JSE – directors cannot override AGM decision

Palace Multiplex in Montego Bay.

Palace Amusement shareholders approved a dividend of $2 per shares at the annual general meeting held in December last year with the record date of January 7 and payment to be made on January 18.
IC insider.com was informed that the Jamaica Stock Exchange stopped the payment. In discussion with the JSE they indicated that the company did not comply with the rules of the exchange to inform them of the dividend. Accordingly, the change in dividend payment was to allow for the public to have notice of the ex-dividend date.
That of course is only partially true, while the company did not advise the exchange when the directors were to meet to approve the dividend and what was the outcome of the meeting. The exchange had adequate notice of the payment from October 31. The exchange JSE staff did nothing about the information that they got and approved for posting on their website.
The company’s directors’ report clearly states that the dividend had an xd dividend date of January 4 with the payment to be made on January 18. The annual report was posted on the JSE website from October. The directors, report along with the audited report were put to the meeting for acceptance which was done.

Andre Tulloch, head of the JSE regulatory arm.

Shareholders after approving the directors’ report, approved the resolution for the payment of the dividend, effectively agreeing to ex dividend and payment dates as set out in the directors report.
In the wisdom of the Jamaica Stock Exchange, they ignored the supremacy of the AGM and forced the company to submit information to change all the dates relating to the dividend. They failed to understand that the directors have no powers to change what the shareholders approved, and if a change is to be made, then the directors would need to call a general meeting to get shareholders to make the change. The correct remedy would have been some reprimand not a call for a non-legal action.
The requirements of the JSE is that any meeting at which a dividend is to be consider should be communicated to the JSE no later than 7 days before the date of the meeting and within 48 days of the meeting the decision taken. This was not done by Palace, but the JSE who had notice of the declaration from the end of October, did nothing about it for more than two months.
On 17 January, a posting on the JSE website showed that the record date was changed to January 31. The posting stated the “Palace Amusement (PAL)  has advised that following decision made at their Annual General Meeting in December 2018, to pay a dividend of $2 per stock, the payment will be made on February 8, 2019, to the shareholders on record as at January 31, 2019,  The ex-dividend date is January 30, 2019.”
The added problem is that shares were traded in January after the xd date of January 4. The seller would have expected to collect the dividend that was approved. It also means that cheques already drawn, may have to be redone, to record the new record date.
The JSE has clearly, made a huge error in this matter and should immediately correct it, to prevent a messy situation from getting worse. You cannot correct a wrong by another wrong.

ICreate prospectus is here

The prospectus, for ICreate initial public offer of shares, is now out. The company seeks to raise $70 million to help fund expansion.
The offer opens on Thursday, January 31 and scheduled to close February 14, with 74,062,500 ordinary shares offered to the public at $1.01 each. The company will list on the Junior Market of the Jamaica Stock Exchange, if the issue is successful. Applications are to be made for a minimum of 1,000 shares and multiples of 100 thereafter. If the issue is successful, the share capital will be 197,592,500 units, with 123.5 million units owned by EMedia and Sagicor Investments.
iCreate says “it is a creative learning institute developed with the aim of filling the gap in skills training and development of creatives in the Caribbean and North America. We provide students 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.”
Existing locations are Kingston, Montego Bay, and Miami. Kingston is currently the only location that offers the full suite of courses. In Montego Bay, the company currently offer our flagship course (Professional Diploma in Digital Marketing) with the remainder to come on board once they built out the infrastructure required to deliver the courses based on our iCreate standards. “Our projected timeline for this is by or before the end of the first quarter of 2019. Miami is in the early business development stage,” the company stated in the prospectus.
The company reported a loss of $4 million for the six months to September from revenues of $18 million and projects profit of $8 million from revenues of $147 million for the year to December 2019 with profit of $62 million from revenues of $250 million in 2020.  Shareholders equity is negative $1.3 million dollar at the end of September.
The company is small, has only recently started business and is at a risky stage of development. Investors need to bear this factor in mind. While the forecast for 2020 appears attractive, the income generated in 2018 does not show a trajectory to support the high income growth, that the above forecast reflects. The business will benefit from the exposure that the IPO and listing will bring and that could help drive revenues. The positive is that current operations show signs of profit with at least two quarters last year, enjoying a profit.
The board is extremely large with nine members for a small company when seven seems more appropriate. The board comprise, Sandra Glasgow, Chairman, Tyrone Wilson, Rhys Campbell, David Wan, Mischa Mcleod-Hines, Sheree Martin, Devon Lawrence, Dr. Jennifer Bailey and Kenneth Benjamin.
The majority shares are owned by EMedia Limited, with Sagicor Investments, holding a minority position. Broker to the deal is Sagicor Investments.

