Barita shareholders to vote on rights

Barita climbs to a new closing high of $50 on Friday.

Barita Investments (BIL) has advised that the Board of Directorshas taken the decision to withdraw its Notice of a Rights Issue to BIL’s shareholders, dated December 14, 2018 and instead hold a meeting of shareholders to consider the matter.
As a result an Extraordinary General Meeting of shareholders will be on Thursday, January 17, 2019, at the Terra Nova Hotel, at 10 am to consider the issue of increasing the issued shares by way of a rights issue.
“The purpose of the meeting is to ensure that BIL’s minority shareholders will have an opportunity to contribute to the decision for a Rights Issue,” the directors stated in their release to the Jamaica Stock Exchange.
The resolutions to be put to the extraordinary general meeting, include one for the issue of 262.28 million shares, as a rights issue. Each shareholder will be entitled to 10 shares for each 17 held, at the record date. The price for each share of the rights, is expected to remain at $15.50, as originally approved by the directors, unless varied at the upcoming meeting. The resolution is also asking that the terms of the issue are to be determined by the directors.
The rights in the original directors release were to be non-renounceable, if this condition remains after the vote at the meeting, it will mean that shareholders will not be able to sell their rights to a third party, as such if they decide not to take them up they will not be able to benefit directly from the issue.
The directors had previously voted to offer the rights to shareholders without calling a general meeting but after consultations, decided to put the matter to a general meeting of shareholders where it properly belongs.
Since announcing the rights in early December, the stock price has risen more than 56 percent to $50 and is up 567 percent for 2018 to be the stock exchange’s best performing stock.

Rita’s 14% of Barita value exceeds 62%

Rita Humphries-Lewin and husband Carl.

Rita Humphries-Lewin sold 81.56 percent of her shares in Barita Investments and collected $2.64 billion for it, but the amount she retained is now valued more than the amount sold in August this year, to Conerstone Investments Holdings.
Up to early part of August, Humphries-Lewin owned 339,975,664 in Barita Investments or 76.25 percent of the total issued shares. At the takeover price of $9.20 that was valued at $3.13 billion. She retained 62.7 million shares representing 14.06 percent of the issued shares, now valued by the market at $2.92 billion.
With the price of the stock reaching $46.50 on Monday, the vastly reduced ownership is worth almost what the full 76 percent holding in the company was priced at, based on the acquisition price, when Conerstone acquired 75 percent of the company.
Humphries-Lewin would have collected from the shares she sold but the amount she retained
On the other hand,Cornerstone paid $3.07 billion for 75 percent of Barita but based on the latest price for the stock the block is now valued at $15.5 billion representing a huge gain of $12.4 billion in a matter of 4 months.
The new majority owners have big plans for the company that could well push the valued much higher in the not too distant future.

Barita defies broker’s sell recommendation

Barita climbs to a new closing high of $46.50 on Monday.

Barita Investments closed at $46.50 on Monday with a gain of 450 percent for the year so far, to be the best performer of any stock listed on the Jamaica Stock Exchange. Since late 2016, the stock gained 1,400 percent.
In late 2016, a leading brokerage house concluded their assessment of Barita Investments as follows, “we expect just a marginal increase in year on year net profit. Given this expectation, we estimate BIL shares to be valued at approximately $2.35 by applying the market average P/E to estimated EPS. Therefore at a current market price of $3.10, we are recommending a SELL on BIL.” Interestingly, while they recommended a sale, IC placed a BUY RATING on it and it occupied the number 2 spot on the main market BUY RATED list. That is a huge contrast.
That year, while reported profit was down to $207 million from $242 million, in 2015 total comprehensive income, the better measure of profitability was $691 million or $1.55 per share, compared to $201 million, a huge increase. In 2017, traditional profit slipped to $172 million after an impairment on investments charge of $81 million, total comprehensive income ended at $492 or $1.10 per share. For 2018, reported profit jumped to $374 million and total comprehensive income moved to $736 million or $1.65 per share.
Investors who sold their stock in 2016 lost out big time. Information gleaned by IC is that the gains experienced in 2018, may not be over. The company may have pocketed around $100 million from the placement of a US$10 million bond issue recently, both the company’s equity portfolio and the equity-linked Unit Trust would have benefitted from the rise in local stock prices and resulted in increased profits for the December quarter. Then there are other fees that should have increased that will add to the profit for the quarter and for the fiscal year. Importantly, unlike in the past, when unrealized gains on securities was treated as other comprehensive income from the current year, all

