Jamaican Teas lists corporate bond

Monday, 25th November 2013 | Tanisha Samuels, Assistant to CEO John Mahfood, inserts the Jamaican Teas fixed & variable rate banner in the slot on the Jamaica Stock Exchange board prior to the start of trading today. To her left is the John Mahfood, the company’s CEO.
In today’s trading 1,000 units traded at $99.50 per 100 units.

Related posts | Jamaican Teas raises over $100m

New additions to Buy Rated stocks

Monday, 25th November 2013 | There are two additions to the Buy Rated and Market Watch list for the coming week. Added to the Buy Rated stock list is Jamaican Teas due to a 30 percent gain in profits for the year ended in September flowing from a 46 percent jump in export sales, sales of apartments in its first real estate development and expectation of further growth in 2014.

Carreras is added to the Market Watch list based on IC Insider’s assessment for earnings around $5 per share for the current fiscal year and dividend yield above 10 percent. Trading in the mid $30’s, this stock has a very good chance to head back into the mid $40 range.

BUyRatedGRowthNov25Performance tracking | During the past week, a few of the Jamaican stocks made some recovery with JMMB breaking even in Jamaica but has retreated in Trinidad. Access Financial is up 15 percent so far but Lasco Financial and Manufacturing are still off by good margins. The selections in the main market remain mostly under water, but the ideal time to buy may be slipping away as prices seem to be at their bottom. More importantly, there are indicators that a year-end market rally will happen again in December.

While Jamaica has disappointed, the same can’t be said about Trinidad. There are only two losers so far; Guardian Holdings and Scotia Investments. During the past week Neal & Massy, that had declined below the price at the time of selection, has bounced back from its low to be just slightly ahead at the close on Friday.

What seems clear, is that the focus ought to be on longer term performance rather than just short term gains. The Trinidad market performance of slow price movements illustrates this very well. There are also signs in the Jamaican market suggesting the same, the major difference being the Jamaican market is more aggressive with price movements.

Related posts | Exports push Jamaican Teas’ profit | Carreras down but not out |  Jamaican Teas raises over $100m

BUYRatedWatch_Nov25

 

Jamaican Teas raises over $100m

Jamaican Teas went to the bond market in October to raise $200 million in an 8.5 percent bond issue. The offer, which closed on November 7, received over 80 applicants for just over J$100 million. The company plans to be employ the proceeds for capital projects. The note is a four year instrument fixed at 8.5 percent per annum for the first two years and variable thereafter.

“I want to congratulate the Stocks & Securities team on another successful offer. This one is significant because we were able to raise the funds needed by the client at a rate of 0.10% below the last GOJ Treasury auction. Jamaican Teas Limited is a strong company and we are happy for the opportunity to work with the organization and bring value to all who participated,” said Lamar Harris, Manager Investment Banking & Attorney-at-law.

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Image courtesy of Praiseaeng/FreeDigitalPhotos.net

“I am happy that we were successful in raising over $100 Million in our corporate bond offer. This was achieved in an environment of extreme economic uncertainty when most investors tend to prefer investing for the short term. I feel that an important reason for our success was the decision to list the security on the Junior Stock Exchange so the investors had the confidence of being able to trade the securities if they needed to. I congratulate SSL for their hard work in making this a success.” John Mahfood, CEO.

Jamaican Teas Ltd distributes the renowned Tetley black tea as well as a Premium Blend of black tea, together with Earl Grey black tea, Green Tea, and Peppermint and Chamomile herbal teas. They are also proprietors of the Caribbean Dreams line of products which consists of herbal teas sourced by the company from Jamaica and other sources, as well as drinking cocoa, powdered natural coconut milk and a range of spring water.

Related posts | Capital market developments | Exports push Jamaican Teas’ profit

Image courtesy of Praiseaeng/FreeDigitalPhotos.net

Capital market developments

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Access paying 16% for $102.5m | Access Financial, a junior listed company on the Jamaica Stock Exchange, is seeking to raise up to $102.5 million and will pay 9% per annum by way of unsecured notes due November 2014 to do so. The notes are priced at 97.99649% of the face value to yield 11 percent to maturity in November 2014, but the cost to the company is closer to 16 percent when all the cost of raising the funds, interest and the discount are taken into account.

