Carib Cement bad news say buy

CCC GteJamaica’s sole cement manufacturing company Caribbean Cement, reported a fall in profit from $621 million in the June quarter of 2015 down to only $221 million and for the six months to June $1.05 billion versus $869 million.
Investors seemed to have focused more on the fall in the quarter than on the details of the results and the clear message sent by them. As a result, the stock was sold down to $19.25 from $23 the prior day, with very few buyers at the close, but investors who sold were making a bad decision. This is a classic case of bad news is indeed good news. For one, revenues climbed 9.6 percent in the quarter and 10.3 percent for the half-year but local sales of cement are up a very strong 27 percent. “Despite a reduction in export cement and clinker volumes by 8 percent and 77 percent respectively, total revenue increased by $777 million. This was mainly due to an increase in domestic cement volumes by 27 percent arising from increased projects and strong retail demand. Improvements in operational efficiencies, effective control of fixed costs, lower financing costs and lower energy costs, contributed to the improvement in earnings before interest, tax, depreciation, amortisation, manpower restructuring costs,” the directors’ report to shareholders stated.
CCC fact - 14Importantly, the cement company took a charge for manpower restructuring, amounting to $421 million, a huge positive development and augurs well for improved profit margin and increased profits going forward. In addition there is a charge for excess inventory amounting to $400 million, this is one off and therefore unlikely to recur. Stripped of these costs, earnings would be up by 63 percent to $1.16 million before tax compared to $708 million in 2015 that includes one off income of $168 million for the quarter and pretax profit of $2.1 billion versus $996 million in 2015.
Not only will the cost for redundancy not recur for the current set of staff being severed, it should results in savings in a year, in the region of the sum expended.
During the twelve months to June, the company repaid Trinidad Cement, its parent, loans and other debt $1.6 billion leaving only $556 million more to be paid. Cash funds were left at $788 million after more than $600 million was added to fixed assets since June 2015. At the pace profits are coming in the accumulated deficit of $4.6 billion will be wiped out in 2017.
IC Insider’s forecast for full years earning form normal operations is $4.75 which excludes the one off cost leaving the stock strongly in the buy column. The stock is listed on the main market of the Jamaica Stock exchange and closed at $22 on Friday.

Lasco companies batter US$ investment

Lasco Distributors closed at a new high on Thursday of $4

Lasco Distributors closed at a new high on Thursday of $4

On June 9, 2014, a reader wrote in with the question, “I respect your learned opinion and analysis in financial matters. In this regard, kindly advise if possible as to your views on Lasco Financial, Distributors and Manufacture. Do you believe that these stocks are likely to perform well in the short, medium and/or long-term.
The prices have declined compared to when I bought them and I am concerned about the potential for further decline as the dollar continues to devalue. Should I just cut my losses and sell and convert to FX.”
The prices on June 6 last year were as follows – it took J$111.37 to buy US$1 and now its roughly $120, an increase of just 7.7 percent. Lasco Distributors traded at $1.32 then and is now at $4 for a gain of 203 percent, Lasco Financial Services traded on June 6th last year at $1.15 and gained 156 percent to trade at $2.95 on Friday last week and Lasco Manufacturing was at $1 in June 2014 and has gained 180 percent up to Friday last. It is clear from the above which investment was the better one to have made. Those stock while doing very well have not been the best performing on the local market since then. Cable & Wireless traded at 29 cents in the 2014 period and last traded at $1.05 a 262 percent gain, Desnoes & Geddes was priced at $4.25 and is now at $30, the Jamaica Stock Exchange was then priced at $1.95 and has increase by 464 percent and Caribbean Cream moved from 75 cents to $4.35 for a gain of 480 percent.
IC Insider’s response, thanks for your enquiry. As you will see our BUY RATED list contains these three stocks. Here are our views. First off the local stock market tends to go down around May until last June or July. This is not cast in stone, just a tendency. One reason for it is that investors get the full information as to what companies did last fiscal year and a glimpse for the new-year. In the case of the three Lasco companies they have just reported their full year results. The distributorship earning is the most encouraging of the three and looks like it will probably do better than the other three in the short to medium term. It will also benefit from the Salada Foods distribution which started this year, as well as from increased production to come from the expanded Lasco Manufacturing company’s operation. The information suggest that the next set of results should possibly show growth over that of 2013.
Lasco Financial seems poised for good things, but big marketing spend last fiscal year kept profits down as they went for more market share. It does look as if they will be spending on the world cup promotions which could build business, but may also keep profits pressured somewhat for a while.
Lasco Manufacturing seems cheap at $1 bearing in mind the impact that the factory expansion is likely to have on both sales and profits ultimately. Short term they will have to pick up interest cost and depreciation on the completed factory but will enjoy cost savings and ultimately increased profits.
One need to be careful of converting to foreign exchange at this stage, as the big move in the FX trade could be over. You may have to hold the stocks for a while but the investment could pay off in the medium term, more so in the case of financial and distributorship, during 2014. We would want to see he Q1 results for Manufacturing before jumping.
It is our view that the market overall, is undervalued but investors will need to be patient and the payoff is likely to huge for those who wait, the gains to be reaped elsewhere is not likely to be all that great, to cause one to jump and possibly miss the gains in the local market that is ahead.

