Junior just 35 points from record – Thursday

Bulls are lurching around the juniors.

Bulls are lurching around the juniors.

The Junior market headed higher at the close on Thursday, with the market rising with 7 stocks rising, while 3 declined out of 15 securities that traded. The market index gained 21.50 points, to close at 2,322.42 and is up 29.7 percent from the close of 2015. The index is now only 34.78 points adrift of the all-time high reached in January this year. Market activities ended with 4 securities closing with bids higher than their last selling prices and 3 ending with lower offers.
Trading volume and value rose over 60 percent from Wednesday’s levels, ending with 1,015,005 units changing hands, 60 percent more than on Wednesday, while the value traded climbed by 94 percent to $5,213,760, compared to $2,690,732 changing hands on Wednesday.
ICI Jm sum 22-09-16At the close, Cargo Handlers stock price closed with the bid at $90.01 with 5,765 units, nearly $4 ahead of the last sale price with no units offered for sale. Key Insurance that reported poor second quarter results continued with the offer at $2.37 to sell 152,290 units, compared with the last sale of $2.49. There were to be no bids to buy the stock at the close.
AMG Packaging jumped $1.99 and ended trading with 26,361 units to end at $16.99, CAC 2000 traded just 200 shares at $6.40, Caribbean Cream lost 10 cents with 37,106 shares changing hands at $9.10, Caribbean Flavours added just 1 cent in closing at $8.01 with 5,358 shares changing hands, Caribbean Producers traded just 46,370 shares to close at $3.40. Consolidated Bakeries rose by 5 cents to end at $2.40 with 6,017 units changing hands, Dolphin Cove ended at $13.70 with 500 shares trading, ICI jm trade 22-09-16General Accident fell 15 cents and closed trading with 253,080 units at $2.10, Honey Bun lost 9 cents in trading just 200 units to end at $6.15. KLE Group ended at $1.85 with 5,800 shares changing hands after rising 5 cents, Knutsford Express had 334 units changing hands to end at with a rise of 50 cents at $24.50, Lasco Distributors closed with 240,980 units trading and ended with a rise of 20 cents at $7. Lasco Financial rose by 3 cents with 2,850 shares changing hands to close at $3.28, Lasco Manufacturing closed at $4.80 with 388,949 shares trading, Medical Disposables traded 18,400, shares with the price remaining unchanged at $4 and tTech traded 28,870 shares at $6.

JSE correcting directors’ error

Marlene Street Forrest - General Manager of the JSE

Marlene Street Forrest – General Manager of the JSE

Shareholders of the Jamaica Stock Exchange (JSE) will have a much longer wait to see the increase in the number of issued shares take effect than the date originally indicated on Wednesday in a release by the JSE.
In the original release of September 21, the company said the “Board of Directors decided at a meeting held on September 21, 2016, that each ordinary share of the Company be subdivided into five shares, resulting in the issued and fully paid capital of the Company increasing from 140,250,000 ordinary shares to 701,250,000 units of no par value, with the record date of October 5.”
In an article reporting on the decision to split the stock IC Insider, stated that the directors had no power to effect a stock split or increase the issued number of shares, as only the shareholders of the company has the power to do so, at a general meeting.
Late on Thursday, the JSE has issued a new statement and now advises “that an Extraordinary General Meeting of the Company will be convened at a date to be decided and communicated following the Board of Directors’ decision at a meeting held on September 21, 2016 that each ordinary share of the company be subdivided into five shares. This advisory supersedes the announcement on September 21, 2016, in which the date 2016 was stated as the effective date for the stock split.”
The JSE regulates the companies listed on the stock exchange and broker members, for them to have made such a huge error, raises some major questions about their ability to regulate the market with the present cadre of regulators. Was the other regulator, the Financial Services Commission aware of the miststep.

