Buy rated: Coming in from the cold

February 1, 2014 by

A number of the Buy Rated stocks are coming in from the cold as prices rose during the last week of January.

The Jamaica Stock market made big strides, separate and apart from the flurry of trading action emanating from the landmark announcement of Sagicor Group’s acquisition of RBC’s Jamaica operations. Wednesday’s trading activity was the best day for months as 21 stocks advanced in price and the main market indices climbed sharply on three consecutive days.

The Jamaican main market trading had 8 stocks climbing and only 1 declining. Sagicor Group gained 18 percent in the aftermath of the RBC takeover, Scotia Group put on 7 percent, Barita gained 4 percent and Caribbean Cement 3 percent.

Percent on falling cubes280x150pxThe Junior market had mixed fortunes with three of the Buy Rated selections rising; Caribbean Producers gained 2 percent and Lasco Manufacturing 4 percent, while Caribbean Cream fell 9 percent and General Accident fell by 4 percent.

Only one stock lost value on the Trinidad Stock Market as First Citizens dipped 6 percent by week end and Sagicor Financial gained 4 percent.

Jamaica Stock Exchange | From inception of the Buy Rated list in July 2013, Barita is up 13 percent, Caribbean Cement 77 percent, Hardware & Lumber 76 percent, Sagicor Group 5 percent. Those with losses in the main market are all less than 10 percent with JMMB at 8 percent being the largest loser. Junior market stocks are not fearing as well with only Access Financial which was up to 44 percent when we pulled it and placed it as Market Watch. Caribbean Producers is up 35 percent so far and Blue Power way behind at 7 percent increase. The big losers so far are Lasco Manufacturing down 21 percent, Caribbean Cream 18 percent, Jamaican Teas off by 14 percent and Lasco Financial 10 percent.

BuyRated31Jan2014Trinidad Stock Market | First Citizens, which gained 52 percent in the first round, is up 2 percent since being reinstated to the Buy Rated list even as the price declined from its peak. Neal & Massy is now up 11 percent, Grace Kennedy 12 percent, One Caribbean Media 8 percent, Republic 6 percent, Trinidad Cement 130 percent and 12 percent for Sagicor Financial. The losers number only 4 with Guardian Holdings down 14 percent, JMMB 2 percent, Point Lisas 8 percent and Scotia Investments 24 percent.

The coming week could be interesting in the Jamaican market as the past week showed signs of increased interest in the market. Will the interest continue into February or  just a month-end dressing? Whatever the case, what is quite clear is that the supply of stocks for many of the Buy Rated stocks have been waning with some having virtually none on the sell side. February could see the return to a decisive bull market.

Related posts | RBC acquisition confirmed | First Citizens off Buy Rated list

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Filed Under: Company News, JSE Main Market, Stock Market, TTSE Market Tagged With: , ,

Cable & Wireless up 56% in January

February 1, 2014 by

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RBC acquisition confirmed

January 30, 2014 by

Sagicor Group confirmed the acquisition of RBC Royal Bank Jamaica’s operations for a price of $9.5 billion. Most of RBC operations would be absorbed into Sagicor Bank but the banking entity will be a direct subsidiary of the group.

The book value was of the order of $10.5 billion but as the operation has been bleeding at around $500 million per quarter the book value would be just under $10 billion at the time the agreement was signed. Loans on the book of around $32 billion reflect good loans as the bad ones were already provided for.

Pooling Sagicor Investments with that of RBC on the surface would create a combined banking group with assets of nearly $150 billion with loans of $40 billion and revenues around $12 billion. However, that is unlikely as the bank will be a totally separate entity going forward. Sagicor Group confirmed that there will be cuts and branch closures where branches overlap. This will results in significant cost savings.

Sagicor150x150This will not be the first time that Sagicor Bank would have entered in merger arrangements having absorbed Manufacturers Merchant bank and Trafalgar Development Bank some years ago.

For the twelve months to September last year, the RBC lost $1.7 billion and $456 million between July and September according to central bank’s data. For the year ending October 2012, RBC reported a loss of $2 billion before tax which was down from $3 billion in 2011. In 2012, loan losses contributed $650 million to the loss and income was inadequate to cover housekeeping expenses. Most likely the NDX in 2013 that cut interest rates would have negatively affected them, thus reducing the net interest margin.

