News, Views & Advice from Investors's Choice
Keep an eye on these stocks for movement | There aren’t many changes to this week’s posting compared to last weeks’. We added two new ones in the junior market as the Lasco companies gain interest from the approved stock split of 10 for 1 and one for the TTSE.
Monday, 1st July 2013 | As was the case on Friday, authorised dealers bought much more foreign exchange than they sold. Unlike Friday, when the excess buying over sales is an unusual occurrence, today’s trades are in line with the long term market trend where Mondays are usually the highest day for inflows as week-end flows are sold into the financial system.
The total amount of purchases on Monday amounted to US$41.6 million, more than $9 million over Friday’s purchases of US$32.2 million and the amount sold amounted to US$33 million, $8.6 million more than Friday’s US$24.5 million. While the actual selling of US currency was $7.4 million less than purchases of $38.26 million.
The selling rate for the US dollar inched down by just 4 cents and the buying rate went up by 7 cents. There was also more buying of Pound Sterling and the Canadian dollars than the amounts sold to end users.
The average selling rate for the Canadian dollar gained 14 cents while the buying rate fell $1.43. The rate for buying the Pound, which fell $1.18 on Friday, declined further by $1.21 to close at $151.54 and was down only 40 cents on the selling rate which ended at $154.07.
There were no changes for the minimum buying rates for any of the currencies, while the highest buying rates moved up by 10 cents for the Canadian dollar and also went up for the selling rates with the highest climbing 70 cents and the lowest by 20 cents. The highest buying rate for the US dollar moved down by 15 cents as the highest selling rate moved up 53 cents with no change for the lowest selling rate. The Pound declined for the highest buying rate which fell by $1.50 and the highest selling rate moved down by $1.12 and 10 cents for the lowest selling rate.
Monday, 1st July 2013 | While the junior market index continues to advance towards the all-time high of 811 points, the main market indices fell moderately as investors try to find acceptable prices to execute trades.
Based on the recent rise in the prices of many stocks, it’s hard to see how this stalemate will change in the short term without new information to entice investors to view stocks as attractive to acquire now, rather than later. Although the majority of the indices fell today, the advance decline ratio was just able to remain positive as 8 stocks gained to 7 that declined. Trading levels of 4.7 million shares was half of Friday’s, but even less was expended as only $38 million traded compared to $116.17 million invested on Friday. Three stocks closed with the last selling price reaching an all-time record. These are Blue Power at $11, Lasco Distributors at $16 and Lasco manufacturing at $16.
Carreras shares gained 27 cents to $52 as just 9,096 units valued at $482,000 traded, JMMB closed up 50 cents as Scotia Investment bought the bulk of the 1,093 million units that traded, with the stock closing at $8.50. Active offers for JMMB is now at $9.25 an indication that the supply at recent market prices is drying up, but investors may well sell below this price as there is a big gap between bids of $7.72 and offers prices. Sagicor Life traded 248,000 units valued at $2 million as the price slipped back by 18 cents. Scotia Group traded 176,000 units, valued at $3.7 million and lost 31 cents in the process.
The supply of Cable & Wireless share on offer at 15 cents fell below the 30 million mark at the end of trading as the amount offered is now at 29.88 million units. RJR has a bid of $1.23 to buy 4.79 million shares as this stock has had a fair volume of trading recently.
Junior market | Eight junior market stocks traded as Lasco Financial, continuing to respond to the 10 to 1 stock split, closed at $12.70 down 30 cents on Friday’s last traded price with 101,185 shares trading between $12.60 and $13. Lasco Manufacturing also responding to the announced stock split, traded over 736,000 shares, closing at $16 up by 40 cents with $11.66 million invested, while Lasco Distributors closed at $16 after trading at a record high of $16.50 with only 206,408 units valued at $3.37 million trading. Caribbean Cream traded down 15 cents to close at $1.05 with 350,000 units changing hands. Blue Power closed at $11 up $1 on the last selling price with 38,000 units but the offer was for 303,000 units at $10.50 at the end of trading. AMG packaging traded 27,800 shares at $4.20.
IC bid-offer Indicator | At the end of trading, the Investor’s Choice bid-offer market sentiment indicator shows that bids for 3 stocks were higher with 1 stock having an offer lower than the last selling price.
Monday, 1st July 2013 | The West Indian Tobacco Company marked a new all-time high, increasing by $3 to end the day at $120 as it traded 1,861 units between $117 and $120 the last traded price. Scotiabank declined by $0.21 to close at $69.75 while trading 3,600 shares valued at $251,100.
Overall market activity resulted in 10 securities trading of which 2 advanced, 4 declined and 4 traded firm.
Trading in the main Market took place in 193,120 units valued at $1,004,310 and Clico Investment Fund traded 165,350 shares valued at $3,802,530 in the mutual fund segment. Trinidad Cement had a volume of 169,589 shares changing hands for a value of $161,110, followed by National Enterprises with a volume of 11,500 shares being traded for $182,980. Guardian Holdings contributed 4,750 shares to the level of trading with a value of $76,000.
