The stock exchange needs radical overhauling

The Jamaica Stock Exchange is thriving with many investors making good money from their investments in the stocks on the market and companies raising fresh capital as a result of the attractiveness of the capital market. But the growth in the market belies some deep concerns and failures in the system.
The reality is that the capital market is in a state that is far from healthy and those in authority are no moving to fix it. It is difficult to understand why.
An example is that some directors think they can override the Company’s Act and do things that they are not empowered to do. An example is that the directors of GWest Corporation in their wisdom decided that a resolution passed at a general meeting prior to going to the public was only to be partially disclosed to potential shareholders. The stock exchange sees nothing wrong with the lack of disclosure which amounts a variation in the terms of the contract. “So public” was the information, that not even the company’s auditors who reported on the financial statements, months after the public issue, included the information of the resolution that was to give rise to the issue of preference shares, in the audited accounts.
In October, just under 92 million Seprod shares were offered to the public for purchase. Some of the shares were reserved for then existing shareholders of Seprod. Subsequent to the closure of the issue, NCB Capital Markets, the brokers that handled the issue announced that all applications for Reserve Shares in the offer were fully allocated. Several shareholders of Seprod found that they did not get their full allocation and contacted NCB, it was then that they seem to have discovered errors made at the stock exchange.
On November 8, NCB Capital Markets “advises and due to the large number of subscribers for the Offer, the process is taking longer than anticipated.” NCB Capital Markets advised that it is in the process of reconciling the applications and verifying payments received and has requested approval to provide the Basis of Allotment on Monday, November 12, 2018. The broker advised the Stock Exchange on the date promised, that in addition to the full allocation of reserve shares, subscribers from the general public will receive up to the first 5,000 units for which they applied, with the balance greater than 5,000 units allocated approximately 16.56 percent. Subsequent to the allocation

The Jamaica Stock Exchnage subsidiary

announcement, IC Insider.com gathers that investors from the general public who attempted to sell their shares after being allocated, had the Seprod shares in their accounts blocked, so they could not be traded. No one thought it prudent to advise them that the shares were blocked. This publication is seeing an increasing practice where persons in control take unilateral action to alter contractual arrangements. Someone or entity made a big mistake in not computing the allocation correctly in the first place. Information IC Insider.com has, clearly points to the error being made by the Stock Exchange subsidiary. Having done the allocation and credited investors, accounts and refunded excess funds, the Stock Exchange in the view of this publication has no authority to vary a concluded contract. Investors on November 26, were informed that the public got the first 5,000 shares and 16.25 percent of the excess. The letter from the Jamaica Central Securities Depository stated that “ we advise that initially, allocations had been calculated and posted to accounts, however, we detected a glitch in processing that resulted in shares of some clients being incorrectly allocated. Steps were taken to make the necessary adjustments that also included a change in the pro-rated percentage initially published from 15.56 percent to 16.25 percent. When an organization with the prestige of the Jamaica Stock Exchange fowls up matters, one expects that they would handle the matter in a professional manner and absorb the cost, and not opening themselves up to potential law suits.
The Stock Exchange has done the same illegal thing by blocking investors account from trading, as usual the Stock Exchange did not a have the decency to communicate with the investors about that matter. The sad thing is that they wanted the TRN numbers, but the reason they want it is spurious at best. It was just needed to try and clarify that more than one account that seem to belong to one person actually is so. But there is nothing in law that requires them to make such demands and worse the investors have no agreement with the JSE to provide such information as a condition of opening an account. Sadly, the JSE don’t need TRN to sort out limited liability companies, as the Company Office of Jamaica gives each company a unique number that can be used for that purpose. That the Stock Exchange is acting in questionable manner should not be surprising as one or maybe more of their dealer members, have wantonly breached agreements that they have with clients, refusing to comply with the contractual terms.
The Jamaica Stock Exchange release relating to an article IC Insider.com published in connection with the Seprod share allocation states:  “The JSE wishes to advise the public that the article published on ICInsider.com on Friday, November 23, 2018 entitled”, “Seprod stock allocation fowl up to cost JSE” incorrectly stated that the JSE was expected to absorb a loss in respect of the recent allocation of Seprod shares.
“The JSE advises that the JSE Group (The Jamaica Stock Exchange and its subsidiary, the Jamaica Central Securities Depository (JCSD) did not suffer any loss in relation to the foregoing.
“There was a delay in the final allotment of the Shares, but this was not due to any malfunction of our systems. We further advise that the allotment of the Shares was successfully completed, as communicated by the JCSD to the relevant investors.
“We wish to underscore that we continue to work tirelessly to maintain the confidence of participants in the market as we deliver our services to our valued customers,” states JSE.
The Stock Exchange may be “trying to work tirelessly to maintain the confidence of participants in the market,” but there are a plenty that they need to speedily do to convince the public that they are seriously tackling the many issues that require sorting out to enhance its reputation. The problems and inadequacies of the present trading platform is just one of them that has lasted far to long. Then there are errors in the trading report. Currently, delisted securities are still showing up in the reports and Eppley 7.5% preference shares for example that has been recently listed is being reported in the ordinary share section rather than in the preference share section where it belongs.
On November 1, the trading report shows the All Jamaica Composite Index of the main market closing at 396,907.46 but the report for the 2nd of November the Index was said to have closed at 387,739.58 with a rise of 832.12 but that was not possible. On the 5th of November the index was said to fall by 5,472.20 to close at 392,267.38. To date the erroneous information is still on the Stock Exchange website.

