Sagicor Financial raises US$320m

Sagicor Financial's  Jamaican subsidiary Sagicor Group HQ. earnings

Sagicor Financial’s Jamaican subsidiary Sagicor Group HQ. earnings

Sagicor Financial, a member of the, successfully issued a new seven-year bond in August 2015 in order to refinance debt, including the US$150 million 10 year bond due in 2016. This new US$320 million bond matures in 2022, and comes with an 8.875 percent fixed rate of interest for the period with interest payable semi-annually.
JP Morgan and Scotiabank, the joint book runners for the Bond, successfully completed the transaction on behalf of Sagicor. In a recent press release, Scotiabank VP, Dylan Coke, stated, “It is important to note that not only was the Bond very successful overall, there was a robust demand for it within the Region.” He added that approximately a third of the Bond’s takers were Caribbean investors.
Rating agencies Standard & Poor’s and Fitch, have both given the Bond issue a ‘B’ rating. This rating has been capped in line with the sovereign rating for Barbados.
Sagicor a Barbados based Life Insurance company is a provider of financial services in the Caribbean and 0perating in 22 countries, including the USA and Latin America, Sagicor has total assets of US $6.2 billion and $774 million in capital. The Sagicor Group offers a wide range of products and services including life insurance, annuities and group and individual health, and has an insured base in the region of two (2) million. Sagicor is a publicly traded company with over 37,000 Shareholders, and is listed on the stock exchanges of Barbados, Trinidad and Tobago and London.
The company is the largest shareholder in Jamaica’s Sagicor Group which includes banking, life and health insurance and fund management.
Sagicor Financial recorded net income from continuing operations of US$37.5 million for the first six months ended June, 2015, compared to the prior year result of US$33.2 million, an increase of 13 percent. Net income from continuing operations attributable to shareholders was US$21.8 million, compared to the prior year of US$19.3 million, an increase of 13 percent. Earnings per common share from continuing operations, was 7.0 US cents compared to the prior year result of6.2 UScents.

JMMB managed funds jump 51%

JMMBJMMB Group enjoyed a big jump in the total amount of managed funds being handled by the group in addition to the $223 billion that the group has on its balance sheet.
Off balance sheet funds jumped 51.2 percent to $58.8 billion, compared to J$38.9 billion for the prior year and is consistent with the Group’s strategy of moving assets off balance sheet as well as the dictates of the International Monetary Fund and the country’s Financial Securities commission. JMMB would be using the slate of Unit Trust as vehicles for shifting funds from on balance sheet to off balance sheet.
This trend is not peculiar to JMMB as other institutions have been on this path for some time. Effective October last year the Financial Services Commission, set a minimum amount for a retail repo. Currently the level is J$500,000 and US$5,000 and is scheduled to be increased on a phased basis to $1 million and US$10,000 by the end of December, this year.
JMMB stated in it release with the quarterly results to June that “the Group is now poised to expand its range of services in the Dominican Republic with the approval of its money market mutual funds”.

Gleaner’s media assets valued at $1.16

RJRGlnr press -815The Gleaner’s media assets to be transferred to RJR in the recently announced merger, is now valued at $1.16 per shares based on RJR’s closing stock price on Monday of $4. The Gleaner’s stock traded at $1.89 on Monday.
The proposed merger of the media arm of the Gleaner Company with Radio Jamaica (RJR) will see the Gleaner’s shareholders being compensated for the media business that RJR is acquiring at the rate of 1 RJR share for each Gleaner share. The initial information led to the interpretation that the Gleaner shareholders would be getting 1.2 billion of the RJR shares while the RJR shareholders would remain with just over 350 million shares. According to information on the Gleaner’s website, RJR will increase the issued shares to 2.4 billion units that will then be shared equally between the shareholders of both companies. RJR will do a combination of a share split and issues of new shares of which 1.2 billion of the shares will be given to Gleaner shareholders as the payment for the Gleaner Company (Media) Limited subsidiary.
RJR currently has 350.154 million shares issued to get the numbers to 1.2 billion for the company’s shareholders would translate to a split of roughly 3.43 to each existing share.
In addition to the value of the media assets, the Gleaner shareholders will retain shares in the new company that will retain the non-media assets. IC Insider.com pieced together information that suggests that these assets which include the current headquarters of the Gleaner, could be valued around $2 billion or roughly $1.70 per share.