The Invitation opens on Tuesday, 8th October 2013 and closes on Tuesday, 15th October 2013 subject to the right of the Company to shorten or extend the time for closing of the subscription list in the circumstances specified in this Prospectus.

AccessFinancialProductsAccess has been very profitable and will use to funds for working capital. Earnings for the six months to June, rose 34 percent to $119.59 million from $89. 38 million in the same period last year. Revenues, which was up by 13 percent in the first quarter, is up 18 percent in the second quarter over 2012 and up 16 percent year to date.

The results are coming off of a successful 2012 when it clocked up earnings of $238 million from an increase of 47 percent from revenues of $661 million.

Access Financial is an IC Insider Buy Rated stock.

Related posts | Access growth continues | No change to Buy & Watch list | Access Financial defying IPO critics

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Image from Behance.net

Jamaican Teas looking $200m | Junior market listed Jamaican Teas (JTL) is offering fixed and floating rate senior secured corporate notes due 2017 to raise up to $200 million at an initial rate of 8.5% for two years and variable thereafter until maturity. The note will be secured by way of a debenture creating a fixed and floating charge over the assets of JTL, subject only to existing registered security interests. JTL has applied to the Jamaica Stock Exchange for the notes to be listed for trading.

The offer officially opens on October 17 and is scheduled to close on November 7. The floating rate for each interest period shall be determined on each interest setting date, commencing on the first interest setting date and shall be equivalent to the 180 day WATBY plus a margin of 2.50%. Interest will accrue from the issue date and will be payable on the 30th day of each month until maturity on November 06, 2017.

JTL has the right to redeem the note after the expiration of two (2) years for the full principal value together with any accrued and unpaid interest thereon without penalty subject to 90 days written notice to note holders.

The company generated revenues, which climbed from $582 million in 2012 to $783 million in 2013 and should exceed a billion for the first time based on the year to June performance.

The company generated profit of $75 million for the nine months to June 2013 versus $65 million the similar period of the prior year, an increase of 16.2% and $24 million in the June quarter versus $22 million in the comparative period in 2012, an increase of 9.5%.

Related posts | Exports push Jamaican Teas’ profit | Jamaican Teas expands property arm | Jamaican Teas buys property | Profits up 19% at Jamaican Teas

Exports push Jamaican Teas’ profit

A strong 70.6% increase in exports for the nine months to June helped in pushing profit at Jamaican Teas up to $75.3 million or 16 percent when compared to $64.8 million for the similar period of the prior year.

Export sales accounted for 52 percent of the total manufacturing sales for the latest quarter. The improvement in exports was driven mainly by increases in sales to the USA and Trinidad. Results for the June quarter were not as strong as the prior two quarters with an increase of 9.5 percent to $24 million as local sales slipped marginally compared to $22 million in the comparative period in 2012. While the growth in profit for the year may not appear impressive, the quality is far better as there was a large $13 million swing in earnings reported from gains on investments in 2012 resulting from a $10 million gain in 2012. While there was a $3 million loss this year, the net amount is partially offset by a $5 million gain from exchange rate movement.

The group recorded improvement in sales for the first nine months of the financial year, increasing by 34.5 percent to $783 million versus $582 million in the prior year. Improved sales was due to healthy increases in both export and supermarket sales, including the newest supermarket in Sav-La-mar, which was acquired by the company in March 2012.

The supermarkets also contributed to the bottom-line improvements which helped the improvement in revenues and profits. The results do not yet reflect sales from the completed real estate development which the group expect to be reflected in the final quarter of the fiscal year in September.

Image from Behance.net

Image from Behance.net

Associated company | The company’s jointly owned supermarket in Montego Bay, continues to show improvement but has not shown profit to date. Sales in the quarter rose 11% above the similar period of 2012. Management stated, “We enjoyed an encouraging improvement in sales since the start of the quarter pushing us closer to a break even position. Our share of the loss is $2 million in the latest quarter which includes an adjustment of $640,000 to deferred tax asset to reflect the reduction in tax rate from 33 1/3 percent.”