What is a Unit Trust?

Jamaica Unit Trust started the first unit trusts in Jamaica

Jamaica Unit Trust started the first unit trusts in Jamaica

Jamaican investors have been blessed with an array of investment opportunities right here in Jamaica, that they can make superior returns from. They just need to know where to look. An easy way, is to leave the choices up to professional managers to make the individual investment decisions.
The investment choices are many, some are quite simple to invest in while others required skills developed over time. For example the stock market may well be the market that delivers the highest returns, but investing successfully in stocks, requires knowledge about the workings of the market as well as a good assessment of the company to invest in as well as learning when to get in and out of a stock. On the other hand investing in Unit Trusts requires little knowledge of the assets the funds invest in, as the reliance should be placed on the management of these funds. In this regard the pass success over time is often a good indicator to be followed when investing in these funds.
An equity linked unit trusts are ideal for persons who want higher returns that the stock market offers without the having to do all the work in identifying the best stocks and the most opportune time to trade stocks, the same applies to fixed interest instruments.
What is a unit trust? Unit Trusts pool funds from numerous investors to invest in a variety of securities. The Trusts are governed by statutory regulations and their own trust deeds which set out the powers and limitations of the management of the funds. One major feature of unit trust is that of diversification of investments especially in the equities. This factor may reduce the growth potential of such funds but it acts as a great protection for investors. Local unit trust prices are quoted daily and are published in newspapers twice per week. The managers of these funds charge a fee for their services which is either taken out at the time of investment as well as an ongoing fee based on the size of the funds.
Upon till a few years ago, there are two main funds managed by fund managers these are equity or money market based. Fees can eat into the returns of investors especially in the case of money market funds. Recently, more funds were added, to include, real estate, foreign exchange and venture capital.
Returns on the money market funds should hover around rates paid on fixed interest securities less the fees the managers get.
When choosing funds to invest in, past performance can be a good guide but not always. Recent top performing funds could be the ones to look at first but it may be useful to look at a longer term period say the last 5 years to see how consistent management has been in delivering the returns. It is useful to determine what financial assets are in the fund at the time that investment is contemplated to see if they are appropriate.
Who are the persons behind the management decisions is the most important. An investment committee that makes decisions as opposed to an individual can make a big difference. Committees respond slowly to changes in market sentiments while individuals can move more swiftly but a committee may well protect against bad decisions. Size can make a difference in performance. A big fund is less nimble than a smaller one.

NCB whips Alibaba in stock gains

Add your HTML code here...

