Cement developments

Carib Cement silos.

There is some amount of excitement in the air, regarding developments in the Jamaican economy. Many investors are interpreting see the change signaling meaningful growth that will lead to increased demand for cement as developers increase their building activities to meet a growing demand for housing and commercial space.
According to Anya Levy of ReMax Elite realtors, demand is extremely high for space to accommodate Business Outsourcing Operations as foreign operations fall in love with the opportunities Jamaica is offering. The problem she states, is that the demand is mostly for 30-60,000 square foot space that is currently is in short supply. In a number of cases, existing commercial space is being converted to meet demand. But it is not only in the commercial arena that there is demand she states.
There are lots of residential units coming on stream. The Millsborough area in Kingston, is slated she says for some major developments for Townhouses in the US$500-600,000 price range. More units are expected that will be similar to the high rise 20 South building going up on South Avenue in Kingston, with another slated to be constructed next door to it. The story does not end there, Levy states that a number of units to be built in the country largest city, will be slated for the short term rental market.
All of this means more demand for cement. Investors expect, the country’s sole cement plant to benefit from the surge in demand that is expected to flow form these new developments as well as the office complexes to be built by Grace Kennedy and the Ministry of foreign affairs in downtown Kingston. Added to the list is the build out of 5,000 hotel rooms in the western side of the island and the many other smaller developments that are planned or started. It may be more than all of that, Levy intimated that she understands that a price increase is on the cards for cement.
Investors are keeping keen eyes on the operations of Caribbean Cement, with great expectations for a major rise in the stock price in 2017 with the company having cut cost and expected to reap increased sales from increased demand in the local economy with increased exports also expected. Against this background the RMOD arm of the Jamaica Stock Exchange wrote to the Company formally on Thursday, March 9, 2017, requesting their response for the reasons of an increase in “contracted” lease payment to Trinidad Cement and the increase in raw materials and consumables costs that rose by 33 percent and seems out of line with the increase in the sales.
The 2015 accounts show that US$22,500,000 (J$2,700,675,000) was due in lease payments in 2016. At an exchange rate of $128.44:US$1 the amount expensed in 2016 was $3,323,635,000 or US$25,876,946. The amount seems to conflict with the reduction by US$22,500,000 of the remaining lease commitment outstanding from US$66,500,000 to US$44,000,000 at the end of 2016.
According to information provided to IC Insider.com, the company who had promised a response by March 20, now indicates that a response is drafted for sign off by management.

Big Apartment complex for South Avenue

20 South Avenue just a few minutes walk to the heart of Half Way Tree square in Kingston, the former home of pre-owned car dealership operated by now Minister of Government, Daryl Vaz, is to be home to a major multi story apartment development.
The complex comprising what now looks like a ten story building, will include regular apartments and penthouses on 9 floors. IC Insider.com’s source states that the development comprises 90 apartments with Virtuoso being the architect who did the design. The property is owned by Commercial Centre Limited that is connected with Tewani Enterprises. The complex will comprise 1 bedroom, 2 bedroom and 3 bedroom penthouse units.
The property is currently screened off from prying eyes, but is decked out by a bright orange coloured crane for all to see, leading many to wonder what was going to be built on the site.
The property is within walking distance of one of the prime shopping areas in Kingston, including the popular Mega Mart store with it wide offerings. The project is being officially launched on Thursday.
The prices for the units are bound to set the standards for other new properties to be priced at within the Kingston area. The units come at a time when there has been some amount of stability in the value of the Jamaican dollar and low interest rates be paid on investments and could attract funds leaving these low yielding investments for a higher returns.

Kingston Properties buys Cayman

One of Kingston Properties units at Red Hills Rd, Kingston

Kingston Properties (KPREIT) completed the acquisition of a fully tenanted, mixed use building located in the West Bay Beach South area in the capital of the Cayman Islands.
“The building comprises offices, retail outlets and residences along the famous Seven Mile Beach corridor, an area that has seen significant infrastructure improvements, as well as new luxury resort and condo developments over the last three years,” KPREIT disclosed.
“This acquisition represents KPREIT’s first foray into the Cayman Islands, which is a country with a per capita GDP of USD58,856 and one of the leading financial centres of the world, offering a tax free environment with no property, income, corporation or capital gains taxes. GDP growth for the first half of 2016 is put at 3% on an annualized basis with unemployment of 3.9%.
KPREIT in their release to the Jamaica Stock Exchange indicated that “The fundamentals in Cayman are expected to continue to improve based on the growth in the Special Economic Zone near the South Sound, planned expansion of the International Airport, construction of a new cruise ship pier in Georgetown, expansion of the highway in the general West Bay Road area, along with continued resort and condo developments along the Seven Mile Beach corridor”.
“This acquisition is part of our strategy to continue to broaden our geographic reach as well as diversify the mix of property types in our portfolio. In addition, this continues KPREIT’s philosophy of multi-tenant rental properties as a means to mitigate vacancy risk, as well as hard currency rentals as a hedge against devaluation,” the KPREIT release stated.

