Is C2W doomed?

August 28, 2013 by

After almost two years, C2W Music, which promised that they would be making profits by now is yet to show the income, much less profits.

In its prospectus for the IPO to raise $129 million on the Jamaica Stock Exchange, the company made this statement about profitability, “As a start-up, the Company is expected to post a Pre-Tax Loss for 2012 of approximately US$241,849. The Directors expect earnings to stabilize from 2013 onwards, with a projected profit before tax of US$668,100 in that year, increasing threefold to a projected Profit before Tax of US$2.36 million in 2016.”

The results to June indicates that those projections were just a pipe dream as the company not only reported a loss of US$345,855 for the six months to June 2013, but for the similar period in 2012 when the loss was US$131,284, and there was just US$1,803 income for the six months. While it is not impossible to win contracts for songs that could change the picture, one would need to see a steady, if even small, flow of income but that is not the case with a year and a half now gone.

C2WMusiclogo2Shareholder equity now stands at US$377,257 down from US$1.2 million at June last year. Cash is almost gone entirely with just US$14,335 left of the sum raised in the IPO. C2W has assets in the form of advances to song writers of more than US$300,000 but that is not income and only $24,000 are due within a year.

The company needs a knight in shining armour and FAST if it is to avoid the burial ground. Crunch time is nigh.

Filed Under: Company News, Company Results Tagged With: ,

General Accident undervalued, but . . .

August 27, 2013 by

General Accident Insurance Company continued to perform well in the second quarter as they did in the first of this year with profit increasing 48 percent to $80 million in the second quarter bringing the six month results to $177.7 million, an increase of 57 percent over the same period in 2012. The company said they made more money in both our underwriting and investment operations and as a result were able to improve their overall profitability and capital efficiency.

Underwriting | For the two quarters, gross premiums grew to $3.2 billion, an increase of 21 percent over the first six months last year. Net earned premiums grew by 8 percent to $443 million. “Premium growth was driven by the healthy organic growth of our core commercial property and motor businesses as well as the execution of facultative transactions on behalf of large domestic and multinational clients,” the company said.

“Our combined ratio improved from 92 percent in the first six months of last year to 90 percent in the first six months of 2013. The improvement in our combined ratio, the insurance industry benchmark for underwriting profitability, occurred despite continued softness in insurance rates and a deteriorating loss ratio. As a result, our underwriting profit in the first half of 2013 stood at $42 million compared to $34 million during the same period last year”, management continued to state.

GeneralAccident_logo150x150Claim expenses rose from $247 million for the year to June last year by 25.5 percent to $310 million in 2013. Management expenses rose from $145 million for the year to June 2012 by 14 percent to $165 million in 2013 and in the latest quarter from $75 million to $88 million, an increase of 17 percent.

Investment Performance | For the six months to June investment income amounted to $145 million, an increase of 68 percent compared to $86 million in the first half of 2012. Investment income in the June quarter was only $52 million much less than the amount generated in the first quarter. A slower fall in the value of the Jamaican dollar would have resulted in a lower gains from foreign currency trading or translation.

Summary | A sharp change in commission expense from a loss of $78 million in the June quarter of 2012 to a small surplus of $6.5 million helped in no small manner to boost the bottom-line in the quarter even as net premiums earned declined from $205 million to $187 million and claims jumped from $118 million to $157 million over the same period.

The company paid out $50 million in cash dividends to shareholders in the first quarter.

Assets jump | The company that had assets totaling $3.9 billion at the end of December last year, has seen a major jump to June to $7 billion mainly as amounts due from reinsurers and co-insurers doubled to $2 billion. The amounts due from policy holders climbed $1.3 billion to $41.8 billion and cash and short term investments increased by $500 million.

On the other hand, amount due to reinsurers and co‐insurers moved up by $1.75 billion, insurance reserves up by $1.3 billion and shareholder’s equity by a little over a $100 million to $1.4 billion since December last year.

Return on average equity is 25 percent which is attractive if the company can maintain the current profit levels. If they can, then earnings per share should reach 35 cents for the year, which makes the stock now priced at $1.85 cents a bargain.

