I Create another IPO coming soon

iCreate, a fairly new company that is involved in the creative industry is at an advanced stage of planning to raise funds publicly by way of an IPO, ahead of a potential listing on the Junior Market of the Jamaica Stock Exchange.
According to the company’s website, they are a Creative Institute, developed with the aim of filling the gap in skills training and development of creatives in Jamaica and the wider Caribbean. As a part of the creative eco-system, students are provided with a wide range of career opportunities in the Creative Economy, while being a key partner of the Advertising Industry, Film Production Companies, Animation and Gaming Companies, and Creative Outsourcing initiatives.
iCreate partners with the University of the Commonwealth Caribbean (UCC) as its Creative Training arm for courses offered in Jamaica and the Caribbean. iCreate is also partnered with the Digital Marketing Institute, to become the only institution in the Caribbean licensed to deliver their Digital Marketing Diploma programme.
The majority shares are currently owned by eMedia Interactive Group with Sagicor Investment said to hold 19 percent of the shares. The total of just over 123.5 million shares issued are issued currently that will go to 196 million if the IPO is fully taken up. The issue should be coming to the market place soon, by the end of the year or early in 2019. Tyrone Wilson is the Managing Director of the Group.

Also expected to list in 2019 are Wigton Wind Farm which will provide an investment more for income than growth. Also exploring listing are a paint company and a manufacturing company from central Jamaica.

Blue Power profit jumped 55%

Sales at Blue Power for the half year of its 2019 fiscal year to October, increased 13 percent to $862 million from $761 million for the same period in 2017, while sales for the second quarter to October were up nearly 12 percent to $426 million from $381 million for the same period in 2017.
Profits for the six months grew 55 percent to $87 million, from $56 million in the same period last year. For the second quarter profit after tax jumped 52 percent to $26.6 million from $17.5 million in 2017 in spite of picking up foreign exchange losses in the current period. Earnings per stock rose from 10 cents to 15.4 cents for the half year.
Lumber Depot sales rose 9 percent from $544 million to $592 million and the Blue Power division increased 25 percent from $217 million to $270 million for the six months
The Lumber Depot contributed $38 million before tax compared to $32 million in 2017 while Soap Division jumped to $61 million from $2 million in 2017.
Net finance cost was $9.5 million compared to $2.7 million for the quarter and for the six months it was a net inflow of $13 million in 2018 and was flat for the 2017 period.
For the half year, “exports sales of soap accounted for 24 percent of overall soap sales,” Noel Dawes, Managing Director told shareholders, in a report accompanying the financials. He further stated that “sales in the Caribbean market continue to be brisk as greater interest, acceptance and satisfaction of our product range materialize. The increase in export sales over the same quarter in the previous year was 64 percent from $47 million to $77 million.”
The company should earn around 30 cents per share for the current fiscal year and close to 40 cents for the next fiscal year ending April 2020. The stock trades at $5.45 at a PE ratio of 18 times estimated current year’s earnings.
Blue Power has investments and cash funds amounting to $247 million, with current assets of $655 million versus current liabilities of just $131 million and shareholders equity of $839 million.

Why is Fontana IPO priced so low?

Owners and directors along with their advisors ought to know the value of their company. But this publication must ask the question if Fontana has really done so well and will continue to expand, why is it priced so low?
At a premium over net book value of 88 percent, the stock is one of the cheapest of Junior Market listings, with the vast majority selling at a premium of 3 to 4 net book and an average PE of around 13 excluding the extreme highs and lows. One would expect the stock to be priced closer to 10 times earnings before tax, that would put the price closer to $3 than $1.88 and that would place price to net asset value at a premium of 200 percent, still below the market average. The fact that the company is setting up a new branch and looking for more expansion, makes the case for a higher price more compelling as investors are most likely going to rake in much profit from this stock. The only problem the general public will not get many shares  to buy up front as it is set tobe heavily oversubscribed. Investors can expect this one to at least double shortly after listing.From where we sit we think the brokers did the owners out of several million dollars on this issue but then the owners may want Jamaicans to party with them on the 50th anniversary.