Barita Investments 2017 AGM held on March 23, 2017

gains or losses will be treated as a part of regular profit and that is likely to make a big difference in how investors value the company.
The new majority owners, in the eyes of investors have brought new life to the company. At least, that is what from the meteoric rise in the stock price is saying. The company is to raise over $4 billion by way of a rights issue at a price of $15.50 each. The directors have not yet stated publicly, what the funds from the rights issue, will be used. There is talk that some of it will be invested in an expanded portfolio of equities, to take advantage of what is being seen as an improving Jamaican economy that should lead to a rise in stock prices and a role out of services to the wider Caribbean region.
Apart from the company’s stock that seems set to be 2018 number one performer, the equity linked units trust is the best performing for 2018 and seems set to cop the number one spot for the year. Their other funds have trailed the rest of the market by a mile, with the real estate and FX Growth funds down more than 20 percent.

NCB to go for 62% of Guardian

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NCB Financial Group is to go after 62% of Guardian Holdings.

NCB Financial is to make a revised offer to acquire 62 percent of the Trinidad based Guardian Holdings (GHL), at a revised price of US$2.79, the group said today, in a release.
This is in line with the original offer made in 2017 but at higher price and above the 51.85 percent at US$2.65 they agreed to, after being investigated by the Trinidad Exchange Commission. The revised offer which will be published soon, with the exact timing is yet to be determined. The acquisition is to be partially funded by US$45 million to be provided by way of vendors’ loan from selected shareholders.
The acquisition is set to make a major impact on the NCB Group and ultimately the stock price. For one GHL is being bought for just less than 10 times earnings while NCB is selling at 15 times 2018 earnings as such the impact on the price of NCB shares will be seen in 2019 as GHL profit will be

Guardian Holding

valued more to NCB shareholders. Most importantly, majority ownership will permit it to reshape the group by merging the separate insurance companies and securities operations into one and allow it to rationalize various back office operations within the group into one unit and thus cut considerable cost out of the enlarge group.
NCB already owns 29.99 percent of Guardian. The GHL shares last traded in Trinidad at TT$16.95 or approximately US$2.53. NCB closed trading on the Jamaica Stock Exchange at $148.

Barita proposes $15.50 rights issue

The directors of Barita Investments on December 13, passed a resolution for a Rights Issue of 10 shares for each 17 owned at the record date, to take effect in early January which if taken fully will results in 258 million new shares and bring the capital issued to 707 million units.
The board resolution states:- The Board approves the issue of 258,064,516 ordinary shares (in this resolution “New Ordinary Shares”) part of the authorised capital, the same to be offered to the holders of Ordinary Stock Units by way of a Non-Renounceable Rights Issue on the following terms:
(i) Offer Price of J$15.50 per New Ordinary Share. (ii) Offer to Stockholders of the Company as at a Record Date of December 31, 2018. (iii) Offer to Open on January 8, 2019
(iv) Last date for splitting to be January 15, 2019. (v) Offer to Close on January 22, 2019 for acceptance by Existing Ordinary Stockholders/Renouncees
(vi) Offer to Close on January 25, 2019 for acceptance by applicants for Excess Shares (not taken up by Allottees under the Letter of Provisional Allotment).
2. The Directors are hereby authorized to dispose of all such New Ordinary Shares not taken up by Allottees on terms and conditions as the Directors may consider expedient in their absolute discretion, in consultation with the Arranger for the Rights Issue, Sagicor Investments. BIL further advised that the share ratio allocation for the Rights Issue will be as follows: Ten (10) additional shares for every seventeen (17) shares owned by existing stockholders of Ordinary Shares in Barita Investments.
Apart from a rights issue, the above resolution speaks to the last date for splitting being January 15, which raises the question if a stock is to be considered as well.
Barita stocks that trades on the Jamaica Stock exchange at $33.45 on Friday and is up 346 percent for the year to date.