C&W CEO Gary Sinclair and also chairman of Kingston Properties

For the nine months ended September 2016, KPREIT posted profit after-tax and comprehensive income of $131 million and $180 million, respectively. In the previous year, losses of $51 million and a loss in comprehensive income of $28 million, were incurred respectively, for the same period. The
For the third quarter 2016, group profit amounted to $14.0 million compared with a loss of $4.5 million for the similar period in 2015. Total comprehensive income for the quarter increased from $5.8 million in 2015 to $25.4 million in 2016. Higher rentals, net finance income and foreign currency translation gains in 2016 were primary drivers of the improved performance.
The group’s Investment Properties valued increased 56 percent to $1.93 billion at September last year, but mostly from acquisitions.
Kingston Properties which trades on the Jamaica Stock Exchange closed on Tuesday at $9 with 11,779 shares trading.

Jamaica National lowers loan rate

JNBS BuildWith mortgage rates on the decline, the local mortgage industry has received a further boost, following Jamaica National Building Society’s (JNBS) recent announcement of a reduction in rates to 8.5 percent for new mortgage applicants residing in Jamaica and across the Diaspora.
“The 8.5% offer spans across five JNBS mortgage product lines with a maximum of $20 million. The rate applies to Home Purchases and Construction loans, both having a 40 year repayment term; as well as Equity loans, Refinance loans, and Home Improvement loans,” Tiffany Gordon, Mortgage Sales Executive of the building Society, announced.
Jamaica National was silent on rates for existing borrowers but a reduction may well occur later in the year with interest rates on treasury bills declining from as far back as 2014 and continuing into 2016 with the last Treasury bill auction in January.

Real estate to get a boost

JNBS HWTThe real estate industry is set to get a boost as Jamaica National Building Society is set to announce a lowering mortgage rates, IC Insider.com has been reliably informed. The announcement could come as early as next week IC Insider.com has learnt.
Details were not available, but from indications it could result in the current flagship rate of 9.5 percent dropping to 8.5 percent. The move will be a welcomed for the society’s borrowers and will act as a stimulus to the housing market that has seen increased building cost as a result of the falling value of the Jamaican dollar pushing the cost of housing upwards. The decline will come against the background of lowering of repo rates by the country’s central bank and a continuous lowering of Treasury bill rates since early 2014.
The move by Jamaica National is expected to see other long term lenders following the JN lead and should result in an all round fall in borrowing cost for mortgages.

Jamaica economy crawls slowly

BOJ 3Real GDP is assessed to have expanded within the range of 0.5 percent to 1.5 percent for the June 2015 quarter by Bank of Jamaica, Governor of the bank, Bryan Wynter, said today.
The bank said the estimated outturn for the review quarter, “mainly reflects continued expansion in Mining & Quarrying, Hotels & Restaurants, Transport, Storage & Communication, Construction and Wholesale & Retail Trade”. There were estimated declines in Agriculture, Forestry & Fishing reflecting the impact of the intensification of dry conditions which started in the March 2015 quarter.
Given the anticipated impact of drought conditions, for FY2015/16 real GDP is forecasted to expand within the range of 1.0 per cent to 2.0 per cent. This projection is contingent on recovery in the mining and manufacturing sectors, assuming there is no recurrence of the production disruptions which occurred in the previous fiscal year. In addition, the economy is projected to continue to benefit from improvements in the business environment, consumer and business confidence as well as continued gains in external competitiveness.

New units being built at Montego Freeport in Montego Bay this year.

New units being built at Montego Freeport in Montego Bay this year.

The Jamaican economy squeezed out a small increase of 0.4 percent in the March quarter over the similar quarter of 2014, according to the Statistical Institute of Jamaica (STATIN), the official body tasked with the responsibility of collating such data. STATIN said then “growth was due mainly to a 0.6 percent increase in the Services industries” with all industries within the Services industries recording increased levels of output with the exception of Electricity & Water Supply and Producers of Government Services which fell by 2.8 percent and 0.1 percent respectively.