The Stock Exchange in its wisdom continues with the circuit breaker that serves no useful purpose. Not only does it have no useful purpose it is making a mockery of the exchange but they seem to have their heads in the sad oblivious as to what is going on around them. Take an example Barita Investments traded at $60 recently but the trade was cancelled as it breached the circuit breaker rules daily limitation, yet it is still being carried as the 52 weeks’ high price. That of course makes no sense, but this is just one of similar errors showing up all over. The stupidity of the circuit breaker is that stocks are frozen for an hour and if a stock breaches the level at a minute after 12 in a day it cannot trade again for the balance of the day. If there is need for it why not have the breaks for 15 or 20 minutes so that trading can take place fairly freely. After all the Stock Exchange still has the power to halt trading in a stock or the market if they consider it prudent to do so. The reality is that the Stock Exchange is not handling what they now have to mange and they want to go into new trading areas that is not really in demand.

Seprod shares attract nearly 4,000 applicants

Seprod shares sold at $24 each.

Many investors who applied for Seprod’s shares that were sold publicly in October will end up getting a relatively small allocation with nearly 4,000 applications chasing the 91.9 million Seprod shares that were offered for sale in October.
According to the release “Facey Group Offer of Seprod Ordinary Shares based on the broker’s preliminary numbers, the indication is that they received 3,799 applications.
NCB Capital Markets advises and due to the large number of subscribers for the Offer, the process is taking longer than anticipated.” NCB Capital Markets advised that it is in the process of reconciling the applications and verifying payments received and has requested approval to provide the Basis of Allotment on Monday, November 12, 2018.
Based on the number of applications, the average allocation would be around 24,000 shares each but with NCBCM allocated 10 million units the average falls to 21,000 units however 45 million units were set aside for exiting Seprod’s shareholders, staff, current and past directors.
The shares that were offered for sale at $24 traded on the Jamaica Stock Exchange today at $39 each.

Stanley Motta list Wednesday

58 Half Way Tree Road owned by Stanley Motta.

After more than a month from closing of initial public offering (IPO) in July, Stanley Motta will be listed on the main market of the Jamaica Stock Exchange on Wednesday.
The company successfully raised $4 billion from the sale of 757,818,862 ordinary shares to the public at $5.31 each. The shares will start trading after the listing of the company when trading commences at 9:30 in the morning. NCB Capital Markets, was the lead arranger and broker for the initial public offering that closed on July 20. The issue was just subscribed to, with NCB Capital Markets picking up a relatively small amount of the units.
Stanley Motta own property at 58 Half Way Three Road in Kingston with rentable space of 200,000 square feet and is said to be the Caribbean’s largest technology park, which is set to employ more than 5,000 Jamaicans within the Business Process Outsourcing (BPO) and technology industry, working for international brands like Alorica and Amazon.
Rental income for a full year is likely to be in the order of US$2.5 million with most expenses picked up by tenants, it should net out around the same amount tax free. The yield on investment will translate to just under 7 percent.

Motta shares fully allocated

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%8 Half Way Tree Road owned by Stanley Motta.