The stock traded at $2.81 in 2011 when profits were not as strong as it is now. Additionally, a number of junior market companies are trading around 6-7.5 times 2013 earnings with General Accident at 5.3 times, suggesting there is room for capital gains in the medium term. Of course Jamaica is in the midst of the hurricane season and some investors may not want to be bold ahead of the end of the season, just in case there is major damage and claims. This stock ought to be watched for benefit from what could be a nice price gain before year end.

Insider call | General Accident is an IC Insider Buy Rated stock.

Related posts | Buy Rated stock list grows | General Accident’s profit up 65 percent

Filed Under: Company News, Company Results Tagged With: ,

Radio Jamaica’s sharp turn

August 23, 2013 by

Radio Jamaica made a sharp about turn in profitability in the June quarter reversing a loss of $25 million in 2012 to a small profit of $1.6 million. The change came about as revenues increased by 7.3 percent to $440 million. The company says the change in revenue is due to increased advertising income, flowing from the website’s continuous growth in visitors and increased portfolio of local production in television which contributed favourably to higher income and improvement in response to the sales and marketing.

Also helping the changed bottom line was a doubling of other income from $17.7 million to $34.65 million but it is cost cutting that really did the trick. Selling expenses was cut to $70 million from $76.4 million in 2012, administrative expenses was reduced from $103.7 million down to $98.5 million and other operating expenses which came in at $73.4 million was down from $87 million. RJR negotiated a number of contracts but bringing the cable channel under the same roof as the main studios help cut costs as well. Interest cost was one expense that climbed as loans were taken on to help fund the acquisition the FIFA franchise for matches between 2013 and 2022. This amount climbed from $1.2 million to $5.4 million.

RJR_Newslogo150x150RJR would have suffered revenue decline from the closure of Claro mobile network resulting in less completion in the market as well as the general economic downturn, which started in late 2008. Data to date indicate that the economy is still declining at least up to the first six months of this year. Forecast going forward does not reflect any signs of much economic growth.

The turnaround in profits is welcomed news for investors who have seen profits decline from 2010 when it peaked at $222 million ending with a big loss for the year ended March 2013. Even with the return to profits, the company is not fully out of the woods as the economy is still fragile and things could get more difficult before they get better. In such an environment, the strength of the finances take on even more import.

IC Insider forecast is for the 2013/14 year to show profits of $63 million after tax or earnings per share of 18 cents which would be a big improvement over the $36 million loss reported last fiscal year ending March 2013.

Loan funding is now at $193 million and cash funds at $252 million and receivables is $439 million versus payables of $224 million.

Related posts | RJR’s $106M 4th quarter loss

Filed Under: Company News, Company Results Tagged With: ,

Profit up, margins shrink at Seprod

August 20, 2013 by

Shrinking margins and lower gross profit could not prevent Seprod from enjoying a bump in profit of $312 million in the June quarter versus $161 million in 2012 and $542 million for the six months period versus $453 million in 2012.

Seprod got a boost of $107 million from the sales of equities in the June quarter. Also in the quarter, they benefitted from a gain of $54 million from holding of assets in foreign currency. Finance and other operating income rose to $112 million in the quarter, up from $80 million in 2012 and for the six months, $206 million versus $167 million. Management has kept selling and administration cost under control with both areas falling in the latest quarter and just rising slightly for the year to date period. Selling expenses which came out at $100 million for the quarter was $6 million less than in 2012 and admin cost came out at $372 million versus $374 million in 2012. For the six months, selling expenses climbed by $4 million to $198 million and admin went to $784 million up from $751 million in 2012. Finance cost moved up to $42 million from $26 million in the June quarter and in the six months period, it rose from $48 million in 2012 to $82 million in the latest period.

Revenues | Revenues were down 2 percent in the first quarter, falling to $3.7 billion and off by $74 million from the year ago period. However, revenues increased by a healthy 17 percent to $3.7 billion in the June quarter and is up 7 percent for the 6 months to June.

