Palace’s $22m 3rd Qtr hit

While many local companies suffered from the negative effects of reduced profit due to costs associated with the write off of unrealised capital gains on government bonds, Palace had a totally different experience. Net results for the March quarter fell sharply to a loss of $22 million from a profit of $2.65 million in 2012. Nevertheless, thanks to a strong first half, the company reported a $8.2 million loss compared to a profit of $5.3 million earned for the nine months of the previous year.

Operating cost fell by $16 million or 10 percent for the quarter while administrative cost was up 11 percent to $34 million but it was the slide in income that was noticeable and probably worrying. Admittedly, the March quarter is usually the worse quarter the company faces. But it is the sharpness of the drop that is surprising. In the 2012 quarter, Palace generated income of $193.5 million, this fell 21 percent or a whopping $41 million to $152.3 million.

Interestingly, the 2013 revenue performance is only 8 percent better than the 2011 quarterly income even as inflation would have affected cost and the price for goods and services sold by Palace would have gone up since 2011. The fall off in 2013 comes against the background of the company introducing a new product, the showing of live operas on screen and an encore season of opera’s best in the summer. Without them, revenues would have been lower. Year to March, the company recorded revenues of $584.7 million that is lower than the $599.5 million generated up to March 2012.

PalaceAmusement3Data on the individual cinemas indicates that the sharp fall in revenues was across all locations except Palace Cineplex. Carib revenues fell $13 million, Cineplex was up $1 million, Palace Multiplex in Montego Bay dropped $13 million and Odeon in Mandeville fell by $4 million. The falloff in the two rural cinemas was far worse than for Carib, in relation to the income for the 2012 March quarter.

The picture up to the December results suggested that 2012/13 would have been by far the company’s best year, but the poor third quarter results have changed the outlook for full year’s profits completely, as it will be nigh impossible to overcome the negative impact of the loss made in the latest quarter.  ICInsider understands that the fall in revenues is due primarily to a shift in a particular brand of film which would normally be shown in the March quarter but will be shown in the June quarter.

In spite of the quarterly loss, Palace had cash funds of $60 million at the end of March, while current assets exceed current liabilities by $36 million. Loans amount to $42 million with equity of $271 million.

Photo via: www.PalaceAmusement.com

JSE: Juniors pick up

Wednesday, 12th June 2013 | While there were only 5 stocks traded on the junior market yesterday, today’s activity resulted in 11 stocks traded. With the exception of Blue Power that traded at an all time high of $8.65, up 64 cents for the day, as 52,315 units traded, price movement in the junior market was generally moderate. The overall stock market seems to have lost some of the recent sparkle as investors seem to have priced in a fair bit of the improved results of companies or adjusted for the undervaluation of others. The market may just be consolidating for awhile before moving in a major way again. This is worth watching.

Dolphin Cove traded 800,000 units to be the largest trade in the junior market and second largest trade for the day for the overall stock exchange. The stock closed at $8.45, a 52 weeks high. Sagicor Life traded 2,011,745 units as the stock closed at $9.01, having traded between $8.80 and $9.01.

Grace Kennedy traded up $1 to at $59 while trading 23,167 units. Lasco Distributors closed at $13.50 up 50 cents with a volume of 19,297 units trading. Lasco Financial Services lost 29 cents to close at $9.70 on small volume. Carib Cement traded as high as $1 in early trading but closed at $0.90. Consolidated Bakeries traded 58,750 shares at $1.15, in continuation of recovery from the sharp sell off when the company released poor full year results earlier this year. Lasco Manufacturing traded firm at $14.10 with 101,610 units changing hands.

The various market indices inched up a bit except the cross listed and US dollar indices where there was no traded stock. The advance decline ratio remains positive with 11 stocks advancing and 6 declining, on a day when 4.1 million shares changed hands with a value of $34.7 million.

At the end of trading, bids for 8 stocks were higher and no stock had an offer that was lower than their last selling price.

JSEIndicesJun12

RJR’s $106M 4th quarter loss

Things are not good for the media houses these days as economic pressure and the withdrawal of Claro mobile operations from the Jamaican market coupled with a soft economy has cut revenues for this sector. In a tough economy, RJR group suffered a pretax loss of $106 million in the quarter ending in March after writing off $35 million for impairment of the investment in Reggae TV and JNN. This result is a major swing from the similar quarter of 2012 when a profit of $15.6 million was made. Result after tax for the period came out at a loss of $51 million versus a profit of $5.6 million in 2012.

A 5 percent fall in revenue to $446 million from $470 million in the 2012 quarter was one of the major contributors to that big loss in the quarter.