JSE’s directors not empowered to split stock

JSE buildDirectors of the Jamaica Stock Exchange approved a 5 for 1 stock split effective October 5, 2016 but the directors do not have the power to effect the change without the approval of shareholders at a general meeting.
According to a release today on the JSE website, the board of directors at a meeting approved the stock split of the company effective in October at the JSE’s board meeting held on September 21, the stock is expected to reflect the split in the price on the JSE on October 3, 2016. The release goes on to state that “as a result of the proposed stock split, the JSE will list an additional 561,000,000 ordinary shares, increasing the issued shares from 140,250,000 to 701,250,000”.
But there is a bit of a problem with the implementation of the decision. The directors have no power to effect the split. A change in the number of issued share capital has to be approved at a general meeting of the company. No resolution has been put to the shareholders at a meeting so to date and none is planned as such the decision will be voidable if legally challenged.
This development is strange as all of the several companies who have split their stock have had it approved by the shareholders at a general meeting. The latest is Cargo Handlers who have called an extraordinary meeting solely to approve it, admittedly, in this case the number of the authorised shares would be inadequate to facilitate it.
Best practice suggests that the directors should err on the side of caution even if they feel otherwise. Shareholders have the power to make fundamental changes to a company not the directors, the latter are just servants.
The Companies Act makes it very clear the subdivision of the shares must be approved in a general meeting. It is very clear directors can only recommend changes to the share capital, they have no power as directors to change it.
An extract of section 65 of the companies Act of Jamaica states.
(1) A company limited by shares or a company limited by guarantee and having a share capital, if so authorized by its articles, may alter the conditions of its articles as follows, that is to say, it may—
(a) increase its share capital by new shares of such amount as it thinks expedient;
(b) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares;
(d) subdivide its shares, or any of them, into shares of smaller amount than is fixed by the articles, so, however, that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived.
(2) The powers conferred by this section must be exercised by the company in general meeting.
The company had in issue only 140 million shares with nine of the broker members holding 10 million units each leaving only a small amount to trade regularly. The stock which now sells at $27 tends to be a bit illiquid and it is expected that the split will foster greater liquidity and allow the stock to trade more freely.

Stock split who is next?

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Paramount with the stock priced at $17.50 with virtually no supply seems a candidate for a stock split.

Paramount with the stock priced at $17.50 with virtually no supply seems a candidate for a stock split.

Companies on the Jamaican Stock Exchange have either announced or effected stock splits or bonuses this year, to loud applause by investors who have driven the stocks sharply upwards in response to the news.
The first to do so was Jamaican Teas with the price doubling after the announced split. Honey Bun followed with the price climbing sharply after the announcement as well as after the split. RJR did both a split and a bonus. Grace and Pan Jamaican that have seen their stock struggling for a long time at very low levels, finally get the lift with the announcement of a stock split. Jamaica Producers effected a bonus with the similar price movement. Cargo Handlers and Jamaica Stock Exchange announced stock splits and the investors immediately responded positively to them by driving the prices up. If the trend seen with other splits holds, the prices of the stocks of the latest announcements will rise further after the split takes place.
Stocks bonuses were a regular feature of the market for years until government removed the tax incentive for them. Only the three Lasco companies split their stocks to create greater liquidity in 2014. With mostly 20 percent of junior market companies’ shares in the wider public’s hands and with some of the twenty percent closely held, supply is not always easy to come by. Splitting the stock encourages increased valuation of the companies and allows for some to be sold to the wider market, thus increasing liquidity.
Palace Amusement with a price tag of $170 and virtually no supply should be a prime candidate of a split.

Palace Amusement with a price tag of $170 and virtually no supply should be a prime candidate of a split.

There are more stock splits to come, so who are the likely candidates. One would expect that Eppley, with a $735 price tag and very limited trading activity, would be a good candidate and so would Palace, with a price of $170. Based on what has happened in the past don’t count on these two to take such action anytime soon, but the directors of these companies are going to be pressured into making a move. Management who are conscious of the valuation the market places on the stock would do the things that would boost investors’ confidence in the stock. With limited liquidity, the companies are losing out on one of the most important benefit of listing which is the constant publicity garnered from having the company’s name repeated publicly daily.
Other candidates ripe for a split, include Paramount Trading, a stock that has limited supply, the company is yet to announce its annual general meeting and that seems a very god time for it to be approved. Blue Power now priced at $21 with very little supply is a prime stock for such action. Others that could well do it are Access Financial Services,
AMG Packaging with a new chairman who is stock market friendly could deliver a split sooner than later.