The biggest issue the company is currently having is a sharp fall in profit margin. To June 2012, gross profit as a percentage of direct cost was 28.2 percent and has fallen to 24 percent for the 6 months to June this year and to only 21 percent versus 24 percent in the June quarter. The deterioration has occurred in the distribution segment as profit stagnated at $99 million, a slight 3 percent rise in that area while sales rose 11.5 percent. In the manufacturing segment, profit is up by 12.5 percent to $893 million and revenues is up 3.5 percent to $4.7 billion.

Earnings per share for the 6 month period is $1.05 and the full 12 months to December should be around $1.80-$2.

Finances | Seprod has $3.9 billion in cash and investments. Borrowing is at $2.26 billion up a billion dollars from June 2012. Current assets are well in excess of current liabilities by 3 to 1 and equity stands at a strong $9.6 billion.

Longer term | Seprod has never been one of those sexy companies but it has done remarkably well since listing back in the 1990s. It appears that for 2014 and beyond a lot is being predicated on the fortunes of the sugar operations in St Thomas where the target for sugar production is the processing of 300,000 tonnes of canes that should work out to around 25,000 tonnes of sugar. Management indicates that the expanded canes farms are already planted and the production should be coming in the 2014 crop. The group acquired Bowden Estates with 3,000 acres along with another property in the area and lands that were in bananas have now been planted out in canes. Management states that the sugar company is critical to them as a foreign exchange earner that can supply foreign currencies for the group when needed.

Related posts | Seprod’s dividend consideration | What’s really up at Seprod?

Filed Under: Company News, Company Results Tagged With: ,

Exports push Jamaican Teas’ profit

August 20, 2013 by

A strong 70.6% increase in exports for the nine months to June helped in pushing profit at Jamaican Teas up to $75.3 million or 16 percent when compared to $64.8 million for the similar period of the prior year.

Export sales accounted for 52 percent of the total manufacturing sales for the latest quarter. The improvement in exports was driven mainly by increases in sales to the USA and Trinidad. Results for the June quarter were not as strong as the prior two quarters with an increase of 9.5 percent to $24 million as local sales slipped marginally compared to $22 million in the comparative period in 2012. While the growth in profit for the year may not appear impressive, the quality is far better as there was a large $13 million swing in earnings reported from gains on investments in 2012 resulting from a $10 million gain in 2012. While there was a $3 million loss this year, the net amount is partially offset by a $5 million gain from exchange rate movement.

The group recorded improvement in sales for the first nine months of the financial year, increasing by 34.5 percent to $783 million versus $582 million in the prior year. Improved sales was due to healthy increases in both export and supermarket sales, including the newest supermarket in Sav-La-mar, which was acquired by the company in March 2012.

The supermarkets also contributed to the bottom-line improvements which helped the improvement in revenues and profits. The results do not yet reflect sales from the completed real estate development which the group expect to be reflected in the final quarter of the fiscal year in September.

Image from Behance.net

Image from Behance.net

Associated company | The company’s jointly owned supermarket in Montego Bay, continues to show improvement but has not shown profit to date. Sales in the quarter rose 11% above the similar period of 2012. Management stated, “We enjoyed an encouraging improvement in sales since the start of the quarter pushing us closer to a break even position. Our share of the loss is $2 million in the latest quarter which includes an adjustment of $640,000 to deferred tax asset to reflect the reduction in tax rate from 33 1/3 percent.”

Investment | The company has short and long term investments of $142 million which includes $76 million of quoted equities.

Going forward | There are good indications that the final quarter should be better than that for 2012. In the 2012 final quarter, a large an impairment loss on investments of $9.3 million had to be made. In this year, the situation might swing in the other direction with the booking of the sales of the apartments. Beyond the September year end, the purchase of a property in St. Thomas should start to contribute to profits from the housing development for 72 two-bedroom single family homes.

Regarding another property purchase, management reported that, “The company will be moving the manufacturing operations to a new facility by the end of 2013, it has adequate space for our operations now and for the foreseeable future. While there may be no savings from this move, it is not expected to cost more than the current rental for the existing space. Ownership will result in savings going forward as inflation drives up rental rates.”

