News, Views & Advice from Investors's Choice
IC Insider will be keeping a close watch on these stocks for movement during the week of 17th to 21st June 2013.
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A Junior Market stock should hit the roof next week as the company Blue Power not only reported record profits, it blew away last year’s results with a stunning 121 percent increase as revenues rose by just 22 percent for the year ending April.
Profits for the financial year stood at $104 million compared to $47 million in the same period last year, an increase of 121 percent. The Lumber Depot division contributed $61 million to the profit, improving by 111 percent over the previous year while the soap division accounted for $43 million, an improvement of 137 percent over the previous year.
The results translate to return on equity of an attractive 35 percent up from 21 percent in 2012. The net asset value is $6.11 and the stock price of $8.65 is less than 1.5 net book value.
Combined sales for the year ended April, 2013 were $1.045 billion compared to $863 million in 2012, an increase of $182 million or 21 percent. For the year, the Lumber Depot division achieved sales of $742 million versus $620 million the previous year, an improvement of 20 percent while the Blue Power soap division moved to $303 million from $243 million, an increase of 25 percent.
April quarter | For the fourth quarter sales rose to $339 million compared to $224 million for the same period last year, an increase of $115 million or 51 percent. Comparing the fourth quarter with the same period last year, the increase in sales for the Lumber Depot division was 77 percent, from $156 million to $276 million while sales for the Blue Power soap division actually declined by 6 percent.
Revenues for the 4th quarter was by far the best of any of the quarters with the December quarter coming closet with revenues of $267 million. The percentage revenue increase was also the best with a 13 percent increase in the December quarter coming closest. The latest quarter profit was the highest of any quarter with July and December quarters coming closest at $24.7 million and $23.2 million respectively.
Management’s comments | In commenting on the results, management said “The extraordinary enhancement in both sales and profits in the Lumber Depot division was due to two main factors: the first and most important being the award of a significant supply contract by an international agency and the second being the strategic management of our purchases of materials for resale. The overall increase in sales and profits of the Blue Power soap division was achieved largely as a result of a significant increase in sales of bathing soaps which are slowly but surely gaining acceptance in the market place.
As a result of the substantial improvement in profits, our balance sheet is healthy which will allow us to expand as well as be in a position to make adequate purchases of materials for resale and raw materials for manufacturing at reasonable prices.”
The company’s finances is in a healthy position with virtually no debt. Current assets of $390 million of which cash is $145 million up from $58 million in 2012. Current liabilities is $88.5 million.
Investor’s Choice is forecasting 2014 earnings close to $3 per share.
Update Wednesday 19th June | The Board of Directors of Blue Power Group Limited will meet on Thursday, June 27, 2013 to consider the payment of a dividend.
Following on the announcement last week by Cable & Wireless to cut all prepaid rates to $2.99 across all networks and to overseas, Digicel Jamaica unveiled a range of new plans that involves the lowest rates per minute. The new plans goes into effect at 12.01am on Friday morning.
Customers are now able to choose from one of six plans that best suit their individual needs a release from the company said.
Digicel’s line up of plans includes the Brawta Plan, the Gimme Five Extra Plan, the Double Bubble Plan and the $2.99 Plan all with per second billing plus the $2.49 Plan and $2.89 Sweet Plan with per minute billing.
Digicel Jamaica CEO, Barry O’Brien commented; “We asked our customers what they wanted and the answers we got were great value, lots of choice and more freeness.”
The details of each plan as provided by Digicel are:
The Brawta Plan and Gimme Five Extra Plan see customers getting even more freeness than they got with Gimme Five. Customers will now get 55 minutes of free Digicel Talk, 200 free Digicel Texts, 10 MB of free Data with free Nights, 55 free International minutes, monthly free Credit and Cash Back after talking for five minutes, sending five texts or topping up with $200 or more.
The Double Bubble Plan with per second billing sees customers getting double the value of their credit every time they top up with $200 or more. But that’s not all. Double Bubble customers will also get 10 minutes of free Digicel Talk, 10 free Digicel Texts and 25 free International minutes once they have talked on net or internationally for five minutes or sent five texts.
