Mentors are supposed to advice and guide junior market companies’ directors in the ways of the securities market as well as other business related issues to help steer them in areas they may not be familiar with. Mentorship was wisely assessed to be needed for the smaller companies, many of whom were not being governed to the more rigorous manner that their main market neighbours are.
Directors should aide and guide management in the right direction. Ideally, management and directors should strive to work together to achieve the objectives desired. Chairmen have a major role to play to ensuring things are navigated properly. When the JSE board approved a stock split and management posted the notice that the board approved the split which was to have been effected without shareholders’ approval, the Chairmen must take a big part of the blame for the error. All the details of such an issue should have been sorted before the board meeting, with Chairman being fully and properly informed and thus ensure that it was done properly. Finally, the board should have determined and agreed when the shareholders meeting was to be held to approve the split. 
Their failure of the board to do their work properly cannot be placed solely at the feet of the executives.
This brings up the Paramount Trading stock split. The stock exchange rules require that all listed companies must advise the exchange at least 7 days before a meeting of directors is to be held at which a distribution or change in the share capital of the company is to be considered and shortly after the meeting is held advise of the result of the deliberation. Pan Jam’s board, in agreeing to a stock split earlier this year failed to inform the stock exchange in accordance with the rules, was hauled over the coals by the exchange, for failure to comply. Note is also taken that Palace approved a dividend but there was no notice on the JSE website about the meeting at which the proposal was to be considered.
The Board of Directors of Paramount Trading failed to follow the rules of the exchange regarding their decision to recommend the subdivision of stock units which was an item for shareholders to consider at the Company’s Annual General Meeting (AGM) which is due to be held on Saturday, 29 October. IC Insider contacted the company to find out the reason for failing to follow the regulated procedure and was advised that the JSE informed them in writing that they did was in order. Contact with the JSE by IC Insider triggered a response that the matter would be investigated.
On Friday the company posted a release which the error. The release in part states that at the AGM that on the list of resolutions is a proposed sub-division of shares, for consideration by the shareholders.
The proposed resolution is set out in the notice of AGM as follows:“SUB-DIVISION OF SHARE CAPITAL
To sub-divide each ordinary stock unit in the capital of the Company into such number of stock units as may be prescribed by the Board: “THAT each of the issued ordinary stock units in the capital of the Company be sub-divided in accordance with the Articles of Incorporation of the Company, into such number of stock units as may be prescribed by the Board of Directors.”
“In connection with the above resolution, please be advised that the Board of the Company shall hold a meeting on Saturday, 29 October to consider and approve the sub-division pending shareholders’ approval of the said resolution.”
Paramount corrects split error
Caribbean Cement tops Top 5
Jetcon Corporation and Caribbean Cement sit atop the IC Insider’s Top 5 stocks with the best chance of rising on junior market and main market of the Jamaican Stock Exchange at the end of last week. Both stocks just edging out the number 2 by just a few points.
There were no new entrants in either lists but Caribbean Flavours swapped place with Medical Disposables that now sits at the number 5 spot. In the main market selections Caribbean Cement changed spots with Berger Paints with the latter enjoying a slight price gain while Cement suffered a mild decline in price. AMG Packaging last traded at $21 and seems a candidate for a stock split with limited supply and inadequate liquidity of the stock. 
Blue Power that last traded at $24.50 and is outside the Top 5, is also in category of a potential stock split.
Derrimon Trading sits just below the Top 5 junior market stocks followed by Dolphin Cove CAC 2000, tTech and Caribbean Cream that dropped sharply this past week to $7.
Sitting below the Top 5 in the main market are, Palace, JMMB Group, National Commercial Bank, (NCB) Sterling Investments and Pan Jamaican Investments. Feedback from the market, is that NCB is in strong demand against a background of very limited supply and the price being severely undervalued.
JSE majors in big fall on Thursday
The main market indices of the Jamaica Stock Exchange declined again on Thursday with the all Jamaica Composite Index dropping 970.06 points to 184,249.33. The JSE Market Index dived 867.41 points to finish at 165,793.44 and the JSE combined index lost 845.61 points to end at 178,125.52 and gained at 13 percent for the year to date.