$6.95 much for Sagicor X fund rights

Hilton Rose Hall Sagicor X Fund recent acquisition

Hilton Rose Hall Sagicor X Fund recent acquisition

Sagicor Real Estate X Fund rights issue is priced at J$6.95 per share, 50 cents higher than the net book value of $6.55. The issue a non-renounceable for up to 598,134,700 new ordinary shares on the basis of two new shares for every five units held as at August 17 2015.
The stock closed at $8.50 on the Jamaica Stock Exchange on Friday August 7th with 34,000 shares changing hands. The closing date for the issue is September 2, 2015, with the opening on August 19. The gross funds expected to be raised is J$4,157,036,165 and are intended to be used to assist Fund to acquire a convention hotel in Orlando, Florida, which is affiliated with a major hotel chain. The rights issue document states that the “resort has 742 rooms with over 62,800 square feet of meeting and convention space. It is located in Orlando at the entrance to the Universal Theme Park. The balance of the purchase price is expected to be funded by way of a loan”.
Sagicor Pooled Diversified Investment Fund and other connected Sagicor entities which together own approximately 80% of the stock units of the Company have stated that they intend to take up all their Rights. Shareholders who do not take up any of their Rights will be diluted by 28.57% assuming that all the Rights Shares are taken up and the Rights Issue is not up-sized.
The Fund reserves the right, in the event of over-subscription for shares from the Un-allocated Pool to upsize the Rights Issue by releasing up to maximum of 149,533,675 shares into the Un-allocated Pool to meet demand from its shareholders. X Fund does not intend to up-size the Rights Issue beyond the aforesaid maximum. If the Rights Issue is up-sized to the maximum the issued share capital of the Company would be increased by 50% over the current amount of shares in issue of 1,495,336,750 stock units and a shareholder who did not take up any of his Rights Shares would be diluted by 33⅓%.
Sagicor group a better buy with a PE around 6 times 2015 earnings

Sagicor group a better buy with a PE around 6 times 2015 earnings

Buoyed by an abnormal first quarter results, earnings ended at 46 cents per share to June versus 27 cents for the six months to June last year. Unfortunately, the rights issue document fails to indicate what income and profit is expected from the property being acquired nor what the forecast is for the rest of 2015 for the overall operations, to allow investors an insight into what is to be expected.
The stock which is overvalued is unlikely to enjoy the generation of profits in the short run from ongoing operations to justify the price being asked. In a market where few stocks are selling at a premium to net asset value, it is difficult to see why rational investors would want to pay a premium to the market for such an investment and suffer later the prospects of disappointing earnings that will justify the price either. One only has to look at Proven Investments shares, where investors gobbled up the stock at inflated prices as high as 22 US cents only to see few buyers for it now at 18 US cents to realise that hype will often will out in the short run but reality sets in after.
Investors should know what they are buying but that is not clear from the offer document but Sagicor Group selling at a PE of 6-7 times this year’s earnings with a book value of $12.17 versus last traded price of $13 is a far better buy. The issue is taking place in a bull market so who knows what will happen?