The $2.99 Plan with per second billing means customers get a great low rate on net and to the other mobile network at any time.
The $2.49 Plan with per minute billing is perfect for those customers who make longer calls and want the lowest rate in the market. Both of these new $2.99 and $2.49 Plans come with 25 free International minutes after the first five minutes.
Best suited to customers who like making long calls, the $2.89 Sweet Plan with per minute billing offers 10 minutes of free Digicel Talk, 100 free Digicel Texts, 10 MB of free Data with free Nights, 25 free International minutes, free Credit and Cash Back to customers once they have talked for five minutes, sent five texts or topped up with $200 or more.
Digicel Jamaica CEO, Barry O’Brien, continues; “We know that everybody loves freeness and presently over half our customers talk time is free and over 90% of Digicel texts sent are free. For example, with the new Gimme Five Extra Plan, with Free after 5, a customer now gets 200 free texts which equates to $600 of free texts when you spend $15.”
To guarantee the customer experience, Digicel invested $7 billion in network improvements and upgrades last year and a further $3 billion investment is planned for this year.
While many local companies suffered from the negative effects of reduced profit due to costs associated with the write off of unrealised capital gains on government bonds, Palace had a totally different experience. Net results for the March quarter fell sharply to a loss of $22 million from a profit of $2.65 million in 2012. Nevertheless, thanks to a strong first half, the company reported a $8.2 million loss compared to a profit of $5.3 million earned for the nine months of the previous year.
Operating cost fell by $16 million or 10 percent for the quarter while administrative cost was up 11 percent to $34 million but it was the slide in income that was noticeable and probably worrying. Admittedly, the March quarter is usually the worse quarter the company faces. But it is the sharpness of the drop that is surprising. In the 2012 quarter, Palace generated income of $193.5 million, this fell 21 percent or a whopping $41 million to $152.3 million.
Interestingly, the 2013 revenue performance is only 8 percent better than the 2011 quarterly income even as inflation would have affected cost and the price for goods and services sold by Palace would have gone up since 2011. The fall off in 2013 comes against the background of the company introducing a new product, the showing of live operas on screen and an encore season of opera’s best in the summer. Without them, revenues would have been lower. Year to March, the company recorded revenues of $584.7 million that is lower than the $599.5 million generated up to March 2012.
Data on the individual cinemas indicates that the sharp fall in revenues was across all locations except Palace Cineplex. Carib revenues fell $13 million, Cineplex was up $1 million, Palace Multiplex in Montego Bay dropped $13 million and Odeon in Mandeville fell by $4 million. The falloff in the two rural cinemas was far worse than for Carib, in relation to the income for the 2012 March quarter.
The picture up to the December results suggested that 2012/13 would have been by far the company’s best year, but the poor third quarter results have changed the outlook for full year’s profits completely, as it will be nigh impossible to overcome the negative impact of the loss made in the latest quarter. ICInsider understands that the fall in revenues is due primarily to a shift in a particular brand of film which would normally be shown in the March quarter but will be shown in the June quarter.
In spite of the quarterly loss, Palace had cash funds of $60 million at the end of March, while current assets exceed current liabilities by $36 million. Loans amount to $42 million with equity of $271 million.
Photo via: www.PalaceAmusement.com
Rick Waugh announces his retirement from Scotiabank effective January 31, 2014. Brian Porter, former chairman of Scotiabank Jamaica, to take on role of President and CEO effective November 1, 2013.
(TORONTO) May 31, 2013 – Scotiabank Chief Executive Officer Rick Waugh today announced his intention to retire as CEO effective November 1, 2013 after 10 years in the role and 43 years with the Bank. He will remain a Director of the Board and assume the role of Deputy Chairman of the Bank until January 31, 2014.