Investors grab Sagicor rights

Hilton Rose Hall Sagicor X Fund recent acquisition

Hilton Rose Hall Sagicor X Fund recent acquisition

Investors in Sagicor Real Estate Fund have gobbled up more than the 598,134,700 provisionally allotted shares in the Rights Issue, the company announced that as at August 24. Pursuant to the terms of the Rights Issue the Directors have decided to release a further 149,533,675 shares in the Un-allocated Pool.
These shares (“Up-sizable Shares”) are available to shareholders as additional shares over and above their provisional allotment.
Shareholders may apply for Up-sizable Shares at the rights issue price of J$6.95 per share in one of 2 ways: (a) by completing an Application for additional shares; or (b) by completing Box 5 in their Provisional Allotment Letter (in the case of shareholders who have not yet returned their Provisional Allotment Letter).
If the aggregate number of shares applied for from the Un-allocated Pool shall exceed the number of shares available in the Pool, then all applications will be scaled down pro rata.
The Rights Issue will close at 4:30 p.m. on September 2, 2015 – unless extended by the Directors.
The funds received from the Rights Issue will be invested as equity in a new subsidiary X Fund Properties LLC established in the USA. X Fund Properties LLC will purchase the DoubleTree Hilton at the Entrance to Universal in Orlando, Florida.
The DoubleTree by Hilton at the Entrance to Universal is 742 guest rooms (inclusive of 17 suites) hotel with over 62,800 square feet of meeting and convention space. It is located in Orlando at the entrance to the Universal Theme Park. The purchase price for the Hotel is US$75,000.000. The balance of the purchase price is expected to be financed by a US institutional lender.

Teas could have a good year

Jamaican Teas DoorJamaican Teas enjoyed good exports sales for the second quarter to March continuing the appreciable growth in the first quarter. Exports moved by 26.6 percent from $64 million to $81 million for the latest quarter and year-to-date $118 million moving to $184 million for an increase of 56 percent.
The strength in exports contributed to the overall increase in sales which moved from $259.2 million to $292.5 million, an increase of 12.8% in the quarter, helping to push profit to $20 million in the March quarter, a 19.8% increase from the comparable period in the prior year. Profit for the six months to March was $43 million, an increase of 16.2% compared to the related period in 2014.
Earnings per share is up to 26 cents for the six months and 12 cents for the quarter, with the expected completion of sale of units in the development property earnings could end up around 80 cents per share for the fiscal year, this could change depending on whether the company disposes of some of the equities it is holding. Sales for the six months to March 2015, are up 14.4 percent to $611 million from $534 million in the prior year.
Exports were helped considerably by the coming on board of a new distributor in the eastern cost of the United States which will see the company products being sold in Wall Mart stores during 2015. Exports were also helped by restoration of sales in the Florida area that was disrupted in the previous financial year from modification in distributorship in that area. Local sales in the manufacturing operations are ahead of the prior year but are not a buoyant as could be expected.

The Orchid property being developed that should add to Jamaican Teas' profits in 2015 & 2016.

The Orchid property being developed that should add to Jamaican Teas’ profits in 2015 & 2016.

The first phase of the real estate development comprising 29 houses has been completed with 5 houses remaining to be sold. Delivery of houses to buyers will commence shortly and should be completed by the end of the fiscal year.
The company’s investment portfolio showed encouraging increase in value, with gains of $12 million during the quarter and $14 million year to March, subsequently it has increased further with the growth in the local stock market.
Jamaican Teas borrowings are at $397 million at March, $310 million is long term, the group equity of $691 million, investments at March amounting to $126 million with cash funds of $27 million. On completion of sales of units in the development property there will be a sharp reduction in loans outstanding and or a build-up in cash.
Jamaican Teas is involved primarily in the production of ingredients for hot beverages, but also sells water and other ready to prepare food products as well as operators supermarkets and in the real estate development. The company is listed on the Jamaica Stock Exchange junior market and last traded at $3.

