New movie house for Portmore in 2019

Palace Multiplex in Montego Bay.

Palace Amusement is expanding with the re-entry into the rapidly growing Portmore community in 2019. The newest cinema house when complete, will bringing the number of movie houses to four.
The company in its 2018 annual report stated, “we are excited about the offerings of the four screens location to come” in Portmore. In 2004 fiscal year, the Portmore cinema brought in just over $15 million in revenue, with segment profit of $1.2 million. In 2004 the population was around 160,000 persons and with some estimates indicating it could be over the 300,000 region now, as a result, the new cinema could generate revenues of more than $100 million per year, with attendant profit to be added to the existing business. With Portmore so close to Kingston it could result in a switch in some of the existing business to the new one.
The company also stated, “It is our hope, in short order, to introduce laser technology in our cinema projection–which will offer a superior light quality for films. Additionally, we will introduce disposable 3D glasses in some of our locations–in response to customer preference and requests.”
Palace reported it best year ever with the fiscal year to June 2018 annual report states profit after tax of $152 million up from just $33 million for the full year in 2017 and earnings per share of $96.58. Revenues climbed  by 17 percent to $1.67 billion that flowed from a 25 percent rise in patronage income at Carib, 27 percent increase at Cineplex and just 11.5 percent in Montego Bay, Multiplex.
Palace share last traded at $1,500 but is on offer at $1,200 without any takers.

Republic Bank lands closer to Jamaica

Republic Bank traded at a 52 weeks’ high.

There has been rumors that Trinidad and Tobago’s Republic Financial is eyeing Jamaica to set up some form of operation. The name was initially mooted earlier this year, when the financial market was abuzz with an ownership change.
Boxed in by the tight economy in its own base of Trinidad and Tobago, Republic is on the prowl and Jamaica with the brightest economic prospects since the 1960s, cannot be off their radar. Keep a watch on this space.
In 2015, they bought the majority shares in HFC Bank in Ghana, they announced last week that as of the end of business on Friday, 12 October 2018, they received acceptances for a total of 22,934,246 ordinary shares of Cayman National, representing 54.15 percent of the ordinary shares, making them a subsidiary of the republic group.
In September, Republic made an offer to acquire a minimum of 51 percent and up to 74.99 percent of the ordinary shares of Cayman National to their shareholders at US$6.25 per share. The consummation of the acquisition remains subject to certain other conditions including, without limitation, receipt of necessary government and regulatory approvals. Republic stated that it is committed to purchase up to 74.99 percent of the ordinary shares of Cayman National. The Offer was scheduled to expire on Monday October 22 but is extended to Monday November 12, 2018, pursuant to the rules of the Cayman Islands Stock Exchange, and to accommodate an Extraordinary General Meeting of the shareholders of Cayman National to be held on Wednesday, 7 November 2018 to amend the articles of the bank.
The Republic Financial has off shore operations in Cayman Islands since 1992. Republic Bank (Cayman) is a private bank offering a comprehensive wealth management service to its clients.
Republic reported profit of $343 million for the June Quarter up from $328 million in 2017 and for the nine months to June $993 million versus $959 million in 2017. Shareholders’ equity stood at $9 billion and total assets of $70 billion with loans advanced to customers of $36 billion. As of June this year, Cayman National Bank had CI$1.56 billion with shareholders equity of $114 million. Profit was $16.4 million up strongly from $11.7 million in 2017. Republic purchased the shares at a PE around 10 times 2017 earnings and that should translate to a higher stock price for republic that sells around a PE of 13 currently. Republic will be able to cut operating cost at the new subsidiary as they can share in certain services that are common to both entities.

