Strong mobile growth in the Caribbean, 7 percent, was offset by a 9 percent decline in BTC, consistent with our expectations CWC PLC reported today. Mobile revenues (40 percent of total Group revenue) was up 1 percent in the third quarter the report stated.
Caribbean growth was driven by continued subscriber additions in Jamaica (+15 percent) where investment in our mobile network led to revenue growth of 16 percent, with data revenue up 72 percent. Broadband (13 percent of Group revenue) was 5 percent higher against the prior year, as subscriber growth in the Caribbean drove Group subscribers up 6 percent.
The company said that they are training new customer service agents for our new call centre in Jamaica which is expected to open in March quarter.
Regulatory approval for Liberty Global to acquire the entire share capital of CWC PLC is ongoing. It is expected that the Scheme Document to be dispatched by mid-March with completion in the second calendar quarter of 2016, as stated in the Offer Announcement.
CWC Caribbean business grows
Liberty Global strikes C&WC Plc deal
Cable & Wireless HQ
John Malone’s Liberty Global Plc agreed to buy Cable & Wireless Communications Plc in a cash-and-stock transaction valued at 3.5 billion pounds ($5.3 billion). Including the Special Dividend, the transaction values CWC at approximately $8.2 billion, including debt CWC Plc said in a release on the deal. The transaction is expected to complete by the calendar second quarter of 2016.
“The deal represents a multiple of 10.7 times Cable & Wireless Communications’ adjusted annual earnings before interest, depreciation, taxes and amortization, (EBITDA) after taking into consideration cost synergies, according to a statement. Cable & Wireless’ shareholders will get a special 3 pence a share dividend at the deal’s close,” Bloomberg Business reported.
The report did not indicate what is planned with the Jamaican company Cable & Wireless Jamaica with nearly 20 percent minority ownership. IC Insider.com Has earlier suggested that the local operation could be valued around $3 using (EBITDA) measure.
All Jamaica at record high 140,195 points
Cable & Wireless HQ – the stock traded at a new 52 weeks’ high on Thursday, Friday and Monday
The Jamaica Stock Exchange closed on Monday at a record high of 140,194.65 points after adding 2,684.37 points with 22 stocks rising, 7 declining as 37 securities, totalling 9,954,429 units valued at $35,061,223 changed hands, in all market segments. A total of 6 stocks ended at 52 weeks’ closing highs.
Today’s gain pushed the market well over the old record of 138,917.59 set on 24th of January 2005 and ends the longest period in the market’s history, that it failed to exceed a previous high. The all Jamaica Composite Index is the last of the JSE indices to hit new highs in October.
The JSE Market Index shot up 2,402.00 points to 126,381.42, a new closing high. JSE combined index climbed 2,317.79, points to end at a new closing high of 131,076.47.
IC bid-offer Indicator| At the end of trading, in the main and junior markets, the Investor’s Choice bid-offer indicator had a reading of 11 stocks with bids higher than their last selling prices and none with offers that were lower.
In trading, Berger Paints traded 295,658 shares and gained 25 cents to close at $3, Cable and Wireless closed with a gain of 20 cents as with 307,231 shares changed hands to end at 52 weeks’ high of $1.02. Trading in the stock was suspended for an hour as the as the trade was executed at 97 cents, a price in excess of 15 per cent from the closing price on Friday as investors continue to respond to the news that Liberty Global planned on making a bid to acquire Cable and Wireless’ parent company. The stock closed with over 4.33 million shares on the bid at $1.02 with 2.8 million units at $1 and five offers amounting to only 47,649 shares between $1.13 and $1.70 and at 3.3 million units at $30. Caribbean Cement gained $2.70 to end at $17.50 for a new 52 weeks’ closing high, with 170,368 shares changing hands. Investors were responding to the company’s reported earnings of 72 cents for the September quarter and $1.75 for the nine months. Cement closed with only two lots being offered, amounting to 13,000 shares at $19 and $24. Ciboney Group traded 5,358,999 shares to end at 8 cents after shedding 1 cent. Desnoes & Geddes had 413,169 units changing hands to close at $30, Grace Kennedy exchanged 1,621 shares at $65.10 and gained 35 cents, Jamaica Broilers lost 49 cents in trading 55,596 shares to close at $8.01. JMMB Group gained 30 cents in trading 101,850 shares to close at $10.20, Mayberry Investments traded 8,050 shares and gained 50 cents to end at $3.50, National Commercial Bank fell 62 cents to end with 7,356 shares trading to end at $31.38.