Scotia Group stuck in neutral

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Investors could find themselves in shark infested waters if they are not careful with the prices of several stocks now at very high levels. Investors need to be careful of being sucked into attractive profit results that are not based on sustainable earnings.
A case in point is Scotia Group. In the July quarter the interim results showed a big jump in profits, but that was based on an unsustainable rise in foreign exchange earnings due to the slippage of the Jamaican dollar, resulting in nearly $2 billion raked in for the quarter. For the October quarter only $396 million is reported for that line item, but the year shows a big jump from $2.5 billion to $4 billion. Net interest income is on the slide, falling from $26.64 billion in 2017 to $25.2 billion in 2018 and in the quarter the decline continues with October falling to $6.1 billion from $6.3 billion in July and $6.7 billion in the October quarter in 2017. While loan provisioning is down, year over year to October, to $1.9 billion from $2.2 billion it rose in the final quarter to $744 million from $695 in 2017 and $620 million in July this year. Net fee income has been steady for the various quarters at just over $2 billion but fell in the fiscal 2018 year to $8.1 billion from $8.6 billion.
Operating expenses rose to $5.74 billion in the October quarter from $5.1 in July and $5.18 billion for the 2017 final quarter. For the full year operating expenses rose to $22 billion from $21.3 billion. The group had a gain on disposal of a subsidiary of $753 million which saved profit from falling for the latest year with a rise to $12.78 billion from $12.17 billion in 2017. For the quarter, profit dropped to just $1.6 billion from $3.36 billion in 2017.
Importantly, the loan portfolio that rose strongly in the July quarter to $177 billion is up at a slower pace of 3.2 percent to $183 billion, an annual pace of 13 percent, but it needs to increase further to really deliver a reasonable increase in profit going forward.
The stock closed at $54.05 on the Jamaica Stock Exchange on Thursday, but its recent profit performance does not send very encouraging signals to buy.

Fontana IPO set for heavy oversubscription

Fontana’s prospectus initial public offer, first mentioned by IC Insider.com is now out but with confusion as to the pricing. The price  seems to be $1.88 except for reserved shares at $1.69 each.  
Whether the price is 1.88 or $2 the stock is price very attractively priced for investors at a PE that is well below that of the Junior Market that is will be listed on and is expected to be heavily oversubscribed. The general public have been allocated 113,434,802 shares at a PE ratio of just 6.4 times 2018 earnings, well below the market average of more than 15, but things get even better as the interim results to September this year show a huge jump in profit from $11.5 million to $51 million before tax, with sale revenues up just 5.5 percent to $936 million while cost of sales declined from $650 million to $640 million, thus improving gross profit margin. While revenues grew just 5.5 percent in the quarter administrative cost climbed faster by nearly 10 percent to $223 million. At the same time inventories rose 19 percent to $680 million over the levels at September 2017 and is up 15 percent from June 2018 figure, a development that requires clarification. The PE ratio based on the interim figures suggest that the PE will fall to around 6 or less for the 2019 fiscal year, with good prospects for continued growth in the business.
The Company, in March 2013 acquired the former Azmart location in Barbican Square, Kingston and opened its Ocho Rios location in November 2013. There has been significant growth in sales from these locations. Kingston and Ocho Rios branches now represent 27 percent and 16 percent of the total sales, respectively, the Company stated. Revenues from the Ocho Rios branch increased from $113 million in 2014 to $536 million in 2018, while revenues at the Kingston branch grew from $508 million in the 2014 fiscal year to $871 million in 2017 with growth slowing to 5 percent in financial year 2018.
The new Waterloo Square location which will open in financial year 2019, is expected to add 28,000 square feet of retail space, an increase of over 40 percent and bolster sales. It is expected that the Waterloo Square store will provide greater buying power to negotiate more favourable terms and rebates with key pharmaceutical partners on the local market. The company is seeking further opportunities to expand its branch network in the growing communities such as Montego Bay and Portmore. The anticipated increase in sales will provide greater critical mass to support the sourcing of higher volumes of inventory directly from China with greater margins.
The Company invites Applications for 124,937,565 Subscription Shares, which are to be newly issued. The Company is also inviting Applications on behalf of the Selling Shareholder for 124,937,400 shares. A total of 136,440,163 are shares that are initially reserved for priority applications. The minimum amount to be raised by the Company from the sale of the Subscription Shares is $234,040,086.
The Company was established in 1968 at the Manchester Shopping Centre in Mandeville by Shinque “Bobby” Chang and Angela Chang. Today, the Company is run by Kevin O’Brien Chang (Chairman), Anne Chang (Chief Executive Officer) and Raymond Therrien (Chief Operating Officer) with the support of the Independent Directors. The Company operates pharmacies and retail stores in Jamaica with 5 locations across the island and 330 employees. Its core business is the sale of pharmaceutical products through licensed pharmacies, and a range of beauty and cosmetic items, housewares, home décor, toys, baby items, electronic, school and souvenir products.
The Company recorded revenues of $3.4 billion in financial year 2018, representing an increase of $272 million or 8.66% over the prior year and an increase of approximately 91% from $1.76 billion in 2014. Pretax profit for 2018 declined 6 percent from $322 million in 2017 to $303 million after rising from $237 million in 2016 that was up more than 100 percent over the 2015 profit of $115 million. The slow down in 2018 is attributed to the state of emergency in Montego Bay and road construction in the Barbican area.
The stock has been accorded IC Insider.com critical BUY RATED accolade.