Big new income stream for JSE

JSE sgn shrtpngThe Jamaica Stock Exchange is to receive another big shot in the arm, with a totally new source of income flowing from the decision of the Financial Services Commission that all retail repurchase agreements, must migrate to the Jamaica Central Securities Depository Trustees Services (JCSD) effective 31st of August.The total book of repurchase agreements amounts to approximately $500 billion as of March this year, the amount to be transferred may be lower has the FSC new regulations require that the minimum amount for a retail repo that is now J$500,000 and US$5,000 and is scheduled to be increased on a phased basis to $1 million and US$10,000 by December 31, this year.
Based on the fee structure the JCSD should earn around $50 million a year in fees from the securities supporting the repos. There will also be fees to be paid for each repo transaction, such transactions will be evidenced by an account held in the purchasers name at the JCSD. According to Robin Levy, Manager of the JCSD they will be trustees for the assets that back the repos, as such the dealers will no longer hold them directly in their name thus legally separating the ownership from the repo issuer during the duration of the repo agreement.
FSCThe stock exchange group will earn an annual fee for each dealer who is registered to deal in Repo securities by the JCSD. The fee structure listed on the Jamaica Stock Exchange has the annual fee at $100,000 with 20 dealers in the country the income from this source will be small only around $2 million per year if all of them sign on. The repo registration fee is likely to be the big income generator as each transaction will incur a fee based on its value.
The JSE enjoyed a very good first quarter this year with huge increase in income, a fare bit coming from one off type transactions but in addition increased trading activities flowing from increase trading levels on the JSE this year contributed to improved profits for the year to date. The JSE stock last traded at $6.23 on the JSE on Friday to gain over 300 percent for the year to date, but with earnings per share now looking like heading towards $1.50 level there is room for another surge forward for the stock. The company’s 2015 second quarter numbers should be out this week based on the released of the June 2014 quarter results on the July 23, last year.

Political Mismanagement kills J$

Poor Jamaican dollar. killed by political mismanagement

Poor Jamaican dollar. killed by political mismanagement

The Jamaican dollar reached an unfortunate mile stone at the end of trading on Wednesday, when it crossed over the $117 mark to one US dollar, after decades of political experimenting and mismanagement that led to long periods of overvaluation for the currency.
Unfortunately, if this was the end of devaluation for the local currency, it may be considered not too bad but things look as if there is more decline coming with the country’s central bank is ensuring that the target they secretly hold is met, with a hike in the compulsory take from authorized dealers moving up sharply last year to 25 percent of each day’s inflows. Interestingly, while the currency has slipped since the last quarter of 2014, inflation at the same time has been virtually zero, thus giving the currency a real increase in competiveness.
Trading in foreign currencies in Jamaican closed with dealers buying the equivalent of US$38,333,260 in contrast to US$34,883,289 on Tuesday, while they sold the equivalent of US$37,824,842 versus US$38,197,799 previously and pushed the average selling rate for the US dollar over J$117 for the first time.
In US dollar trading, dealers bought US$36,094,493 compared to US$27,766,608 on Tuesday. The buying rate for the US dollar rose 6 cents to $116.41 and US$36,465,228 was sold versus US$35,932,831 on Tuesday, the selling rate rose 3 cents to $117.01. The Canadian dollar buying rate declined $1.07 FX Sum 1-7-15.docxto $91.49 with dealers buying C$1,004,694 and selling C$649,575, at an average rate that rose 20 cents to $94.04. The rate for buying the British Pound fell $1.93 to $180.32 for the purchase of £877,924, while £437,821 was sold, at an average rate that rose 1 cent to $183.79. At the end of trading, it took J$130.34 to purchase the Euro, 11 cents less than on Tuesday, according to data from Bank of Jamaica, while dealers purchased the European common currency at J$127.69 for 3 cents less than Tuesday’s rate. Other currencies bought, amounted to the equivalent of US$89,263, while the equivalent of US$149,848 was sold.
Highs & Lows| The highest buying rate for the US dollar rose 15 cents to $117.25, the lowest buying rate jumped $4.82 to $95.82, the highest selling rates was unchanged at $122.78, while the lowest selling rate jumped $19.34 to $114.95. FX HL 1-7-15The highest buying rate for the Canadian dollar dropped $2.88 to $94, the lowest buying rate lost 33 cents at $74.70. The highest selling rate inched up 27 cents to $97 and the lowest selling rate lost 50 cents to $89.50. The highest buying rate for the British Pound, and the lowest buying rate remained at $183.90 and $147.82,respectively, with the highest selling rate rising $3.61 to $190.99 and the lowest selling rate was up $1.30 to $178.

Tax Inflows up cost down for GOJ

Phillips pulling in revenues ahead of target and holding on cost.

Phillips pulling in revenues ahead of target and holding on cost.

