $400.6 billion over the prior year, primarily due to the consolidation of GHL’s portfolio valued at $369 billion. Stockholders’ equity amounted to $137 billion, a 10 percent or $12.8 billion increase over the prior year due primarily to an 18 percent increase in retained earnings.
Earnings per share for the quarter came in at $3.42 but that includes one-time income and expenses, ongoing earnings could be in the region of $3 per share or around $12 annually. For the nine months earnings per share reported was at $8.49. Going forward the growth in the loan portfolio is one of the most critical factors to look for in assessing prospects going forward, with the acquisition of the General Insurance portfolio this area is also very critical to growth in the future. There are areas of duplication in the operations of Guardian and NCB accordingly, investors can expect rationalization to come and with that reduced cost and likely more robust sourcing for new business. NCB stock that last traded on the Jamaica Stock Exchange at $220 is a good long term investment.
The Board of Directors declared an interim dividend of 90 cents per ordinary stock unit. The dividend is payable on August 27, to stockholders of record as on August 13.

Carib Cement 2019 profit mixed

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Carib Cement silos

Caribbean Cement revenues climbed 5.6 percent in the June quarter to $4.68 billion and 4 percent year to June, with $9.13 billion booked.
The company reported lower profit the June quarter than in 2018, due mainly to $485 million incurred as foreign currency losses and ended up with profit after tax at $368 million versus $674 million in 2018. Or the half-year profit after tax grew 48.6 percent to $15 billion. The company reported earnings per share of 43 cents versus 79 cents in the similar quarter in 2018 and $1.76 compared to $1.18 in the 2018 six months period.
Expenses excluding depreciation and finance grew 2.7 percent for the quarter to $2.94 billion and fell 21 percent for the half-year to $5.47 billion. The sharp reduction in cost results from the termination of an equipment lease agreement with the parent company and the purchase of those assets. The acquisition of the assets drove depreciation charge for the quarter to $405 million from $340 million in 2018 and $796 million from $467 million for the six months periods. Finance cost including foreign exchange losses rose to $688 million from $412 million for the quarter and $856 million versus $386 million for the half-year.
The results boosted shareholders’ equity to $7.9 billion from $6.4 billion at the end of December last year as the company wiped out accumulated losses of $994 million at the end of 2018 leaving a surplus of $493 million. Borrowing amounts to $9.8 billion while cash funds amount to $394 million and net current assets stood at negative $759 million.
The stock trades at $80 on the Jamaica Stock Exchange main market. IC projects earnings for the full year to December at $5 per share that would place the PE ratio at 16, just around the markets PE of 17. With the economy doing well and increased construction activities, investors should have their eyes focused on increased future earnings.

Sagicor Group Q2 profit up 40%

Sagicor Group & PanJam hit new closing highs.

Sagicor Group is reporting profit attrib8uutabel to shareholders for the June quarter of $3.69 billion up from $2.70 billion in the first quarter this year and 40 percent higher than the $2.64 billion in the 2018 second quarter.
For the six months to June net profit of $6.39 billion attributable to stockholders rose 21 percent over the similar period in 2018. Earnings per share come out at $1.64 per share for the half-year and 95 cents for the quarter.
According to the report accompanying the results, “the current year-to-date results benefited mainly from overall good new business and portfolio growth which were both better than the prior year. The 2018 numbers included large impairment charges on Government of Barbados and other bonds. There were other factors that influenced the outcome for the period, these include, The fluctuating rate of the Jamaican dollar to the US dollar which reached a decline of 5.5 percent in April compared to the rate at December 2018 and by June bounced back to a 2.9 percent decline. The Group picked-up both realized trading gains and unrealized revaluation gains for higher US dollar positions. Appreciation of the Jamaica Stock Exchange main index which grew by 23 percent during the six months period. The Group picked-up good trading gains and increased bond prices on USA stock markets.”
Sagicor Bank enjoyed an excellent period contributing net profits of $1.04 billion for the current period, versus $772 million recorded in 2018, from revenues of $6.36 billion, 18 percent more than the prior year.
The stock traded on the Jamaica Stock Exchange on Tuesday at $58.

FX losses cut Wigton 2019 profit

Wigton shares are still the most heavily traded on the JSE.

