Trans Jamaica dominates US trading

Trans Jamaica Highway commenced trading in the US dollar market having been listed at the start of trading and dominated market activity 86 percent of the day’s volume.
At the close of trading, the US dollar market ended with 2,713,918 units for $94,890 with the market declining 15.09 points to close at 184.86. First Rock Capital lost 0.6 of a cent to close at 8.4 US cents, with an exchange of 8,880 units, JMMB Group 6% preference share lost 1 cent to close at US$1, with 479 stock units changing hands, Margaritaville traded 100 shares at 24 US cents. Proven Investments shed 1.5 cents in swapping 332,924 units and closed at 23.5 US cents, Sterling Investments lost half of a cent in trading 32,300 stock units and closed at 2 US cents. Sygnus Credit Investments traded 6,264 units 12 US cents and Trans Jamaican Highway shed .001 of a cent in transferring 2,332,971 shares to end the day at 0.9 of a US cent.

Prices of securities trading are those for the day’s last transaction unless otherwise stated.


TransJamaican IPO pulled in $25.5B

Ministry of Finance, Dr. Nigel Clarke in his budget presentation in the Jamaica Parliament stated that the TransJamaican Highway IPO pulled in $25.5 billion from 36,428 applicants.
National Road Operating and Constructing Company (NROCC) that owned all the 12.5 billion ordinary shares that are issued, 8 billion ordinary shares at $1.41 each and they upsize the offer by an additional 2 billion shares.initial
the issue attracted more applications than the 31,000 brought in by Wigton Windfarm. The shares went to the market at a PE ratio of 24 times earnings and will hit the market at a time when the market values have declined sharply since the debut of the IPO in February.

Worse day for Jamaican Stocks

The Jamaica Stock Exchange suffered it worse day with a fall of 24,224.80 points off the Composite index on Thursday, beating the 14,424.69 points fall on Tuesday when the market closed at 511,165.47.
Main Market stock suffering significant declines include NCB Financial $1.55, Caribbean Cement $2, PanJam Investments $2.01, Scotia Group $2, Sygnus Credit $3.30 and Wisynco off $2.45.
The Junior Market that has been under pressure some months and fell 99.62 points on Wednesday dropped another 102.35 points on Thursday, to close at 2,656.41. Junior Market stocks that suffered the greatest losses that to Thursday’s sharp fall include Access Financial down $2.11, Blue Power off 56 cents, Cargo Handlers with a loss of 96 cents Express Catering falling 46 cents, General Accident down 80 cents, Knutsford Express off by 65 cents and Stationery and Office Supplies down 75 cents.

Jamaican stocks set for 2020 growth

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The Jamaica Stock Exchange saw divergent movement in the three markets it operates, in 2019. While the major focus was on the Main Market performance with 34 percent gain, the US dollar market actually outdid it with gains of 40 percent but the Junior Market was nowhere to be found.

Almost clear skies for the Jamaica Stock Exchange

The Junior Market had its worse performance in three years, with an increase of just 3.4 percent. Last year was the fifth year of annual gains for the Jamaica Stock Exchange. In the past, the five-year mark meant that the market had peaked and was due for a major correction. Technical and fundamental indicators are not pointing in this direction currently.
Technically, the Main Market has 900,000 plus points on its radar, 60 percent away for the All Jamaica Composite index from the start of the year. The market is being steered by an upward sloping support line. There is no indication of any major resistance until it passes the 900,000 points mark.
The PE for the Main Market based on 2020 earnings is down to 16 times, 25 percent below the 2019 PE at the end of 2019 of 20.  NCB Financial performance is going be crucial to the performance of the market index as it controls so much of the market capitalization. In the end, the index is just a barometer of the movement in the value of all the companies listed and investors would be well advised to focus on the quality of stocks that will provide good returns. IC forecast shows 13 to 15 companies that could double in price during the next 15 months in the Main Market starting in January.
The Junior Market is poised to move much higher on improved profits for 2019 and 2020, even as some 2019 results were disappointing and did not stimulate investors to acquire these stocks in increasing volumes with many of them still undervalued relative to values in the Main market. Improvement in profitability will convince investors that there are excellent values in this segment of the market.
There are 28 Junior Market stocks with the potential to deliver gains between 100 to 600 percent in 2020 and up to March 2021. The major reason for the large group is the lack of performance in the market in 2019. Investors placed a major focus on the Main Market, driving the PE ration to 21 compared to 14 for the Junior Market. At the end of 2018, both markets were trading around 17 times 2018 earnings. This divergence, suggests that there are good opportunities to profit from in 2020, as investors move to take advantage of undervalued stocks when
The forecast assumes that economic growth will continue during the year around the 2 percent level and that interest rates will remain close to current levels with Treasury bills rates staying under 2 percent. A major factor, that is important in viewing the market is the number of companies that are enjoying strong growth in sales as well as those that are expanding or likely to do so. Such developments bode well for major gains in profit going forward.
Investors should not ignore companies that performed poorly in 2019 but could enjoy a strong turnaround in 2020. The Investors’ Choice 80:20 rule based on 40 years of data, shows more stocks rising form the bottom 10 worse performers in a year and surge into the TOP 10 the following year, while an average of 80 percent of those in the TOP 10 fail to repeat in the following year and since 2016 the average is just one.
With the likelihood of twenty IPOs planned for 2020, investors can look for a series of disruptions in the upward trajectory of the market. For the past two years, there were signs that on each occasion of popular initial public offers, prices of existing stocks came under pressure.  The most recent were the three issues for 2020 to date. This phenomenon is most pronounced in the Junior Market that is far less liquid than the Main Market. The pullback of prices caused by the sell-off to fund IPOs also provides opportunities for investors who may want to pick up existing listed stocks at bargain prices.