Big boost for Access from new Acquisition

In its quest for continued growth by acquisition Junior Market listed Access Financial Services announces yet another prospective acquisition.
The micro lender has indicated that it has reached an agreement to acquire a Florida based consumer finance company. The release by the company states that the successful completion of the acquisition expected to be completed in 90 days, is subject to satisfaction of all conditions of the purchase agreement and applicable legal and regulatory approvals.
Usually reliable source indicates that this acquisition when concluded will swell Access assets by US$8 or J$1 billion and will increase Access size by 25 percent. Estimated revenues should be approximately US$4 million per annum at the present level of business. The business is based on lending, for up three months with loans usually under US$1,000. The loans are collateralized by motor vehicles titles. The entire loan process is done on line thus requiring limited staffing. According to a report online, “today in Florida, we have car title loan clients achieving 90 percent to 140 percent per annum on their loan portfolios.”

Access Financial

This acquisition when completed will bring to 5, the number of entities Access acquired since 2015. In 2017, the loan portfolio, fixed assets and trade name of Micro Credit Limited. In 2016, Access purchased the business of Damark Limited comprising mainly the loan portfolio, fixed assets, trademark for $180 million. In 2015, Access acquired the loan portfolios of Asset Management Company, formerly operated by Scotia Investments.
Access recorded net profit after tax of $217 million from revenues of $457 million for the quarter ended June this year up 16 percent over net profit of $188 million for the corresponding period in 2017. Total assets at June, amounted to $3.86 billion.
The company’s stock is listed on the Junior Market of the Jamaica Stock Exchange and last traded at $45.50.

Early Xmas gift for Seprod stakeholders

Add your HTML code here...

Seprod shares being sold at $24 each.

Shareholders of Seprod and management and directors are in for an early Christmas present as Facey Group on Behalf of the International Finance Corporation offers 91,914,894 shares for sale at a price well below the level the stock has been trading at in recent times.
The offer is being made to the public but 55 million shares are reserved for staff, managers, executives, directors and former directors and shareholders of Seprod including Facey Consumer staff.

The offer is at a discounted price of $23.99. Last week the stock traded as high as $62 as limited selling of the stock in the market led investors to bid the price up to acquire some that were on sale, but pulled back to $49.50 on Friday and traded at $39 on Tuesday as investors reacted to the offer.
Up to 30 million shares are reserved for staff, managers, executives, directors and former directors of the Company and its subsidiaries. 15 million shares are reserved Shares for shareholders of the company (with JCSD accounts) as at August 31 and 10 million shares are reserved for the Lead Broker.
According to a spoke person for the Facey Group, the shares are a part of the shares that were acquired when the Company has reached an agreement with Seprod to acquire the consumer business consisting of distribution of consumer and pharmaceutical products in Jamaica earlier in the year. As part of that arrangement, Facey Group holding in Seprod was restricted to less than 50 percent and the shares being offered for sale was held as nominee on

Some of Seprod,s product

behalf of International Finance Corporation who had invested in the group as a part of an agreement for them to continue to recover their investment when an IPO was effected. The shares were priced at the time they were initially issued when they were trading at $28, IC Insider.com was advised.
For the six months ended June 2018, Seprod generated revenues of $10.44 billion, an increase of $2.07 billion or 25 percent over the corresponding period in 2017. Net profit increased 29 percent for the period to $598 million in the 2017 period. The 2018 results are bolstered by the transfer of the former Jamaican dairy operations of Nestle within the Group effective January, this year.
The directors’ report stated that, “had these operations been included in the Group’s results in 2017, the increase in revenues for the six months ended 30 June 2018 would have been $1.20 billion or 13 percent and the increase in net profit would have been $77 million or 15 percent.”
For the June quarter, revenues rose 33 percent to $5.48 billion with gross profit rising sharply to 36 percent from 24 percent in 2017, with gross profit hitting $1.96 billion and profit after tax coming in at $325 million attributable to Seprod’s shareholders, 37 percent ahead of the 2017 out turn.
Based on the expansion of Seprod foot print and new ventures recently entered into, the future of the group seems solid and this could be bettered if they can put the ongoing losses of sugar behind them.