Fontana another IPO another set of errors

Fontana operators of a series of Pharmacies in Jamaica has now released the Prospectus for their initial public offer but like Elite Diagnostic last year, there are errors in this document that needs correction and explanation.
This is an unfortunate development for yet another issue, that seems very attractively priced. The directors have all signed off on the document that has gone through the Financial Services Commission, the Jamaica Stock Exchange and the Company Office of Jamaica, so why the errors and important ommission.
The introduction in the prospectus speaks to a price of $1.88 except for reserved shares at $1.69 but later on in the body of the document it speaks to a price of $2 for each share, making it unclear exactly what the price really should be? In the interim results to September, there are two issues, one is an error and the other, information that really needs clarification. The interim cash flow has no profit, nor depreciation and it therefore is not balanced and needs correcting.
The gross profit in the interim results jumped sharply,even as revenues grew just 5.5 percent with inventories are up 19 percent at the end of the quarter over 2017 and 15.5 percent over June this year. Why the big jump in inventories with sales are just rising moderately? Importantly, this raises questions about the accuracy of the inventory levels and the gross profit margin for 2018. Management should explain the sharp changes in this area so that investors can better understand why there is such a sharp jump in the quarterly profit.
This publication finds it difficult to once more raising issues relating to a prospectus. We are concerned that enough care is not going into them. The breach of GWest Corporation relating to the non-disclosure of information relating to an extraordinary meeting that was said to approve the issue of preference shares that was never brought to investors’ attention is fresh and has not been properly dealt by the regulators or the company. The regulators seem to have turned a blind eye to it. We need to raise the standards if the capital market integrity is the be enhanced.

Barita directors to consider rights issue

Barita Investments advised the Jamaica Stock Exchange that a meeting of the Board of Directors will be held on December 13, 2018, at which the consideration of rights issue of the ordinary shares of the company is being considered.
IC Insider.com, has been reliably informed that a large portion of the recent $5 billion bond issue that was raised by Conerstone Investments Holdings the new majority Barita Investment shareholder is earmarked for the rights issue.
The company will need to call an extraordinary meeting of shareholders to get shareholders approval for the rights, it is therefore unlikely that if approved by the directors it will take effect until late January 2019 at best.

All Jamaica hits record 435,785 points

In early morning trading after just 7 minutes of the opening the JSE All Jamaican Composite Index (AJI) rose 5,319.88 to a record 435,784.80 points and the JSE index climbed 4,847.01 points to 397,049.24.
Later on, the market briefly moved higher into the 435,900 points level on the AJI, but fell back to 435,061.21.
he market hit a record high follows on Thursday last week Barita Investments traded at a new high of $24.01, NCB Financial hit a record $160, PanJam Investment traded at $72, Sagicor Group at $51.95 haven risen sharply to a record high, but the bid is at $55 to buy 49,301 shares, Scotia Group trades at $60 and Seprod at $33.65.
The junior market continues under some selling pressure is not sharing in the strong gains of the more matured companies and declined by 2.81 points to 3,179.52 with just one stock trading so far.
In today’s trading Scotia Group is back at $60, along with Grace Kennedy that traded at $57, NCB and Supreme Ventures are the major contributors to the rise.