ICreate ipo opens January 31

The ICreate initial public offer of shares will open on Thursday, January 31.
The issue is scheduled to close on February 14, with the prospectus set to be released this week, word reaching IC Insider.com reveals.
The issue is a sale of 74,062,500 ordinary shares to the public at $1.01 each. The shares will be listed on the Junior Market of the Jamaica Stock Exchange, if the issue is successful. Revenue is said to be running in the region of just under $50 million per annum with prospects for strong growth going forward. Already the company is making a small profit, IC Insider.com gathers. The business is the training of students in graphic designs and animation.
The majority shares are owned by EMedia Limited, with Sagicor Investments, holding a minority position. Broker to the deal is Sagicor Investments.

Barita rights issue closes in March

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Barita Investments – 2018 best performing JSE stock.

Barita Investments held an Extraordinary General Meeting on January 17, 2019 and passed the Resolution to issue up to 262,280,484 ordinary shares as a Rights Issue to Stockholders and gave the power to the directors to set the other terms.
Subsequent to the meeting, the directors agreed the terms of the issue with offer opening on February 25 and closing on March 18 to shareholders on record at February 5 at a price of J$15.50 per share. Shareholders will be entitled to ten shares for every seventeen shares owned on the record date. Shares not taken up by existing shareholders will be available to other shareholders who apply for excess shares. The deadline for applications for any excess shares is March 25.
Barita’s stock has been trading in the $50 region for sometime, spurred partially by announcement of the rights issue plus other positive developments for the company, including new business.
Barita’s share was the best performing on the Jamaica Stock Exchange in 2018, with gains of 593 percent.

Case against hanging on to stocks

Many stocks listed are undervalued based on projected earnings but many offer attractive potential gains but the likely gains are inadequate to put them into the TOP 15. So attractive is the market that many below the TOP 15 have potential to gain in excess of 50 percent in 2019.
Not all growth companies will deliver the same level of returns, a feature of markets that investors need to bear in mind to optimize return on investment. Expansion of smaller companies can have a far more telling impact on profit that larger ones. For example, Grace Kennedy would need to acquire a large entity to make a big improvement to its profit than the typical Junior Market company that are vastly smaller but could acquire a business that will make a big impact on profits.
The 80/20 Rule in the market suggest that only around 2 out of the Top 10 stocks repeat in the subsequent year, this is the results from nearly 40 years of tracking the market. The data shows that around 40 percent of the worst performing stocks in a year are likely to enter the TOP 10 in the subsequent year. What the data suggest is that investors need to be careful in identifying top performing stocks and that top performers with above average growth are likely to come from the worst performers of the prior year.  The year 2018 was unusual with three stocks repeating their 2017 top 10 appearance from the Junior Market and four in the main market. The Junior Market had C2W renamed SSL Venture Capital repeating and in the main market 5 repeated including Pulse Investments and Palace Amusement.
Half of the Junior Market TOP 15 list have either acquired new businesses or actively expanded operation in the past year or plan expansion in the coming year and a boost in revenues and profit is expected. The average PE ratio for the Junior Market based on 2019 projected earnings is 12 but the market closed out 2018 at 16.5. This is an indication of how far the market may rise as well as the extent to which the top 15 stocks are undervalued.

CMP flouting law – no AGM for 11 years

For the nine months to December 2007 CMP Industries reported profit of $5.2 million representing an improvement over the results for the similar period in 2006. The company had $23 million in cash and no interest bearing debt.
From all indications, CMP was generating rental income from property owned at Marcus Garvey Drive that been rented successfully since. By now, the company should have piled up a large amount of cash with several years having passed, are those funds been well managed? That is a big question. Shareholders have no way of knowing since the company has not presented any new financial information nor held a general meeting to update them.
The 2007 results are the last that minority shareholders have received, when the company was listed on the Jamaica Stock Exchange. Apparently, Cash Plus owned entity acquired the majority shares but the Trustees in Bankruptcy has taken control over the company but has supplied no updates on the company finances nor called a general meeting of the company. That leaves the company in breach of the companies Act that require annual general meetings to be held annually.
Recent contact with the Trustees in Bankruptcy indicates that they are controlling the company to realise funds to pay off debtors of Cash Plus. If that is true and it can’t really be so unless they sell the shares of the controlling interest, as the company belongs to all shareholders and any cash inflow if distributed has to be done equally to all shareholders as CMP is not indebted to Cash Plus debtors.
CMP Holdings Limited, was incorporated under the laws of St. Lucia, and which owns and controls approximately eighty percent (80%) of the shares in CMP Industries in 2007 sold the shares to Castelo Holdings, was said to have acquired 80 percent interest in CMP.
CMP shares were suspended from trading on the JSE in 2008, pending an offer to minority shareholders that never came. Minority shareholders need to know what is happening to their investment in the company and the Trustees in Bankruptcy cannot continue to flout the law.