The bank’s problem apart from heavy loan losses is the fixed operating cost that the income generated cannot match. It would require major loan growth to deliver the required income and that has not been growing fast enough having reached $32 billion in 2013 from $30.5 billion in October 2012.

Trading picks up | In Wednesday’s trading on the Jamaica Stock Exchange, Sagicor Group and Sagicor Investments climbed ahead of the news of the RBC takeover. The order book for Sagicor Group shows only six offers; two are at $10.50 to sell 25,400 units, one for 3,000 units at $10.95 and three at $11 for 255,000.

On the buy side there are bids as high as $10.50 for 25,000 units then $9.80 with only 1,185 units and 128,265 units on the bid between $9.75 and $9.79 and of course, there are bids below these levels.

Sagicor Investments had 7 bids and 7 offers with the highest bids being $18 for 1,000 units; 14,926 units for $16.50 and 100,000 at $15. On the sell side, there are only 1,565 units at $19; 7,235 shares at $21.50; 30,000 units at $22; 20,000 at $26.71 and 1.34 million units at $30.

Related post | A bigger Sagicor Bank?

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Lasco Financial’s marketing investment

January 29, 2014 by

The latest quarterly report to December 2013, shows that Lasco Finance Services pumped in funds to nearly double its promotional cost to push for a greater share of the remittance business, resulting in heightened marketing and selling cost from $111 in 2012 million to $204 million in 2013.

In the December quarter the cost was pushed to $87 million compared to just $36 million in 2012. The increase spend in this area kept profits down to $46 million versus $55 million in the December 2012 quarter and for the nine months period $136 million or 20.6 percent above the 2012 results for the similar period. Administrative cost rose by a strong 26 percent for the year to September but by the end of 2013, the rate of increase fell to 22 percent as the December quarter increased by only 15 percent to reach $47.5 million and for the nine months $144 million versus $118 million.

With the reduced spend on promotion that should flow with the completion of the World Cup promo, profit should end the year around $220 million and that would be up from $164 million in 2013 or earnings of 18 cents per share.

FX_USPound2“In pursuit of our strategic objective to increase our market share in the remittance industry, towards the end of the 2nd Quarter, we launched our Brazil 2014 promotion which lasted until December 31, 2013. This investment contributed to the more than 100% increase in selling and promotional expenses. We anticipate that the resulting rise in transactions from this awareness campaign will continue into the future periods,” management stated in release accompanying the results.

As the promotion ended, the March quarter figures should reflect much lower cost in this area and with that increased profit. Trading income in the quarter rose by a strong 42 percent to reach $176 million and for the nine months period the growth was 42.6 percent taking it to $469 million.

The financials remain strong with equity of $610 million, liabilities of only $95 million and cash of $302 million.

Lasco Financial is an IC Insider Buy Rated Stock. To view the full list, click here.

Related posts | Buy Rated stocks coming in | Lasco Financial profit rise

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A bigger Sagicor Bank?

January 29, 2014 by

Reports are circulating that Sagicor Group is in talks to acquire the RBC Royal Bank Jamaica’s operations. IC Insider understands that an official announcement could be made to the Jamaica Stock Exchange by the end of Wednesday.

From all indications, RBC operations would be absorbed into Sagicor Bank. IC Insider gathers that the deal has not yet been inked, but talks are in fact taking place that will most likely to lead to a deal.

As is the case with the acquisition of this nature, the deal would be subject regulatory approval and due diligence. No purchase price has been revealed but Sagicor will most likely acquire it for a figure that will be lower than book value that is currently around $10.5 billion as the bank’s Jamaica operations has been bleeding for some time at close to $2 billion per year based on 2013 numbers.