At the close 2,395,219 units valued at $25,654,956 changed hands, compared to 3,225,271 units valued at $32,690,159 changing hands on Wednesday. The junior market accounted for 880,474 units trading valued at $3,474,124 of the stocks traded.
The average trade for the day in the main market ended at 72,131 units, compared to an average for the month to date of 65,744 units. On Wednesday, an average of 59,357 units traded with the average for the month to date being 150,666.
The market closed with 38 securities trading as the prices of 8 gained while 12 declined in the overall market, including 5 stocks rising and 7 falling, in the junior market.
IC bid-offer Indicator| At the end of trading, in the main and junior markets, the Investor’s Choice bid-offer indicator reading shows 15 stocks with bids higher than their last selling prices and 4 with a lower offer.
In market activity, Barita Investments lost 25 cents in trading 10,000 shares at $4.40, Cable & Wireless lost 7 cents and closed at 90 cents with 155,700 units trading, Caribbean Cement traded 9,891 shares and lost 50 cents to close at $31.50, Carreras closed at $66 with 15,964 units changing hands. Grace Kennedy gained 44 cents and closed with 17,845 shares changing hands at $41.99, 
Jamaica Broilers closed at $14.55 after adding 5 cents, with 22,052 shares switching owners. Jamaica Stock Exchange ended at $27.97 while trading 26,683 shares, JMMB Group lost 97 cents in trading 80,446 units to close at $13.02. Mayberry Investments ended with 50,000 shares trading at $3.50, National Commercial Bank traded 198,269 shares to close with a loss of $2 at $42, trading in 138 Student Living resulted in 672,737 shares changing hands at $4.70, Pan Jamaican Investments closed at $23 after trading 68,000 shares, Sagicor Group had 55,535 shares changing hands and closed at $22.60, Sagicor Real Estate Fund traded 3,000 shares to close at $10.20, Scotia Group regained the 95 cents lost on Wednesday and closed at $31 with 9,373 shares changing hands, Seprod lost 60 cents as 4,360 units changed hands to close at $24 and Proven Investments traded 99,502 units at 20 US cents.
2016 T-Bill rates slow JSE gains
Rates on Treasury bill slipped in the latest issues for October with the 91 days instrument coming in at 5.7 percent, down from 5.86 percent in September and the 28 days falling to 5.78 percent a decline from 5.84 percent previously.
The 192 days Treasury bill rate inched up from 5.81 percent to 5.83 percent. The latest rate out turn, comes off changes in rates with the 192 days instrument rate at 5.75 percent February 2013, rising to hit 9.11 percent in March 2014 and been on the decline since, with a few minor hiccups along the way. The trend continues downwards with the rate of decline having slowed markedly with the Bank of Jamaica repo rate set at 5.25 percent since May.
In June, the 192 days rate climbed to 6.01 percent from a 2016 low of 5.73 percent in February, at the same time, the 91 days instrument, fell to 5.65 percent in April and moved up to 5.86 in June and September. The 28 days T-bill fell to a 2016 low of 5.37 percent in April but rose to 5.95 percent in August.
The stock market has been heavily influenced by the decline in interest rates in late 2014 to the end of 2015 has struggled since, with rates being flat in 2016 with a few cases of it having risen.
Medical Disposables returns to Top 5
Medical Disposables back in TOP 5
Jetcon Corporation closing at $4.51, was squeezed out by Medical Disposables while General Accident enjoyed strong buying during the past two weeks and rose to $2.65 and moved well out of the Top 5.
Medical Disposables still has more room for growth with the company expanding its product range but supply of the stock has dried up. Derrimon Trading closed the week at $3.65, moving it to third spot. Knocking at the Top 5 position in the junior market are Jetcon, tTech and Caribbean Cream trading just below.