Indies shareholders exposed to tax risk

Indies Pharma reported lower profit for the year to October as slower gains in second half revenues and a more meager profit margin sapped the contribution from the increased sales.
While the company needs to sort out the loss in profit margin. There is also another big issue directors need to deal with. Included in receivables is shareholders’ loan of $136 million with no movement in the year and no information in the audited statements of terms relating thereto including the date for liquidation. IC insider.com source suggest that the recent two large blocks of shares of approximately 115 million units traded in the market this week, is a move to clear off the balance and that should show in the March quarterly report.
Additionally, directors owe the company $37 million, an amount that increased during the year. The company needs to clean up the balance sheet as it could be subject to taxes on distribution for the amount owed to the company by directors and possibly the shareholders. The other factor is that it appears that these amounts are free of interest. Other related party indebtedness also needs regularising with specific terms for transparency.
Profit for the full year is down to $120 million after tax, from $137 million in 2017. At the half way mark, profit was $54 million versus $52 million in 2017, the growth in profit for the 2018 second half was less than in 2017.
Revenues from sales grew just 2.5 percent for the year, down from 9.9 percent at the half-year mark. Cost of sales rose 16.6 percent for the full year compared to the 17.5 percent at April, but with sharply differing sales growth. The net effect is a fall in gross profit for the full year to $393 million from $412 million in 2017. Gross profit improved to $187 million at the 2018 half-way mark, from $177 million in 2017.
Administrative cost was virtually flat at the end of April at $110 million versus $108 million and climbed 6.7 percent to $240 million for the year. Finance cost, inclusive of foreign exchange losses, was flat at $16 million for the year.
As the company listed on the Junior Market, the corporate tax bill is down to $18 million, from $35 million in 2017.
The statement of financial position reflects pretty strong financials, with equity capital of $668 million, strong working capital including $102 million of liquid funds.
Indies last traded at $3.35 on the Junior Market, based on these results the PE ratio would be 37 but investors are looking for a brighter 2019 results.

Heavy demand for Fontana shares

Fontana shares are now listed on the Junior Market of the Jamaica Stock Exchange with bids now in to purchase 7.7 million shares up $2.50 prior to the opening of trading. There is just one offer at $4 to sell 4,500 shares.
The heavy demand in in keeping with heavy over subscription the IPO received. A number of investors in the stock are not pleased that the company varied the terms of the allocation of shares to persons in the general pool from the stated treatments included in the prospectus that stated that multiple applications would be merged and treated as one.
The share issue attracted 2,770 applicants for shares in the company. The order book on the buy side is shown in the accompanying chart with orders at 10 am.
The PE based on last year’s earnings is a low 8, suggesting that a price in the mid $4 region or higher is likely, once it can trade at those levels. Subsequent to the time the attached chart was created, the highest bid is now at $2.60 to buy 130,000 units with total bids in the syetem to purchase 17.7 million shares. One more offer at $3.77 to sell 30,610 units was posted after trading commenced. The maximum price the stock can trade at today is $2.44, 30 percent above the IPO price of $1.88.

Fontana lists today

Fontana Waterloo Road

Fontana shares will list on the Junior Market of the Jamaica Stock Exchange and will commence trading on Tuesday.
The shares that were well sort after will be in high demand with the price expected to jump sharply in a few days. A number of investors in the stock are not pleased that the company varied the terms of the allocation of shares to persons in the general pool from the stated treatments included in the prospectus that stated that multiple applications would be merged and treated as one.
Scotia Investments advised that they are currently in the process of disbursing refunds to applicants via transfers to each broker for their clients and expects to complete the majority of refunds during the week of January 7th.
The share issue attracted 2,770 applicants for shares in the company. Fontana brings to 38, companies listed on the Junior Market. In December, Eppley that was listed on the Junior Market moved over to the main market.

Record new JSE listings for 2019

This year could be a busy one for Initial public offers (IPOS) and record new listings on The Jamaica Stock Exchange (JSE), giving investors many more choices for placing their money.  
Nine IPOs came to the market in 2018 with three in December, giving investors more investment choices than in 2017. For 2019, ICreate will be the first IPO out of the block. The government owned Wigton Wind Farm’s IPO will be launched early 2019, probably by March, but it is not one for all investors, in spite of what some politicians would want to see happening. IC Insider.com gathers others to come include, a central Jamaica Manufacturing entity with strong export base, a large paint company and one in the BPO sector. In addition, IC Insider.com gathers that there are at least another three IPOs, should definitely make it to the market this year.
The JSE is projecting for 21 new listing in the current year, Marlene Street Forrest, General Managing Director, informed IC Insider.com recently.
“The main market expects 10 of the total and the Junior Market 11. The list includes both ordinary and preference shares”, Street Forrest stated.