The Board of Directors has appointed Brian Porter to the role of President and Chief Executive Officer effective November 1, 2013. Brian was appointed to the role of President on November 1, 2012, and just prior to that was Group Head, International Banking, overseeing all of the Bank’s personal, small business and commercial banking operations in more than 55 countries outside of Canada. Brian was also Scotiabank’s Group Head of Global Risk Management and Treasury. He joined Scotiabank in 1981, and has held a variety of other management positions, including Deputy Chairman of Global Banking and Markets.
“Rick Waugh has guided Scotiabank through a period of tremendous growth, generating exceptional returns for shareholders and employees during some very turbulent times. His focus on customers, diversification, emerging markets and risk management along with his strong values, has shaped the growth and direction of the Bank over the last ten years,” said John Mayberry, Chairman of the Board.
The Board expressed its confidence in Brian Porter appointing him President in November 2012. Mayberry added, “We are pleased to take the next step in succession today by confirming him in the role of President and CEO effective November 1, 2013. Brian has a tremendous range of experience across the Bank, including the critical role of Chief Risk Officer. The Board is confident in Brian’s ability to continue to produce strong results and build on the straightforward and proven business model that has worked so well for customers, shareholders and employees.”
“I want to congratulate Brian Porter on his appointment to President and Chief Executive Officer,” said Rick Waugh, CEO, Scotiabank. “He has had an exceptional career at Scotiabank. Brian and the management team bring the right experience, values and culture to ensure our Bank’s continued success.”
“It is a distinct privilege to have been entrusted with the role of President and Chief Executive Officer, and I would like to thank the Board of Directors and Rick Waugh for their confidence in my ability to continue to deliver superior, consistent and predictable results for all of our stakeholders,” said Brian Porter, President, Scotiabank.
Scotiabank is a leading multinational financial services provider and Canada’s most international bank. With more than 83,000 employees, Scotiabank and its affiliates serve some 19 million customers in more than 55 countries around the world. Scotiabank offers a broad range of products and services including personal, commercial, corporate and investment banking. In December 2012, Scotiabank became the first Canadian bank to be named Global Bank of the Year and Bank of the Year in the Americas by The Banker magazine, a Financial Times publication. With assets of $754 billion (as at April 30, 2013), Scotiabank trades on the Toronto (BNS) and New York Exchanges (BNS). For more information please visit www.scotiabank.com.
The Urban Development Corporation (UDC) has concluded the sale of its 50% stake in Bloody Bay Hotel Development Limited (BBHDL) to Village Resorts Limited (VRL), which owned the other 50% of the company. VRL, in response to the UDC’s offer, had expressed its desire to exercise its pre-emptive right to acquire the UDC’s shares in BBHDL in June 2011. Cabinet approved the sale of the shares to VRL in January 2013 and the sale transaction was finalized in March with the signing of an agreement on 27 March 2013.
The gross transaction proceeds realized by the UDC was US$11.2M, which included US$9.5M for the real estate and related fixed assets, and US$1.7M representing UDC’s share of cash and other liquid assets of BBHDL at the date of the sale agreement.
BBHDL’s principal asset was Breezes Grand Resort & Spa, Negril, (formerly Grand Lido Negril) a 210 suite all-inclusive property located in Negril, Hanover.
VRL secured an agreement to sell the hotel’s real property and other assets owned by BBHDL to BBNH Resorts Limited, which will further develop and expand the hotel utilizing lands acquired through the sale transaction. BBNH is an affiliate of Blue Diamond Hotels & Resorts Inc. The expansion will be in accordance with the UDC’s overall plans for the development of the area.
Blue Diamond’s portfolio of hotels also includes, in addition to Breezes Negril, the former 350-room Breezes Trelawny/Starfish Beach Hotel purchased in June 2012, which will re-open as Royalton White Sands in October 2013. With the acquisition of Breezes Negril now complete, Blue Diamond has rebranded the property as the Grand Lido Negril Resort & Spa. The same name was used by former owner SuperClubs when the company opened the resort in 1989 before rebranding it as a Breezes property in 2009.