Sagicor150x150How much will Sagicor spend? | For the twelve months to September last year, the RBC lost $1.7 billion and $456 million between July and September according to BOJ’s data. The continued losses suggest a price around $5 billion. For the year ending October 2012, RBC reported a loss of $2 billion before tax, which was down from $3 billion in 2011. In 2012, loan losses contributed $650 million to the loss and income was inadequate to cover housekeeping expenses. Most likely the NDX in 2013, that cut interest rates, would have negatively affected the bank thus reducing the net interest margin. The bank’s biggest problem, apart from heavy loan losses, is the fixed operating cost that the income generated cannot match. It would require major loan growth to deliver the required income and that has not been growing fast enough having reached $32 billion in 2013 from $30.5 billion in October 2012.

If the deal goes through, it would create a combined banking group with assets of nearly $150 billion, loans of $40 billion and revenues around $12 billion.

Sagicor would enjoy significant cost savings from a merger of both entities as some of the branches overlap and should lead to closure of some and expansion of others. Head office operations would result in major cost savings as well, once the two are fully integrated. This would not be the first time that Sagicor Bank have entered in merger arrangements having absorbed Manufacturers Merchant Bank and Trafalgar Development Bank some years ago.

Sagicor Jamaica is a IC Insider Buy Rated Stock. To view the full list, click here.

Related posts | Buy Rated stocks coming in | Marked changes for Buy Rated stocks | Sagicor cuts dividends

Filed Under: Company News, General Business News, JSE Main Market, Stock Market Tagged With: , ,

39% hike for NCB dividend

January 28, 2014 by

The Board of Directors of National Commercial Bank (NCB) announced a 39 percent hike in the latest dividend that has been declared. The banking group will be paying the interim dividend of 32 cents per ordinary stock unit on February 20, 2014 to stockholders on record as at February 7, 2014. Last year, NCB’s first dividend for the year was 23 cents that was paid in March and on May 24, 16 cents per share.

NCB also reported earnings for the first quarter to December indicating that operations are back to normal coming out of 2013 when profits were negatively impacted by the government debt swap. Profit after tax came out at $2.856 billion versus profits of $2.786 billion and for the September 2013 and $1.778 billion after writing off some large one-time expenses. Earnings per share amounted to $1.16 and should reached around $5 for the year, barring any major negative developments.

NCB_TheAtrium280x150Total revenues climbed by 15 percent to $13.75 billion compared to $11.967 billion.

While net revenues grew from $9.16 billion to $10.47 billion, expenses grew from $5.78 billion to $7.34 billion resulting in reduced operating profit of $300 million. A $301 million gain from on acquisition of a subsidiary counter balanced the reduced operating profit. Bad loan provision was down from $563 million to $390 million, but policy holders cost climbed by a billion dollars with the acquisition of Advantage General Insurance Company.

Looking forward, loans grew 27 percent or $31.8 billion to $148 billion from December 2012 and deposits were up 10 percent to $194 billion.

Related posts | NCB ill-fated IPO cost $680m | NCB cuts dividend 75% | NCB recovers from NDX hit

Filed Under: Company News, Company Results, Dividends Tagged With: ,

TTSE PE: Neal & Massy makes strides

January 24, 2014 by

Friday, 24th January 2014 | Neal & Massy was the major mover in the Trinidad Stock market this past week as the price closed at $65.02 gaining $2.

The other stock that shared some of the spot light was First Citizens. The stock lost some ground during the week as some profit taking occurred due to appreciated so much since listing in August 2013.

TTSE_PE24thJanGuardian Holdings inched up back to $14. One Caribbean Media closed the week up at $18.77 for a small gain. Angostura Holdings slipped a bit and so did Point Lisas.

The T&T market still provides attractive buys for investors as prices have hardly moved over the last few months for most of the stocks.

The Top Stocks with potential by PE Ratio range from Citizens Bank at the low end at 33% to Trinidad Cement at the upper end with 283%. Berger (206%), Guardian Holdings (202%), National Flour (175%) and Point Lisa (132%) round out the top five stocks with the highest potentials for price gains.

TTSE_PE24thJanTopStocksChart

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Filed Under: Company News, Stock Market, TTSE Market Tagged With: ,

Buy Rated stocks coming in

January 24, 2014 by

Friday, 24th January 2014 | There has been no change to the Buy Rated or Market Watch list since our last update on Friday, 20th December, even as prices of some stocks have increased sine the start of the new year.

