Andrew Holness, Prime Minister of Jamaica, seems to want to go down in history as the PM who has divested the most government assets through the Jamaican Stock Exchange. While there are clear benefits for the country and investors, major dangers lurk around the corner for many investors.
Rate cut for Wigton’s number 2 turbine to cut profit by nearly $400m.
The local capital market has many challenges for investors and in some cases, it is downright ugly and terrifying. One such is Wigton Windfarm that went to the market with information in the prospectus indicating that all the energy output would be sold to JPS at predetermined prices for twenty five years for each turbine. This publication has reviewed the prospectus and cannot find any information to indicate that the rate on turbine no 2 was to be reduced effective April 2021. That information is critical and could have meant the issue price for the stock might have been inflated. Worse, investors who bought a pile of the stock post IPO around $1 region could be facing serious losses for years to come. Investors are now likely to see their investment stagnate for a long time due to the downward adjustment to the rate for the number two turbine. This is not the way to build a capital market.
The company’s 2021 audited accounts state “Wigton Phase II which was commissioned in December 2010 and supplies 18MW power to the grid. The plant was awarded the avoided rate for the energy it supplies and as per the terms and conditions of the Power Purchase Agreement (PPA), the final rate adjustment for this plant was applied at the end of March 2021. The rate adjustment will translate to approximately fifty percent reduction in the revenue from Wigton Phase II in United States Dollars. This is projected to equate to an overall fourteen percent decrease in revenue in Jamaican Dollars.”
ICInsider.com’s calculation shows the effect of the rate adjustments will reduce revenues by approximately $380 million per annum before tax and will result in net profit coming in around $470 million of 4.3 cents per share for the 2021/22 fiscal year that would put the value of the stock around at the latest price of 63 cents at a PE of 15. That would be fine if there were likely to be growth in sales.
The prospectus list a series of risks and it goes on to state that If one or more of them described in the Prospectus or other risk not mentioned were to arise, Investors could suffer a material loss of their investment.
Electricity is sold by the Company to JPS under three (3) separate Power Purchase Agreements for twenty years each. Wigton one expires in April 2024 but can be extended up to 6 years. Wigton two expires in December 2030, with an extension of up to 5 years and Wigton three expires in May 2036 with any additional period to be agreed.
According to the prospectus, “the payment for energy supplied to JPS by each wind farm is determined by a formula fixed by the relevant PPA. Each formula, while different from the others, essentially determines the price payable by reference to the energy price for the relevant month and the Net Energy Output delivered to JPS. The Company regards the pricing formula in each PPA as highly confidential and disclosure might breach the confidentiality clause in each PPA but would be highly detrimental to the competitive interest of the Company in bidding for future generating capacity”.
At the close of trading on Tuesday, all 43 listed securities traded, up from 36 on Monday, with 22 rising, 11 declining and 10 ending unchanged.
At the close, 
Knutsford Express jumped 38 cents to $8.45 with 607 stock units passing through the market, 
At the close of trading, the All Jamaican Composite Index climbed 678.47 points to finish at 457,678.01, just a few thousand points away from resistance around the 460,000 mark. The JSE Main Index rose 718.60 points to end at 424,776.60 and the JSE Financial Index popped 0.30 points to 105.48.
Trading averaged 251,952 units at $3,318,266, up from 143,638 shares at $2,497,595 on Monday. Trading month to date averages 238,535 units at $4,213,605, in contrast to 235,716 units at $4,401,702 on Monday. May ended with an average of 439,937 units at $4,698,961.
Sagicor Group fell 70 cents to $52.05 after 91,205 stock units crossed the exchange. Sagicor Real Estate Fund shed 64 cents to $8.35 with the swapping of 15,100 shares, Scotia Group gained 55 cents to $41.55 in trading 10,068 stocks. Seprod rose $1.02 to $73.02 in an exchange of 19,247 stock units, Supreme Ventures popped 90 cents higher to $20.90 in switching ownership of 26,108 units and Sygnus Credit Investments rallied 70 cents to $15 in trading 1,016,997 stocks.