“The Grand Lido brand has long been synonymous with top-quality accommodations, service, cuisine and beach settings. This is the first resort to be relaunched under our Grand Lido brand,” said Jordi Pelfort, managing director of Blue Diamond.
Blue Diamond is a division of the Toronto-based Sunwing Travel Group.
Things are not good for the media houses these days as economic pressure and the withdrawal of Claro mobile operations from the Jamaican market coupled with a soft economy has cut revenues for this sector. In a tough economy, RJR group suffered a pretax loss of $106 million in the quarter ending in March after writing off $35 million for impairment of the investment in Reggae TV and JNN. This result is a major swing from the similar quarter of 2012 when a profit of $15.6 million was made. Result after tax for the period came out at a loss of $51 million versus a profit of $5.6 million in 2012.
A 5 percent fall in revenue to $446 million from $470 million in the 2012 quarter was one of the major contributors to that big loss in the quarter.
Annual Loss | For the year to March, the loss before taxation came out at $79.5 million and $36.4 after tax, compared to a pretax profit of $146.5 million in 2012 and a net of $87.4 million after taxation of $59 million. The company reported revenues of $1.866 billion for the year, in 2012 revenues were $1.937 billion a decline of 3.7 percent.
Bad debt provision increased from $10.7 million to $30.5 million and special events cost amounted to $186.8 million compared to $90.3 million in the prior year.
While amounts in receivables were kept relatively constant with the previous year’s figures, payables at the end of March climbed to $124 million versus $44 million and the company borrowed $201.5 million. Fixed and intangible assets were purchased amounting to $192 million of which FIFA world cup rights accounts for a large portion.
Decline | The company has suffered a series of set backs over the years. One that is most noticeable is the fall in return on equity from 21 percent in 2000 and 19.7 percent in 2010 to 10.3 percent in 2011, 6.4 percent in 2012 and now a negative return in 2013. Even adjusting for the one-off cost items that are in the 2013 fiscal year, profit would still be inadequate to beat the return on equity of 2012.
RJR recovered from a stunning loss of $129 million in 2009 to record a profit of $222 million in 2010, so it could recover again. However, there are some differences. In 2010, revenues rose by nearly 21 percent on top of a 7 percent in the two previous years. This time around revenues are down in a soft market for advertising as revenues were flat in 2011, declined in 2012 and again in 2013. This is not a market where revenues can be easily raised to dramatically turn around profits. On the positive side, there are some costs in 2013 that should not recur in 2014. Depreciation charge is $109 million, which is not a cash item, so even if it were to continue to make a small loss it can continue to operate for a long time until it recovers as cash flow can be positive.
FIFA rights | The company paid $83.55 million for the exclusive right to transmit FIFA football matches in Jamaica between 2015 to 2022 which means that it will be some time before this investment pays off.
The company’s stock trades at $1.37 and it is difficult to see how this stock will be able to justify a higher price with these results, but more importantly, how will the company grow revenues or cut cost to restore reasonable profitability.
Cable & Wireless (C&WJ) has announced that they are going to use Google to host cwjamaica.com email and portal services in the future. According to a message to their subscribers the company says “this is a very exciting change, as it will enable us to provide you with latest email technology through Google’s dynamic suite of communication applications.”
The company said that they expect the Google migration to be implemented within the next two months and that email addresses will not change and that the change will not impact virtual domain customers nor will it impact any aspect of their Internet connection.
“In preparation for this move, a change to your email password may be required. Once the mail services have been transitioned to Google, your email password will need to be at least eight characters. This change is necessary to be compatible with Google’s security requirements, if your password is already least eight characters, you will not need to make any change. If not, you will need to change the password before July 8th, 2013 to avoid any possible downtime during the move to Google.” the release from the company said.
The move is likely to make it easier for the company’s customers to send and receive emails, especially when overseas. Presently, when overseas, email access is through the company’s webmail service which is not user friendly.