Financial position |The group continues to maintain a healthy financial position with good cash flows, adequate bank credit facilities and investments. Receivables increased by $41 million, which is due to a significant increase in exports that have longer credit terms. Management further stated that, “All the short and long term loans will be cleared subsequent to the quarter end from longer term loans and proceeds from the sale of the apartments. The company recently announced plans to issue $200 million of Corporate Bonds with attractive features for the investor including the fact that interest will be paid monthly and will be traded on the Jamaica Stock Exchange. The funds will be used to pay off more expensive debt and assist with funding our next real estate development. We have also obtained medium term financing from Bank of Nova Scotia for funding of the Bell Road property acquisition.”

Related posts | Jamaican Teas expands property arm | Jamaican Teas buys property | Profits up 19% at Jamaican Teas | Is the real estate market bullish?

Filed Under: Company News, Company Results Tagged With: ,

Blue Power profit up 20%

August 19, 2013 by

Blue Power reported profits for the quarter ending June 2013 of $30 million compared to $25 million in the same period last year, an increase of 20% and earnings per stock unit moved from 43 cents to 53 cents in the quarter, an improvement of 23%. While the growth is not bad, the operation was not firing on all cylinders as the increase came totally from the Lumber Depot division which contributed $18 million, improving by 34% over the same period in the previous year, while the Blue Power division added $12 million which was an improvement of 5% over the first quarter of 2012.

Combined sales were $246 million compared to $233 million for the same period last year, an increase of $13 million or just 6% much less than the increase in profit. The Lumber Depot division achieved sales of $175 million versus $154 million the previous year, an improvement of 14% while the Blue Power soap division moved down to $70 million from $79 million for a decrease of 11%. It was not only increased revenues which helped to grow profit for the quarter. Administrative cost was down from $33 million in 2012 to $27.9 million due to a write back of doubtful debt that was made in the last fiscal year to April and non-accrual of certain expense that was made in 2012 but not repeated in this latest quarter. Also, other income almost doubled from $2.2 million to $4.26 million.

BluePower150x150The chairman Dhiru Tanna, in a release with the quarterly report stated that “we are pleased that despite the very challenging economic circumstances facing the country we were able to achieve an improvement in the overall performance. During the quarter, the Blue Power soap division faced serious competition in the market place with wholesalers and distributors shaving their prices significantly to reduce inventories. As a result, our ability to adjust prices in keeping with the exchange rate changes was seriously hampered and our sales actually declined. We have taken steps to offer more vendor-friendly packaging as well as significant promotions which we hope will reverse the trend.”

He went on to say, “We continue to take advantage of our cash position to acquire inventory for resale at advantageous prices which is the main reason for the increase experienced in this category on the balance sheet. Our analysis indicates that this approach is essential to remain competitive in a very stagnant market.”

Finances | Since the April year end, cash has increased to $153 million from $145 million but inventories are up to $198 million from $176.85 million. Accounts receivables has remained flat at $69 million. Amounts due to creditors amounted to $88 million the same level as in April. Equity capital amounted to $375 million and there is no longer any loan capital being used.

Insider call | Blue Power is an IC Insider Buy Rated stock.

Related Posts | Blue Power dividend | Blue Powered huge profit increase

Filed Under: Company News, Company Results Tagged With: ,

Bolt won but he could still lose

August 19, 2013 by

There is no doubt about it! Usain Bolt is a great sprinter and based on his feats at the just concluded World Championships in Moscow, there are none close to him. However, his winning form on the track is yet to be transferred to his investment portfolio.

Well, that may be a broad statement but if the performance of his investment in KLE Group is anything to go by, he may lose all or most of his investment in the venture that we estimate is close to quarter of a million US dollars.

How did we get to this number? | When KLE went public last year, the prospectus indicated that 3,243,000 shares (“the Bolt Shares”) were reserved for Sherwood Holdings Limited, a company incorporated in Jamaica and owned by Bolt. Bolt’s company should have purchased the additional shares at a discounted price of $2.77 per share, which would have taken Sherwood’s shareholdings in the KLE Group to 10 million units. However, there is no indication that his company took up the shares nor if Bolt himself bought them. At the end of June, the top 10 shareholdings in KLE showed Sherwood Holdings holding 6,757,000 shares, the same as before the public issue. At $3.70 per share, the IPO price the public was asked to pay, his investment is valued at about US$250,000 dollars.