Point Lisas undervalued shares

Bauxite shipProfit before tax for Trinidad’s Point Lisas Port Development Companyand excluding the impact of fair value gains was $15.3M, an increase of 358 percent compared to the same period last year of $3.3M this flowed from a 19.6 percent growth in revenues. Including gains on valuation of investment properties the company reported profit of TT$67 million versus $36 million in 2014.
Volumes handled by the port grew strongly with the containerized cargo operations experiencing a 25 percent increase in volume but general cargo operations suffered a 13 percent compared to the levels recorded in 2014. The growth in containerised cargo resulted from a 10 percent increase in imports, an 11 percent increase in exports along with a 94 percent increase in trans-shipment cargo. For general cargo there was an 88 percent decrease in exports, a 7 percent increase in imports and a 320 percent increase in trans-shipment.
Direct cost rose faster than the growth in revenues with an increase of 29 percent. Administrative expenses remained relatively stable during the quarter at $21 million but other operating expenses declined to 158 million from $20.5 million.
The Group’s total assets grew to $2.33B in the first quarter of 2015, an increase of 3 percent from December 2014 when the asset base was $2.26B. Working capital continues to remain strong having improved from $49M at December 2014 to $65M in March 2015. The shareholders’ equity stood at “PLIPDECO will continue to embark on various endeavours as determined in its strategic plan. These include among other things infrastructural improvements, information technology upgrades (some already implemented during the first quarter 2015), and continuation of the Port expansion project. The preceding undertakings would further enhance efficiency and productivity to effectively position PLIPDECO in its drive towards continued growth$1.966 billion” Ian Atherly, Chairman of the company told shareholders in his report accompanying the quarterly results.
At the rate of income generation in the first quarter Point Lisas could earn around $1.70 per share excluding cap gains in 2015. The stock which is listed on the Trinidad & Tobago Stock Exchange and traded as high as $8.25 in 2007, last traded at $3.69. The net asset value of the stock is $49.60.
The stocks is undervalued and seems to be an interesting, IC Insider is maintaining a BUY RATED status on the stock.

More choices for investors

Barita280X150There were times, not so long ago, when things in the local financial markets were much simpler than they are now. Well up to just a few years ago there were only three unit trust companies operating and about 6 or 7 schemes. At the end of 2014 there were 22 different unit trust offerings and currently there are 27.
NCB Capital Markets added two new ones this year and Barita has just launched two new ones. By the end of 2015 the field is likely to get even more crowded with a number of institutions already indicating that they will be launching new schemes, included are JMMB Securities and Stocks and Securities. Part of the reason for the mush rooming of these schemes is occasioned by the dictates of the IMF and the World Bank who considered the risk financial institutions were taking by issuing repos using government securities as the flip side of the trades as too high and could pose major problems to the financial system. The result is a change in the rules that now require smaller amounts of funds to be routed through managed schemes, where the liability is left with the investors rather than the financial institutions, as is now the case. The market has also changed, with investors looking for a greater number of opportunities to invest in.
Barita Unit Trust is the latest entity to launch new schemes, bringing their suite of schemes to 6 in April. The latest are; the Barita US$ FX Growth Portfolio which invests mainly in international equity, and the Barita JA$ Real Estate Portfolio which invests primarily in commercial and residential buildings for lease or sale.
The US$ FX Growth Portfolio is a US Dollar denominated equity portfolio with investments in foreign currency ordinary and preference shares of countries within the Commonwealth, Caricom and the United States and may extend to other sovereign governments as prescribed by the Financial Services Commission and the Bank of Jamaica. A minimum purchase of 100 units is required to open an account, the current price per unit is US$1.

Barita Property Fund invested in 138 Student Living shares

Barita Property Fund invested in 138 Student Living shares

The real estate portfolio is JA$ denominated with investments in commercial or residential buildings for lease or sale and may also become financiers of real property developments and or participate in construction or financing of such structures.
Real Estate Portfolio investments must be held for a minimum of three years with a moratorium of 6 months’ notice required for encashment of the investment. At the launch, the managers stated that the fund has started off with an investment in 138 Student Living shares that are listed on the Jamaica Stock Exchange (JSE). A minimum purchase of 100 units is required to open an account and the current price is $5,000 per unit.
How the new funds will perform is left to time. What is known is the Cameron Burnett who is associated with the US dollar equity fund, has been investing in the overseas’ market for several years successfully, the fund should benefit from his experience. Hopefully, they will be able to navigate what is set to be a choppy period ahead for the US stock market, with interest rates set to go up.
Locally, real estate values should grow at an increasing pace as the government keeps the target of a balance fiscal operation firmly in sight and be committed to achieving it, which will lead to lower interest rates and higher asset values.
Barita Unit Trust is a subsidiary of Barita Investments a JSE listed stock.