Gwest’s share issue response inadequate

The response by GWest the issue of preference shares is inadequate and they still have a number of questions to answer about the issue and the lack of disclosure in the prospectus and the audited financial statements.
The openness of directors with their investors is critical in cementing trust between them. A prospectus is a contractual invitation to the public to purchase shares in the offering company. It requires that full disclosure of all material information is made, so that prospective investors can make rational decisions pertaining to the shares being offered for sale. Any rational person reading GWest prospectus would come to the conclusion that the only matter agreed on at the extra-ordinary meeting of November 27 was that which was disclosed in section Page 45 of the prospectus which list details of the “Recent Capital Restructuring of the company to be as follows”:
“At an extraordinary general meeting the shareholders of the Company approved the following actions in respect of the capital structure of the Company: The re-registration of the Company as a public company in accordance with the Companies Act, adopting new Articles of Incorporation for that purpose:”
a)”The increase of the authorized share capital. (b)The subdivision of each Share”
“The disapplication of any pre-emption rights, howsoever arising, for the purposes of the issue of new Shares for subscription. The conversion of all fully paid Shares to stock on issue.”
There is no mention of the issue of any other type of share. Any decision to issue other shares should have been disclosed in this section if a meeting took place before the date of the prospectus.

Dr. Konrad Kirlew, chairman of GWest.

The fact that it was not, is the clearest sign that there was inadequate disclosure of important and material information and that the issue of preference shares after, should not stand before approved by a meeting of the new owners.
The vast majority of Junior Market companies have limited administrative staff, as such all the skill set to properly run them are not in their employ. The end results is that mistakes are made and will continue to be made. Recognizing, that most of them don’t have the knowhow of running a public company, the JSE created the creature called a Mentor, but not even that seems to be adequate to fill the breach.
According to the company in a release to the JSE, “Sections 18 and 19 in the November 2017 GWEST Prospectus specifically disclosed that shareholders loans were to be converted to preference shares, thereby reducing the servicing cost to the Company: Shares in the capital of the Company are under the control of the Directors, as expressly provided for in the Articles of Incorporation.”
That is nonsense. The prospectus only has 16 sections, with the last (section 16) being signed by the directors.
Section 11 contains projections along with supporting notes that were reviewed by Ernst and Young who signed their report on November 28.
The extraordinary meeting at which the change in share capital was approved was said to be held on the November 27. According to the resolution, the directors were given authority to issue, to allot such Cumulative Non-redeemable Preference Shares at such subscription price per Preference Share as the Directors of the Company or such Committee may deem fit, the same to be allotted to shareholders of the Company who have invested in the capital of Company (in cash or in kind) with the understanding/pursuant to agreement(s) that such investment(s) will be recognized as shareholder loans or by the issue of preference shares, in each case on terms and conditions determined by the Directors of the Company, subject always to the Articles of Incorporation of the Company”.
Having given the directors the authority to determine the terms and conditions of the preference shares, GWest in releasing information of the above resolution has not presented the minutes of the meeting of the directors that agreed on the terms. The fact that the extraordinary meeting did not set out the terms of the issue of the shares is even more reason why it should have been fully disclosed in the prospectus.
The company refers to 18 and 19 but it appears they mean notes 18 and 19 of section 11 that deals with the projections. What does the section say about the preference shares?
Note 18. “Borrowings| This relates to the NCB Term Loan and shareholders’ loans converted to preference shares.”
NCB Term Loan| The terms of this loan for $350 million, include a repayment period of eight years payable in equal quarterly installments and an interest rate of 11.5% per annum.”
“Preference Shares| 50% of shareholders’ loan will be converted to non-redeemable preference shares with interest at 10% per annum. The remaining 50% will remain as shareholder’s loan with no fixed repayment with interest at 10% per annum for the J$ amounts and 4% per annum for the US$ amounts.”
Note 19. “Shareholders’ Loan| This amount relates to funds advanced by the shareholders. It is assumed that outstanding balances will continue to attract interest at the prevailing rates of 15% and 4%, respectively for J$ and US$ funds. However, once the IPO is completed and the Company becomes publicly-listed, it is assumed that the interest rates will be reduced to 6% and 2% for J$ and US$ denominated loans, respectively on the remaining balance not converted to preference shares. With respect to the J$ denominated balance, the interest rate is assumed to increase annually by 1%, with a cap at 10% by 2022. The Directors are of the view that these rates are more in line with arm’s length rates prevailing within the market.”
Nowhere in the prospectus is there any reference to a meeting called to approve the issue of any shares other than ordinary shares and the terms of those shares. Under no stretch of the imagination could assumptions included in a financial projections be regarded as disclosure of an agreement to issue shares or that a resolution was already passed to do so. Earlier in the prospectus it is made clear that futuristic statements are just that, as they may not be achieved. That the company withheld pertinent and material information from the new investors even when they had a number of occasions to do so, is glaring and concerning. That the Jamaica Stock Exchange sees nothing wrong with what has transpired is plain shocking, even more shocking is that they did not ensure that proper and full disclosure of the information was included in the relevant part of the prospectus.
The directors cannot over ride, the company’s act that requires that all changes in share capital of a company be approved by shareholders at a general meeting. From all indications this was not agreed to before the prospectus was published, in which case it appears that the new shareholders would have to approve it at a general meeting.
To compound the problem, the preference shares were issued to connected parties to the company. That alone should have alerted all concerned that all decisions should be properly executed.
Of note,  the Audited accounts to March 2018, made no mention of the issue of additional shares that were issued or to be issued. It is the norm in auditing, that minutes of meetings are made available to the auditors and the directors have a responsibility to ensure that the financial statements are accurate. The directors need to state if the audited accounts correctly disclose all relevant information pertaining to the share capital. They need to state why they all signed the Prospectus with no mention being made of the resolution to modify the share capital indicating full details of the resolution.
What date did the directors meet to determine the terms of the preference shares and why were those terms not disclosed in the prospectus for all to see?
The Jamaica Stock Exchange requires that they should be advised in advance of any meeting of directors called to alter the share capital of a company and after the meeting the outcome of the meeting is to be communicated to them as well. There are no indications that the directors complied with this section of the Stock Exchange rules.
The handling of this matter is not the way to properly operate in the capital market.