AMG Packaging with a new chairman who is stock market friendly could deliver a split sooner than later.

AMG Packaging with a change in chairmanship who is a stock market follower should land a split sooner than later and Knutsford Express in the junior market.
There appear few main market stocks that need to consider one but National Commercial Bank with the price struggling around $40 with good results could well do one to increase investors interest and so could Scotia Group and of course Montego Ice.
If stock splits are so popular in Jamaica, why is it not being used in Trinidad that only has limited trading taking place daily. Management is depriving their company of maximum exposure for the cost of listing and preventing their shareholders from enjoying a more liquid market in which to trade.

JSE stocks make strong gains – Tuesday

$85 million of NCB's shares traded on Tuesday

$85 million of NCB’s shares traded on Tuesday

Stocks mostly rose on the Jamaica Stock Exchange on Tuesday, with a slight deterioration compared to Monday, in the number of advancing stocks versus declining ones. The market indices climbed sharply but with much less volumes passing through the market on Monday.
At the close of the market, prices of 16 securities gained out of a total of 40 trading, while 13 declined in the overall market, including 5 stocks rising and 6 falling, in the junior market.
At the close, 7,614,266 units valued at $192,616,632, changed hands, compared to the 12,416,676 units valued at $159,207,495 changing hands on Monday. The junior market accounted for 907,063 units valued at $3,876,442 of the total traded on Tuesday. Carreras accounted for $66,047,705 and National Commercial Bank $85,057,375 of the value of stocks traded amounting to 78 percent of all trades.
The market index ended with good gains, with the JSE Market Index climbing 1,241.23 points to end at 161,382.31. ICI JSE sum 20-09-16The all Jamaica Composite Index jumped 1,388.13 points to close at 179,316.17 and the JSE combined index surged 1,067.23 points, to end at 173,477.14.
IC bid-offer Indicator| At the end of trading, in the main and junior markets, the Investor’s Choice bid-offer indicator reading showed 15 stocks with bids higher than their last selling prices and 7 with lower offers.
In market activity, Barita Investments gained 25 cents to close at $3.50 on Monday and seems set to rise further with the bid at $3.75 to buy 40,00 units, the stock is on offer at $4 to sell 47,767 shares at the close. Cable & Wireless continues to garner support in the mid 90 cents region and seems to be heading back over $1, but it shed 1 cent and closed at 94 cents, with 381,613 units changing hands, Caribbean Cement lost 60 cents, to close at $26 with 456,774 units changing hands. Carreras closed at $65.50 with 1,016,110 units trading, slightly less than the 1,137,767 shares traded on Monday, Grace Kennedy lost 1 cent, with 104,303 shares changing hands at $42.49, Jamaica Broilers had 88,541 shares changing hands and gained 45 cents to end at $15. Jamaica Producers ended with a loss of 20 cents to close at $8.30 with 175,143 units trading, Jamaica Stock Exchange fell 10 cents to end at $27.40 while trading 5,623 shares, JMMB Group traded 3,579 units and rose 18 cents to $9.99. Kingston Wharves traded 10,455 shares to close at $17, after falling 50 cents, ICI JSE fn qt 20-09-16 National Commercial Bank traded 2,083,020 shares and closed at $41. The price of 138 Student Living remained unchanged at $4.70, after 158,000 units changed hands, Pan Jamaican Investments gained 45 cents and closed at $23.95 after trading 7,185 shares.Portland JSX ended with 12,000 units trading at $11.39, Sagicor Group traded 103,169 shares and gained 21 cents to close at $23.02, Sagicor Real Estate Fund traded 21,100 shares to close with at $10.20. Scotia Group gained 49 cents to close at $30.50 with 7,349 shares changing hands, Scotia Investments had 133,013 units changing hands at $26.10, for a gain of 1 cent, Seprod fell by 50 cents to close at $21 with 2,724 shares trading, Sterling Investments gained 88 cents to close at a new high of $15 with 5,098 units changing hands, Supreme Ventures rose 20 cents to close at $4.90 with 1,874,873 units changing hands and Proven Investments closed at 19.99 US cents with 49,700 units trading.

