Jamaica Money Market Brokers (JMMB) closed at 56 cents, the equivalent of JS$9.50 while it closed at J$7.50 in Jamaica, providing investors with a great arbitrage position, with a huge 26 percent price difference at the end of trading.
Trading overall in the Trinidad Stock market on Wednesday saw 12 securities changing hands of which 5 advanced, 5 declined and 2 traded firm resulting in the Composite Index declining by 4.54 points to close at 1,173.08, the All T&T Index falling by 8.83 points to close at 1,990.79 and the Cross Listed Index easing by 0.03 points to close at 46.62. Trading resulted in 653,357 shares changing hands, valued at $6,420,588.
Gains| (JMMB) was the volume leader with 186,000 shares changing hands for a value of $103,300, closing 3 cents higher to end at 56 cents, National Enterprises gained 2 cents to close at $18.27, National Flour Mills added 110,000 shares valued at $138,600 to close a cent higher at $1.26, a 52 weeks high, Neal & Massy traded only 35 units at $66.31 for a one cent gain.
Declines| First Caribbean International Bank traded 15,072 shares at $5.75, down a cent, First Citizens Bank 3,581 shares at $36.07, down 28 cents Grace Kennedy with 161,400 shares traded for $564,975 and fell 13 cents to $3.50, Scotiabank with 215 shares, close at $70.10, down $1.90 and Trinidad Cement contributed 118,574 shares with a value of $243,723 to close at $2.05.
Firm Trades| Angostura Holdings 900 shares to close at $11.00, Sagicor Financial Corporation had only 50 units changing hands to end at $7.05.
IC bid-offer Indicator| At the end of trading the Investor’s Choice bid-offer indicator had 2 stocks with the bids higher than their last selling price and 3 stocks with offers that were lower.
Strong arbitrage position in JMMB in JSE & TTSE
Trinidad’s sleepy market
Stock market activity in Trinidad on Tuesday, saw trading in 13 securities, of which 3 advanced, 2 declined and 8 traded firm as 603,335 shares changed hands, for $7,429,236. The Composite Index edged up by 0.41 points to 1,177.62, the All T&T Index declined by 0.14 points to close at 1,999.62 and the Cross Listed Index inched up by 0.13 points to 46.65.
Gains| Clico Investment Fund traded 70,814 shares valued at $1,540,905 and gained 6 cents, to end the day at $21.76. Jamaica Money Market Brokers with 230,942 shares changing hands for a value of $122,179, closed 3 cents higher at 53 cents, Republic Bank with 955 units at $120.05 up 2 cents, a new 52 weeks high.
Firm Trades| Stock trading unchanged are Agostini’s with 471 units at $17.75, ANSA McAL 10 shares at $66.49, Angostura Holdings 10 shares at $11, National Flour Mills with a volume of 172,504 shares traded for $215,574 to close at $1.25, Point Lisas Industrial Port Development 300 shares at $3.65, Sagicor Financial Corporation 13,200 shares to close at $7.05, Guardian Media 957 units at $19.75 and West Indian Tobacco which added 17,501 shares valued at $2,065,118 to close at $118.
Declines First Citizens Bank contributed 88,671 shares with a value of $3,223,211 to close 4 cents lower at $36.35, Grace Kennedy traded 7,000 units to close with a one cent fall at $3.63.
IC bid-offer Indicator| At the end of trading the Investor’s Choice bid-offer indicator had 3 stocks with the bid higher than the last selling price and 5 stocks with offers that were lower.
Grace doing better than bottom-line
2013 was a remarkable year for Grace Kennedy despite reporting lower profit after tax compared to 2012. Remarkable indeed, as the 2013 net results speaks volumes about the Group’s profit potential going forward.
The Group’s profit after tax was $3.22 billion, which was slightly lower than the 2012’s $3.48 billion. The results for 2013 suffered from some restructuring cost in the insurance segment, losses picked up from the government debt exchange program and increased taxation due to a number of factors. By comparison, the 2012 prior year enjoyed a much lower tax cost from the lowering of the Jamaican tax rate to 25 percent and utilization of previous year’s tax losses. In 2013, the changes in taxation dragged down a 24 percent increase in profit before tax of $5.08 billion compared to $4.1 billion in 2012, resulting in earnings per share coming out at $9.65 versus $10.41 in 2012. On the upside, in 2013, the Group benefited from a sharp increase in gains in foreign currencies trading and holdings and from changes in pension liabilities at Hardware & Lumber.
