Grace Kennedy is advising that the terms to dispose of their holdings in Hardware and Lumber (H&L) include a maximum price of J$18.50 per ordinary share subject to conditions and with completion anticipated by the end of July.
The above price is just around book value at the end of March this year and would give Grace Kennedy who owns 58.1 percent of the 80.842 million shares in issue, $845 million.
Don Wehby CEO of Grace indicated that the agreement is conditional and stated that “GraceKennedy is looking forward to the conclusion of the transaction in a timely manner and will communicate further as soon as it is finalized.” He reiterated that Grace Kennedy’s decision to sell its shares in H&L was a strategic one, having regard to its core strategy of expansion in the foods and financial services sectors. He added, “We feel very positive about the continued growth of H&L under the prospective new owners who have signalled that they are excited about the possibilities for the future”.
H&L currently comprises two separate divisions – Rapid True Value local supplier of hardware and home improvement products, and the Agro Grace business, local wholesaler and retailer of agricultural products.
There are currently 10 Rapid True Value outlets across Jamaica, along with six Agro Grace Retail Centres. The company is headquartered at 697 Spanish Town Road in Kingston.
Greystone Equity Partners Inc. the proposed purchaser is a Caribbean based and Caribbean focused private equity firm with a stated strong commitment to the Caribbean.
H&L reported profit in 2014 of $217 million or $2.69 per share. Profit after tax for the three-month ended March, 2015 was $34.5 million, 14.5 percent less than the $40.4 million for the same period last year and earnings of 43 cents per stock unit, compared to 50 cents for the comparative period in 2014 after revenues fell 4.5 percent to $1.73 billion.
$18.50 per share max price for H&L
Treasury bill rates fall
At the latest auction for the issue of Treasury bills held today, rates on the 28 days, the 91 days and 182 days bills declined from ay auction, continuing the decent starting March last year.
The latest rate on the 91 days instrument is now at 6.48 down from 6.57 percent at the May auction and the 182 days is now at 6.63 percent, a fall from 6.7 percent. The 28 days instrument ended with a rate of 6.23 percent down from 6.27 percent in May. The rates are far off from the BOJ CD rate of 5.25 percent.
A total of $1.2 billion was available for the public to bid on, split equally between the three issues. The 28 days offering attracted $475 million the 91 days attracted $602 million and the 182 days instrument attracted $828 million. With the interest rates on some of the Jamaican government’s bonds tied to Treasury bill rates, the latest development of lower rates will mean lower cost for the variable rate bonds.
With inflation looking as if it could end 2015 around 3.5 percent Bank of Jamaica may have to intervene by lowering the CD rate to speed up the fall in Treasury bill rates.
Falling prices dominate with 15 down
Carreras dominated with $64.8M in value
TheJSE Market Index lost just 3.39 points to 96,596.51, the JSE All Jamaican Composite index fell 3.79 points to close at 108,907.87 and the JSE combined index gained 28.63 points to end at 99,293.77.
IC bid-offer Indicator| At the end of trading, in the main and junior markets, the Investor’s Choice bid-offer indicator shows 19 stocks with bids higher than
their last selling prices and 7 with offers that were lower, an indication that the number of stocks likely to gain on Wednesday should outnumber the ones declining.In trading, Cable & Wireless put on 2 cents with 431,297 units changing hands to close at 46 cents. Caribbean Cement rose 1 cent while trading 121,350 shares at $5, Carreras gained 28 cents in trading 1,341,078 to end at $48.35, with NCB Capital Market s being the main broker selling and Sagicor Investments the main broker buying. Grace Kennedy suffered a decline by 40 cents with 8,919 shares changing hands at $63.50, Hardware & Lumber traded 50,000 shares at $18, with just one trade. Jamaica Broilers slipped 30 cents with 23,654 shares trading to close at $5.20, followed by Kingston Wharves that fell 15 cents to $6.40 with only 725 units trading,
National Commercial Bank traded 528,170 units to close at $29.46 down from the last traded on Monday of $30, as the price slipped 54 cents. Sagicor Group fell 30 cents to $12.30 with 94,210 shares changing hands. The price of Sagicor Real Estate Fund rose 10 cents, with 42,375 shares changing hands, to end at $7.70. Scotia Investments fell 72 cents as 25,291 shares traded to close at $26.28 and Proven Investments traded 595,502 shares at 21 US cents, down from 21.05 US cents on Monday, after 467,745 units were traded in the morning session, at 22 US cents.