Top 5 stocks in the main market underwent changes with JMMB Group that entered the list for the week ended September 9, gained 50 percent since, to move off the list and replaced by Grace Kennedy, entering at number 4. Radio Jamaica that was top of the list last week rose to $1.70 and sits at number 5 at the close on Friday.
Stocks peeping in at the Top 5 in the main market are National Commercial Bank, Mayberry Investments and Sterling Investments.
With the junior market trading at new records this past week, the attractive gains that were evident a few weeks ago are receding in the junior market with IC Insider’s data showing just 7 junior market stocks that could double by early 2017. That is in contrast to the main market that shows 18 stocks that could double or more than double.
BUY RATED Jetcon & Paramount jump 52%
Paramount Trading gained 52% in September and is up 622% since BUY RATED.
Jetcon Corporation and Paramount Trading were the top performing BUY RATED stocks in September, jumping 52% in the month, followed by Medical Disposables up by 39 percent. In the main market, Barita Investments with a gain of 35 percent leads the majors.
JMMB Group is the second best main market performer with a rise of 31 percent, following IC Insider listing the stock as one of the Top 5 selection on September 9 and recent announcement of it getting a commercial banking license.
Berger Paints is now IC Insider’s BUY RATED listed, with the company benefiting from an improving environment that will keep cost down and encourage increased revenues and profit. IC Insider’s forecast is for earnings of $1 per share for the current year ending March 2017. For the full year to March 2016, revenues grew by 11 percent and material cost input fell as a percentage of sales to 46 percent versus 48 percent in 2015 while profit climbed 82 percent from 31 cents per share to 57 cents.
Performance to date. Jamaica Stock Exchange with gains of 1,250 percent since entering the BUY RATED list, is the top performing stock, followed by Caribbean Cement with gains of 1,067 percent. JSE will be splitting the stock into 5 shares and that could move the price up a bit in the short term, buying at these levels could be risky in the short term, not so for Caribbean Cement, that could easily double in a few months. The next highest main market selection is Jamaica Broilers Group with 186 percent gain and is now expected to market perform. Sagicor Group gained 163 percent and seems heading higher with no supply to sell now visible in the market that now has just one offer to sell.
For top all round gains, the junior market that is up 33.4 percent in 2016 to date is the place to have been, with 15 of the 18 selections gaining over 100 percent and one with 77 percent.
The top performer is Caribbean Cream with gains of 793 percent overall and 28 percent in September and seems heading higher with $15 seems a likely target over the next few months. Paramount Trading gained 622 percent, with expansion taking place and a stock split to be approved at the October AGM, there is much more room for growth. AMG Packaging is up 472 percent and will head higher with expansion into tissue paper production. The company is adding more brands to its tissue operations and plans on adding more tissue production machines as well upgrading carton box machines, to improve efficiency. In the junior market, recent additions ISP Finance and Jetcon have gained 166 percent and 100 percent respectively, both have room for more growth. Knutsford Express Hold rating, has been lifted with prospects of long-term growth baked into its profit performance.Prices are consolidating on the Trinidad & Tobago Market with few compelling buys currently.
Medical Disposables out Jetcon in – Top 5
Medical Disposables fell out of the Top 5 junior market selection during the past week, based on price movement, with the bid at $4.95 and Jetcon Corporation with the price at $4.51 returns, making it back into the top list by just inching ahead of General Accident.
The insurance company enjoyed strong buying during the past week and could slip out in the coming week. Medical Disposables still has more room for growth with the company expanding its product range. Derrimon Trading moved up to third spot after the stock traded at $4 during the week but pulled back to $3.50 by the close. Knocking at the Top 5 position in the junior market are tTech now that the price slipped to $5.30, Caribbean Flavours and Caribbean Cream with Paramount Trading just below.
Stocks in the main market all remained in the Top 5 but positions have changed, the top attraction for the week is JMMB Group that climbed to $13 and sits just and now sits at number 5 spot having entered at the top spot last week. With the news of the group obtaining a banking license, the way may be clear for the price to surge a bit more in the coming week and most likely push it out of the top 5. Stocks peeping in at the Top 5 in the main market are Grace Kennedy, National Commercial Bank and Sterling Investments.