Pretax profit was up 32 percent in the final quarter of the year, well off from the 53 percent growth in the second quarter, but well above the 14 percent in the first quarter and the flat profits in the third quarter.
Total revenues gained 11 percent for the year to $69.53 billion. The December quarter grew by 14 percent compared to 4 percent in the first quarter of the year and 11 percent in quarters two and three. Other income grew sharply by 65 percent to $1.7 billion helped by a big jump in foreign exchange gains. Expenses, on the other hand, grew by 9.85 percent to reach $63.9 billion.
Segment performance | Revenue changes varied from segment to segment with money services gaining 14.4 percent to $5.54 billion, food trading 11 percent to hit $44.6 billion, retail and trading 8.3 percent to $6.8 billion, banking only 3.6 percent to reach $5.54 billion and 2.2 percent for insurance to $4.76 billion. Segment profit saw food trading increasing 23 percent to $1.3 billion, banking was flat at $676 million, insurance fell to $109 million from $384 million but money transfer services grew by 20.6 percent to $1.88 billion and retail and trading 98 percent.
The insurance, banking and money services segments launched new products. There was some fallout in the division however, due to the debt exchange, structural changes and a claims review in the insurance segment. These negatively impacted the profitability of the segments.
Regional performance | Jamaica accounts for 64 percent of revenues with a moderate increase in 2013 of 6 percent to $43 billion. The UK enjoyed a 17 percent increase, USA 13 percent, Canada 20 percent, other European countries 57 percent and Africa 91 percent. Changes in currency rates would have played a big role in the growth in the overseas markets.
Grace should go on to earn between $12 to 13 per share in 2014 making the stock extremely cheap.
Grace Kennedy is an IC Insider Buy Rated stock.
Related posts | Grace’s profit up 41% in June quarter | Grace looking up
Grace dividend coming
The Board of Directors of Grace Kennedy will consider the payment of an interim dividend to be paid in December 2013 at a meeting scheduled for Thursday, November 7, 2013. Last year the company paid a dividend of 70 cents per share on December 18.
Grace Kennedy earlier this year increased its dividend partially in line with the increase in profits for the period. Accordingly, the company paid an interim dividend of 78 cents per share on September 30 this year.
The previous dividend paid was 70 cents per stock unit on March 27, 2013 and in September 2012, a dividend of 70 cents per share was paid.
Grace Kennedy is an IC Insider Buy Rated Stock
Related posts | Grace’s profit up 41% in June quarter | Buy Rated: Some gains, some losses
Grace’s profit up 41% in June quarter
Thanks to good pick up in other income and increased segment profit from the food division, GraceKennedy’s profit before tax was pushed up by 53 percent to $1.19 billion and 41 percent after tax of $703 million in the second quarter of the year to June.
In the first quarter, profit after tax was up by just 4 percent and 13.5 percent before tax but the results were negatively affected by the cost associated with the government debt swap. For the year to June, after-tax profit increased by 21 percent over 2012 to $1.39 billion with revenues being up 8 percent to $33.9 billion. The second quarter revenues were up 12 percent to $17.2 billion versus the 4 percent in the first quarter.
In the first quarter, the retail and money transfer divisions did well in growing profits. Banking and investment recorded a loss of more than $200 million while the huge food division only eked out a very small increase over 2012 figures. In the second quarter things looked better all-round except for Insurance which recorded a loss of $100 million compared to a break even position in the first quarter. In the second quarter, the food division contributed $170 million of the increased profit as sales climbed by $1.33 billion compared $470 million in the first quarter. Retailing with just $144 million more sales contributed $74 million more to profits. Banking and investments’ contribution in the second quarter was $229 million, while money transfer contributed $55 million to the increase in profits for the quarter.
In 2012, the first quarter was the highest for revenues than any other quarter, while the profit in the second quarter of 2012 was the lowest. The big jump in profit in the latest quarter is unlikely to repeat at that level for the remaining of the year but earnings seem set to reach between $9.50 and $10 per share for 2013.