4 for 1 stock split for Pulse Investment?

Investors in Pulse Investment can look forward to a stock split that is likely to see each existing stock split into four units when it becomes effective.The directors have not yet met to determine the exact amount of the split or the total number of shares that likely to be offered for sale later, but at Tuesday’s annual general meeting, the Chairman gave shareholders some sense as to what the outturn could be.
At the general meeting, shareholders approved a resolution “That the company be authorized to issue any or all of new shares pursuant to a Rights Issue or Stock Split or both, as the Directors may determine.” The company is not only planning to split the stock but is likely to come to the market for fresh capital to assist with its venture into residential development and investments into other companies. The meeting was told of the progress being made in the hospitality sector with occupancy said to range from 30 percent up to 100 percent at various times of the year. Rental of commercial space had very high occupancy rates. The modeling segment continues to add new talent with good demand coming from overseas for some of the models.

Kingsley Cooper Chairman of Pulse Investments.

The Chairman explained to shareholders that the sum of $377 million shown in the financial statement as income represents amounts covering production expenses relating to TV shows and advertising entitlement sold or used by the company. For the 2019 fiscal year, Pulse reported profit of $688 million up from $315 million in 2018. For the six months to December 2019, the company reported profit of $230 million for the quarter versus $102 million and $473 million for the six months compared with $229 million in 2018. Operating revenues were $163 million for the December quarter and $312 million for the half-year. Fair value gains on investment property contributing $145 million to profit in the second quarter and $291 million for the half-year. Earnings per share ended at 14 cents for the quarter and 29 cents for the six months. Pulse is trading at $11.30 on Wednesday morning on the Jamaica Stock Exchange.

Wigton erroneous EPS

Last year, IC forecasted earnings for Wigton Windfarms at six cents per share after the posted excellent first-quarter numbers that initially suggested a significant surge in profits for the year. The latest report from the Company indicates that earnings will fall well short of this forecast.

Wigton closed at anew high of $1

Wigton posted a loss in the December 2019 quarter.

IC stated that the Company’s earnings are seasonal and investors should be informed of it, in compliance, with general accounting policy, relating to interim results. The forecasted earning was criticized by some when we reported on the first-quarter results in 2019 and stated that earnings were seasonal and as such the quarterly revenues would be less for the rest of the year and by extension profits.
The latest report to December has made it clear that there is significant seasonality in revenues and earnings.  Information on the seasonality of revenues is not in the current interim report. In addition, although notes accompanying the financial report states that it is prepared in accordance with International accounting standards relating to interim financial statements, it does not, in totality. Apart from the lack of reporting on the seasonality of operations, the earnings per share computations are wrong.
The company wrongly reports the earning per share in 2018 at $27,096 for the quarter and $56,701 for the nine months. That is incorrect. The company, in anticipation of the public sale of the existing shares, adopted a resolution on April 3, 2019, to sub-divide the Company’s 10,000 ordinary shares into 11 billion ordinary shares.
The effect of the increased share capital is that all previous periods’ earnings per share must use the increase shares. Accordingly, the comparison for the 0.2 cents loss in the December 2019 quarter is 0.25 cents and for the nine months to 2018, the earnings per share work out 5.15 cents. Year to date profit of $526 million works out at 4.78 cents and not 6 cents per share, this is a significant overstatement.
Wigton generated revenues of $363 million in the December quarter, compared with $465 million in 2018. For the nine months, revenues declined from $1.95 billion to $1.82 billion. Gross revenues fell from $279 million in the quarter to December 2018, to $159 million in 2019. In the 2019 nine months period, gross profit slipped to $1.24 billion from $1.4 billion. Other income fell from $290 million to $115 million for the quarter and the nine months, to $234 million from $465 million. While general expenses were steady at $85 million, in the latest quarter and slightly up to $266 million, year to date, finance cost rose to $210 million from $128 million in the quarter. It declined from $881 million to $512 million. The December 2019 quarter, recorded a loss of $16 million, compared to $271 million in the 2018 December quarter and $526 million in 2019, year to date versus $567 million.
IC full year’s original forecast called for earnings per share of 6 cents, but the latest numbers suggest that it is unlikely to exceed 5 cents.  The stock price pulled back from $1 per share in Novembers and 97 cents towards the end of January to 80 cents at the close of trading on the Main Market of the Jamaica Stock Exchange on Tuesday for a PE ratio of 16.

