Directors of the Jamaica Stock Exchange approved a 5 for 1 stock split effective October 5, 2016 but the directors do not have the power to effect the change without the approval of shareholders at a general meeting.
According to a release today on the JSE website, the board of directors at a meeting approved the stock split of the company effective in October at the JSE’s board meeting held on September 21, the stock is expected to reflect the split in the price on the JSE on October 3, 2016. The release goes on to state that “as a result of the proposed stock split, the JSE will list an additional 561,000,000 ordinary shares, increasing the issued shares from 140,250,000 to 701,250,000”.
But there is a bit of a problem with the implementation of the decision. The directors have no power to effect the split. A change in the number of issued share capital has to be approved at a general meeting of the company. No resolution has been put to the shareholders at a meeting so to date and none is planned as such the decision will be voidable if legally challenged.
This development is strange as all of the several companies who have split their stock have had it approved by the shareholders at a general meeting. The latest is Cargo Handlers who have called an extraordinary meeting solely to approve it, admittedly, in this case the number of the authorised shares would be inadequate to facilitate it.
Best practice suggests that the directors should err on the side of caution even if they feel otherwise. Shareholders have the power to make fundamental changes to a company not the directors, the latter are just servants.
The Companies Act makes it very clear the subdivision of the shares must be approved in a general meeting. It is very clear directors can only recommend changes to the share capital, they have no power as directors to change it.
An extract of section 65 of the companies Act of Jamaica states.
(1) A company limited by shares or a company limited by guarantee and having a share capital, if so authorized by its articles, may alter the conditions of its articles as follows, that is to say, it may—
(a) increase its share capital by new shares of such amount as it thinks expedient;
(b) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares;
(d) subdivide its shares, or any of them, into shares of smaller amount than is fixed by the articles, so, however, that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived.
(2) The powers conferred by this section must be exercised by the company in general meeting.
The company had in issue only 140 million shares with nine of the broker members holding 10 million units each leaving only a small amount to trade regularly. The stock which now sells at $27 tends to be a bit illiquid and it is expected that the split will foster greater liquidity and allow the stock to trade more freely.
ISP $150M arsenal for expansion
ISP Finance got the money to expand lending
The bonds provide an arsenal funds that will allow for a major expansion of the company’s loan portfolio at a huge spread. At the end of December 2015, the company’s loan portfolio, before loan loss provision stood at $304 million and grew marginally to J$305 million at the end of June. After loan loss provision of $70 million, it stood at $234 million as of June this year versus $241 million at December and is up from the $225 million at the end of March 2016. The new funds should aid in a major increase in lending and should result in as welling of profits. In addition to these fresh cash injection, the company will have funds generated from profits to lend as well.
The Company will apply to the Jamaica Stock Exchange to list the bonds.
Mavis Bank Coffee sold
Mavis Bank Coffee (‘Mavis Bank’) with sales of $1.15 billion and profit of around $98.4 million in 2015 according to the 2015 audited reports for Jamaica Producers is being sold to Specialty Coffee Investments Company Limited (‘SCI’).
The joint shareholders made the announcement to the Jamaica Stock Exchange on Thursday. Pan Jamaican Investment Trust and Jamaica Producers Group, in separate reports, advised that the Pan Jamaican subsidiary, Scotts Preserves and JP Tropical Foods, a subsidiary of Jamaica Producers Group, entered into an agreement to transfer their shares owned in Mavis Bank Coffee Factory to SCI. SCI is acquiring the shares in Mavis Bank that are owned by both companies on a fifty percent basis each.
The Jamaica Producers audited accounts for 2015 showed Mavis Bank with net assets of $171 million and IC Insider estimates that the sales price, could be in the region of $750 million.
In October 2011, the Government sold its majority interest in Mavis Bank Coffee for an estimated J$243 million and then approximately 150 employees. Since acquisition the company invested additional sums in the venture.
Junior market legislation draft ready
Legislation is ready to come to parliament to make the junior market tax incentive retroactive to April 1, this year to restore the incentive to its original benefits of 100 percent tax-free status for 5 years and 50 percent of the regular tax for the second 5 years, Minister of Finance, Audley Shaw recently.