Profit before tax at Wigton Windfarms fell from $768 million in 2018 to $727 million in 2019 from sales revenue of $2.44 billion for 2019 compared to $2.36 in 2018.
The 2019 results include a net loss of foreign exchange of $177 million. The company retired loans that were denominated in US dollars and swapped them for loans in local currency at interest rates that were higher than the prior loans but removing the risk of exchange rate adjustments.
Costs are relatively stable as well as income. Depreciation accounts for $665 million of the total administrative and operating cost of $1.17 billion. The audited financial statement had finance expenses of $1.05 billion but that figure includes foreign exchange losses of $663 million, partially offset by foreign exchange gains of $486 million.
Taxation charge for the year came out at $173 million. It will be difficult for the company to earn much more for the current fiscal year to March 2019, than the 5 cents per share recorded in 2019.
Wigton ended the year with shareholders’ equity of $2.9 billion, borrowings of $6.3 billion and cash and equivalent of $1.38 billion. Current liabilities were relatively insignificant.
The stock has been trading around 90 cents on the main market of the Jamaica Stock Exchange with a PE ratio of 17 times earnings.

Pretax profit up 18% at the Lab

Limners and Bards (the Lab) reports pretax profit of $72 million half year to April, up 18 percent versus $61 million last year on revenues of $334.5 million compared to $261 million in 2018.
After-tax profit for the six months ends at $57 million, up 9 percent against $53 million in 2018. For the quarter to April revenues brought in $145 million and delivered pretax profit of $30 million against revenues of $136 million and pretax profit of $24.5 million.
The data suggest seasonality in earnings with full-year’s income of $483 million for the year to October last year and profit before tax of $76.5 million. The 2018 half year’s revenues amounted to 54 percent of income. Of significance is a sharp fall in operating expenses from $100 million in the second quarter of 2018 to $88 million in the 2019 period even as revenues rose resulting in gross profit rising from $36 million to $57 million. For the six-month period, gross profit moved from $100 million to $125 million. Partially offsetting the gross profit improvement is a $15 million in the second quarter is a rise in administrative expenses to $26 million in the quarter but was only up by $11 million for the half-year to $51 million.
The stock was listed on the Junior Market of the Jamaica Stock Exchange today at traded a small amount at $1.30 but closed with bids to buy at $1.65.

JSE profit jumps 36%

Profit climbed 36 percent in the June quarter, to $122 million from $90 million in 2018 at Jamaica Stock Exchange, from a 36 percent rise in revenues to $429 million, from $316 million in 2018.
For the six months to June, profit after tax climbed a robust 28 percent to $245 million from a 31 percent rise in revenues to $874 million compared to $666 million in 2018.
Administrative other expenses rose 37 percent to $262 million in the quarter and increased 32 percent in the six months period to $524 million. Staff cost rose 23 percent to $105 million for the quarter and 24 percent for the half-year, to $212 million. Advertising and promotion expenses were 192 percent higher in the quarter to hit $26 million and more than doubled in the half-year to $63 million from $31 million in 2018.
Earnings per share came out at 17 cents for the quarter and 35 cents for the six months and should end the year around $1.
The growth in 2019 is consistent with that from 2014. With the continued increase in the number of listings on the exchange and increasing trading activities, the immediate future looks promising for increased revenues and profit.
Gross cash flow brought in $400 million and after paying dividends of $175 million ended up with cash and equivalent of $151 million and investments of $413 million. Shareholders’ equity stood at $1.2 billion up from $1 billion at the end of June last year. Net current assets ended the period at $404 million.
The stock traded at $40 on the Jamaica Stock Exchange with a PE ratio of 40 times 2019 estimated earnings.

