Prices increased for October rose by a mere 0.1 percent over September this year, and is in line with the increase in February and June but above a negative 0.3 percent in April. The rate for the rest of the year could be negative based on developments locally and overseas.
The inflation rate, the Statistical Institute of Jamaica (Statin) reveals was mainly due to a 0.2 percent increase in the index for the category of Food and Non-Alcoholic Beverages and 0.3 per cent increase in Housing, Water, Electricity, Gas and Other Fuels. This increase in the index for the latter division was mainly as a result of higher water and sewerage charges in October 2014 Statin stated. A 0.8 percent fall of prices in transportation, moderated the effect of the increases, in the other areas. Statin said that the ‘Transport’ division’s index fell as a result of the decline in the cost of airfares, as well as the price of fuel.
NCB books $1B loan loss in Q4
National Commercial Bank pushed provision for loan losses to $988 million in the September quarter, well up from $357 million in the June quarter and $283 million for September 2013, to reach $2.2 billion for the year, compared to $2.07 billion.
Despite the losses in this area NCB reported profit after tax of $2.9 billion, for the September quarter and $11.6 billion for the fiscal year.
Non-performing loans totalled $8.7 billion as at September 2014 versus $7 billion at September, 2013, representing 5.4 percent of the gross loans compared to 4.8 percent as at September 2013. The total provision for the year amounts to a high 8 percent of total interest income, for the segments that lend and would be much higher as a percentage of loan income.
After the provision for credit losses, loans and advances, totaled $157.6 billion at September this year and grew by 12 percent, or $16.5 billion, compared to the loan portfolio, at September 2013.
C&WJ strong mobile growth continues
Jamaica, mobile subscribers grew by 125,000 during the April to September period, according to CWC Communications, the parent company for Cable & Wireless Jamaica.
At the end of March, Cable & Wireless Jamaica (CWJ) stated that they had 705,000 mobile customers. The increase since March, puts active mobile customers at roughly 830,000, by the end of September. At the end of June this year, Mobile subscriber base increased by 37 percent with revenue increasing by 34 percent, broadband base increased by 12 percent with revenue up 39 percent. The continued strong growth in mobile customers is resulting in increased revenues for the local company, moving them closer to a break-even point.
CWC Communications in their release of their September quarter’s report that “in our LIME Caribbean businesses, mobile revenue grew 6 percent on a reported basis and 8 percent at constant currency, with Jamaica up 24 percent and continuing to gain market share (5 ppts) as we invest to deliver improved services for our growing customer base. In Jamaica mobile traffic increased by 34 percent and mobile service revenue is up 38 percent at constant currency.”
The stock which traded as low as 25 cents on Wednesday traded 7,481,913 units between 28 cents and 32 cents by Mid day. The change in demand is most likely tied to the news that CWC acquired the Flow operations, which will be seen to have positive implications for CWJ going forward.
CWJ has been BUY RATED by IC Insider from early this year on strong mobile growth and reduced cost.
Cable & Wireless Plc acquires Flow
Cable & Wireless Communications Plc (“CWC”) today announces that it has agreed terms to purchase 100 percent of the equity of Columbus International, a privately-owned fibre based telecommunications and technology services provider operating in the Caribbean, Central America and the Andean region, for USD1.85 billion.
“The move will significantly enhance CWC’s growth profile and accelerate the progress towards each of its strategic goals unveiled in May. CWC also announced the placing of new shares constituting approximately 9.99 percent of CWC’s outstanding share capital which will be used to finance in part the proposed acquisition. The Enlarged Group is expected to generate significant operating cost and capital expenditure synergies, with additional revenue benefits also available. The transaction will be earnings neutral in the first full year post-completion and materially earnings enhancing in subsequent years” CWC directors stated in their release.
Columbus is a privately-owned diversified telecommunications and technology services company, based in Barbados, with approximately 700,000 residential customers in the Caribbean, Central America and the Andean region. In the Caribbean, it is one of the leading providers of triple-play cable TV and broadband enabled services over its proprietary fibre optic network infrastructure. Through its wholly owned subsidiary, Columbus Networks, Columbus provides backhaul connectivity to 42 countries in the region, as well as capacity and IT services, corporate data solutions and data centre services throughout the Caribbean, Central America and the Andean region. Columbus also provides next generation connectivity and IT solutions, managed networking and cloud-based services under the brand Columbus Business Solutions.
For the year ended 31 December 2013, Columbus had revenue of USD505m with EBITDA of USD216m and total operating profit of USD104m. For the six months ended June 2014, Columbus had revenue of USD284m with EBITDA of USD118m and total operating profit of USD48 million.
BNS provides C$109m for Carib hotels’ debt
Bank of Nova Scotia decision to shed 1,500 workers globally and close a number of branches, within the Caribbean and Mexico, has led to other developments within the group, in an attempt to recognize areas of potential losses in the worldwide operations.
This had led the bank to record additional loan loss provisions of approximately C$109 million. The amount for “ losses relates, primarily to three existing net impaired loans, within the Caribbean region’s hospitality portfolio. Due to the prolonged economic recovery and continued uncertain outlook. These additional amounts, bring the net carrying value, in line with the expected net recoverable value,” the bankers said in their press release, on Tuesday. There is also an additional amount in the Canadian Banking related to a change in methodology in estimating loss parameters, on the unsecured lending portfolios.
Reports are that the bank plans to shutter 35 branches within the Caribbean region.
Eppley seeking up $350m
Dividends will be paid monthly at the rate of 10% per annum for the first two years, 11% per annum for years 3 to 4 and 11.5% per annum for the final year. This issue will be the second preference share to be offered to the market, since last year by the company.
