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 priced very attractively priced for investors at a PE that is well below that of the Junior Market that it will be listed on and is expected to be heavily oversubscribed. The general public has 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 are 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 the 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 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 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 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 slowdown 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 IPO set for heavy oversubscription
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.
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.
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.
All Jamaica hits record 433,000 points
NCB trade at a record high of $160.
The market opened up at the start of trading with gains of 1,433.80 points for the all Jamaica and 1,306.36 for the JSE index.
The opening high follows Wednesday’s trading when the JSE All Jamaican Composite Index closed at a new all-time high of 418,487.99 and JSE Index ended at 381,289.90.
Barita Investments traded at a new high of $24.01 to more than double in value for the year so far, 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 20.08 points to 3,158.36.
Junior Market index slips again – Wednesday
Derrimon Trading pref shares traded 2.2 m units.
Trading on the Junior Market of the Jamaica Stock Exchange ended trading on Wednesday with 24 securities changing hands, resulting in an exchange of 2,866,572 units valued at $7,184,147 compared to 11,662,775 units valued at $43,945,611 on Tuesday from 22 securities.
The day’s volume was swollen by 2.2 million units of Derrimon Trading preference share. The development of note is that Key Insurance that traded 21.5 million units with a rise in the stock price has a bid of 912,000 units on the bid at $4 and is one to watch.
At the close of market activities, the prices of 10 securities advanced, 7 declined and 7 remained unchanged. The Junior Market Index declined by 8.73 points to close at 3,178.44.
Trading ended with an average of 119,441 units for an average of $299,339 in contrast to 530,126 units for an average of $1,997,528 on Tuesday. The average volume and value for the month to date amounts 
to units 191,443 units valued at $657,797 and previously 195,380 units valued at $677,394. October, ended with an average of 69,421 units valued at $347,455 for each security traded.
IC bid-offer Indicator| At the end of trading, the Investor’s Choice bid-offer indicator reading shows 2 stocks ended with bids higher than their last selling prices and 5 with lower offers.
At the close of the market, AMG Packaging ended 1 cent higher at $1.90, with 3,158 stock units changing hands, Blue Power concluded trading of 38,311 units, at $5.45, Caribbean Cream ended trading with a loss of 25 cents at $5.25, with an exchange of 8,381 shares, Caribbean Producers finished trading 4 cents higher at $5.44, with 10,000 units changing hands, Consolidated Bakeries closed with a loss of 1 cent at $2.14, trading 11,365 shares. Derrimon Trading ended with a loss of 35 cents at $2.50, with 220,486 shares changing hands, Everything Fresh traded 40,861 shares after adding 5 cents and closed at $1.55, Express Catering ended trading 10,000 shares at $8, FosRich Group traded 40,835 shares, and rose 5 cents higher to $4.05, General Accident finished trading with a loss of 25 cents at $3.25, with 700 shares changing hands. GWest Corporation closed with a loss of 12 cents at $1.58, with a swapping of 11,715 stock units, Honey Bun ended at $4, with 4,051 units changing hands, Indies Pharma traded 26,099 shares in closing at $3, Jetcon Corporation ended trading of 2,813 stock units, with a loss of 25 cents at $3.50, Key Insurance traded 55 cents higher at $4, with 88,017 units. KLE Group finished trading of 3,590 
shares at $4, Knutsford Express closed 1 cent higher at $11.51, in exchanging 1,298 shares, Lasco Distributors ended 10 cents higher at $3.90, with 15,184 shares changing hands, Lasco Financial concluded trading 15 cents higher at $5, with an exchange of 57,387 stock units. Lasco Manufacturing finished with a loss of 2 cents at $3.48, trading 50,500 units, Medical Disposables ended trading 13,174 shares at $6.20, Paramount Trading gained 5 cents close at $2.20, with 3,647 shares being traded and SSL Venture Capital traded 3,000 shares to end at $1.80. In the junior market preference segment, Derrimon Trading 9% ended 5 cents higher at $2.20, with 2,200,000 stock units.
Prices of securities trading for the day are those at which the last trade took place.