IC indicator | At the end of trading, the Investor’s Choice bid-offer sentiment indicator shows that bids for 2 stocks were higher with 3 stocks that had offers lower than their last selling price.
The Jamaica Stock Exchange (JSE) prospectus to raise $107,865,000 is now released to the public for consideration with the issue scheduled to open at 9:00 am, Friday 5th July 2013. The Invitation is scheduled to close at 4:00 pm, Friday 19th July, subject to the right of the Company to close the Invitation at any time after it opens. The total amount of shares being made available will be 38.25 million units comprising 28 million being issued directly by the Jamaica Stock Exchange and 10.2 million by JMMB. JMMB is selling the shares they acquired when they took over the Capital Group, which put their holding at 18.18 percent, well above the threshold of 10 percent any one investor is allowed to hold as stipulated by the JSE articles.
The issue price | IC Insider computes that the stock carries a value around 10 times 2013 earnings, based on the assumption that trading activity continues for the rest of the year at the rate experienced in June. For the 12 months to December last year, profit of $93 million was reported but that figure included revenue from the sale of a board seat to Proven Wealth Management for $60 million, as well as large fee income from the purchase of Lascelles’ shares that were acquired by Campari last year and to a lesser degree the shares traded when Capital & Credit was acquired.
Existing capital | There are currently 112,200,000 (formerly 28 million) ordinary shares in issue and the new shares will bring the issued capital to 140 million units. The shares have a book value of $5.52 but earnings per share based on 2012 profit will be just over $0.83 and that figure is inflated by the non-recurring income mentioned above.
Profit after tax amounted to $5.8 million compared to a loss of $6.1 million in 2012. For the quarter ending March, the JSE’s income rose 8 percent to reach $69.5m compared to $64.4m in 2012. Other Operating Income increased by $5.5m or 32% over the same period, primarily due to an increase of $5.3 million in revenue from the JSE regional conference. Investment income of $22 million jumped $14 million over 2012 due largely to the gains on US dollar investments as a result of devaluation of the Jamaican dollar.
Positives | The number of shares to be issued is relative small but shareholding is limited to 10 percent of issued shares. The preference shares which was a debt instrument was repaid and these funds replace the amounts paid out. The stock market is not at its most buoyant but with interest rates having declined below ten percent and government slashing the fiscal deficit, rates could go lower. This development ultimately makes stock market investments more attractive and drive up trading volumes and therefore fee income for the exchange. The stock exchange plans for more instruments to be traded on the exchange but there are no imminent new listings that are known. The stock exchange is showing signs of greater activity this year but it has not reached a level to ensure that the JSE makes an operating profit. The JSE will benefit from listing fee income if the value of shares rise, as the annual listing fees are tied to the value of each company’s shares that are outstanding at the start of each year.
Negatives | The number of shares to be issued will not ensure a good level of liquidity for the stock, which will keep bigger investors away. There are no rules preventing existing shareholders from selling their holdings in partially or in full thus increasing the volume that could become available to the wider public. Short term profit prospects are not exciting suggesting that the stock is not very attractively priced relative to the rest of the market. The company has an oversized board of 19, resulting in an unnecessary waste of funds and an unwieldy structure that makes it more difficult to properly run board meetings and by extension, the company.
Revenues | The Company derives its revenue from a range of sources including the JSE cess, calculated on the value of each market transaction, fees charged for listing companies at the initial stage, annually, as well as any supplementary listings, membership, transactions, the registrar and trustee fees paid to its subsidiary company JCSD, amongst others, income generated from the provision of conferences, seminars and the e-Campus. The JSE has recently entered into a Memorandum of Understanding with the Bank of Jamaica to work towards the development of a fixed income trading platform for Government of Jamaica securities and corporate bonds. It is also conducting research into the development of exchange-traded products and other exchange-related products.
In summary | Stock markets are cyclical in nature resulting in peaks and troughs in earnings flowing from bull and bear markets. At this juncture, the market is in the process of moving into a bull market. Investors who buy the shares now are essentially buying at the lower end of the market. The levels of trading currently are a fraction of what they have been in the past, so the potential is huge going forward. The change in interest rates and the focus of government on controlling the fiscal deficit will ultimately have a huge impact on the fortunes of the stock exchange. Investors should not be looking for any big pay day any time soon from this stock.
In Friday’s foreign exchange trading, authorised dealers bought much more foreign exchange than they sold and in a late after hours release, Jamaica’s central bank again decided to mop up more local funds from the financial system.
The timing of the release isn’t isolated from the developments in the foreign exchange market. It seems that the CD issue is linked to what the central bank may consider to be holding of a long position in US dollar by financial institutions. According to the release from the bank, the issues are “to augment its liquidity management operations, the Bank of Jamaica will be offering two variable rate instruments commencing Monday, 01 July 2013 to Thursday, 04 July 2013. The release comes against the back drop of the day’s trading when authorised dealers bought more than US$32 million and sold only US$24.5 million with the rate for the US dollar hardly trading.