Wisynco expects better Q2

Wisynco held its AGM on Tuesday, November 26, at the Sam Mahfood Distribution Centre, Lakes Pen Road, St Catherine. The well attended meeting was updated on the financials for the 2018 fiscal year ending June and the 2018 first quarter by the managing director, Andrew Mahfood.
Mahfood spoke to the major developments during the year and the quarter including the successful IPO last year. Shareholders were informed on the full resumption of the storage facilities at the headquarters, with cold storage being the latest to come on stream. He stated that not much savings was expected in the switch. There will be cost savings in rental and from a more efficient operation with just one location than two.
The company reported sales revenue of $25.54 billion up 14.8 percent from $21.38 billion in 2017 and generated net profit of $3.29 billion compared to $2.45 billion in 2017. Attendees were informed by the managing director that the 2017 net profit included the one off income from the insurance claim amounting to $636 million before tax which relates to the fire that occurred in May 2016.
The installation of two new bottling lines and one new filler Mahfood told shareholders and guests, should result in 40 percent more efficiency, the lines allows for less packaging material being used to produce bottles and will also result in lower transportation costs. The new lines have created capacity to meet increased demand and facilitate increased exports sales. For the first quarter sales revenue grew

Shareholders at Wisynco 2018 AGM.

just over 12 percent to $6.8 billion but should rise faster in the second quarter with new products for distribution and increased production to meet market demand. Profit grew 15.7 percent to $779 million in the September quarter, from $698 million in 2017, with earnings per share for the quarter ending at 21 cents and is projected by IC Insider.com to reach $1.10 for the full year. Gross Profit also increased to $2.6 billion or 10.4 percent over the $2.3 billion achieved in the same quarter of the previous year. Gross Margin of 37.8 percent was slightly lower than the 38.4 percent for the 2017 first quarter due to the commissioning of the new beverage lines and the devaluation of the Jamaican Dollar, management indicated.
Selling, Distribution & Administrative Expenses for the quarter totaled $1.73 billion or 11.4 percent more than the $1.55 billion in 2017.
Both Andrew and William Mahfood seem very optimistic that the second quarter will show improved sales growth over the first quarter. The settling down of the new lines are major factors as well as continued economic growth in the Jamaican economy.
But the operations were not without problems. The operation of the new equipment took time to settle and this resulted in dislocation in supplying the marketplace with adequate supplies, which held back sales in the first quarter. That problem seems to have been resolved as sales have improved, the two Mahfood brothers told IC Insider and this will show up in increased sales in the second quarter and beyond. Distribution of the Rum Bar brand of spirits produced by Worthy Park Estates commenced in November. Sales from this is expected to reach $500 to $600 million per year, while the distribution of sugar will commence in 2019.

NCB share grows 10 times since 2014

NCB stock closed at $159.05 on Friday.

NCB Financial stock sold at a record $160 last week for a gain of 60 percent for the year to date. Added to this return, are dividend payments totaling $2.80. While investors are now enthused about the stock pushing to new heights, not so long ago they were not with it selling at just $17.
In November 2014, NCB shares were being sold at $17 on several days but the banking group was about to release record profits of $11.6 billion or earnings per share of $4.73, this compares to EPS of $3.49 in 2013. As late as November 2016, the shares were trading at $46 each, less than 10 times the 2014 profit per share. In just two years since, the stock gained 248 percent plus dividends paid and since late 2014, the capital appreciation is a staggering 941 percent. The truth is that the group is not finished yet delivering for investors. When they take majority ownership in Guardian Holdings investors should see major cost savings from rationalization and increased business with the expanded resources.

NCB Financial hits up on resistance at $160 & may find it difficult to break through to the next level at $200, 25% away.

Long term investors should hold on to their stocks for the big ride ahead to flow from acquisition and the impact that growth in the Jamaican economy will have on the operation.
The stock that traded at $160 this past week is currently trading around resistance level, if it breaks through meaningfully, the next major resistance is at $200 or 25 percent away from current price.