At the close, six securities changed hands, similar to Monday, two gained, three declined and one finished unchanged.
Margaritaville advanced 1 cent to 10 US cents with 9,962 stock units changing hands, MPC Caribbean Clean Energy climbed 22 cents to US$1.15 with investors switching ownership of 310 units. Sygnus Credit Investments finished at 15.01 US cents with a transfer of 2,000 shares and Transjamaican Highway lost 0.06 of a cent to settle at 0.86 US cents with 467,450 units crossing the exchange.
Investor’s Choice bid-offer indicator shows seven stocks ending with bids higher than their last selling prices and two with lower offers.
Mailpac Group dropped 11 cents to $3.64 with a volume leading 2,136,468 units traded and Stationery and Office Supplies jumped $1.47 to $8.99 with 116 shares crossing the exchange.
The All Jamaican Composite Index rose 603.81 points to 456,999.54, the JSE Main Index shed 210.23 points to end at 424,058.00 and the JSE Financial Index lost 0.65 points to settle at 105.18.
Trading averaged 143,638 units at $2,497,595, compared to 471,529 shares at $4,645,412 on Friday. Trading month to date ended with a average of 235,716 units at $4,401,702, in contrast to 260,205 units at $4,908,113 on Friday. May closed with an average of 439,937 units at $4,698,961.
Palace Amusement surged $153.56 to $1,148.56, after hitting $1,250 in early trading with a transfer of 663 units, Sagicor Real Estate Fund rose 64 cents to $8.99 in trading 10 shares, Scotia Group fell $1 to $41 after exchanging 8,110 stock units, Seprod advanced $1 to $72 in switching ownership of 16,611 shares and Sygnus Credit Investments shed 70 cents to finish at $14.30 in exchanging 94,468 units.
Trading ended with six securities changing hands, similar to Friday, with three rising, two declining and one ending unchanged.
First Rock Capital ended trading of one share at 9 US cents, Margaritaville lost 0.9 of a cent to close at 9 US cents after 176,842 units crossed the market, Proven Investments gained 0.1 of a cent to end at 26.09 US cents, with 164,560 stock units changing hands. Sterling Investments rose 0.09 of a cent in ending at 2.39 US cents after 814,150 stock units cleared the market and Sygnus Credit Investments dropped 0.29 of a cent to 15.01 US cents in trading 5,800 stock units.
The company enjoys a ten-year tax profit break and will be subject to zero taxation until mid-2022 and 50 percent thereafter for five years.
Cash funds and investments amount to $121 million after the company generated cash funds of $69 million before working capital and capital financing needs. ICInsider.com projects earnings of $1 for the financial year to December 2021 and $1.60 for 2022.
Trading ended with the JSE USD Equity Index rallying 3.19 points to close at 200.51. The PE Ratio, a measure that determines an appropriate relative value of each stock, averages 12.5 based on ICInsider.com’s forecast of 2021-22 earnings.
At the close, First Rock Capital settled at 9 US cents after 10,814 shares were traded, Productive Business Solutions remained at 80 US cents with 108 stock units changing hands, Proven Investments popped 0.99 of a cent to 25.99 US cents with 108,096 shares changing hands. Sterling Investments rose 0.25 of a cent in closing at 2.3 US cents after exchanging 39,116 units, Sygnus Credit Investments rose 0.1 of a cent to 15.3 US cents, with 3,717 stock units crossing the exchange and Transjamaican Highway popped 0.01 of a cent to 0.92 of a US cent in trading 13,719 shares.
Investor’s Choice bid-offer indicator reading shows two stocks ending with bids higher than their last selling prices and three with lower offers.
Limners and Bards popped 23 cents to $3.13 with a transfer of 195,668 stock units, Lumber Depot climbed 13 cents to $3.39 in switching ownership of 322,073 shares, Main Event spiked 58 cents to $5.28 after trading 2,500 stock units, Medical Disposables fell 70 cents ending to $4.25 with 70,357 shares changing hands, Stationery and Office Supplies dived 79 cents to end at $7.52 in exchanging 88,968 stock units.