Cable & Wireless (C&WJ) revenues from landlines slipped $2 billion in the year ending March 2013 which helped push the company’s operating income into a loss before an exceptional charge of $2.75 billion relating mostly to reduction in staffing. A $670 million increase in mobile revenues could not prevent a slide of $1 billion in overall revenues which came in at $19.1 billion versus $20.4 billion in the previous year. In spite of the fall in revenue, a $1.5 billion drop in out payments made to other carriers offset by $500 million increase in other cost of sales resulted in gross profit slipping by just $340 million.
New rates | Last year June, when it announced radically new low rates, “the company indicated that it hoped the “game-changing” Talk EZ plan will double its market share from 18 per cent to 36 per cent within three years. It currently has 400,000 pre-paid customers and 50,000 subscribers, according to a Jamaica Observer report. The initial up take of the service last year suggested that they were on target to achieving that target with 250,000 new subscribers by the end of December but by March this year the numbers melted down to a 16 percent net increase or just under 100,000.
More customers | For the September quarter, the company stated that the mobile customer base increased by 20% and that they attracted 100,000 customers within 100 days of launching the new plan. Extrapolating, they started off with 500,000 mobile customers which reached 600,000 by September. In March the company shifted the tax of 50 cents per minute on cell calls to customers which they had absorbed from July last year when it was 40 cents per minute. This shift seems to have resulted in the attrition in new customers. Our estimate is that C&W decision to absorb the cell tax, cost the company about $500 million, a cost that won’t be repeated this year.
Banking | The company is banking on the recent reduction in termination rate to hand it an advantage, as they retain more of the amount customers spend with them, as they talk more with the new rate for both local and overseas calls to other networks. Down the road they expect that number portability will also present them with another opportunity as mobile users will be freer to switch networks.
Going forward | “Now that we have the new, lower Mobile Termination Rate that will be almost 90 percent less than what it was a year ago, LIME is in a better position to increase subscriber numbers and grow revenues,” management said in an exclusive response to IC Insider.
What seems logical is that persons will be less concerned about what number they are calling once the various rates are close to each other. So the scenario where customers were ring fenced to calling within their network due to the high cost of calling other network will no longer exists, allowing for freer calling and quite likely more time spent talking.
It will also reduce staffing and related costs and have a net benefit as a result of outsourcing the repairs and servicing to Ericsson. The first quarter of the last fiscal year had a lower margin on calls made to other networks as the termination rate came into effect in July 2012. In this year’s first quarter, C&WJ will enjoy a higher margin on cross network calls, helping improve the bottom line.
The savings to come from outsourcing of the field service support and from the absorption of the mobile call tax plus some growth in net cell revenues suggest that the company should be much closer to a profitable position, if not a profit, in the current year from normal operational expenses, assuming they maintain substantially existing business and continue to add mobile customers and get more talk time from existing ones.
Stock outlook | The stock last traded at 16 cents with a bid of 17 cents. The company has a negative net book value and it owes the parent company $28 billion which attracts interest at Treasury bill rates plus 1 percent. Working capital is negative with current assets being less than current liabilities.
Seprod Limited | Declared a dividend of $0.53 per share payable on July 8, 2013 to shareholders on record as at June 21, 2013. The ex-dividend date is June 19, 2013.The previous dividend paid by the company was $0.30 per share, on November 9, 2012. Prior to this, the company paid a dividend of $0.53 per share on August 7, 2012.
Seprod reported profits for the first quarter of this year that was down on the similar quarter in 2012. Profit after tax profit slipped to $231 million compared to $292 million in the 2012 first quarter.
JPS Preference dividends | Declared quarterly dividends for the issued preference shares which will be paid on July 1, 2013 to shareholders on record as at June 14, 2013, the ex-dividend date is June 12, 2013. The following are the shares and the amounts:
Insider trades | Jamaica Producers Group Limited advised that two Directors purchased a total of 290,287 of the company’s shares, between May 17 & 24, 2013. Mayberry Investments Limited has also advised that a connected party purchased 29,037 shares in the company on June 3, 2013.