This week, IC Insider makes special note of the continued success of Caribbean Cement, which closed the week at $4.60, up 71 percent since our selection in November and Neal & Massy, up by 10 percent since selection in July. Republic Bank continues to inch upwards and had some gains during the week and so did One Caribbean Media.

BuyRatedTable_24thJanCompanies have started releasing results for the final quarter of 2013 and it will be interesting to see how these results impact on the prices of our Buy Rated selections. NCB released their results on Thursday and profit was back on line with the pre-NDX hit in 2013. The company announced an increased dividend payment compared to the first one made in 2013.

Related post | Access moved to Market Watch

Filed Under: Company News, JSE Main Market, Stock Market, TTSE Market Tagged With: ,

Carib Cream making headways but…

January 24, 2014 by

Caribbean Cream, the ice cream maker, is making headways as profits made big jump with an increase of 5,000 percent to reach $11 million in November 2013 quarter, up from only $222,000 after tax in the 2012 November quarter. Profit before tax was $3.9 million in the 2012 but as a recent Junior Stock market listing, the company is not subject to corporate tax in 2013.

The revenue improved 14 percent from $165.5 million to $188.8 million for the November quarter. However, sharp rises in electricity, depreciation, audit and accounting, security and other administrative and interest cost robbed Caribbean Cream of a better bottom line. Nevertheless, the company saw a 186 percent increase in profit before tax for the quarter, and for the 9 months, profit is up 45 percent to $28.7 million compared with $19.8 million in 2012.

Administrative cost rose sharply by 50 percent for the nine months to $80.86 million up from $54 million in 2012. This is of concern as it has risen too fast and has partially eroded the improvement generated in the revenue growth.

Caribbean Cream LtdThe company was able to squeeze more gross profit out of the operations this past year with a margin of 37 percent for the quarter, surging over the 24.7 percent of 2012 and 29.6 percent year-to-date compared to 26 percent for the same period in 2012. The latest quarter revenues reflected the lowest growth rate for the year-to-date with the February and April quarters climbing by 48 percent each and 27 percent for the July quarter.

Impressive as the growth in profit is, earnings per share was only 8 cents for the nine months, which is inadequate to drive interest in the stock even with management’s promise of continued expansion in retail outlets and growth in sales as well as the reduction in production cost due to the installation of new machinery.

Our estimate for earnings for the current fiscal year is 15 cents, and for the next year 50 cents. There is quite some room for the stock to appreciate during this year barring some bad quarterly results.

Related posts | Kremi up, hardly out of the blocks | Caribbean Cream trading on Friday

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Berger keeps profit gains

January 21, 2014 by

Berger Paints reported continued gains in profit for the current year which ends in March with a 30.7 percent increase for the December quarter and 33.7 percent for the nine months period.

The growth for the period is down on the performance to September last year when profit was up 80 percent for the six months and revenues grew by 12 percent after a 17.8 percent jump in the September quarter. Revenues gained only 6 percent for the December quarter and 9.3 percent year to date. Cost reduction would have facilitated to robust increase in net profit out turn. Profits after tax amounted to $51 million from the quarter versus $39 million in 2012 and $64 million year to date compared to $48 million in 2012 on revenues of $622 million for the quarter and $1.409 billion for the nine months. The information was disclosed in an abridged version of the interim report that provided no details of expenses.

berger_construction-paintingBerger has current assets of $792 million at the end of December and current liabilities of only $149 million with equity capital of $522 million.

After paying a dividend of $27.86 million in July, the company had cash on hand in December amounting to $58 million that is down from $163 million at the end of December 2012 and $130 million at the end of the March 2013, but the cash position is an improvement over the $33 million on hand at the end of September.

A lot of Berger’s fortunes are tied to the buoyancy of the construction sector. The sector had not been performing well since 2008 and that has weighed down on the company’s fortunes. The moderate increase in the monetary value of sales is a reflection of the challenges they face. What has been the major attraction for the stock is the tendency for a high dividend payout that enhances the rate of return on investment for outside investors.

Related posts | Profits up 80% at Berger Jamaica | Economy pressuring Berger

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