NCB stock beat Alibaba street and lane

NCB stock beat Alibaba street and lane

One aspect of successful investment is not to go after every fad that’s out there. Since the US stock market bottomed after the 2007 collapse and started moving up and the FED kept pushing interest rates lower, the rage has been the gains to be made in this market.
But investors ought to note some elements of successful investments. Markets don’t go up or down for ever. The role interest rate plays in market movement don’t seem to be fully appreciated by many. This applies to real estate, stocks and bond investing alike.
Some feel that Jamaican real estate is cheap, because of crime but that is only a fraction of truth. The undervaluation is tied to high interest rates that require a higher rate of return on investment to compensate, hence a lower valuation of properties. The US stock market has been fueled a great deal by super low interest rates, not unlike what happened in the real estate boom prior to the fall in 2007.alibaba
When rates start reversing there is going to be some shake out. Rising interest rates and uncertainty drove down stocks value in Jamaica since 2013. Last year Interest rates started to fall and the local stock market started to respond by June last year, slowly at first, but it gradually gathered momentum and by October really started to move up and cumulating in a rise of 36 percent in the main market stocks since.
Jamaica has undergone a very long bear market, possibly the longest in history, having peaked in 2005, but more so since 2009, when the market fell in response to higher local interest rates. It was the sort of market that causes some investors to want to give up. On the other hand the US market gave the impression that one cannot go wrong by investing therein. The chart below tells why one should be careful when entering markets after several years of strong gains and to focus on investing in stocks that are severely undervalued instead. The payout in one, is highly risky and there are huge payoff for investing in undervalued ones. Its will just be a matter of time for the break out to take place.
Around November last year, an investors sold out National Commercial Bank shares to invest in the newest investing fad at the time – Alibaba. NCB alibaba Grph 2015At the time Alibaba was around US$100 and NCB was sold around J$17. The chart below tells how wrong the investor was. NCB shot up 79 percent in Jamaican Dollar terms. Dividends payable adds to the NCB returns less the effect of devaluation of the Jamaican dollar which still leaves a huge gain. On the other hand, Alibaba is now at US$81 and looks like it may well head lower while NCB is definitely heading higher. the details above indicates that all that glitters is not gold, but it indicates how tough a lesion some investors have to learn to make money.

Lasco shares sell & buy FX or hold

Lasco cambioOn June 9, a reader wrote in with the question, “I respect your learned opinion and analysis in financial matters. In this regard, kindly advise if possible as to your views on Lasco Financial, Distributors and Manufacture. Do you believe that these stocks are likely to perform well in the short, medium and/or long-term. The prices have declined compared to when I bought them and I am concerned about the potential for further decline as the dollar continues to devalue. Should I just cut my losses and sell and convert to FX.”
Our response back then, thanks for your enquiry. As you will see our BUY RATED list contains these three stocks. Here are our views. First off the local stock market tends to go down around May until last June or July. This is not cast in stone, just a tendency. One reason for it is that investors get the full information as to what companies did last fiscal year and a glimpse for the new-year. In the case of the three Lasco companies they have just reported their full year results. The distributorship earning is the most encouraging of the three and looks like it will probably do better than the other three in the short to medium term. It will also benefit from the Salada Foods distribution which started this year, as well as from increased production to come from the expanded Lasco Manufacturing Company’s operation. The information suggest that the next set of results should possibly show growth over that of 2013.
Lasco Financial seems poised for good things but big marketing spend last fiscal year kept profits down as they went for more market share. It does look as if they will be spending on the world cup promotions which could build business, but may also keep profits pressured somewhat for a while.
Lasco Manufacturing seems cheap at $1 bearing in mind the impact that the factory expansion is likely to have on both sales and profits ultimately. Short term they will have to pick up interest cost and depreciation on the completed factory but will enjoy cost savings and ultimately increased profits.
US$ 100At this stage one need to be careful of converting to foreign exchange , as the big move in the FX trade could be over. You may have to hold the stocks for a while but I would think that the investment will pay off in the medium term, more so in the case of financial and distributorship, during 2014. I would want to see he Q1 results for Manufacturing before jumping.
It is my view that the market overall, is undervalued but investors will need to be patient and the payoff is likely to huge for those who wait, the gains to be reaped elsewhere is not likely to be all that great, to cause one to jump and possibly miss the gains in the local market that is ahead.