The Invitation will open at 9 am on the Opening Date, Tuesday 11 November 2014 and will close at 4 pm on the Closing Date, Tuesday 18 November 2014 subject to the right of the Company to: (a) close the Invitation at any time after it opens once applications for all Preference Shares in the Invitation are received; and (b) extend the Closing Date for any reason, provided that it does not extend beyond the expiration of 40 days after the publication of this Prospectus
The Company reserves the right to redeem the Preference Shares (in full or part) on any dividend payment date that is not less than three years from the issue date at the higher of: (a) the Invitation Price plus 1 percent; or (b) the average of the last 10 days’ closing market prices on the JSE, prior to the notification date, plus any accrued and unpaid dividends subject to 30 days notice.
Eppley’s directors stated in the prospectus that “since the company’s initial public offering, of ordinary shares in July 2013, the company invested over $600,000,000 in the expansion of its credit business. The Company has deployed most of the capital it raised in its 2018 Preference Share issue in November 2013.”
Eppley provides credit to clients, allowing policyholders to finance insurance premium payments for property and motor vehicles. It also provide lease and commercial loan financing to medium and large businesses.
The ordinary shares are held mainly by Musson Investments – 37.68 percent, General Accident – 9.17 percent, ATL Pension – 25.65 percent and Stony Hill Capital – 15.28 percent.
Jamaica money Market Brokers are the brokers to the issue.
For the six months to June profit of $30 million was achieved from revenues of $74 million. At the end of June the company’s equity is $336 million with debt capital of $428 million. The proposed offer will raise debt to at least $678 million putting the leveraging at a high level. It seems as if the company needs a dose of ordinary equity as well as debt funding.
NCB wage award adds J$430M to cost
National Commercial Bank (NCBJ)has provided an update to the two Stock Exchange that its shares are listed on.
The bank has now stated that the total gross provision required to meet the total sum needed to satisfy the award, for the two year negotiating period, ending September 30th, 2014 is, approximately J$1.7 billion. The total amount to cover the award exceeds by approximately J$430 million, the amount that NCBJ had been providing for increased salaries and benefits, for the negotiating period. The amount is lower than the net sum of approximately $500 million IC insider suggested, would be the charge net of taxation. This shortfall, NCBJ says will be reflected in their income statement, for the year ended September 30th, 2014.
Drop in export pushes up Jamaica’s trade deficit
Jamaica’s trade deficit during the first seven months of 2014, deteriorated compared to the same period last year. The worsening position occurred as a result of a sharp fall in non-traditional exports, rather than increased imports.
The deficit ended at US$2.613 billion, compared to US$2.573 billion in the comparable period for 2013. The deterioration flowed from merchandise imports during the 7 months, valued at US$3.47 billion, decreasing by 2.4 percent or US$86 million, compared to the $3.55 billion recorded in the similar 2013 period. On the other hand, exports for the 2014 period, amounted to US$852 million, a decline of 12.9 percent or US$127 million below the US$979 million earned in the similar 2013 period.
Imports| According to the Statistical Institute of Jamaica (Statin), the decline in imports was largely influenced by lower spending on importation of Mineral Fuels, Chemicals, Beverages & Tobacco.
Exports fall| During the first seven months to July, traditional exports earned US$453 million, falling by 5.3 percent or US$25.6 million below the exports earnings during the 2013 period. Non-traditional export earnings from January to July 2014, fell by US$91 million or 20.2 percent, to US$360 million.
NCB to face $500m wages hit in 2014
National Commercial Bank (NCBJ) advised that the Industrial Disputes Tribunal made an award in respect of salaries and benefits for most of the clerical employees of NCBJ and its subsidiaries (NCB Group).
The award included an increase in salaries of 8 percent per annum for each of the financial years ending September 2013 and 2014. The increases for those years will now have to be paid retroactively. NCB Group said they make provision for salaries to be increased once the award was received, but the increases awarded exceed the amounts provided. The extent to which the retroactive payments for those two financial years exceed the provisions that had been made will be taken into account in the income statement for the financial year ended September 30, 2014. Union leaders for the staff association claimed that the bank offered five percent for 2013 and four percent for the current year. Such an offer would mean that the group would need to book an additional 7 percent to the wage bill. The groups wage bill was approximately $11 billion for the 2013 fiscal year to September and would place the additional charge, somewhere in the $800 million region. The net effect would be closer to $500 million or around 20 cents per share after tax. The bank’s wage bill for the 2013 financial year was $9.5 billion.
IC Insider originally projected earnings of $4.80 per share for the 2014 fiscal year. The adjustment to be reflected in the 2014 accounts will most likely results in a lower out turn.
Price increase to push Witco 2015 profit
Trinidad’s West Indian Tobacco (Witco) raised prices on cigarettes approximately 15 percent, effective October. The increase should push revenues to over $1.3 billion dollars in 2015, from TT$1.185 billion in 2013.
An increase of that level on top of one in 2013 will most likely reduce the volume of sales on the Trinidad market, where the increase was effected. The price adjustment should help boost next year’s profit and by our calculation that should hit $700 million after tax or around $6.80 per share. That would put the PE ratio of the stocks at just over 17 times next year’s earnings and should help move the stock back into the $20 region which should be helped with an expected increase in dividends in the region of the EPS.
Witco’s profit jumped 23.5 percent in the June quarter, this year to hit $127 million as revenues climbed by a smaller 15 percent, to $324 million. For the six months to June, profit is up to $224 million from $188 million, a 19 percent spurt, from revenues of $590 million versus $556 million in 2013. Earnings per share came in at $1.50 for the quarter and $2.65 for the half year. Earnings for the full year to December should reach $5.70 per share.