NCB rating up
NCB gained $1.01 to close at a new 41/2 years’ high of $31.01
S&P raised its long-term issuer credit rating on NCBJ to ‘B’ from ‘B-‘. It also affirmed its short-term ‘B’ issuer credit rating on the bank. “The upgrade follows the same rating action on Jamaica’s sovereign debt, reflecting the country meeting its fiscal targets in the past two years, which has led to improved fiscal credibility and stabilized its debt trajectory. NCBJ’s ‘b+’ SACP remains unchanged,” stated S&P in a notice on June 4.
S&P views NCBJ’s business position as “strong” with a moderate risk position, funding as “average,” and liquidity as “adequate.”
“Given NCBJ’s exposure to sovereign debt, its ratings remain constrained by those on the sovereign. This is reflected in the bank’s ‘b+’ SACP and ‘B/B’ ratings. We will also monitor the bank’s performance and the potential improvements in its credit fundamentals as a result of relatively better economic prospects in the country. Also, in our view, NCBJ is still a highly systemic important financial institution in Jamaica,” added S&P.
Access almost private again
Proven upped its stake in Access in May, leaving few shares in the public’s hands.
On May 18, Proven acquired an additional 1,249,608 shares in Access Investments, thereby increasing its interest to 49.72 percent. In December last year, Proven bought 135,339,271 units in the financial micro lender when it picked up most of the shares held by Mayberry at the time, at a price of $9. in the latest audited report for Proven, Access is listed as a subsidiary of Proven. Normally, owning less than 50 percent plus one share in a company would result in a company being a subsidiary and less down to 20 percent, would qualify as an associate.
The stock has been trading recently at $17 each, with Access having reported improved results for the March quarter increasing by 72 percent to $157.6 million, up from $79 million in 2014. Marcus James in March this year transferred his 112,421,260 units to a company representing 41.6 percent of the issued shares leaving just under 9 percent in the public’s hands.
Digicel capex US$650m for 2015
Digicel Group should spend US$650 million on capital expenditure this financial year ending June 2015, based on its build out of cell towers in Myanmar, according to Fitch rating agency.
As a consequence of the heavy capital expenditure, the rating agency expects negative free cash flow for the Digicel group into 2016. Its capital expenditure is forecast to increase 17 percent more than a year ago then attenuate in 2016.
“[Its] as a result of network expansion and upgrades, including cable networks as well as a tower project in Myanmar. Capex is likely to decline to US$500 million in FY2016 and towards US$400 million in FY2017 as expansionary projects are largely completed,” stated US based Fitch rating on Digicel’s performance.
The telecom’s earnings remain stable despite weak growth in Jamaica but financial projections were not disclosed for the privately held company. Digicel generated “stable operating results” in the first nine months of fiscal 2015 (FY2015), ending on March 31, 2015, and Fitch expects this trend to continue over the medium term.
“During the period, the company’s constant-currency-based revenue posted stable growth of 5 percent with a solid EBITDA margin of 41.4 percent, which was a modest decline from 42.8 percent a year ago. (Fitch’s EBITDA calculation includes staff costs related to share options.),” stated Fitch. “This was mainly driven by increasing data revenue supporting average revenue per user, and steady growth in Papua New Guinea (PNG), Trinidad & Tobago, and the Other Markets segment….PNG continues to grow strongly, offsetting weak growth in other major countries of operation, such as Jamaica and Haiti.”
Its total subscriber base hovers at 13.8 million as of December 2014 from 13.4 million a year ago.
“FY2014 dividend payment was high at US$690 million, mainly due to the special dividend payment of US$650 million,” stated Fitch. “In the absence of sizable dividends, Fitch expects free cashflow to turn positive from FY2017.”
NCB Raises US$250m
NCB Financial Montego Bay branch
National Commercial Bank (NCB) has advised that they have successfully completed the securitization transaction.
The transaction closed on May 18, 2015 and generated financing of US$250,000,000 via issuance of notes backed by future flows derived from international merchant voucher receivables acquired by NCBJ in Jamaica.
The notes were issued by Jamaica Merchant Voucher Receivables Limited, a special purpose vehicle incorporated under the laws of the Cayman Islands, in private placement within the United States to qualified institutional buyers. The notes were assessed by Fitch, Inc. and achieved a BB+ rating, the release stated.