Gwest statement on Preference Share issue

The Board of Directors and Management of Gwest Corporation Ltd are deeply concerned about the articles published on the IC lnsider.com website dated September 6, 2018 and September 21, 2018, authored by John Jackson.
The first article dated September 6, 2018 speaks to Gwest Corporation’s first quarter report showing the issue of 250 million preference shares, and with quite remarkable language the writer concludes that the preferences shares in the capital of the Company have been allotted without authority.
We wish to confirm that at the Extraordinary General Meeting of the Company held on November 27, 2017, the following resolution was duly passed:
“As a special resolution that the Company be authorized to issue and/or allot Cumulative Non¬ redeemable Preference Shares with rights/restrictions as to Voting, Dividends and Winding up and/or otherwise as may be determined by the Directors of the Company or a Committee of the Directors appointed for such purpose, subject always to the Articles of Incorporation of the Company, and that the Directors of the Company or such Committee be and are hereby authorised to determine all such rights and restrictions and the Directors be and are hereby authorized to allot such Cumulative Non-redeemable Preference Shares at such subscription price per Preference Share as the Directors of the Company or such Committee may deem fit, the same to be allotted to shareholders of the Company who have invested in the capital of Company (in cash or in kind) with the understanding/pursuant to agreement(s) that such investment(s) will be recognized as shareholder loans or by the issue of preference shares, in each case on terms and conditions determined by the Directors of the Company, subject always to the Articles of Incorporation of the Company”.
The above resolution was passed specifically to facilitate non-redeemable preference shares being allotted to persons who had invested in the Company by way of shareholders loan made available to the Company.
Sections 18 and 19 in the November 2017 GWEST Prospectus specifically disclosed that shareholders loans were to be converted to preference shares, thereby reducing the servicing cost to the Company:
Shares in the capital of the Company are under the control of the Directors, as expressly provided for in the Articles of Incorporation.
In all the circumstances the allegations by the writer of the articles under review are unfounded and without merit.
It is unfortunate that the writer of the articles did not undertake greater due diligence towards determining correct factual positions, before publishing false and misleading material that could be injurious to the Company, this at a time when the Company has embarked on programs to stabilize its operations and to achieve its objectives in the short term.