KLE_bannerPoor performance | When KLE Group came to the market last year, its broker defended what many others considered to be a highly overpriced and extremely risky investment. Once again, the KLE Group has reported lousy results with a worsened loss position in the June quarter and a year-to-date loss of $36 million for the six months in 2013 when compared to a $9 million loss for the same period last year.

In the June quarter, the Group chalked up a loss of $18.5 million compared to just $2.8 million in 2012. Although revenues climbed to $84.7 million in the quarter, up from $72 million in 2012, a $24 million jump in administrative expenses killed any hope of a bottom-line improvement. Year to date, this line item is up $30 million over 2012, while revenues only increased by $15 million for the same period. Further aggravating the loss problem is interest cost, which remains relatively high despite raising fresh capital through the public issue.

It appears that most of the cash raised has been used to support the operating losses and to purchase fixed assets and property. Shareholders’ equity, which was $119 million at the end of December, is down to $83 million in June with interest bearing debt of $48 million. The group has burnt up a lot of cash with only $15 million left at the end of June. This not good news as losses seem set to continue. Also current liabilities are well in excess of current assets by almost 3 to 1 — an absolute no-no in business — even when income is mainly cash.

This one is not looking good at all. The stock price is down to $1.80 and is poised for more decline. Not good at all, for a stock that was issued at $3.70.

About the KLE Group | KLE‘s (Kingston Live Entertainment Group) first venture was the uber-chic Fiction Lounge launched in 2008 and located at the Marketplace in Kingston. In April 2011, Usain Bolt’s Tracks and Records opened its doors adjacent to the Fiction Lounge as a new addition to the Kingston restaurant and entertainment scene. Late in 2012, the company placed 27 million shares on the market, all of which were snapped up with lightening speed by investors. With the needed capital raised through the IPO, the KLE Group is to expand into other related ventures including a theme park and villa community on the north coast.

Related Posts | KLE Group — to buy or not?

Photo credit | www.deependdining.com

Filed Under: Company News, Company Results Tagged With:

JMMB big bump in profits

August 15, 2013 by

JMMB reported a big jump in profits from ongoing operations for the first quarter to June this year with profit after tax and due to shareholders of J$753 million and earnings per share of 46 cents for the quarter ending June 2013 compared to $470 million in 2012. The investment bank now looks set to rake in profits of around $2 per share for the year to March 2014, which makes the stock cheap at the last selling price of $8.

Last year, JMMB acquired all the shares of Capital & Credit Group. The 2013 figures are a combination of both entities, unlike 2012 when there was only a few days results included of both. Hence, the comparison with each year’s figures may appear distorted. For the current year, net interest income grew to $1.178 billion from $984 million in 2012. Gains on securities trading jumped more than 100 percent to $674 million from $300 million. Overall, net operating income was up strongly to $2.06 billion from $1.39 billion. Operating expenses also moved up from $837 million to $1.13 billion, a 35 percent increase that is mostly related to the CCFG acquired entities. Last year’s results had a one-off gain of $1.57 billion resulting from the CCFG acquisition, which was a surplus of assets acquired over the purchase price.

Regionally, Dominican Republic contributed J$390.9 million to Group profits. The Trinidad & Tobago based IBL Group, an associated company, contributed a loss of J$25.5 million due mainly to additional provisioning for loans. The Group has already stated that they have agreed to acquire the shares held by the other shareholder in the bank.

jmmbGrouplogo150x150Shareholders’ equity stands at $18.7 billion at the end of June and the group has total assets under management of $175.5 billion and increase of $20 billion since last year June, a growth of 14 percent. JMMB has placed focus on lending with loans having increased by 17 percent to $12 billion since March or 69 percent annualised. While loans are a relatively small part of the assets, it could be one of the more profitable areas if lending is done smartly to minimize losses. If growth continues at the current pace, in a few years it could be a major part of the group’s assets and add much to profits. More importantly, when the IBL shares are fully owned the total loans will effective increase sharply over what is being shown now.