Watch this one – RJR Group

Investors should be watching keenly developments at Radio Jamaica as the company seems poised for a turnaround in its fortunes.
The company today reported to the Jamaica Stock Exchange that a connected party purchased 26.5 million of the company’s shares on July 5, 2019. The trade took place at $1.03 and is very significant, sending a strong message of the group fortunes ahead, but few are watching this one. The RJR purchase may not mean much to most, but IC assessment of recent results suggests otherwise.
In November last year, IC posted an article, captioned “NCB Insiders sending a powerful message.” The article highlighted the fact that some directors and executives at NCB Financial Group see big things ahead, to have put down $650 million in buying a block of 4,793,610 shares close to the highest price it traded at in recent times. Since then the stock rose from $136 to more than $200 for a gain of 47 percent, with more to come.
RJR Group, reported profits that more than doubled in the December quarter from $79 million to $168 million on revenues that climbed from $1.39 billion to $1.5 billion but for the year to March this year, the group reported a small loss of $22 million thus reversing the profit of $34 million at the end of December 2018. Operating revenues rose an attractive 9.7 percent in the March quarter to reach $1.29 billion, segment results show that revenues grew 5.3 percent for television, 7.4 percent for radio and 8.2 percent for print in the March quarter over the prior year’s March quarter. Some cost incurred in the 2019 fiscal year will not repeat in 2020, while income as a result of the World Cup football, will not recur. The group lost around $40 million in doing world cup coverage and that loss will disappear in 2020. RJR ended the year with shareholders’ equity of $2.35 billion, borrowings of $387 million. Current assets amounted to $1.5 million with cash funds at $448 million and current liabilities at $662 million. In spite of the loss for the fiscal year, gross cash inflows amounted to $485 million.
The gains in revenues are an important message about future income and a very good indication that the 2020 fiscal year should be a profitable one. The purchase of the block of shares when coupled with growth in revenues seems a positive indicator of what to expect for 2020.
There are a few other indicators as well. Some entities placing advertisements in the Gleaner faced cancellation as a section of the paper attracted increased business that they had to turn away advertising and that seemed to have gone on for weeks in the June quarter. Faced with a growing economy with sales rising as well as increased competition companies will spend more on advertising to move more products and services, a trend that should continue going forward. Of significance, is that GDP growth in the first quarter of 2019 is 21 percent faster than in the same period in 2018 if this trend continues for the rest of the year growth would be in the 2.5 percent level or more. That would mean more advertising dollar spend and the RJR Group is in a good position to benefit from that going forward.
IC projects 15 cents per share in earnings for 2020 with the stock that traded at $1.10 on the Jamaica Stock exchange on Friday, is now at a PE of just 7, well under the market average of 15.6.

Barita blowout profits

Barita Investments is reporting a huge jump in profits for the third quarter and the nine months to June compared to the similar periods in 2018 as revenues surged to record levels under new management.
For the quarter, profit after tax jumped 594 percent from just $131 million in 2018 to $911 million with the nine months ending with $1.43 billion up 691 percent from just $181 million in 2018.
Revenues net of interest cost, leaped 371 percent to $1.65 billion for the quarter from $352 million a year ago and to $2.8 billion for the nine months, up 234 percent from $842 million in 2018.
For the quarter and year to date, the company record strong improvement in revenues in every major category but gain on investment activities was the most outstanding, with revenues rising to $626 million in the quarter from just $31 million in 2018 and from $112 million for the nine months in 2018, it jumped 1,073 percent to $1.24 billion. While investments brought in a pile, they can be volatile as gains or losses are subject to market gyrations from time to time. Going forward there are no certainty that gains will be at the above levels. The company also recovered $312 million in investments losses incurred earlier in the year, of which $310 million is accounted for in the third quarter.
Expenses rose sharply but at a much slower pace than income, with the quarter seeing cost of $365 million including impairment and expected credit losses of $58 million against $171 million in 2018 while the nine months incurred cost of $829 million versus $542 million in 2018.
The company earned $1.44 per share for the quarter and $2.26 for the period to June and seems on course to record profits closer to $4 for the full year. More importantly, the latest quarter’s earnings suggest 2020 earnings could be in the $6 region all things being equal.
Barita ended the quarter with assets of $31 billion, up from $17 billion in 2018 with shareholders’ equity of $9.3 billion and securities sold under repurchase agreements amounting to $19.5 billion which grew from $12.3 billion at march 2018.
Barita is not satisfied with their outstanding achievement so far. The company will be going back to market to raise around $4 billion by way of a renounceable rights issue to help fund an acquisition.
The stock traded on the Jamaica Stock Exchange at $45 at a PE ratio around 11 times 2019 earnings compared to an average of 15.5 for the overall main market.