Shares offered for sale in Stanley Motta were fully taken up report from NCB Capital Markets shows.
According to a release from the brokers to the deal, the offer of reserve shares and those the general public were full allocated.
The Company intends to apply to the Jamaica Stock Exchange for the listing on the main market of the JSE of all the Shares and to make such application as soon as is conveniently possible following the close of the offer. The offer opened on July 6 and was scheduled to close on July 20, but an notice in Friday the 20th in the Daily Gleaner, disclosed that the issue was closed suggesting that the issue was fully taken up with minimal take up by the NCB Capital Markets as underwriters.
The offer covered 757 million shares with 227,348,547 reserved mostly for family members of the majority shareholders of the Musson Group and 529,970,315 units for the General Public for purchase at $5.31 per share, meant to raise $4 billion.

Scotia Premium Growth up 37% in 2017

Scotia Investments was the top performing unit trust in 2017.

The Jamaica stock market enjoyed strong growth between 2015 and 2017 with several stocks recording more than 100 percent gains in each of the years. The vast majority of Jamaicans have not participated in the gains offered by the market.
The vast majority of Jamaicans have not enjoyed the benefits of investing directly in the stock market because they do not fully understand it while some are just scared to lose their money. Many investors have taken the hassle or concerns out of investing directly in stocks by investing in equity based unit trust schemes that have delivered better gains than those in the fixed income market.
For while the combined market index of the Jamaica Stock Exchange racked up gains of 43 percent in 2017, the top performing equity based fund, Scotia’s Premium Growth Fund recorded gains of 37 percent for their investors in 2017 on top of a 25 percent gain in 2016. The Scotia Fund displaced Barita’s Capital Growth Fund, the 2016 front runner that ended at number 6 in 2017, delivering a 21.5 percent return, down slightly from 26.7 percent in 2016
Many investors have benefit from the strong performance of the local stock market in a number of ways. Pension funds that a large number of Jamaicans are members of, hold shares of many companies on the Jamaica Stock Exchange (JSE). There are also insurance company funds that rely on the shares as part of their investment portfolios. The National Insurance Scheme also invests in these companies and many more Jamaicans benefit from the market’s performance than they may be aware of. Others persons invest through unit trusts to enjoy the growth in the market and thus lower their risk. How does this work?

Barita Unit Trust equity drop from #1 in 206 to 6th spot in 2017 with a gain of 21.5%

A unit trust is a pooled investment scheme that allows anyone without expert knowledge and time to invest in a diverse portfolios of most stocks, to invest in them and therefore benefit from the gains that the funds can deliver. The investments, which comprise local and foreign equities, bonds, corporate paper, government securities, real estate, among others, are professionally managed to optimize gains for the investor.
Investing in a unit trust is an attractive option as the portfolios are not only diverse but they also cater to those with or without an appetite for risk. A few of the benefits to be derived are tax free gains, depending on the portfolio, lower levels of market volatility given the mix of securities in each portfolio as well as other perquisites.
From year to year, the performance of investments in equity based unit trust funds may in part reflect the highs and lows of the economy, the percentage share of investments in the local stock market shares and fixed income funds. Most importantly, the management of the funds can make a big difference as can be seen from the varied performance of funds in Jamaica. Additionally, in recent years there have been new players entering the market and new products being offered, thereby creating greater diversity so as to capture new investors and a greater share of the market of the non-investing market.
At present, there are eight schemes managed locally, namely Barita Unit Trust, JMMB Fund Managers, JN Fund Managers, NCB Capital Markets, Proven Fund Managers, Sagicor Investments, Scotia investments Jamaica and  Victoria Wealth Management. All offer varied slate of funds denominated in Jamaican dollars and US dollars. Sagicor Investments has fifteen (15) portfolios, the most diverse of all, followed by Barita Unit Trust, JMMB and NCB, VM, Scotia and newcomer Proven.
Funds under management as at October 2017 stood at $229 billion with Sagicor still commanding the lion’s share with Scotia and NCB holding their double-digit portion while the others shared the remainder of the pie.
In the next article, IC Insider.com will look at the performance of the unit trust equities’ portfolio in 2017 compared to previous years to give investors a better view of the best performing funds.

Elite shares start trading on Tuesday

The latest initial public offer to hit the capital market, Elite Diagnostic,will be listed on Tuesday on the Junior Market of the Jamaica Stock Exchange and will bring the number of listed companies to 35.