Split & rights issues for Sterling

Sterling Investments coming with split and rights issue.

Sterling Investments is considering a 5 for 1 stock split and a rights issue of ordinary shares to existing shareholders.
The company will hold an Extraordinary General Meeting at the Knutsford Court Hotel, on October 8, to consider the an increase in the authorized share capital by the addition of 1,850,000,000 ordinary shares and to approve the issue up to 2,000,000,000 ordinary shares currently un-issued, by way of a Rights Issue, on terms to be decided by the directors, including the number and price of the shares.
November 14 is the expected date for the commencement of the rights issue, Yanique Leiba-Ebanks advised IC Insider.com.
“Proceeds of the rights will be used to fund private equity and investment in some local stocks. We have been participating in IPO share issues that have done well for the fund,” Leiba-Ebanks said. So it will be more of that, going forward along with the focus on leveraged fixed income investments.

Yanique Leiba-Ebanks – AVP Pensions & Portfolio Investments
Sterling Asset Management

The issues were necessary as the company has just under 300 shareholders with limited interest in trading the stock by the general public. The company was encouraged recently to split the stock and issue more shares to broaden the shareholdings to provide a platform for more liquidity for the stock that trades infrequently.
Sterling’s fortunes will be boosted with net profit that grew by 20.5 percent in the 2018 half year, to $52 million and $27 million in the June quarter, from $25 million, in the similar period in 2017. Sterling has 59.15 million shares issued and enjoyed earnings of 87 cents for each share for the half year.
Others to expect splits from are, Barita Investments and they could well have a rights issue to fund acquisitions and other expansion and new products such a margin facilities. CAC2000 with the stock price rising into the mid-teens, Stationery & Office Supplies with the stock price expected to be priced in the teens sooner or later is expected to split by 2019. At the annual general meeting held earlier this year, shareholders were informed that the board had be looking at it but no decision was make. Access Financial directors and NCB Financial indicates that they don’t see any benefit to their company in doing a split but it only a matter of time that they will be forced to, the same applies to Palace Amusement. Some investors are of the view that with Derrimon Trading splitting  when the stock got in the teens that Caribbean Flavours is likely to follow. Investors should not ignore the possibility of Berger Paints and ISP Finance joining the queue in the near future.

Wisynco adds $2.5B in sugar & rum sales

Wisynco brand Wata to benefit from 3 new production that is now in operation.

Wisynco Group, is set to lose revenues and profit with the ban on single use plastic straws and Styrofoam but the contract to distribute sugar and rum manufactured by Worthy Park should add $2.5 billion to revenues.
The sugar and rum revenues will more than make up for the cut in revenues of approximately $1 billion per year and profits by an insignificant $70 million information released by the company to Jamaica Stock Exchange suggests.
Investors in the company’s stock could not get enough after it listed in December last year, driving it to a high of $13.81 for a then rich PE of more than 20. With the PE below 10 times the current year’s earnings and set to go to 20 by 2019, investors are dumping the stock at a PE of 8. But now they should be holding and buying more, as the stock has few that are likely to deliver better returns in the next twelve months.
According to the company, plastic straws represent less than 0.1 percent of the Company’s revenue and Styrofoam represents 4 percent of the company’s revenue and approximately 3 percent of the company’s net income. Investors seem to be concerned about the impact of the ban on the company’s operations and profit. With earnings of 62 cents for the 2018 fiscal year and 15 cents in the June quarter, investors may not be seeing a boost in profit to come to warrant holding the stock.