Lower borrowing cost and big increases of $3.3 billion over forecast for General consumption and special consumption taxes on local and imported items, helped to push revenues for May and April above budget by $1.3 billion, in spite of a shortfall of $1 billion in grants and a $345 million in the bauxite levy.
Expenditure is down by $3.76 billion, with reduced spend on capital expenditure accounting for $2.1 billion, interest $571 million and other programmed expenditure of $1 billion. Programmed expenditure savings, may include amounts budgeted for wage increases but not yet paid and may be purely a timing issue than a real savings.
Taxes280x150Government borrowed $13 billion less than forecast, paid out $1.7 billion more than budgeted and that should result in a reduction in interest cost going forward. Overall, the Fiscal deficit for the two month period, is $5 less that budgeted and pushed the overall deficit to $11.5 billion down from $16.5 billion planned.
The wage bill is $27 billion for the two months. A settlement of 5 percent for the year would add $8 billion to the cost, but government would get taxes direct and indirect form its payment. The longer the parties take to settle the less costly it will be for the government, or the easier it will become to pay a higher amount, but there is a matter of year two to contend with as well.

595 phone numbers switched

CWJ old OffCable & Wireless (C&W) is the clear winner in the number portability so far a 91 percent switching to Cable & Wireless according to data provided by C&W CEO Gary Sinclair on Thursday afternoon.
With only a few days since the sector started to allow the swapping of numbers in response to an IC Insider query Sinclair said “the numbers are overwhelmingly in our favour. Latest count 543 ported to us from Digicel and 52 ported out to Digicel from us”. Up to press time, Digicel representative who was contacted has not yet submitted their numbers.
Digicel off prtThe changes although more than the 200 the Minister responsible for telecommunication disclosed earlier this week, represent only a small fraction of the total number of more than 2 million phone customers in the island. Number portability has been long in coming and was promised to be in effect from last year but was put back based on request from Cable & Wireless.
While the change will provide telecom users with more flexibility it could be problems for some users in determining which numbers belong to which carrier with different pricing structure in place by the two dominant carriers.

Something stinks in Trinidad

TCement_280x150Something stinks in the land of calypso and it has nothing to do with football. Trinidad Cement offered rights to purchase shares in the company early this year but only some shareholders were invited. No one has done anything about this stinking thing. One investors in the twin island state made a stink about the issue but not really about the salient point.
They are of the view that with Cemex controlling a large block of the shares by way of the rights issue made it tantamount to a takeover, hence they ought to have made an offer to the other shareholders to buy their shares. With officially less than 50 percent of the shareholdings that seems a bit farfetched.
What is of far greater import are two issues that go to the heart of good corporate governance, equitable treatment of shareholders and proper disclosure. The first issue is that all shareholders were not treated equally as is the norm for all holders of the same class of shares.
TCL directors found it convenient to deprive shareholders who reside overseas except for a select few from participating in the offer. It is interesting that when Guardian Holdings had a rights issue it was open to all shareholders whether residing in Trinidad or not. TCL had lots of time to have prepared themselves and others for the rights.
“TCL has advised that at a meeting of the Board of Directors of TCL held on Thursday, February 26, 2015, the board confirmed a decision to offer the shares in the Rights Issue of 124,882,568 new shares in Trinidad and Tobago only, and to exclude all other jurisdictions in which TCL`s shares are listed – including Jamaica. This decision was based on the following: (1) The complexities involved in satisfying the requirements of the various regulatory bodies in all jurisdictions in which the Company is listed and its effects on the stringent timeframe for the Rights Issue, especially having regard to the fact that the condition imposed by TCL`s Lenders; and (2) the de minimis shareholding and trading activity in the other jurisdictions (including Jamaica).”
The second and even more serious concern has to do with disclosure or lack of it. One would hardly be regarded as foolish as to think that the deal was hatched to get Cemex controlling interest by the back door.
First overseas based shareholders were excluded from the issue, no shareholder was allowed to subscribe to more than their allotment and the scheme provided for Cemex to have their required holding whether the rights was successful or not by the agreement to issue added shares if the amounts from the rights did not allow them at least 35 percent ownership.
The offer document stated “If Sierra Trading has not achieved a shareholding in TCL of 35%, then subject to receiving all required approvals, including Shareholder approval, a private placement of TCL shares will be issued in favour of Sierra Trading in an amount that will permit Sierra Trading to achieve a shareholding of 35% of TCL’s outstanding shares”