With the junior market trading at new records this past week, the attractive gains that were evident a few weeks ago are receding in the junior market with IC Insider data showing just 7 junior market stocks that could double by early 2017. That is in contrast to the main market that shows 15 stocks that could double or more than double. All that is reflected in the fact that the junior market is up 33 percent year to date, while the main market is up just 9 percent.
10 Stocks to avoid now
Junior market stocks gained 27 percent for the year to date but those in the main market have gone up just 6 percent over the same time. Seven stocks in the junior market have more than doubled two gained just over 90 percent and one over 80 percent.
In contrast the main market highest gain is at 93 percent followed by 64 percent. The above data points to the need for selective investment decision making to get the best out of investing in the stock market. Last week IC Insider started a list of top 5 stocks in the main and junior market. This week we introduce a list of the top 5 stocks to avoid at this time as some seems fully valued based on appreciation recently or in some cases the companies are not performing well. The list will be reviewed weekly and updates published. Even these stocks appreciate in the medium term they are likely to lag gains in the overall market.
Stunning 47% increased Scotia profit
Scotia Group reported a stunning in net earnings jumping 47 percent for the third quarter to $3.3 billion over the 2015 July quarter. For the nine months, net earnings jumped 36.7 percent to $8.2 billion. Total comprehensive income for shareholders of the group ended at $9.3 billion for the nine months ended July 2016 up 10.5 percent from $8.8 billion.
For the third quarter, total comprehensive income of declined from $4.4 billion to $3.66 billion.
The results translate to earnings per share of $1.07 cents in the July quarter and $2.64 for the nine months, with full year’s earnings set to end around $3.90 and would put the PE at 7.8 versus an average of 9 based on estimated 2016 earnings for the main market valuation.
President and CEO of the banking group, Jackie Sharp, in a report to shareholders, commenting on the performance stated, “We continue to show strong performance this year, resulting from the execution of our strategic initiatives to grow revenues and reduce operating costs. All business lines showed good volume growth year over year, as we continued to meet our customer’s diverse needs. Our loan portfolio, after allowance for impairment losses, grew by $15.2 billion or 10.2 percent year over year. Customer Deposits also increased by $42.4 billion or 20.8 percent year over year. Funds under management in our wealth business grew by $15.9 billion or 14.9 percent year over year.”
Jackie Sharp – CEO Scotia Group
Other revenue for the nine months ended July 2016 amounted to $10 billion, an increase of $1.7 billion or 20.6 percent compared to the same period last year. This was due to growth in net fee and commission income from increased transaction volumes on our deposit and payment services, credit card and merchant service business segments, as well as higher foreign currency gains.”
Sharp went on the further state “Operating Expenses amounted to $15.6 billion over the nine months ended July 31, 2016, a decrease of $464 million or 2.9 percent compared to prior year. Salary related expenses declined by $400 million, which offset higher operating expenses of $276 million. There was also a decline in asset tax of $330 million.”
Loans, after allowance for impairment losses amounted to $163.9 billion as at the end of the 2016 quarter, while nonperforming loans totalled $4.4 billion, representing 2.7 percent of total gross loans down from 3.1 percent last year. Total customer liabilities represented by deposits, securities sold under repurchase agreements, and policyholders’ funds grew to $350 billion, an increase of $35.3 billion or 11.2 percent compared to July 2015. A significant portion of the growth was reflected in core deposits, which grew by 20.8 percent year over year the company stated.
The stock that traded at $30.50 on the Jamaica Stock Exchange is undervalued and importantly with strong growth in the third quarter and increased growth in the loan portfolio as well as a pickup in economic growth in Jamaica augurs well for strong growth in profits going forward. Note need to be taken of a possible fall in foreign exchange gains an area that grew sharply in the July quarter by 127 percent to $1.17 billion.
The group declared another dividend of 45 cents per share and seems set to pay total dividend for the fiscal year of $1.80 providing an attractive yield of 6 percent.