Investment | The company has short and long term investments of $142 million which includes $76 million of quoted equities.

Going forward | There are good indications that the final quarter should be better than that for 2012. In the 2012 final quarter, a large an impairment loss on investments of $9.3 million had to be made. In this year, the situation might swing in the other direction with the booking of the sales of the apartments. Beyond the September year end, the purchase of a property in St. Thomas should start to contribute to profits from the housing development for 72 two-bedroom single family homes.

Regarding another property purchase, management reported that, “The company will be moving the manufacturing operations to a new facility by the end of 2013, it has adequate space for our operations now and for the foreseeable future. While there may be no savings from this move, it is not expected to cost more than the current rental for the existing space. Ownership will result in savings going forward as inflation drives up rental rates.”

Financial position |The group continues to maintain a healthy financial position with good cash flows, adequate bank credit facilities and investments. Receivables increased by $41 million, which is due to a significant increase in exports that have longer credit terms. Management further stated that, “All the short and long term loans will be cleared subsequent to the quarter end from longer term loans and proceeds from the sale of the apartments. The company recently announced plans to issue $200 million of Corporate Bonds with attractive features for the investor including the fact that interest will be paid monthly and will be traded on the Jamaica Stock Exchange. The funds will be used to pay off more expensive debt and assist with funding our next real estate development. We have also obtained medium term financing from Bank of Nova Scotia for funding of the Bell Road property acquisition.”

Related posts | Jamaican Teas expands property arm | Jamaican Teas buys property | Profits up 19% at Jamaican Teas | Is the real estate market bullish?

Jamaican Teas expands property arm

Jamaican Teas Limited (JAMT) has advised that an agreement has been signed to purchase Orchid Estates in Yallahs, St. Thomas. The property comprises eleven acres and has been approved for the construction of 71 individual housing solutions. The total cost of the purchase is $63,000,000 and construction should commence during 2013 with the first units being delivered in 2014. The low-income scheme, which was at an advanced stage of development before the acquisition by H Mahfood & Sons, requires completion of some units which require roofs and internals fittings, the full build-out of other units plus road works.

The development will be undertaken by H Mahfood & Sons Limited, a wholly owned subsidiary of JAMT.

The company successfully developed a 19 unit apartment complex at Kingsway in Kingston this year and the units should be handed over to prospective owners by the end of the company’s financial year in September.

Jamaican Teas reported profits of $51.2 million for the six months versus $43.2 million in the six months period of the prior year, an increase of 18.6 percent from improvement in sales of 44 percent to $528.2 million versus $365.9 million in the prior year.

Jamaican Teas buys property

Jamaican Teas advised that they signed an agreement to purchase a property located at 2 Bell Road in Kingston. The property previously housed the operations of Beal Industries which manufactured Comet  Matches, which closed some time ago.

The property will be used to house the manufacturing operations of Jamaican Teas as the current facility rented at Norman Road in Kingston is inadequate to meet the company’s growth.

The property is approximately 1.5 Acres and the building is 17,000 square feet. The company expects to move in later this year after the necessary renovations are completed.

The acquisition will be funded by a combination of internally generated funds and external funding.

Profits up 19% at Jamaican Teas

Jamaican Teas recorded a profit of $51.2 million for the 6 months of its fiscal year ending March. Last year for the same period, the group made $43.2 million, an increase of 18.6%.  Profit in the March quarter this year amounted to $25.7 million versus $22.2 million in the comparative period in 2012, an increase of 15.9%. Return on equity rose to 20 percent. The improved results came from growth in sales by 44% to $528.2 million, versus $365.9 million in the prior year to march. This was due to healthy increases in both export and retail supermarket sales including a supermarket in Savannah La Mar which contributed $36 million for the second quarter, compared to $12.6 million in 2012. However, during 2012 period investments sold contributed more to profits than for this year. As a result the core business contributed more profits than the reported figures suggest. According to management’s report, sale of investments in the March quarter resulted in a loss of $3 million.