Carib Cement a subsidiary of TCL

Carib Cement a subsidiary of TCL

The grave error is that the company withheld important and extremely relevant information from shareholders. In fact they got noted auditors to issue report that is questionable in one critical area for what it did not disclose that was a part of the offer document. Why did PriceWaterhouse (PW) signed off on it and leaving out one of the most critical bit of information on the profit in 2015 and thus giving great validity to the numbers is a mystery? The information would have led any reasonable reviewer to the conclusion that the group made no profit for the March quarter, the hiding of this critical information is very unfortunate. If TCL who would have been in a good position to know what the profit for the quarter was likely to be had disclose same to investors many more would probably have taken a more positive view of the company as the numbers showed a vastly better picture than was released to the investing public.
According to the offer document TCL made no profit between December and March this year and this was critically false information. Yet the company posted a huge improvement in profit in the March quarter. That is odd, so hear what PW said in their report about the financial position and forecast prepared by management of TCL. Extract from the PW report states, ”in our opinion the projection has been properly compiled on the basis of the assumptions set out in note 1 and the basis of accounting used is consistent with the accounting policies of the group.” It goes on to suggest that actual results may vary materially from forecast. That is fine for projection somewhere down the road but can’t be good for information that has already been known.
Retained earnings at December 2014 is included in the balance sheet at $64.257 million and the same figure of $64.257 million on April 1, 2015, the conclusion here is that there was no profit nor loss in the quarter and if so many would consider the price of $2.90 too high. On April 23 the TCL directors signed off on the first quarter results showing a big jump in profit to $43 million up from $11 million in 2014. Was all the profit made in March alone ahead of the rights issue document and if not, why was it not disclosed in the report? Certainly for the months or the period that they had information investors should have been provided with it and with some guidance for the rest of the months for the quarter and for the full year as well. The numbers for the quarter puts full year’s earnings around 64 cents without any savings from debt restructuring that makes the $2.90 rights issue price extremely cheap, few would have known what the numbers were likely to be based on the silence of the company’s “dumb” directors.
Why hasn’t the FSC of Trinidad and the stock exchanges on which the stock is listed not taken up the matter in the interest of the investing public? Caribbean investors deserve far better treatment than this shabby approach.

Trading picked up on junior market

Jamaican Teas is one of 3 stocks closing at 52 weeks' high on Friday.

Jamaican Teas is one of 3 stocks closing at 52 weeks’ high on Friday.

Trading on the junior market ended with 13 securities trading, and with 973,318 units changing hands valued at $2,695,211. The JSE junior market index gained 5.30 points to close at 918.26, with the price of 8 stocks advancing, 4 declining with 3 closing at 52 weeks’ high.
At the close of the market, there were 2 stocks with bids higher than their last selling prices, 2 with lower offers and 5 securities closing with no bids to buy and 6 that had no stocks being offered for sale.
Stocks trading in the junior market are, Access Financial lost 35 cents to close at $15.50 while trading 100 shares, AMG Packaging ending with 1,233 shares changing hands to close unchanged at $3.16, Caribbean Flavours closed with16,581 shares trading at $2.30, while gaining 21 cents. Caribbean Producers with 76,978 shares trading, ended lower by 12 cents to $2.88, Consolidated Bakeries finishing trading with 33,200 shares, the price inched up 1 cent to a 52 weeks’ high of $1.18 at the end. JM 19-6-15
Dolphin Cove closed trading with 11,167 shares at a new high of $12 after gaining 50 cents, General Accident Insurance concluded trading with 10,590 shares changing hands to close 11 cents higher at $1.67. Jamaican Teas closed trading with 47,930 shares and gained 48 cents for a 52 weeks’ high of $4. Lasco Distributors traded 18,564 shares, 3 cents lower at $1.65, Lasco Financial Services in trading with 432,000 units, gained 5 cents to end at $1.95, Lasco Manufacturing in trading 14,349 shares, ended 8 cents higher at $1.40, but closed with an offer to sell at $1.37 and Paramount Trading ended with 123,959 shares changing hands with an increase of 11 cents to $5.11.