Wisynco Group

IC Insider.com spoke with the company’s CEO William Mahfood, advises of a number of positive developments that bode well for the future fortunes of the group. The company on Friday released information on a new distribution agreement with Worthy Park Estate (WPEL) for the distribution of WPEL’s spirits and sugar. Wisynco advised that the distribution of WPEL’s spirits will commence on November 1 and will include the ‘Rum-Bar’ and Worthy Park Estate brands of spirits. The distribution of WPEL’s sugar will commence on January 1, 2019, the start of the new sugar crop.

The new products could add around $750 million to gross profit. According to Mahfood the company has just added three new production lines to alleviate production capacity constraint and is expected to help increase sales around 20 percent. The expanded capacity will facilitate expanded production of Wata, carbonated products and juices. “New process has cut the production cost of plastics by more than 50 percent and this will result in significant cost savings,” Mahfood said. Importantly, Mahfood expects revenues from existing product lines to be up 20 percent for the fiscal year. Add to that, revenues from the new contract resulting in revenues probably increasing 30 percent in the period ahead.
IC Insider.com projects profit of approximately $4 billion or earnings per share of $1.10 and that should push the stock to $20 in 2019. IC Insider.com is placing the BUY RATED stamp on the stock.

Plastic ban to have minimal impact – Wisynco

Wisynco, traded the most shares on tuesday.

Wisynco Group will see little impact in the recently announced ban on plastic bags, plastic straws and Styrofoam, to take effect between 2019 and 2020 a release by the company stated.
“The areas of impact for Wisynco include plastic straws and Styrofoam, which the Company manufactures. Regarding plastic straws, it is proposed that this ban take effect on January 2019. Plastic straws represent less than one tenth of 1 percent of the Company’s revenue and the ban will therefore have no impact.”
“Regarding the ban on Styrofoam for local manufacturers, though there is still some uncertainty, it is currently proposed that this ban take effect on January 2020. Styrofoam represents 4 percent of the company’s revenue and approximately 3 percent of the company’s net income.”
For the fiscal year ended June 2018, Wisynco recorded profits attributable to shareholders of $2.3 billion or 62 cents per share on a normalized basis for the year from a 14.8 percent rise in revenues to $24.54 billion compared to a profit of $1.97 billion or 55 cents per share on a normalized basis for the corresponding prior in 2017.
Revenues for the June quarter grew 15.2 percent to $6.49 billion over the $5.63 billion generated in the 2017 corresponding quarter.
The group benefited from improved profit margins in the quarter and for the full year while general expenses rose at a much slower pace than the increase in revenues. In the quarter Selling, Distribution & Administrative Expenses for the quarter totaled $1.86 billion or 3.4 percent more than the $1.79 billion for the corresponding quarter of the prior year and for the 12 months it rose 8.5 percent to $6.37 billion.
Wisynco Group stock that has been under selling pressure from the start of May, when it was trading at $10.72, gained 20 cents to close at $9 with 320,465 shares changing hands on Thursday, on the Jamaica Stock Exchange. The stock is selling at less than 10 times 2019 earnings and remains one of the better buys in the market.

85% of Scotia’s transactions now online

Scotia Group branches now being used less with more use of electronic banking by customers.

Scotia Group is reporting major breakthrough in customers switching much of their banking operations outside the banking halls.
According to the banking group in their report to shareholders, “We continue to simplify our operating model to focus on growing our core businesses, enhancing our digital capabilities, and reducing our structural costs.”
Scotia stated that “Our digital strategy continues to deliver new milestones as evidenced by a 24 percent increase in the number of mobile banking customers.” mobile, online, ATM and Point of sale continue to grow and now account for more than 85 percent of all transactions as at July. The banking group is reporting lower operating cost and fee income as a result of the switch.
The sharp fall in branch transactions come against and 7 percent increase in total to $535 billion over assets on the books in July 2017.