Shaw made the announcement when he delivered the keynote address at the official ground breaking of the Allegheny Petroleum and Paramount Trading joint venture lubricant factory in July to be built at 39 Waltham Park Road in Kingston.
Benefits far out weight the loss in revenues given up by the government, Shaw said. He stated that while corporate taxes were foregone, government saw increased intake from other taxes as a result of the expansion of junior market companies. He indicated that GCT intake grew by 337 percent by junior market companies, with NIS, NHT rising by 100 percent.
“Shaw went on to state that the time for fooling around is long past” we must chart a course to a better future urgently and commended the thrust Prime Minister Holness was pursuing to focussing on growth in an aggressive way. He said that “with 13,000 new hotel rooms to come on stream over the next 5 years that an avenue is being provided for additional goods for the sector to be provided by local goods producers for the sector.”
Shaw commended the joint venture partners and stated that is what he expects to see with a more economically friendly environment that should encourage local production for exports or import substitution.
NCB gains from Palmyra sale
National Commercial Bank is set to benefit from the sale of Palmyra Resort and Spa in Montego Bay, St James Jamaica and an adjoining power plant, owned by Caribbean Green Power Systems Limited that were in receivership, to Sagicor Managed Funds.
Richard Byles, President and CEO, Sagicor Group, announced recently, that the Sagicor Group through their managed funds, acquired the property and assets.
The sale means that NCB will recover monies that were lent to Palmyra, but was classified as non performing loans.
The announcement by Byles did not state the amount paid for the acquisition. With this acquisition the total amount invested over the last four years by Sagicor and its managed funds, amounts to approximately US$200 million in the acquisition and refurbishing of resort properties and attractions, namely, Hilton Rose Hall Hotel, Runaway Bay Golf Club, Jewel Runaway Bay, The Jewel Lagoon Waterpark, Jewel Paradise Cove, Jewel Dunn’s River and Double Tree by Hilton at the entrance to Universal in Orlando.
NCB to benefit from sale of Palmyra..
According to Byles, the company ‘now has J$41 billion invested in hotel properties, making us the 3rd largest hotel owner in Jamaica, earning on behalf of our clients, US$100 million each year. The Montego Bay property is only partly complete, with the design originally meant to have more apartments built out, but slow sales and inadequate capital led to financiers pulling the plug on increased lending.
National Commercial Bank had set aside over J$3 billion for a large client, a few years ago, was incurring cost relating to the receivership, will be a big winner with the sale, as they will recoup much of what they provided for, if not more, cut the cost of receivership and importantly, have more funds to generate added income.
1m mobile phones cheer investors
Cable and Wireless is celebrating the recent attainment of 1 million mobile customers but investors should be celebrating as well. This milestone could mean big bucks for investors as the company moves out of losses into profit.
At the end of March 2015, the total number of cell phone customers stood at 838,000 users, the increase to 1 million resulted in 162,000 new customers. The growth in the numbers place the company around 35 percent market share as it continues to eat away at the competitor’s market share. Importantly, it translates to additional revenues that is close to $2 billion per annum. This is important for a company that suffered operating loss of $2.2 billion in 2015 and $700,000 million loss for the nine months to December 2015. With continued growth expected in the number of mobile customers, for the current fiscal year to March 2017, should move the company into a clear profit from operation, for the time since the year ending March 2007.
IC Insider.com is projecting 20 cents per share for the current fiscal year. The stock traded at $1.28 on the Jamaica Stock Exchange but could well rise when the company release full year results for 2016 March year end, by the end of May.
Pan Jam’s 5 for 1 split
IC Insider.com long standing BUY RATED stock, Pan-Jamaican Investment Trust (PJAM) may now be set to come into its own with an announced 5 for 1 stock split approved by the board in February, with the Jamaica Stock Exchange being informed more than 2 months after they should have been.
The stock last traded on the Jamaica Stock Exchange at $98, but based on its earnings of $15.19, the price should be much higher. The stock price has struggled for some time to achieve the valuation that most other stocks in the main market have attained, since the start 2015. As one of the highest priced stocks on the Jamaican market, investors have been looking elsewhere, to invest their money, leaving the stock attractively priced and undervalued.