Annual Loss | For the year to March, the loss before taxation came out at $79.5 million and $36.4 after tax, compared to a pretax profit of $146.5 million in 2012 and a net of $87.4 million after taxation of $59 million. The company reported revenues of $1.866 billion for the year, in 2012 revenues were $1.937 billion a decline of 3.7 percent.

RJR_Newslogo150x150Bad debt provision increased from $10.7 million to $30.5 million and special events cost amounted to $186.8 million compared to $90.3 million in the prior year.

While amounts in receivables were kept relatively constant with the previous year’s figures, payables at the end of March climbed to $124 million versus $44 million and the company borrowed $201.5 million. Fixed and intangible assets were purchased amounting to $192 million of which FIFA world cup rights accounts for a large portion.

Decline | The company has suffered a series of set backs over the years. One that is most noticeable is the fall in return on equity from 21 percent in 2000 and 19.7 percent in 2010 to 10.3 percent in 2011, 6.4 percent in 2012 and now a negative return in 2013. Even adjusting for the one-off cost items that are in the 2013 fiscal year, profit would still be inadequate to beat the return on equity of 2012.

RJR recovered from a stunning loss of $129 million in 2009 to record a profit of $222 million in 2010, so it could recover again. However, there are some differences. In 2010, revenues rose by nearly 21 percent on top of a 7 percent in the two previous years. This time around revenues are down in a soft market for advertising as revenues were flat in 2011, declined in 2012 and again in 2013. This is not a market where revenues can be easily raised to dramatically turn around profits. On the positive side, there are some costs in 2013 that should not recur in 2014. Depreciation charge is $109 million, which is not a cash item, so even if it were to continue to make a small loss it can continue to operate for a long time until it recovers as cash flow can be positive.

FIFA rights | The company paid $83.55 million for the exclusive right to transmit FIFA football matches in Jamaica between 2015 to 2022 which means that it will be some time before this investment pays off.

The company’s stock trades at $1.37 and it is difficult to see how this stock will be able to justify a higher price with these results, but more importantly, how will the company grow revenues or cut cost to restore reasonable profitability.

JSE: Attention switched to main market

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Tuesday, 11th June 2013 | Only 5 stocks traded in the junior market today with AMG Packaging closing up 22 cents at $4.40 while trading 24,937 units. Lasco Distributors closed at $13 off 74 cents for the day as it traded 14.900 units. General Accident traded 149,954 units at $1.92 and Lasco Manufacturing was flat for the day in trading 28,750 units at $14.

In the main market, Grace Kennedy traded 1.17 million units between $58 and $58.75 before closing at $58, down $1. Jamaica Money Market Brokers traded 706,000 units between $8.65 and $8.75 but closed at $8.65. Sagicor Life saw 319,000 shares swapping hands at $9 down 43 cents for Monday. Proven preference shares traded 1.336 million units at $5.09, National Commercial Bank closed up 30 cents at $19.50 at the close as 70,310 shares traded. Pan Jam rose 40 cents to close at $55.50. Seprod gained 39 cents to reach $15 at the close. Carreras traded 95,696 units while closing at $59 after loosing $1, the stock closed with its offer at $58.95. D&G had trading in 93,941 units at the closing price of $4.95 and at the end of trading there were 365,955 units with a bid at the closing price of $4.95.

In the end 4,502,486 shares traded for a value of $94.58 million as 23 stocks changed hands as 9 stocks registered price gains and 8 recorded declines. At the end of the day, bids for 2 stocks were higher and 5 stocks had offers that were lower than their last selling price

All the indices except the US dollar index where there was no trades and the junior market that slipped less than a point recorded moderate increases on the day.

JSEIndicesJun11

$2B slide in landline revenues sinks C&WJ

Cable & Wireless (C&WJ) revenues from landlines slipped $2 billion in the year ending March 2013 which helped push the company’s operating income into a loss before an exceptional charge of $2.75 billion relating mostly to reduction in staffing. A $670 million increase in mobile revenues could not prevent a slide of $1 billion in overall revenues which came in at $19.1 billion versus $20.4 billion in the previous year. In spite of the fall in revenue, a $1.5 billion drop in out payments made to other carriers offset by $500 million increase in other cost of sales resulted in gross profit slipping by just $340 million.

New rates | Last year June, when it announced radically new low rates, “the company indicated that it hoped the “game-changing” Talk EZ plan will double its market share from 18 per cent to 36 per cent within three years. It currently has 400,000 pre-paid customers and 50,000 subscribers, according to a Jamaica Observer report. The initial up take of the service last year suggested that they were on target to achieving that target with 250,000 new subscribers by the end of December but by March this year the numbers melted down to a 16 percent net increase or just under 100,000.