For the quarter, banking and related services only contributed revenues of $487 million out of a total revenues of $3.77 billion and profit of only $77 million.

JMMB is a financial conglomerate with the principal activities are securities brokering, securities trading, merchant banking, dealing in money market instruments, operating a foreign exchange cambio and managing funds on behalf of clients.

Insider call | JMMB is an IC Insider Buy Rated stock.

Related Posts | JMMB’s rebranding | JMMB posts improved profit | JMMB to acquire 100% of IBL

Filed Under: Company News, Company Results Tagged With: ,

Profits up at Cargo Handlers

August 15, 2013 by

The latest quarterly results for Cargo Handlers may not look impressive when compared with the 2012 figures, but the numbers actually beat last year’s by nearly 16 percent when it hit $22.6 million for the quarter to June. For the nine months to June, profits which are at $63.6 million, are up 29.6 percent over the $49 million generated in 2012. Revenues from the main operations is up to $115 million for the nine months from $95 million in 2012, a gain of 21.6 percent and for the quarter to June, revenues are $40 million from $34.6 million in 2012, a gain of 15.6 percent, slower than the nine months growth.

Earnings per share is 54 cents for the quarter and $1.53 year to date and looks as if earnings for the full year will top $2. For 2012, earnings came in at $1.73 per share. While profits are up, this company seems more like a dividend stock than one for great capital gains. Nevertheless, with the price around $13 for the stock and earnings in the $2 range there is room for price appreciation.

Administrative expenses didn’t move by much, from $6.16 million to $6.4 million year to date but other operating expenses are up 19 percent in the latest quarter and for the nine months, the increase was 29.4 percent.

At end of June, cash stood at $89 million, current assets at $123 million and current liabilities at just $20 million and is well covered. Shareholders’ equity stands at $108 million.

Dividend | Last year the company paid $1 per share in two dividends. So far they have made a dividend payment of $1 earlier in the year. No more should be expected, but you will never know.

Cargo Handlers operates out of Montego Bay and carries out stevedoring services.

Related Posts | Cargo Handlers profits up 38%

Filed Under: Company News, Company Results Tagged With: ,

Palace triples profit

August 13, 2013 by

Palace Amusement Company has reported profits that has more than tripled the results for the June quarter last year. Profit after tax came in at $26.6 million in the latest quarter versus $9 million in June 2012.

The company made $18.5 million for the 12 months to June 2013, up from the $14.7 million made for the year to June 2012, a 26 percent increase. The results completely erased the poor March quarter when revenues fell sharply and took profits with it. Year to date revenues are up to $862 million coming from $842 million in 2012 and in the last quarter revenues were $278 million versus $243 million in the same quarter in 2012 for a 14 percent increase, much better than the 2 percent increase for the entire year.

March quarter | Profit for the March quarter fell sharply compared to the March 2012 quarter to a loss of $22 million from $2.66 million in 2012. IC Insider reported in our analysis of the first quarter, that the fall in revenues was due primarily to a shift in a particular brand of film, which would normally be shown in the March quarter, but was shifted to the June quarter. The latest results are confirmation of this.

In the three months to March, operating cost fell by $16 million or 10 percent, while administrative cost was up 11 percent to $34 million. In the 2012 quarter, Palace generated income of $193.5 million, this was down 21 percent or $41 million to $152.3 million in the 2013 quarter. The fall-off in 2013 comes against the background of the company introducing a new product, the showing of live operas on screen and an encore season of opera’s best in the summer. Without them, revenues would have been lower.

June quarter | Gross margin climbed in the June quarter compared with 2012, but year to date, it just barely moved. Administrative cost was kept under raps for the year, moving from $138 million to $147 million, less than 6 percent but for the latest quarter it is up by a much larger 23 percent.

Palace had cash funds and investments of $124 million million at the end of the financial year, which is up from $80 million last year. Working capital would appear to be tight with current assets at $195 million and current liabilities of $173 million. Loans amount to $40 million with equity of $300 million.

Related posts | Palace’s $22m 3rd Qtr hit

Photo via: www.PalaceAmusement.com

Filed Under: Company News, Company Results Tagged With: ,