Barita directors to consider rights issue

Barita Investments advised the Jamaica Stock Exchange that a meeting of the Board of Directors will be held on December 13, 2018, at which the consideration of rights issue of the ordinary shares of the company is being considered.
IC, has been reliably informed that a large portion of the recent $5 billion bond issue that was raised by Conerstone Investments Holdings the new majority Barita Investment shareholder is earmarked for the rights issue.
The company will need to call an extraordinary meeting of shareholders to get shareholders approval for the rights, it is therefore unlikely that if approved by the directors it will take effect until late January 2019 at best.

Carib Cement locks in $170M in FX gains

Carib Cement could earn $5.30 in 2019.

Caribbean Cement secured a Jamaican dollar denominated loan from National Commercial Bank amounting to J$3.076 billion and available in United States Dollars. The report from the company advised that Board of Directors approved the facility on November 30 the same day the facility was received.
The company advised that the proceeds from the revolving Loan Facility were received on November 30 and will be used to pay related party debt denominated in United States Dollars, diversifying the sources of funds for the company. Throughout its term, the Loan Facility will also be used for general corporate purposes, reports Caribbean Cement.
The facility is an unsecured revolving loan facility for five years at a fixed interest rate of 7.45 percent per annum.
Cement owed the parent company $11.09 billion plus $1 billion due short term as of September, the September interim results show. The amounts were contracted in US dollars and resulted in devaluation losses of $464 million. Since September, the exchange rate swung in favour of the Jamaican dollar by over J$7. Carib Cement will enjoy a big foreign exchange gain and a reduction in the amount due on the loan to around US$65 million as a result of the revaluation of the local dollar, once NCB facility fund is used to pay down the loan from the ultimate parent company. As of today, the exchange rate is JS$127.4623 to the US dollar and on September 30, the average rate was $134.6486, a gain of more than J$7. The amount received for the loan amounts to just over US$24 million and has cut J$174 million from the devaluation losses incurred in the September quarter. The revaluation of the Jamaican dollar to date have reversed another $470 million in losses incurred on the amount of the loan that will not be paid off, with the combined savings being $640 million.
The facility, will allow the company to pay down the overseas loan from cash flow from its operations in the order of J$4-5 billion per annum. By the end of 2019, the foreign loan exposure should be reduced sharply.

Seprod stock allocation fowl up to cost JSE

Seprod’s shareholders did not get full allocation of shares.

There is a big fowl up in the allocation of shares to Seprod’s shareholders who applied for shares in the recent offer of the share by the Musson Group.
On Monday November 12, NCB Capital Market announced that all applicants for reserved shares were fully allocated but that has so far turned out to be incorrect. Information gleaned by this publication is that applicants in the general pool apparently got more shares than they should, apparently at the expense of shares reserved for shareholder’s of Seprod as of the end of August, the cut off date for the purposes of allocating the shares.
IC gathers that several of the applications for the Seprod reserved shares did not get their full allocation as they were placed in the general pool. IC can confirm that around ten applications that should have been placed in the shareholders poll did not get the full allocation.
The problem, IC gathers stems from a glitch in the system at the Jamaica Central Depository, a subsidiary of the Jamaica Stock Exchange. The staff of the JCSD have been working to determine the extent of the error but our sources indicates that up Thursday the matter was still be worked on a suggestion that the extent of the error is wide spread.

The Jamaica Stock Exchange subsidiary

Shareholders who should have received their full allocation will in fact get them subject to funds being provided by the to complete the purchase. From all indications, the stock exchange seems poised to absorb the loss that is likely to be incurred to obtain the shares required to satisfy those shareholders who affected.
A total of 92 million shares were publicly offered for sale with 55 million reserved. A total of 15 million units were reserved for existing shareholders of Seprod. Since the close of the issue that offered the shares at $24 each, the stock now trades at $32 a difference of $8, with the price seeming set to rise.