The notes have not been registered under the Securities Act of Jamaica and may not be offered or sold in Jamaica without registration or an applicable exemption under the said Securities Act and regulations
More choices for investors
Barita
There were times, not so long ago, when things in the local financial markets were much simpler than they are now. Well up to just a few years ago there were only three unit trust companies operating and about 6 or 7 schemes. At the end of 2014 there were 22 different unit trust offerings and currently there are 27.
NCB Capital Markets added two new ones this year and Barita has just launched two new ones. By the end of 2015 the field is likely to get even more crowded with a number of institutions already indicating that they will be launching new schemes, included are JMMB Securities and Stocks and Securities. Part of the reason for the mush rooming of these schemes is occasioned by the dictates of the IMF and the World Bank who considered the risk financial institutions were taking by issuing repos using government securities as the flip side of the trades as too high and could pose major problems to the financial system. The result is a change in the rules that now require smaller amounts of funds to be routed through managed schemes, where the liability is left with the investors rather than the financial institutions, as is now the case. The market has also changed, with investors looking for a greater number of opportunities to invest in.
Barita Unit Trust is the latest entity to launch new schemes, bringing their suite of schemes to 6 in April. The latest are; the Barita US$ FX Growth Portfolio which invests mainly in international equity, and the Barita JA$ Real Estate Portfolio which invests primarily in commercial and residential buildings for lease or sale.
The US$ FX Growth Portfolio is a US Dollar denominated equity portfolio with investments in foreign currency ordinary and preference shares of countries within the Commonwealth, Caricom and the United States and may extend to other sovereign governments as prescribed by the Financial Services Commission and the Bank of Jamaica. A minimum purchase of 100 units is required to open an account, the current price per unit is US$1.
Barita Property Fund invested in 138 Student Living shares
The real estate portfolio is JA$ denominated with investments in commercial or residential buildings for lease or sale and may also become financiers of real property developments and or participate in construction or financing of such structures.
Real Estate Portfolio investments must be held for a minimum of three years with a moratorium of 6 months’ notice required for encashment of the investment. At the launch, the managers stated that the fund has started off with an investment in 138 Student Living shares that are listed on the Jamaica Stock Exchange (JSE). A minimum purchase of 100 units is required to open an account and the current price is $5,000 per unit.
How the new funds will perform is left to time. What is known is the Cameron Burnett who is associated with the US dollar equity fund, has been investing in the overseas’ market for several years successfully, the fund should benefit from his experience. Hopefully, they will be able to navigate what is set to be a choppy period ahead for the US stock market, with interest rates set to go up.
Locally, real estate values should grow at an increasing pace as the government keeps the target of a balance fiscal operation firmly in sight and be committed to achieving it, which will lead to lower interest rates and higher asset values.
Barita Unit Trust is a subsidiary of Barita Investments a JSE listed stock.
JPS costly power losses
Kelly Tomblin – CEO JPS
The cost to the wider society the loss in business opportunities and jobs lost due to higher operating cost, that makes some entities not as competitive as they ought, have not yet been quantified, but is likely to be far greater than the $27 million mentioned above. According to data from JPS, system losses increased by just over 1 percent last year, ending the year at 26.65 percent. That is huge, and is well over the 10 percent experts say it should be. JPS in a recent report to its shareholders said “Electricity theft resulted in a net penalty of US$18.4 million to JPS on the cost of fuel used in electricity generation.”
Faced with the massive theft of electricity, the company began curtailing the hours of service to certain communities where according to the company more than 70 percent of the electricity provided was being stolen. The move irritated the Office of Utilities Regulation and some politicians forcing the company to back off. Unfortunately, the issue of theft has been a longstanding problem which the government who have responsibility for keeping order in the society have failed to address, forgetting that it has wider implications for economic growth and development.
Celebrities for Blood Drive
Kaci Fennell
The Lucozade Blood Drive now celebrating its eleventh annual renewal, is an opportune event for Jamaicans to start to save their blood and give lives to others. The 2015 edition of the Lucozade blood drive takes place on Tuesday, April 28, and Wednesday April 29, 2015, between 8 am and 4 pm daily, on the grounds of the Girl Guides’ Headquarters, Waterloo Road.
Through its on-going corporate partnership with the National Blood Transfusion Service, Lucozade has played a pivotal role in encouraging Jamaicans nationwide to become voluntary donors to this vital cause.
Since inception, the drive has been supported by a growing number of persons including high school students, professionals, business persons, celebrities and entertainers as well as the media.
Laurie Ann Chin, Miss Universe Jamaica 2013