Why Dividend matters

Investing in stocks is not only for those big capital gains that create excitement for many investors. Dividends are an important part of the investment returns, but are often underestimated. They carry additional message, than the pure pay out of profits to shareholders. Dividends provide cash flow while one waits on a stock to increase in value. Stock prices move up and down over time.
Div cert 2014-09-23 001Because of such movements and that sometimes, good companies have bad patches, when profits fail to grow much and can hold the stock price down for long periods, investor can just collect dividends while waiting on the return to stock price growth. Look at the example quoted below, while the stock price gained nearly 700 percent, since the end of 1993, the dividends have grown by over 2,000 percent in the same period. The exciting thing is that investors got paid every year since 1993. The amount accumulated over that time is large, amounting to $23.58 cents per share or more than the increase in the stock price.
Best Signal| The level of payment or future payments, may well be the best signal that investors will get from within a company that the stock price is set for upward movement. Dividend yields on stocks usually fall well below the interest paid on government paper. History dictates that yields usually return to their norm over time. We can use the level of present or future dividends as a predictor of stock prices. At the heights of the stock market in Jamaica, dividends yields fell to round two percent on average. Yields currently are 7% for many stocks, in the case of Carreras well over 10 percent, suggesting huge gains ahead for stocks, not taking the sharp fall in interest rates, locally into consideration from high teens.
High priced stocks| New investors should not be afraid of what some persons will regard as expensive or high priced stocks, if they have the qualities to rise in value above lower priced stocks. The absolute price of a stock is not determinant, if an investment in it is warranted or not.
History confirms that a good dividend policy will provide an attractive rate of return on original investment over time. A very good example is bank of Scotia Group. In 1993 they paid out $220 million or fifteen cents per share but paid out $4.98 billion or $1.60 as dividends, this fiscal year. The stock price at the end of 1993 was just over $3 and is at $20 now and yet the stock is undervalued presently. Those returns happened during one of the most turbulent periods, in the local capital market.
AFS graph of EPS 9-14Useful indicators| Some useful indicators to follow are, financial results, one wants to see a nicely rising trajectory of earnings. Take the chart of Access earnings and revenues this is a excellent example of the picture an investor ought to be looking for. It is not surprising that the stock price of Access has done so well since it was listed.
Information such as major expansion, could mean increased sales and with that profits ahead. Developments within the economy, lower interest rates are major factors that influence the movement of stock prices. An increased dividend payment is another good indicator that things will be better going forward, as companies are unlikely to increase dividends, if profits are not growing.

Are Jamaican stocks on the verge of a breakout?

J-stks1Stock markets can be like tsunamis, the change in the current is not seen as it moves out of site until it’s time for all to see what’s been happening. That is one reason investors are often advised to invest in stocks that enjoy good profit performances, as there is no certainty when markets will move in one direction or another.
Profit drives stock prices, one only has to wait on the pay day, which will surely come. What does this have to do with the local stock market? Many investors wrote off any chance that the local market would have any recovery after the spring decline coming against the strong demand for foreign exchange, not aware of the market’s history.
A critical point, investors in local stocks should note, is that the best times to start buying stocks is during the summer months. The Jamaican stock market bottoms and starts to move upwards in more summers than at any other time in its history, this goes back to the start of the creation of the market index, back in the early 1970s. For 2014, prices on the Jamaica stock market declined a bit from its earlier 2014 high, with several stocks hitting 52 weeks’ lows into the early summer months, with the Main market hitting a low on June 23 and the junior market on August 4.
Recent developments| The average person may look to changes in the market indices to guide them in what is happening in the market. And yet others will wait until the news headline say stocks are rising. The problem with this approach is that indices movements cloud what may be important shifts in values and prices and when the main news highlights what is happening in the market much of the gains are gone. From the end of August to September 19th this year, the all Jamaica index rose by 1 percent while for August it remained flat. The junior market index rose 3 percent in September so far, but was flat for August. But something else is happening that bode well for continuation of an upward move of the market. More importantly, upward move for some stock prices. In September up the 19th on 53 percent of trading days, the all Jamaica index rose while for the junior market it is 60 percent and with the month not ended the ratio could improve. In August the ratios are 42 percent and 48 percent respectively. The advance decline ratio tells a far better story than the indices movements. The main market had only 7 days when the advance decline ratio was negative and so far for September that number is just 4 with 7 trading days to go before the month ends.
Interest Rates| Rising interest rates drive money out of stocks into other investments, the reverse is also true falling rates drive money into stocks to position for better returns in the stock market. Interest rates on government Treasury bills have been declining since May and flows in the forex market are buoyant with the local dollar remaining stable. Technically, the main market is seeing the short term moving average on the verge of crossing the medium term moving average, a bullish sign. Importantly, many listed companies have been posted some attractive results for 2014 that is supportive of an upward push in their stock price. These are positives that will help the market.