Sweet River delisted from Junior Market

Sweet River Abattoir and Supplies became the first Junior Market company to have its shares delisted from the Junior Market of the Jamaica Stock Exchange.
The delisting is effective on Monday, February 10, 2020. According to the Jamaica Stock Exchange, “the delisting is in accordance with Junior Market Rule 505 (14) (a) (i) and the Company’s failure to remedy Board Level and financial requirements breaches.
Sweet River was listed in2014 and the shares were undersubscribed, leaving the company short of critical working capital to function properly, as it embarked on building out a new abattoir. The targeted in the IPO was to raise $180 million from the sale of 46.6 million shares to the public, but subscribers only applied for approximately 30.6 million shares amounting to $118 million. Recently, the company’s land and buildings were auctioned off and acquired by the purchaser for far less than the more than $300 million they are recorded on the books.
Sweat River ran up losses of $124 million up to June 2019, according to the last interim report the company released to the JSE and had a net worth of just $19 million.

Trans Jamaican Highway IPO highly overvalued

After suffering a US$11.5 million loss in 2014, with more losses in 2015 and 2016, Trans Jamaican Highway (TJH) turned a profit in 2017 of US$1.75 million, with an increase to US$6.5 million in 2018. The company seemed on track for another profitable year, in 2019, before cost associated with restructuring debt financing, pushed profit off the road. projects 2020 earnings to be around US$5 million or 6 Jamaican cents per share, from total revenues of US$57 million with a gross profit of $21 million. Finance cost is projected at $15 million, inclusive of preference share dividend with a high, 8 percent coupon rate.  The PE ratio is a rich 25 times 2020 earnings, but that should fall to 19 in 2021. The IPO price works out at 1.3 times book value. Shareholders’ equity amounts to $95 million, with borrowings at $245 million inclusive of nearly US$20 million in preference shares, putting the debt to equity ratio at a high 2.6.
National Road Operating and Constructing Company (NROCC), the selling party, currently owns all the existing 12.5 billion ordinary shares, is inviting investors to purchase up to 8 billion ordinary shares of TJH, at $1.41 each. The company reserves the right to upsize the offer by an additional 2 billion shares in the event of oversubscription on the terms and conditions set out in this Prospectus.  NROCC estimates that after the issue, new shareholders will own between 64 percent and 80 percent of the issued ordinary share, s offer is upsized or not.
Just under 80 percent of 8 billion shares offered for sale, is underwritten by NCB Capital Markets, Underwriting of a portion of the offer will ensure the listing of the shares will on the Main Market of the Jamaica Stock Exchange.
A total of 5.36 billion shares are reserved for a select group of applicants and just under 2.64 billion are available for the general public.
Highway 2000 East-West was the first toll road built and operated in Jamaica and connects May Pen and Portmore to Kingston and is operated under a concession agreement.
The concession is for a period of 35 years, with 17 years remaining, with an option to renew for a further 35 years, subject to payment of a renewal concession fee to be determined. The company has the right of first refusal to secure a similar concession to maintain, operate or own, when complete, the leg of Highway 2000 that will extend from May Pen to Williamsfield that will extend the length of the Toll Road by approximately 50 percent.
The Portmore leg of the highway accounts for 56 percent of traffic and 51 percent of revenue in 2019 and Vineyards accounts for 19 percent of traffic and 36 percent of revenue, with Vineyards having higher tolls than any other toll plaza due to more class 2 and 3 vehicles using it.
Traffic on the highway is exceeding the forecasts since 2015 onwards, the prospectus states and is expected to grow at a steady pace, with 4.5 percent in 2020. In 2021, the growth rate rises to 5.6 percent and 6.3 percent in 2022. For the nine-months to September last year, the Company had revenue from ordinary operations of US$39.26 million, reflecting an increase of US$240,000, on the US$39 million generated for the same period in 2018. This miniscule rise was primarily due to an increase in the annual toll rates starting in July 2019 following the toll rate increases allowed under the Concession Agreement. Revenue was also affected by decreased traffic since March 2019, primarily at the Portmore leg, due to the near completion of construction works of the Nelson Mandela Highway. The reduced traffic at Portmore has, however, been offset by increased traffic at the Spanish Town toll plaza as more users divert to the Nelson Mandela Highway.
There are other opportunities for the company to take advantage of expansion locally and overseas. As such, the growth prospects could be very positive going forward.
The stock seems suited for investors with a long-term time horizon. The stock at the offering price is well ahead of the average of 16 for the market based on 2020 earnings. Investors in the IPO are taking on a considerable risk of a pullback in the value of the stock when things settle sometime after listing.