The instruments being offered are:
These offers are extended to all Primary Dealers and commercial banks, from 01 July 2013 to 04 July 2013. The term sheets for these Certificates of Deposit will be circulated via electronic mail to all Primary Dealers and commercial banks.
The Bank says they will continue to offer its regular 30-day Certificate of Deposit at the current interest rate of 5.75 per cent per annum.
This is the third CD offering within a month and is in conflict with the view that the government wants the rate of the Jamaican dollar to fall as well as utterances from government’s spokesmen that the continuing devaluation is to ensure that the country has a competitive exchange rate. The measures are meant to tighten liquidity which means that there will be less Jamaican dollars available to purchase foreign exchange thus resulting in either stability in the exchange rate or a revaluation of the currency.
Read more about the BOJ’s intervention in the FX market, Market demand is not driving J$, BOJ is click here.
In a market with stocks that trade at high PE ratios, this PE Chart shows the potential for price growth and bargains that can be had on the Trinidad Stock Exchange (as of May 2015).
Friday, 28th June 2013 | In today’s foreign exchange trading, authorised dealers bought much more foreign exchange than they sold, an unusual occurrence for a Friday. This seems to have signalled to Bank of Jamaica that speculation could be re-entering the market. As such, the BOJ initiated a pre-emptive strike in an after hours move in which they announced two Certificates of Deposit instruments to mop up Jamaican dollar liquidity and pry foreign currency into the NIR in the coming week.
The total amount of currency purchased on Friday amounted to US$32.2 million and selling US$24.5 million. While the actual selling of US dollars was nearly $6 million less than purchases, the selling rate inched down by just 1 cent and the buying rate by 11 cents. There was more buying of Pound Sterling and the Canadian dollars than the amounts sold to end users.
The average selling rate for Canadian dollar gained 4 cents and for the buying rate, 9 cents. The rate for the Pound fell all of $1.18 for the buying rate to close at $152.75 and was down only 6 cents on the selling rate.
Traders dropped the minimum selling rate for three currencies between 5 cent and $1.94, while the highest selling rate hardly changed. The highest buying rate for the US dollar moved up 20 cents but for the Canadian dollar it fell by 20 cents and the pound was also off 50 cents.
Friday, 28th June 2013 | The junior market index was the only one to advance today surpassing the 800 point level for the first time since November 11, 2011 and is now within a stone throw from the all-time high of 811 points. Although the majority of the indices fell today the advance decline ratio was once again positive with 7 stocks moving up in price whilst 3 declined. Trading levels picked up as 8.19 million shares changed hands with a value of $116.17 million.
There was heavy trading in Carreras shares which fell 77 cents to $52 as 1.146 million units valued at $60.7 million traded, Sagicor Life traded 1.456 million units valued at $12.45 million, Scotia Group traded 563,000 units valued at $11.9 million, and Seprod traded 285,000 units at $4.14 million. Cable & Wireless, which has more than 30 million shares on offer at 15 cents, traded 650,000 units 15 cents each. Jamaica Producers gained 45 cents to close at $18.50 with nearly 25,000 shares trading, Sagicor Investments gained 49 cents but hardly any shares traded.
Proven Preference shares traded 1.7 million units at a value of $8.7 million.
Junior market | Nine junior market stocks traded, as Lasco Financial closed at an all-time high of $13 gaining a $1 in the process, having traded 162,300 share between $11 and $13. Lasco Manufacturing traded over 300,000 shares closing at $15.60 while Lasco Distributors closed at $15.90 with only 73,600 units trading. Consolidated Bakeries moved back to $1.60 at the close while trading 847,000 shares. AMG packaging which had put on 20 cents yesterday while trading a very small amount, closed at $4.20 today with 55,613 shares changing hands and lost 50 cents.
The junior market is in the golden cross which indicates that further big increases are ahead.
IC bid-offer Indicator | At the end of trading, the Investor’s Choice bid-offer market sentiment indicator shows that bids for 1 stock was higher with 2 stocks that had offers lower than their last selling price.
Friday, 28th June 2013 | The West Indian Tobacco Company recording a new record trading at 52 weeks high when it closed up by $1 at $117, as 3 stocks enjoyed positive changes in price with only 5 stocks trading with a volume of 217,976 shares valued at $8,117,281.
Neal & Massy Holdings had 94,995 shares changing hands for a value of $5,604,705. Republic Bank traded 10,663 shares at a value of $1,173,112. Angostura Holdings traded 92,274 shares for a value of $830,466. National Flour Mills contributed 15,800 shares to the total amount that traded, with a value of $12,450.
IC bid-offer Indicator | At the end of trading, the Investor’s Choice bid-offer market sentiment indicator shows that bids for 2 stocks were higher with 4 stocks that had offers lower than their last selling price.