Public gets small amount of Seprod shares

Some of Seprod,s product

Just under 92 million shares of Seprod were offered for sales by Facey Group in October and was oversubscribed. All applications for Reserve Shares in the offer were fully allocated, according to a release from NCB Capital Markets.
55 million shares were reserved for employees and directors and existing Seprod shareholders and the Lead Broker.
Subscribers from the general public will receive up to the first 5,000 units for which they applied, with the balance greater than 5,000 units allocated approximately 16.56 percent. The shares were priced at $23.99 each but trades on the Jamaica Stock Exchange at $39.

Nothing for Carib Cement stockholders

Carib Cement silos.

Jamaica’s Caribbean Cement Company slashed the cost formerly associated with leasing of Kiln 5 and Mill 5, from Trinidad Cement after acquiring direct ownership of the assets by $2 million per annum but shareholders are getting none of it the September quarterly results show.
Shareholders are unlikely to see any major benefit form the savings until 2019 when the plant upgrading costing US$45 million comes on stream and aided by a near 5 percent price increase effected in October to help offset cost increase.
For a number of years, some of the company’s shareholders have complained that the lease arrangement of the two items with the Trinidad parent was not in favour of the minority owners as it was costing too much and was not properly accounted for in past financial reports, thus suppressing the profit. With the termination of the lease and acquisition of assets it was expected that there would be a immediate noted impact on the results, that was not to be. The interim results to September, with the first period showing the full impact, indicate that shareholders are not benefitting from the $500 million cost reduction per quarter.
Data disclosed by Jamaica’s sole cement producer in their nine months interim report, show that excluding foreign exchange loss, there is a $500 million savings in the overall cost associated the acquisition of the two items formerly leased.
The equipment lease ended in April 2018 when both parties agreed to end the arrangement, leading the Jamaican company to purchase the assets. The interim figures show finance cost excluding foreign exchange loss rose of $227 million up sharply from just $11 million in 2017, in the quarter, resulting from funds borrowed to help finance the purchase of the equipment and $299 million versus $4 million year to date. Depreciation and amortisation cost rose to $342 million from $132 million in 2017 and for the nine months to $808 million from $400 million in 2017, with the increase mostly relating to the former leased equipment. The net effect is that the company enjoyed a savings of $500 million for the quarter or $2 billion per annum. None of these gains are so far flowing to the bottom-line for the benefit of shareholders.
Revenues grew 6.7 percent in the September quarter or $282 million but certain direct operating cost rose by $546 million with no indication that any attempt was made to recover the increased cost except for price increase in October. The effect is that profit before foreign exchange losses and taxation was only $148 million greater than in the prior year, when $846 million was reported.

Peter Donersloot – Managing Director

“The true story should be that the company’s performance illustrates the resilience of the its operations with the reporting of a profit even when taking a big foreign exchange loss, the company’s managing director, Peter Donkersloot, suggested in an interview with IC Going forward he said that, the upgrading of the plant will push the capacity to 1.2 million tonnes of cement allowing them to meet local demand and resume exports. “The upgrade should be completed and be in production around December but no later than January,” Donersloot stated. The immediate impact will be the elimination of imports that added to cost of sales and reduced profit margin, up to September”
Subsequent to the end of the quarter the price of cement was adjusted up by 4-4.5 percent Donkersloot confirmed. Information gleaned is that the increase took place for sales as of October 22 and is the first increase in 16 months.
The often talked about energy plant to be constructed to cut the huge energy bill was not an area the managing director was prepared to talk about, in light of negotiations currently in place.
As it stands, what appears to be a decision to defend their market share resulted in the company reporting much lower profit in the quarter as a result of a $464 million foreign exchange loss hitting the results for the September quarter, pulling the strong 44 percent increase in operating profit to $1.2 billion from $836 million, into lower net profit of only $305 million, versus $748 million generated for the prior year’s period.
Since the results, the stock that has been trading between $47 and $50 dropped to a recent low of $41.20.