Grace is a dominant player within the Jamaican market in its traditional business of food and trading and its focus on overseas markets for expansion and growth is obvious. Any meaningful growth in these two areas in the local market would have to come from growth in the economy, which is not likely to happen for a few years due to fiscal deficit reduction. Grace’s deeper involvement in investing in overseas markets with a physical presence could provide the needed market intelligence to grow by acquisitions and thus speed up the growth rate as well as providing a solid platform for the company to introduce some of its existing products to a wider populace.
Increased lending by banks, or the pace of it, gives a good indication about likely growth in profits. As such the 17 percent annual growth of lending by the group’s commercial bank, First Global, is a good indication that there should be pretty healthy growth in profits going forward, subject to strong control on non-performing loans. Banking, of course, is only one area of the group’s business.
Grace is financially solidly based with equity of $33 billion and total assets of $107 billion at the end of June.
The shares are trading at around 6 times this year’s earnings and sells for just under 60 percent of book value and approximately 30 percent of sales, making it historically cheap but relatively adequately priced. This should be a good medium to long term buy — don’t expect an explosive movement in the stock price unless the entire market were to do the same.
Related posts | Dividends: Carreras cuts, Grace ups | Grace looking up
Dividends: Carreras cuts, Grace ups
Carreras | Carreras has cut its interim dividend to be paid in August from $1.50 paid last year to $1 this August. The decision by the Board of Directors to approve a lower amount must be seen as a reflection of the uncertain situation with demand of its product in light of an announcement last week that sales had slipped sharply with the advent of the ban on smoking in public spaces.
Carreras Limited disclosed today that it declared an interim dividend of $1.00 per share per share payable on August 28, 2013 to shareholders on record as at August 14, 2013. The ex-dividend date is August 12, 2013. The dividend paid at the same time last year was an interim dividend of $1.50 per share on August 23.
Grace Kennedy | The Board of Directors of Grace Kennedy increased its dividend partially in line with the increase in profits for the period. Accordingly, the company declared an interim dividend of 78 cents per share payable on September 30, 2013 to shareholders on record as at September 11. The ex-dividend date is September 9. The last dividend paid was 70 cents per stock unit on March 27, this year. In September last year a dividend of 70 cents per share was paid.
Grace looking up
Grace Kennedy posted increased profits in spite of a one-time charge of $216 million in the first quarter of this year. The charge relates to the write-off of premiums on investments that were swapped in the government debt exchange in February. The improved results flowed from revenues which were up to $16.5 billion in the quarter from $15.85 billion in 2012 and profit before tax $1.14 billion and $689.7 million after tax and minority interest, slightly more than the $652 million netted in 2012.
NDX plunged the banking and finance division into an operating loss of $7 million, down from $209 million in 2012. The trading operations more than doubled operating profit from $22 million to $55 in 2013. All other divisions contributed moderate increases to the groups operating results for the quarter.
Growth markets | Management stated that the food division performed well with improved profit. Jamaica, Canada, Belize and the USA were leading markets for them. Grace‘s international business benefited from marketing efforts with the main focus on consumer acceptance. The focus on newer markets is going well. The west coast of America expansion is on target whilst they have seen gains in shelf space in the UK top retail chains. Lower yields on government bonds have forced shifts within some of the group companies. Other segments within the group will benefit from lower cost of funds as interest rates on some instruments have declined since the NDX.
This year’s results are commendable. If the company can maintain or improve upon the first quarter numbers, earnings for the full year could beat last year’s and the year’s results could come in around $11 per share. The group has also increased the dividend payout to shareholders making the stock a bit more attractive with a 17 percent increase in the last one paid out in March.
Financial position | Grace’s finances are in good health. Assets amount to $104 billion including fixed assets of just $7 billion. Liabilities are $72 billion. Equity capital is $30.7 billion.
With economic growth in the local economy at low levels and likely to be that way for some years, Grace needs to look outside Jamaica for higher growth levels than they have been enjoying having been dominant in most areas that it operates in the local market.
The stock is cheap, selling at around 5 time earnings. Growth has not been great and may not be so for a while, but with the present price between $55-56 per share the stock has lots of room to grow. It is worth a serious look.