The issue that was heavily oversubscribed could see trading taking place at the maximum allowable on the first day which is 30 percent above the IPO price of $2 up to $2.60.
On Wednesday, the price could surged above 30 percent if the bid were to close above $2.60 on Tuesday but not exceeding $3.38 which could result in the price hitting $4.39.
The company offered 70,680,000 Ordinary Shares to the public which were aggressively taken up by investors with applications for 614,190,600 units were received from 3,346 investors with a value of J$1,228,381,200. The public offer was oversubscribed by more than 10.5 times.
A total of 3,257 Application for Shares were received from the general public who will receive the first 15,000 units with the balance in excess, allocated 3.383 percent.
IC Insider.com forecasts profit of 22 cents per share for the current year to June and 35 cents for 2019. With the heavy demand for the stock and the sharp fall in Treasury bill rates the prospects of the price reaching $4 should not be ruled out.
Sagicor Investments and NCB Capital Markets were the brokers to the issue.

$1.22 billion chased 71M Elite shares

Elite Diagnostics could be in the Junior Market TOP 10 by the end of 2018.

Elite Diagnostic initial public offer of 70,680,000 ordinary shares were aggressively taken up by the General Public and place the issue as the one to have attracted the largest number of subscribers.
Applications for 614,190,600 units were received from 3,346 investors value of J$1,228,381,200.
The public offer was oversubscribed by more than 10.5 times and only one category of reserved shares was fully subscribed to, with 6,160,000 shares reserved for Medical Practitioners, receiving 54 applications. Applications from this group covered 19.046 million shares valued at $38,092,600, the first 70,000 units were allotted in full with balance getting 10.062 percent.
A total of 3,257 applications for shares were received from the general public who will receive the first 15,000 units with the balance in excess, receiving 3.383 percent.
A total of 12 applications for shares valued at approximately 1.555 million shares were received from Directors and Employees of the Company for the 4,060,000 shares reserved.
Five Affiliated Doctors applied for 142,000 out of the 700,000 shares reserved for them, two Affiliated Entities applied for just 56,000 of 420,000 shares reserved for them. Eight Referring Doctors Tier 1 applied for 2,240,000 of the 6,160,000 shares reserved. Applications from Referring Doctors Tier 2 applied for 1.011 million shares from the 1,900,000 shares reserved for them.
Sagicor Investments and NCB Capital Markets were the brokers to the issue.

Elite IPO fully subscribed

Elite Diagnostics could be in the Junior Market TOP 10 by the end of 2018.

Word reaching IC Insider.com from usually reliable sources, is that the much delayed Initial Public Offer for Elite Diagnostics was oversubscribed before the revised prospectus was posted on the Jamaica Stock Exchange on Monday. 

The company is issuing just over 70 million shares at a price of $2 each and a PE ratio around 9 times estimated 2018 earnings and just under 6 times 2019 estimated earnings. The shares were to have officially opened on Monday January 22, but was put off until Wednesday 24, following amendment to include depreciation that was omitted from interim results to September, and then was pulled to correct errors in the interim results balance sheet and cash flow statement. The issue will now officially open on Monday February 5 and is expected to list on the Junior Market of the stock exchange that will see profit being tax free for 5 years and at half the regular rate for the second 5 years. Brokers for the issue are NCB Capital Markets and Sagicor Investments.

Elite Diagnostics IPO a buy

Elite Diagnostics is the first 2018 IPO out of 9, that is expected this year.