Scared of investing in stocks you need not

Many persons are scared about investing in stocks but they need not be that afraid even as markets have gone through major changes since 2007. It is not only the stock market that felt the impact. The real estate market that many swear by, suffered declines as well as demand for real estate worldwide fell.
JSE index mvmntThe Jamaican stock market has languished at a low level, since 2008 when it fell to 60,952.64 on April 28, 2009 from an all-time high of 138,917.59 points on January 24, 2005. Since then, the market regained a fair amount of what it lost by moving to 118,353 points on February 2008 but fell sharply in the second half as a result of the year, in response to the world economic crisis and Jamaica’s response to it. The market has moved up from the low, but has struggled ever since as Jamaica underwent changes in government, several major economic policy shifts and long periods of uncertainty.
Knowledge matters|Like anything else, having knowledge will be a big help. For starters new investors can take simple steps. Follow some simple rules. Never get emotional about an investment. Don’t follow hypes and fads. Keep it simple. The best way is to start the investing small amounts that one can allow to stay invested for a long time if needed. Invest in good quality companies with long term prospects, with time and more knowledge, the time frame can be shortened if the investor is comfortable.
Profit drives stock prices| A good place to start, is the financial statement of listed companies. Most carry a ten year table of historical results. The simple approach is find companies that have regular increases in profits over time. Keep this most important investment adage in mind at all times, increased profit is the major driver of stock prices. If profits keep on rising stocks prices will eventually respond. Quarterly profit performance is also important. If an investors can find a good investors who knows the market, then they can get advice from them but having more than one opinion is always useful. Keep a journal, indicating what advice is received and by whom and why you are investing or not. That will help you to know who ca be relied on as well as let you understand what causes stock prices to move. All in all to become successful at investing practice becomes perfect.

The best time to buy & sell stocks

J-stks1The best times to sell stocks, is generally, in late April to mid-May and the best times to start buying is during the summer months. The Jamaican stock market bottoms and starts to move upwards in more summers than at any other time in its history and this goes back to the start of the creation of the market index, back in the early 1970s.
The above two periods have been very visible when the market movements are analyzed from the start of the local stock market. No wonder the simple adage, “sell in May and go away” has been bandied around as what appears a casual investment comment, there is more than just talk as the facts support it. History suggests that it really should read, sell in May rest awhile but start your buying in July. For 2014 prices on the Jamaica stock market declined a bit from its earlier 2014 high, with several stocks hitting 52 weeks’ lows into the early summer months. The decline was taking place against the back ground of an increase in interest rates and slippage in the value of the Jamaican dollar, encouraging some investors to exist the local stock market for US dollar based investments. At a glance to the casual observer it may appear that this is a negative trend that would take the market much lower, it did not do happen. The history of the market as well as technical assessment of it suggest, otherwise. The local bear market has gone on for as long as any other and much more than what has been a 4-6 cycle of decline before a bull market sets in. When markets go through long periods of hibernation, investors lose interest, as they don’t see the market turning anytime soon, but that usually is the genesis of a new bull run. Demand declines but so is supply. If companies report improving results then the smart investors quietly picks up stocks cheaply waiting for the inevitable up turn.

Calculating Treasury Bill interest income

GOJ TbillNew issues of Treasury Bills are offered on a regular basis by governments all over the world, to fund their short term financial obligations, but not everyone knows how the income payable on them are computed. Unlike regular bonds where the rate of interest to be paid is stated on the face of the instrument, that is not the case with treasury bills. .
The bills are usually of 30 days, 90 days, 182 days and 365-days duration but may vary by a day or two in each case. The rate of interest paid on these instruments is determined by an auction system. At these auctions investors predetermine what rate of interest they want and made an offer in writing ahead of the closing time prior to the bids being opened. The lowest rates are satisfied first. If the amount offered for sale by the government is oversubscribed, then those with rates that are higher than the rates on those amounts that equate to the amount offered, are rejected.
These bills are sold at a discount below the face value that the holder receives at maturity and requires the buyers to quote their bids lower than the maturing amount. For example one may bid at a price of $97 per $100 of 91 days Treasury Bills giving a discount of 3 percent. The discount rate is the difference between the lower price paid for a security and the security’s face value, adjusted for the maturity of the issue. It is calculated as follows:
((face value-purchase price)/face value) x (365/term) x 100 = discount rate. Using this example the discount rate for an instrument of 91 days will be computed as follows:
((100-97)/100) x (365/91) x 100 = 12.03%. ((face value-purchase price)/purchase price) x (365/term) x 100 = yield. The annualized yield, or the actual rate of return per year, is calculated as follows:
((100-97)/97) x (365/91) x 100 = 12.41%.
The amount of treasury bills offered, are published by the central banks who act on behalf of the governments and may be purchased either directly by investors or through brokers. There are usually set dates each month for these issues. Information published for each tender are those relating to the dates of issue, maturity, the closing and settlement.