More customers | For the September quarter, the company stated that the mobile customer base increased by 20% and that they attracted 100,000 customers within 100 days of launching the new plan. Extrapolating, they started off with 500,000 mobile customers which reached 600,000 by September. In March the company shifted the tax of 50 cents per minute on cell calls to customers which they had absorbed from July last year when it was 40 cents per minute. This shift seems to have resulted in the attrition in new customers. Our estimate is that C&W decision to absorb the cell tax, cost the company about $500 million, a cost that won’t be repeated this year.

cellphone280x150Banking | The company is banking on the recent reduction in termination rate to hand it an advantage, as they retain more of the amount customers spend with them, as they talk more with the new rate for both local and overseas calls to other networks. Down the road they expect that number portability will also present them with another opportunity as mobile users will be freer to switch networks.

Going forward | “Now that we have the new, lower Mobile Termination Rate that will be almost 90 percent less than what it was a year ago, LIME is in a better position to increase subscriber numbers and grow revenues,” management said in an exclusive response to IC Insider.

What seems logical is that persons will be less concerned about what number they are calling once the various rates are close to each other. So the scenario where customers were ring fenced to calling within their network due to the high cost of calling other network will no longer exists, allowing for freer calling and quite likely more time spent talking.

It will also reduce staffing and related costs and have a net benefit as a result of outsourcing the repairs and servicing to Ericsson. The first quarter of the last fiscal year had a lower margin on calls made to other networks as the termination rate came into effect in July 2012. In this year’s first quarter, C&WJ will enjoy a higher margin on cross network calls, helping improve the bottom line.

The savings to come from outsourcing of the field service support and from the absorption of the mobile call tax plus some growth in net cell revenues suggest that the company should be much closer to a profitable position, if not a profit, in the current year from normal operational expenses, assuming they maintain substantially existing business and continue to add mobile customers and get more talk time from existing ones.

Stock outlook | The stock last traded at 16 cents with a bid of 17 cents. The company has a negative net book value and it owes the parent company $28 billion which attracts interest at Treasury bill rates plus 1 percent. Working capital is negative with current assets being less than current liabilities.

JSE: Light trading, advancers dominate

Monday, 10th June 2013 | Probably the most noted features of Monday’s trading was the continued strong positive advance decline ratio which started in the first week in April. At the end of the day, the indication from the bids and offers suggest further gains ahead with bids for 11 stocks being higher and only 1 stock had the offer that was lower than the last selling price.

A total of 3,390,391 shares valued at $22,151,233 traded, on a day when 24 stocks traded with 11 gaining and 4 declined in price continuing a strong advance decline ratio that has been present throughout May and now into June.

Trading was on the light side as only Jamaica Money Market Brokers exceeded the million share mark with 1.5 million units valued at $13 million. Caribbean Creams traded 613,481 units and Caribbean Producers 420,613 units were the other volumes of note.

Price movements were moderate with National Commercial Bank gaining 20 cents to close at $19.20, Sagicor Life closed at $9.43 up 3 cents and Scotia Group up 50 cents to close at $22, having traded as high as $23 during trading.

Access Financial Services reached a new all time high of $8.10 as well as Blue Power which closed at $8.10.

Stocks to watch

  • Access
  • Blue Power
  • Consolidated Bakeries
  • JMMB
  • Sagicor Investments

JSEIndicesJun10

JSE: Profit taking took prices down

Friday, 7th June 2013 | The market indices that had trading activity recorded declines even as the advance decline ratio was one to one, with 8 stocks advancing and 8 declining. But by the end of trading, bids for 8 stocks were higher and 2 stocks had offers that were lower than their last selling price. Trading was much lighter than for most of the week with 3,738,986 units valued at $21.2 million as only 25 companies had stocks trading.

The all Jamaica composite index closed down 498.47 points at 89,195.42 and the main market index closed at 87,495.76 falling 283.14 and the junior market index closed at 747.27 down 2.68 points.

Price movements | Grace lost $1 in closing at $59, less than the bid price in Trinidad, NCB lost $3 to close at $19, similar to the price in Trinidad. JMMB lost 34 cents to close at $8.65 close to the Trinidad closing price, Sagicor Life lost 40 cents and closed at $8.60.

One noticeable trade was Caribbean Creams that traded 948,000 units, the largest volume for the day, between $1.03 and $1.10 all but 21,000 were purchased by Mayberry Investments for their own account.

JSEIndicesJun7

C&WJ announces $2.99 prepaid rate

Following on the decision of the Office of Utilities Regulation to lower interconnection rates, from $5 to $1.10 effective July 1, Cable & Wireless (C&WJ), today announced a one rate of $2.99 per minute for all pre-paid calls to any domestic and select international numbers, effective midnight tonight.