Various investors in the past, have been saying that the company needed to split the stock to make it more attractive for investors. Management felt otherwise, saying that a split would make it appear to be a penny stock, in the eyes of overseas investors.
It seems like the decision of both Jamaican Teas and the Lasco group to split and the impact that the spilt has had on the prices of these stocks may have convinced the Pan Jam directors to take the plunge.
The company in a release to the Stock Exchange today, advised that the following resolution was recommended by the Board of Directors at its meeting held on February 29, 2016: “Special Resolution- Resolution for the Sub-Division of Shares – “That each of the 250,000,000 ordinary shares in the capital of the company be subdivided in 5 ordinary shares each thereby making a total share capital of 1,250,000,000 ordinary shares of no par value at the existing total stated capital of 2,141,985,000 with effect from the close of business on May 31, 2016”.
The resolution is subject to approval at the Annual General Meeting scheduled for Thursday, May 26, 2016.
Interestingly, the Jamaica Stock Exchange rule states that a company is required to give notice to the Exchange of at least a week in advance, the date of the Board meeting at which the declaration or recommendation of a dividend, bonus issue or rights issue will be considered. Question did Pan Jamaican comply?
Eppley seeks $317m from right issue
Eppley limited, providers of insurance premium financing, is expected to raise $317 million from its renounceable rights issue of ordinary shares, when it offers 487,703 new ordinary shares priced at $650 to ordinary stockholders this month. The record date for the issue is Friday 6 May and the date for the stock to start trading ex rights, is May 4.
Proceeds from the rights will doubled the company’s existing equity capital of $314 million and improve the debt to equity ratio which is heavily weighted towards medium term redeemable preference shares with total borrowings of $997 million at the end of March, this year.
The company reported a 17.7 percent increase in profit after tax for the first quarter this year, of $10.6 million over the $8.7 million made in the first quarter of 2015. Profit for 2015 financial year ended at $56.5 Million.
Since the company announced plans for the issue, the price moved from $400.01 to $650 in this morning’s trading for an increase of 62.5 percent. The proceeds will allow them to expand their offerings and or pay down debt.
Eppley is listed on the junior market of the Jamaica Stock Exchange, and last traded at $650 with a PE ratio of 8.
Guardian acquisition near complete
National Commercial Bank’s agreement November 2015 to purchase a 29.99 percent stake in Guardian Holdings Limited is much closer to completion with approval given by the two most important countries in the region.
According to a note in NCB’s March quarter results “the approvals in Jamaica and Trinidad and Tobago have been obtained, but a few others remain to be received but a few others remain to be received, following which it is expected that the transaction will be completed.”
The acquisition of the shares will be done through a private sale of shares from a group of large shareholders. The successful completion of the transaction required regulatory approval from territories in which both entities operate.
NCB reported profit for the six months ended March of $6 billion or $2.44 per stock unit an increase of $594 million or 11 percent and for the quarter profit of $3.6 billion was realised or earnings per share of $1.47. The group is on target to enjoy earnings for the full year, in the region of $5.50 per share.
Jamaica’s business optimism surges
New units built at Montego Freeport in 2015.
Present business conditions reached its second highest level in February when measured by the index of present business conditions, since the record high of 240.2 in the September 2007 survey, Bank of Jamaica reported.
The index of present business conditions increased to 224.9 from 190.4 in the December 2015 survey. The out turn compares with a low of 47.50 reached in April 2013 and in March 2010 the lowest level of 40. The index has a base of 100 in December 2005.
The executives have a heightened picture of the future as the index of future business conditions also climbed reaching 172.1 from 158.2 in the previous survey.
The improvement in both indices reflected increases in the number of respondents of the view that conditions were or will be “better” while there were declines in the number of respondents indicating that conditions were “worse” the BOJ report stated. The recent improvement is reflective of a gradual improvement since the latter half of 2013 and it been on the increase since with the occasional slip as occurred in July 2015.The chart shows that the perception of future business conditions is more stable than short term current conditions view. The data shows in the latter part of 2015, for the first second time since the commencement of the survey, the present business conditions have moved well ahead of future conditions.