Rising JSE’s stocks doubled – Monday

Supreme Ventures traded the most shares on Monday with 6.9m units

Supreme Ventures traded the most shares on Monday with 6.9m units

Stocks mostly rose on Monday with the number doubling the gains on Friday with losers up moderately. The market indices climbed sharply as advancing stocks beat out number declining stocks 2 to 1 but with much less volumes passing through the market compared to the heavy trading on Friday.
At the close of the market prices of 19 securities gained out of a total of 38 trading, with 11 declining, in the overall market, including 4 stocks rising and 5 falling, in the junior market.
At the close, 12,416,676 units valued at $159,207,495, changed hands, compared to the 56,335,591 units valued at $1,576,979,024 changing hands on Friday. The junior market accounted for 835,628 units valued at $4,086,204 of the total traded on Monday. The big trade of the day was Supreme Ventures with 6,871,362 units valued at $32,318,545 changing hands to close at $4.70 after falling 28 cents. Carreras traded over 1 million shares at a value of $73,955,605.
The market index ended with good gains, with the JSE Market Index climbing 892.01 points to end at 160,141.08. The all Jamaica Composite Index rose 997.57 points to close at 177,928.04 and the JSE combined index surged 1,128.53 points, to end at 172,409.91.
At the close, IC bid-offer Indicator| At the end of trading, in the main and junior markets, the Investor’s Choice bid-offer indicator reading showed 16 stocks with bids higher than their last selling prices and 3 with lower offers.
ICI JSE sum 19-09-16In market activity, Barita Investments rose 25 cents and ended with 61,030 units changing hands to close at $3.50, investors pushed the price of Cable & Wireless up by 15 cents to close at 95 cents and picked up 1,594,615 units as selling of the stock abates. Caribbean Cement rose 60 cents, to close at $26.60 with 10,315 units changing hands, Carreras traded 1,137,767 shares to close at $65.50, Investors traded 49,527 shares of 1834 Investments to close with a loss of 6 cents at $1.18, Grace Kennedy lost 50 cents, with 394,085 shares changing hands at $42.50. Jamaica Broilers had 678,683 shares changing hands and gained 5 cents to end at $14.55, Jamaica Producers ended with a gain of 10 cents to close at $8.50 with 108,851 units trading, Jamaica Stock Exchange gained $1 to end at $27.50 while trading 15,168 shares, JMMB Group traded 1,200 units and rose 1 cent to $9.81. Kingston Wharves traded 6,161 shares to close at $17.50, after falling 5 cents, Mayberry Investments had 12,000 shares changing hands, to close with a rise of 5 cents at $3.55, ICI JSE fn qt 19-09-16National Commercial Bank jumped by $1 with 321,588 shares trading and closed at $41, the price of 138 Student Living remained unchanged at $4.70, after 7,150 units changed hands. Pan Jamaican Investments lost just 1 cent and closed at $23.50 after trading 185,496 shares. Radio Jamaica rose 2 cents and closed at $1.42 after 8,000 shares changed hands, Sagicor Group traded 24,120 shares and fell 29 cents to close at $22.81. Sagicor Real Estate Fund traded 38,153 shares to close with a gain of 8 cents at $10.20, Scotia Group gained 30 cents to close at $30.01 with 6,124 shares changing hands. Seprod gained 99 cents to close at $21.50 with 2,333 shares trading and Proven Investments gained 0.95 19.99 US cents.

Juniors make big gains – Monday

Eppley 9.5% preference share closed at a new high of $6.50 in Monday.

Eppley 9.5% preference share closed at a new high of $6.50 in Monday.