The standard Talk EZ Prepaid customers will enjoy the $2.99 per minute rate – billed on a per second basis – for local calls as well as the USA, Canada and landlines in the U.K. The Talk EZ plan is the default option for all new LIME customers, existing subscribers may activate the plan by dialling *123*1# from any mobile phone.

Garfield Sinclair, CEO, Cable & Wireless Jamaica and Cayman revealed that the TALK EZ prepaid plan will also extend to calls made to subscribers on its rival competitors’ network, Digicel.

cable-and-wireless-worldwide280x150Coming down from $6.99 per minute – the new cross network rate of $2.99 represents a 60% reduction in the cost to call across networks for its mobile subscribers. Digicel customers currently pay up to $14.20 per minute to call the C&WJ network, the CEO said.

Sinclair further announced an offer for persons wishing to capitalize on the company’s new rate adjustment with an in-store deal that will see customers receiving a free Alcatel 296 handset and a free SIM card with the purchase of $1000 pre-paid mobile call credit. The two-day offer will be available at C&WJ stores island-wide from Friday, June 7 to Saturday, June 8.

C&WJ, which has emerged as the clear mobile value provider, announced a dramatic rate cut in on and off-network calls on June 14 last year, when the Office of Utility Regulation (OUR) issued its Interim Determination to reduce the Mobile Termination Rate from $9 to $5 per minute.

JSE: 18 stocks up, 5 down, index falls

Thursday, 6th June 2013 | There was broad based trading on Thursday as shares in 31 companies traded resulting in 18 stocks registering positive price changes and only 5 fell. In what turned out to be a relatively low trading day, just 2.55 million shares valued at $17 million traded. Junior market Blue Power traded 912,587 units up to $8 an all time high with a total value of $7.3 million. Scotia Group traded 129,408 shares valued at $2.77 million, closed at $21.20 and traded at a high of $23.08. Lasco Financial Services traded 127,078 units to close at $10. All other stocks traded less than a million dollars.

Main movers | Scotia Investment recovered $1.50 of the $4 it lost in trading on Wednesday with the stock closing at $27 but it had a bid of $27 at the end of trading. Desnoes & Geddes gained 25 cents to close at $4.95, Carreras gained 70 cents to close at $60, Jamaica Producers closed at $18 up 94 cents for the day. Jamaican Teas traded up 20 cents at $4.60. National Commercial Bank gained 90 cents to close at $22 but the offer was at $21 at the end of trading. Pan Jamaican Investments traded up 50 cents and closed at $55.01. Scotia Group closed at $21.20, off 31 cents on the day.

First Caribbean Bank lost $2 to close at a 52 weeks low of $101.

But by the end of trading, bids for 5 stocks were higher and 2 stocks had offers that were lower than their last selling price.

JSEIndicesJun6

JSE: Trading levels up again

Wednesday, 5th June 2013 | The main indices recorded advances in today’s trading except for a small decline in the junior market index. But advance decline ratio turned negative with 8 stocks advancing and 12 declining. But by the end of trading, bids for 10 stocks were higher and 1 stock had an offer that was lower than the last selling price. There was heavier trading than has happened for sometime with $127 billion being expended on 11.87 million shares.

The all Jamaica composite index closed up 174 points at 89,985.22 and the main market index closed at 88,466.47 up 98.67 points.

Main movers | Desnoes & Geddes which traded at $5.10 closed down 20 cents at $4.70 while trading 694,173 units, Carreras fell 70 cents in trading 23,568 units. Jamaica Broilers traded up 21 cents to close at $4.83 with 460,913 units having changed hands. Kingston Wharves traded 329,566 units and put on 19 cents in closing at $7.81 after trading as high as $8. Lasco Manufacturing saw profit taking, with 990,188 units trading closing at $13.85 down 15 cents on the day. National Commercial Bank traded 1 million shares and slipped back 10 cents at the close at $21.10, the stock traded down to $19.17 at one stage.

Pan Jamaican Investments traded 20,500 units and gained 51 cents and closed at $54.51. RJR had just two trades which accounted for 2.989 million units and inched up 5 cents to close at $1.35. Sagicor Life put on 48 cents in closing at $8.99 but only traded 65,152 units between $8.50 and the closing price. Scotia Group had 17 trades that accounted for 712,000 units between $21.20 and $23.50 with the stock closing at $21.51up 42 cents on the day. Scotia Investment had 5 trades that accounted for 1.29 million units with the stock closing at $25.50 down $4 but it had a bid of $27 at the end of trading. Seprod traded 527,000 units at $14.61 and gained 11 cents and Supreme Ventures saw 771,000 units being exchanged for 10 cents less at $2.90 by the end of the day.

Based on trades for a few stocks it appears that some special deals were done resulting in adjustments in the prices of some, which does not conform to recent market movements.

JSEIndicesJun5