Pan Jamaican price jumped $5 in trading 5,720 shares to end at a 52 weeks’ high of $80, Pulse Investments traded 200,000 and close at 61 by gaining 6 cents, Sagicor Group with 21,192 shares closed at $14.50. Sagicor Real Estate Fund traded 1,104 units but the price gained $1.05 to close at $9.20 and closed with a bid to buy 99,296 units at $9.20 and with only three offers posted with two at $10 to sell 25,000 units and 19,000 at $11, Scotia Group ended with 11,554 shares trading closed at $26 after rising $1.24. Seprod traded 20,700 shares at $14.96, Supreme Ventures ended at $4 with 308,224 units changing hands and gained 10 cents and Proven Investments ordinary traded 6,875 shares and fell 1.5 cents to end at 23 US cents.
C&W shares may fetch over $3 in a takeover
Cable & Wireless with the old Lime brand logo
Cable and Wireless shares had become scarce in recent weeks, with one investor IC Insider sources indicated, was seeking 7 million shares to buy, earlier last week at 60 cents each. From as far back as the 8th of October, there were only 4 million units on offer between 55 cents and $1.21. By Thursday the supply dropped even more with trading taking place as high as 67 cents. At 12.30 on October 22, there were 453,964 shares on offer at 67 cents, with 5,000 units sold out of this amount by the close of the market. A total of 305,850 units were on offer at 70 cents, with the next at 90 cents, with 5,000 units. At 99 cents there were 233,730 units, at $1 one block of 877,723 units with the next lot of 10,000 at $1.71, the next 130,169 shares at $2 and 1.66 million units at $3.75. That not a lot for a stock that usually trade in millions of units.
Only 5,850 shares traded on Friday at 82 cents and demand swelled to more than 5 million units at the close to buy at 82 cents. Supply disappeared with only 4 offers listed, ranging for 10,000 units each at $1.20, $1.21 and $1.70 and then 2.66 million units at $3.75.
The question on investors’ minds, is where will the price settle? One broker indicated that it will trade at $1 on Monday if there is supply. With the imbalance between supply and demand, a higher price than that seems imminent. Some Investors are wondering why some buying on the buyout news of the parent when there is uncertainty if the Jamaican shareholders will be bought out as well if the deal goes through. Some are looking at the Diageo transaction with Desnoes & Geddes and speculating that the same could happen here.
IC Insider.com has the stock as BUY RATED from February 2014 on the basis of a turnaround in the financial fortunes of the company. Based on what’s happening locally the current price can be justified as the company is now in a position to be reporting profits, with rising revenues and falling cost. If the deal with CWC goes through, (that does not seem likely at the stated price) and the minority shareholders in C&W were to be bought out, IC Insider went to work to see how high the price could be, in a takeover.
C&W had major improvement in earnings in the June quarter, with EBITDA rising a very strong 82 percent. Net results saw a sharp fall to a loss of just $303 million, from a loss of $712 million in 2014 as revenues grew 13 percent to $5.45 billion, aided by a 17 percent growth in mobile subscribers and 27 percent increased mobile revenues. Operating expenses were static at $4 billion but finance cost rose to $1.1 billion from $962 million in 2014, depreciation was down and amortization up. Revenues should climbed close to $6 billion in the September quarter and is likely to result in a profit around $200 million before any allowance for tax.In March 2015, CWC completed the purchase of Columbus International, a fibre-based telecommunications and technology services provider operating in the Caribbean, Central America and the Andean region, for a consideration comprising US$708 million in cash and 1,558 million CWC shares. This resulted in an increase in share capital of US$78 million and the formation of a merger reserve of US$1,209 million. The total consideration, $2 billion for the CWC acquisition resulted in a multiple of 7.8 times EBITDA.
The proposed price of US$5.5 billion being proposed for CWC with EBITDA of US$840 for the combined entities at March, would be 6.55 times EBITDA. Applying this ratio, puts C&W value based on EBITDA for the current fiscal year around $3.30 each. CWC communications paid much higher multiple for Columbus only a year ago which would make it difficult for CWC management to justify to their shareholders a deal that reduced the value of the group with the full benefit of the merger of the Flow operation not yet visible. The proposed buyout price would, however, be more than the market value of CWC, worth 2.6 billion pounds, or about $4 billion, based on its market capitalization on Thursday. John Malone the major owner of Liberty Global already has a 13 percent stake in CWC.