The Junior market closed on Monday, with the market index rose strongly by 1.28 percent but with 4 stocks that gained, while 5 declined out of 12 securities that traded. Trading volume and value fell sharply from Friday’s levels.
At the close the stock had a bid of $4.35 to buy 15,000 units, 10,200 units was the lowest offer at $4.80.
The market index gained 29.34 points, to close at 2,326.19. Market activities ended with 8 securities closing with bids higher than their last selling prices and 3 ending with lower offers.
ICI Jm sum 19-09-16Trading ended with 835,628 units changing hands, 83 percent less than on Friday, while the value traded dropped 87 percent, with $4,086,204, compared to $32,514,713 changing hands on Friday.
At the close, Caribbean Cream closed trading with 133,630 shares changing hands at of $9, earlier in the trading session the stock traded at $9.50. Caribbean Producers traded just 13,000 shares and rose 15 cents to close at $3.60. Consolidated Bakeries closed with a loss of 1 cent at $2.43 with 105,051 units changing hands. General Accident closed trading with 81,654 units, to close at $2.20, with a 9 cents loss, Honey Bun gained 32 cents in trading 4,300 units to end at $5.85, ICI jm trade 19-09-16 Jetcon Corporation fell 15 cents and ended at $4.15 with 65,867 units changing hands, after trading at new record high of $4.40. As was the case on Friday, Key Insurance has not traded but seems set to trade at a new low with the offer still at $2.38 compared with the last sale of $2.49, there were no bids on the stock at the close. Lasco Distributors closed with 76,600 units trading and ended with a loss of 15 cents at $6.90. Lasco Financial fell 20 cents with 14,000 shares changing hands to close at $3.10. Lasco Manufacturing closed at $4.90 with 177,726 shares trading, Medical Disposables traded 129,000 shares and closed at $4 and Eppley 9.5% preference share, gained 39 cents in trading 7,100 shares, to end at a 52 weeks’ closing high of $6.50, after trading as high as $7.

Buy stocks before the explosion

Image courtesy of suphakit73/FreeDigitalPhotos.net

Image courtesy of suphakit73/FreeDigitalPhotos.net

Stocks in the main market are hardly moving in any direction currently with prices up one day and down another and with the all Jamaica index gaining just 6 percent to date. That is not the case in the junior market, as investors seek out what they see as undervalued stocks and in the process drove up these stocks 27 percent for the near nine months of the year.
Both markets have some appealing choices that offer investors a great deal of potential upside. Investors have been making big mistakes by ignoring these opportunities. The errors keep showing in junior market stocks where many wait until prices start to move before trying to buy, at which time the volumes dry up and prices have to move steeply for sellers to be induced to dispose of stocks. Recent cases in point are, ISP Finance, the stock was available under $3 but there were very few buyers, now there are many buyers with bids in the $6 region, a level at which there has been no stock offered for sale since it traded nearly 23,000 units at $6, earlier in September. Jetcon Corporation is another case, with the stock trading below the $3 level for a long time until recently, even as the profit of the company is running at almost twice the pace of 2015, now they are more investors interested at the higher prices at a time when the supply has evaporated. Caribbean Cream is yet another, with IC Insider pointing to strong increase in profits for a long time, now buyers are in at much higher prices but supply is limited. tTech is yet another example with the stock trading for a long time in the $4 region now there is virtually no supply as interest in the stocks grows.
KremiIceCreamConesFREE280x150While some investors focus on trailing quarterly earnings as the basis for valuing stocks, they tend to miss out on companies with explosive growth in profits. There is also the tendency to ignore one off time items. The case of Caribbean Cement is an excellent one. A Brokerage house has the earnings at just over $2 for 2016, but the ongoing earnings are likely to be in the $5.50 region for 2016 and this is what they should be using to value the company. Investors seem to miss the main point. The company incurred cost for reducing labour which will show up as lower operating cost in future periods, but investors don’t seem to appreciate that fact, added to what now appears to be an economy that is growing and could grow even more making Cement, a huge buy. The same can be said for National Commercial Bank and Scotia Group that are having a great 2016.
An indication of where values could reach based on this year’s earnings can be gleaned from three stocks selling at PE ratios that are 16 to 17.5 times this year’s earnings with 11 out of the 29 junior listings having a PE of 10 times or more with, an average of 13.5. The average of the junior market is now at 10 times 2016 earnings with several stocks selling below. In the main market the top 11 stocks average PE is just over 15 with the overall average for the market at 9.
Based on close of the market on Friday the stocks to watch in the coming week are AMG Packaging that fell back sharply in the past week and is on IC Insiders top 5 junior market buys, Blue Power with limited supply. Cargo Handlers still in demand with the announcement of the 10 to 1 stock split and with the bid at $87.05 versus the last sale of $86.10. Caribbean Cream with limited supply and increased buying, Honey Bun with good demand and declining supply, but the price could be heavy with a PE of 17. The 2016 fiscal year ends this month, so investors may want to focus on the 2017 numbers as the main reason for buying. ISP Finance with no supply but with bid at $6.50 compared to last sale of $6 and with the success of the $150 million bond issue, could move if some supply appear.
Scotiabank with profit up 47% for the July quarter the stock could be very active this week.