The initial public offer for Elite Diagnostics will open on January 22 at $2 per share and is scheduled to close on January 29, the prospectus which is now out states.
A total of 70.68 million shares are offered to raise $141 million. The shares to be listed on the Junior Market of the Jamaica Stock Exchange, if the issue is successful and will bring the total company listings on the Junior Market to 35 and the total listings to 39 and the total listings on the entire exchange to 96. Elite will be the second medical related company expected to list on the market and the second within two months.
Based on interim first quarter results to September last year the stock is attractively price and seems set to be heavily oversubscribed to be followed by a big bounce after listing. Elite has done well in just 5 years and seems set to expand at a nice pace going forward.
The company operates from Holburn Road in Kingston and now have a new office on 164½ Old Hope Road. The 4 year old company provides imaging and Diagnostic Medical Facility offers services such as MRI, CT Scan, X-Ray, Ultrasound & Fluoroscopy.
Of the shares available for subscription in the IPO, 18 million units are reserved for subscription at $2 each. The company has 282 million issued shares. The proceeds of the IPO will put the company in a position to repay a substantial part of the debt due lenders amounting to $202 million.
A number of Imaging diagnostic service providers operate in Kingston and Saint Andrew. These providers compete with the company for the provision of services in the Kingston and Saint Andrew market.
For the September quarter 2017, the company had net profits of $23 million on revenues of $69.8 million compared to revenues of $56.9 million in 2016 and profits of $14.4 million. Annualised, net profits would be $92 million or an increase of 108 percent over the previous financial year, if the current trend continues and would result in earnings per share of 30 cents for a PE ratio of 6.7 times earnings.
In the first year of operations in 2014 a loss of J$48.7 million was realized on revenues of $58.3 million. For 2015, revenues increased 127 percent and profit of $498,079 was realised. For the financial year ended June last year, revenues increased to J$263 million and net profits moved to J$44.2 million from $29 million in 2016. Gross Profit margin is very high at 67 percent for the 2017 fiscal year with administrative expenses at 31 percent of revenues, excluding depreciation.
In 2017, a new office was set up at 164½ Old Hope Road, opening in November 2017 and is expected to generate additional income for the benefit of the company commencing the current financial year, the company says.
Directors are, Steven Gooden, B.Sc., M.Sc., CFA, Chairman, Warren Chung, B.Sc. Executive Director, Dr. Neil Fong, B.Sc., M.B.B.S Executive Director, Andre Ho Lung, FCCA, M.Sc. Non-executive Directors are Kevin Donaldson, B.Sc., M.B.A, Paula Kerr-Jarrett, B.A., LL.M., Quentin Hugh Sam, B.Sc., Peter D. Chin, B.Sc., M.B.A., William Mahfood, B.Sc.
The company believes that its principal competitive advantage lies in using state of the art diagnostic equipment. “It 64-Slice or Multi-Slice CT Scanner is one example. It produces clearer images compared to older models by allowing technicians and radiologist to acquire thinner slices and 3D images at lower doses of radiation leading to a more detailed view of the patients’ anatomy. This leads to faster and more accurate diagnosis. 10.20 The Company has recently acquired a 3 Tesla (3T) MRI scanner – to the company’s knowledge only one of two in the Caribbean, the other being located in the Cayman Islands. The strength of the magnetic field generated by a 3T MRI scanner is twice that of the current industry standard 1.5T MRI scanners. The image quality of an MRI scanner is generally dependent on the strength of the magnetic field it is able to generate, the higher the magnetic field the better the image clarity. This increased image clarity aids Radiologists in their interpretations of diagnostic images. In certain circumstances the more powerful scanner is also capable of reducing scan times thereby reducing patient turnaround time.”
NCB Capital Markets and Sagicor Investments are brokers for the issue.

Wisynco should list by year-end

NCB Capital Markets Manager, Origination and Structuring Stanley Thompson (left) exchanges laughs with Wisynco Group Limited Chairman William Mahfood during a signing ceremony commemorating a partnership with the local manufacturing and distribution giants. Sharing in the moment, too, are Wisynco Chief Executive Officer Andrew Mahfood and PriceWaterhouseCoopers Director Fiona Hyman

Investors who subscribed for share Wisynco Group’s Initial Public Offering in the General Public pool have been allocated up to the 25,000 units with any amount in excess is allocated 18.70 percent thereof.
Shares reserved for Employees, Strategic Investors and the Broker were fully taken up. The listing committee of the Jamaica Stock Exchange meets today to consider the listing of the shares and it is expected that trading in the stock should commence sometimes next week.
The Company offered 149,414,576 shares to raise approximately $1 billion to use in its operations but existing shareholders offered 635,085,424 shares for sale at the same time as a part of the overall offering. Up to 314,700,000 Shares in the Invitation were reserved for priority application from, of which 150,000,000 units for subscription by the Strategic Investors and 52,200,000 Shares for the Broker at the Subscription Price of $7.87 per Share to 112,500,000 Shares for employees and directors at $7.08 per Share.
NCB Capital Markets were the brokers to the offer that was heavily oversubscribed with issue being opened on Wednesday December 6.
Financially, the company is strong, with shareholders’ equity of $7.6 billion and cash of $4.75 billion as of September. Profits for the 3 months to September came out at $656 million versus $591 in 2016 and for the June 2017 fiscal year, $2.24 billion versus $2.3 billion in 2016, from revenues of $19.4 billion while in 2017 revenues were $21.25 billion. For the current fiscal year to June 2018, IC Insider.com is forecasting profit of $2.6 billion, around 70 cents per share, from revenues of $24.8 billion and $3.9 billion or $1.05 per share in 2019, from sales of $29 billion.