All Jamaica at record 418,488 points
The main market of the Jamaica Stock Exchange, gained the most, in its history, on Wednesday with a rise of 11,005.53, bettering the previous high of 10,534.24 points on the All Jamaica Index, to close at at a record high of 418,487.99 on Wednesday.
Prior to Tuesday the previous best gain in a day was 9,823.00 points on October 1, 2018, when the index closed at 403,100.29 on October 5 and bettered the next highest one day index gain with a rise of 9,736.35 points, to end at 416,956.11 on January 27, 2017.
Wednesday’s all-time record high beat out the previous high on the All Jamaica Composite Index of 418,450.70 on October 12, this year. The Jamaica Stock Exchange Index rose 10,027.28 points to close at a record high 381,289.90, having risen above the previous record high of 381,255.95 reached on October 12, this year.
The main market was primarily driven by gains in NCB Financial that closed at $149.99, after trading at a record high of $152, Kingston Wharves trading at $78, PanJam Investment trading at $70 and Sagicor Group ending at $45.01,
The junior market continues under some selling pressure is not sharing in the strong gains of the more matured companies and declined by just 8.73 points to close at 3,178.44.
Big fall for Junior Market – Tuesday
Key Insurance in another big trade.
Trading on the Junior Market of the Jamaica Stock Exchange closed on Tuesday with 22 securities changing hands, resulting in an exchange of 11,662,775 units valued at $43,945,611 as Key Insurance traded 9.5 million units. On Monday just 843,267 units valued at $2,847,021 traded from 26 securities.
At the close of market activities, the prices of 4 securities advanced, 11 declined and 7 remained unchanged leading the Junior Market Index to dive 82.86 points to close at 3,187.17.
Trading ended with an average of 530,126 units for an average of $1,997,528 in contrast to 32,433 units for an average of $109,501 on Monday. The average volume and value for the month to date amounts to units 195,380 units valued at $677,394 and previously 177,719 units valued at $607,746. October, ended with an average of 69,421 units valued at $347,455 for each security traded.
IC bid-offer Indicator| At the end of trading, the Investor’s Choice bid-offer indicator reading shows 6 stocks ended with bids higher than their last selling prices and 4 with lower offers.
At the close of the market, Access Financial closed with a loss of $2.50 at $49.50, with 81,323 shares changing hands, AMG Packaging ended at $1.89, with an exchange of 2,100 stock units, Blue Power concluded trading of 807 units and rose 45 cents to $5.45, Caribbean Producers finished trading with a loss of 9 cents at $5.40, with 500 units, Derrimon Trading ended with a loss of 10 cents at $2.85, with 183,100 shares changing hands. Elite Diagnostic finished 5 cents higher at $3.05, trading 70,455 stock units, Eppley settled at $9.10, with an exchange of 298 units, Everything Fresh traded 368,432 shares after falling 10 cents and closed at an all-time low of $1.50, Express Catering ended trading of 48,905 shares, with a loss of 50 cents at $8, FosRich Group traded 54,955 shares and rose 10 cents to close at $4. General Accident finished trading of 13,917 shares with a loss of 2 cents at 
$3.50, Indies Pharma traded 68,298 shares in closing at $3, Jamaican Teas settled at $4, trading 1,294 shares, Jetcon Corporation ended trading with a loss of 4 cents at $3.75, with 26,843 stock units changing hands, Key Insurance traded 9,535,317 units with a loss of 55 cents to end at $3.45. Lasco Distributors ended at $3.80, with 1,016,500 shares changing hands, Lasco Financial concluded trading with an exchange of 87,215 stock units after falling 40 cents to $4.85, Lasco Manufacturing finished trading 58,277 units at $3.50, Main Event settled 10 cents higher at $6.10, with an exchange of 7,226 shares. Paramount Trading dropped 82 cents to end at $2.15, with 25,000 shares trading, SSL Venture Capital traded 9,823 shares to end at $1.80 and Stationery and Office finished trading of 2,190 stock units with a loss of 8 cents to close at $9.40.
Prices of securities trading for the day are those at which the last trade took place.
Fontana another IPO another set of errors
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.