Scotiabank with profit up 47% for the July quarter the stock could be very active this week.

Jetcon Corporation has seen increased demand come to buy with the stocks still in the IC Insider’s top 5 list. Knutsford Express, Lasco Financial, Medical Disposables, Paramount Trading with no stock on offer and tTech could all make positive moves. Keep an eye on Key Insurance that is set to fall with disappointing interim results reported recently, there is no bid to buy the stock which is offered for sale at $2.38.
Main market activity has been fluid, there are no indications from Friday’s trading, that there will be much change. Investors should keep an eye on Barita Investments, IC Insider’s Top stock in the main market, with bids at $3.51 at the close on Friday, compared with a last sale price of $3.25. There are currently only 5 offers on the board, amounting to 70,000 units and Scotia Group that is set to report earnings for 2016 in the region of $4 per share, after reporting a 47 percent jump in the July quarter. Investors may want to keep an eye out for Cable & Wireless that could well report decent profit for the 12 months to March next year. Note the company’s year end is set to change to December.

10 Stocks to avoid now

Junior market stocks gained 27 percent for the year to date but those in the main market have gone up just 6 percent over the same time. Seven stocks in the junior market have more than doubled two gained just over 90 percent and one over 80 percent.
Btt 5 jm-mm -18-9-16In contrast the main market highest gain is at 93 percent followed by 64 percent. The above data points to the need for selective investment decision making to get the best out of investing in the stock market. Last week IC Insider started a list of top 5 stocks in the main and junior market. This week we introduce a list of the top 5 stocks to avoid at this time as some seems fully valued based on appreciation recently or in some cases the companies are not performing well. The list will be reviewed weekly and updates published. Even these stocks appreciate in the medium term they are likely to lag gains in the overall market.

Derrimon in Paramount out – Top 5

AMG Packaging is IC Insider's top junior market stock for growth in the next 12 months.

AMG Packaging is IC Insider’s top junior market stock for growth in the next 12 months.

Paramount Trading jumped 25 percent from $14 to $17.50 for the week ending September 16, pushing it out of the IC Insider Top 5 junior market stocks, allowing another trading company, Derrimon Trading, to enter the list in its place.
Paramount Trading price movement is directly related to limited supply of the stock. There are good prospects for increased earnings to flow from expansion into the processing of lubricants, for the local market. Production is expected to get on the way in the first quarter of 2017. With a PE ratio of 7.6 times 2017 projected earnings, the stock remains attractive. With the limited supply, the stock seems a prime candidate for a stock split later this year.
Jetcon Corporation seems set to move out of the top 5 by the end of the week, if the trend of increased demand and limited supply continues. During the past week, the stock gained 24 percent based on the closing bids that were higher than the last sale price. AMG Packaging fell sharply in the week and has pushed the stock to top of the list, while Medical Disposables has moved down to 3 due to a revision downwards of earnings to 60 cents per share and an increase in the stock price.
Top 5 jm-mm -18-9-16rDerrimon enters as number 4 but the company is highly leveraged but expanding. Derrimon Trading reported slightly increased profit of $32.2 million or 12 cents per share up from $30.6 million in the June quarter with profit of $58.5 million compared to $51.2 million for the six months to June, with 3.5 percent growth is sales in the June quarter and 6 percent for the six months year over year. Other income grew but the company’s share of associated profit fell in both periods, while costs were held tightly.
Barita Investments is the only stock in the top 5 main market list, to show any major change, with the bid moving up to $3.51 at the close of the week and seeming set to trade in the $4 region sooner than later, with limited supply on the offer.