Caribbean Assurance IPO details out

Caribbean Assurance Brokers are offering just 52.5 million ordinary shares for sale at the subscription price of $1.91 with a minuscule amount allocated for the general public.
The offer includes 44.36 million units for Reserved Share Applicants, including 5.25 million for Mayberry Investments’ clients with just 8.14 million units available to the general public.
Earnings for the past three years to 2018 have been almost flat, but results to September 2019 show a steep rise putting pretax profit to $71 million compared with $43 million for the full year in 2018. Based on the 2019 results, annualized earnings on 263 million shares that will be in issue after the IPO will translate to earnings of 36 cents per share, with a PE around, five which is well below the Junior Market level.
The company intends to use the net proceeds of the IPO to (i) pay IPO & Listing Expenses, (ii) expand its brokerage operations to other Caribbean territories, (iii) extend the Company’s solar photovoltaic system and for working capital purposes.
The issue opens on February 18 and scheduled to close on March 3, subject to early closure. Investors fortunate to get a good volume will enjoy a nice payday, with the limited supply, the general public will have to be satisfied with the usual dribblings.
The company acts as brokers for International, general and individual Life Insurance and employee benefits.
The directors of the company are Raymond H. Walker, Chairman Chief Executive Officer. Non-executive directors are, Rion B. Hall, Norman Minott, Jennifer Rajpat, Barrington Whyte, Tania Waldron-Gooden, Carlton Barclay and Janice P. Holness.

Growing Lasco Manufacturing profits

Profit at Lasco Manufacturing rose 10.5 percent in the December quarter, to $218 million from $197 million in 2018. For the nine months to December, profit increased by 11 percent to $781 million from $701 million in 2018.
The company’s net results rose modestly, this is due to a hike in its tax bill from $28 million in the 2018 quarter to $71 million in 2019 and from $129 million for the nine months to December 2018, to $169 million in 2019. Before the increased tax charge, the latest quarter results were up a robust 28 percent to $289 million and 14.5 percent for the year to December at $949 million.
The improved profit flowed from a rise in sales revenues of 10 percent for the quarter to $2 billion from $1.8 billion in 2018 and 4 percent for the year to date to $5.9 billion from $5.6 billion in 2018.
The gains in 2019, following on from the March 2018 fiscal year when profit moved from $561 in 2017 to $1.07 billion. The 2017 bene was off sharply from $826 million generated in 2016 and $612 million in 2015. The current fiscal year should see the company surpassing the $1m mark in profits for the second time.
Improvement in profit margin, in the first half of the year, continued into the December quarter with 36 percent from 34 percent in 2018 and for the year to date period, from 34 percent in 2018 to 37 percent this year. Input cost rose 6 percent in the December quarter, to $1.28 billion, compared to $1.2 billion in 2018, and was virtually flat for the year to date period at $3.7 billion versus $3.68 billion.  The rise in revenues and containment of cost below the growth in revenues resulted in operating profit rising 18 percent in the quarter to $719 million from $611 million and almost 11 percent for the year to date to $2.14 billion from $1.9 billion in 2018.

Lasco’s ICool drinks.

Administrative and Other operating expenses rose 7 percent to $393 million in the quarter and 9 percent in the nine months to $1.1 billion. Finance cost declined in the quarter, to $21 million from $26 million in 2018 and $90 million to $75 million for the nine months.
The company continues to expand its capacity. According to James Rawle, Managing Director, “Capital investments were primarily focused on the expansion of the dry plant at White Marl facility and is expected to be completed by the end of the financial year.”
Gross cash flow brought in $975 million, but funds were used to finance a number of items, with $314 million going into stock market investments, funding of a rise in receivables and inventories. Addition to fixed assets absorbed $166 million, while $220 million in loan net of inflows was repaid, with $250 million going into dividend payment. At the end of December, shareholders’ equity stood at $6.5 billion, with borrowings at just $1 billion inclusive of $484 million that will is payable within a year. Net current assets ended the period at $2.4 billion inclusive of trade and other receivables of $2 million, cash and bank balances of $719 million. Current liabilities ended the period at $1.6 billion.
Earnings per share came out at 5 cents for the quarter and 19 cents for the nine months. IC is forecasting 30 cents per share for the year to March and 45 cents for the 2021 fiscal year.
The stock traded at $4.25 on the Junior Market of the Jamaica Stock Exchange with a PE ratio of 14 times earnings for 2020 and just seven times that of 2021. Net asset value is $1.57, with the stock selling at 2.5 times book value. At prices around the current level, the stock is a buy.