Sales at the Kingston supermarket were up on the similar quarter in 2012 and the store in Savannah La Mar enjoyed steady sales during the period. It recorded its first profit in March. Management is hopeful to build on the second quarter performance, effectively wiping out, or reducing the losses experienced in the first half.

Despite tightness in the local and regional economies, the company was able to generate improved sales in the manufacturing business and more importantly in domestic manufacturing sales that contribute proportionately more to profits than either export or retail sales.

The jointly-owned supermarket in Montego Bay continues to show improvement but has not shown profit to date.  Sales in the six months rose 16 percent above the similar period of 2012. As per management, “We enjoyed an encouraging improvement in sales since the start of the quarter, pushing us closer to a break”. The group’s share of the loss is $1.6 million in the latest quarter.

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Apartment complex | An apartment complex developed by the group on Kingsway will be completed by the end of May or very early in June.  Sale of the units attracted solid buying interest with more than 90 percent having written commitments. The sale of the units is expected to be booked before the end of the financial year in September when ownership would be transferred to the new owners.  The group has plans for more developments now that the first was successfully executed.

Financial strength | The group continues to maintain a healthy financial position with working capital and investments of $388 million and this position should improve when the apartments are fully sold.  Equity was $550 million and will continue to rise.

Image from Behance.net

Image from Behance.net

Borrowings are up to $145 million from $75 million in March 2012, most of the increase relates to loans to partially fund the building of the apartment complex and is expected to be repaid from the sale proceeds. In addition, the group acquired the supermarket building in Kingston and is carrying a medium term loan on it, which was booked last year after the March quarter. The proceeds from the sale of the apartments is more than adequate to cover the total loans on the books.  The group is acquiring a property to house Jamaican Teas operations which will result in discontinuation of rent but there will be interest cost relating to loan-funding for the acquisition.

Outlook | Management says they will continue to see buoyancy in sales after the end of the quarter at all locations. “The equity portion of the investment portfolio has fluctuated with recent market volatility but in recent weeks we have seen some improvement in the prices of some of our investments. There are signs that the local stock market is picking up life and if that continues, the valuation of the investment portfolio should rise in the months ahead, thus improving the equity base of the group.”

Management concluded their report by stating that with the performance for the first 6 months, the pending sale of the apartment complex, as well as sales performance subsequent to the March quarter, suggest that results for the 2013 fiscal year should exceed the 2012 fiscal year barring unforeseen developments. At the annual general meeting, the range for profit given by the company was $125-140 million for the year to September, which works out at earnings per share of 80-83 cents.

Is the real estate market bullish?

Jamaican Teas is reporting that its first real estate development, Carmen’s
 Court was sold out in 2 days when the units went on sale in mid-April, as
 buyers said a resounding, Yes!

This very first real estate project brought to market by H Mahfood & Sons Limited, a subsidiary of Jamaican Tea. Billed as charming, contemporary and ideal for property virgins and investors, the gated community on Kingsway in the prime Kingston 10 area, offered eighteen super studios of approximately 630 sq ft, with added features of private parking, a water tank and generator.

“Fifteen of the units were sold in one weekend and the remaining three are spoken for”, according to John Mahfood, Managing Director, Jamaican Teas, who believes that the development was a big winner because it had great timing, is quality real estate in a great location and affordably priced at
$10.5m to $11.9m.

Since its listing on the Junior Market of the Jamaica Stock Exchange in
2010, Jamaican Teas has demonstrated that it has its finger on the pulse, in terms of innovation and expansion. The group has plans for future real estate projects, as well as growth in its supermarkets and consumer brands of Tetley Teas, Caribbean Dreams and Jamaica Blue Spring Water products.

Talk Back | But investors are wondering if the quick sell off of units is an indication that investors are opening their wallets again to invest locally as opposed to putting money in foreign assets.  More importantly, is this move heralding a revival of the real estate market?