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 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 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

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

Word reaching IC 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 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.

Wisynco Group IPO is imminent

NCB Capital Markets Manager, Origination and Structuring Stanley Thompson (left) exchanges laughs with Wisynco Group Chairman William Mahfood during a signing of the IPO agreement. Sharing in the moment, too, are Wisynco Chief Executive Officer Andrew Mahfood and PriceWaterhouseCoopers Director Fiona Hyman

Wisynco Group today announced its intention to offer shares in the company by way of an initial public offering (IPO), confirming IC report yesterday.
Information gleaned is that the draft prospectus is being vetted by the Jamaica Stock Exchange, the Financial Securities Commission and the Company Office of Jamaica with the IPO expected to come to market before the end of this year and could happen in November.
Founded in 1965 by the Mahfood family, West Indies Synthetic Company (WISYNCO) began manufacturing ‘Iron Man’ water boots from a 6,000 square foot factory in Twickenham Park, St. Catherine. The company now ”owns and manufactures a portfolio of category-leading beverage brands such as WATA and its extension of cranberry flavoured-WATA, BOOM Energy Drink and BIGGA Soft Drink. In addition to its owned brands, Wisynco is the exclusive local bottler for the Coca-Cola Company, as well as third-party beverage brands such as SqueezZ and Hawaiian Punch also distributing for global giants such as Red Bull, Tru Juice, Freshhh, Kellogg’s, General Mills, Nestlé and others.
A rapidly-growing company, Wisynco has increased sales significantly in recent years moving from JMD 12.6 billion in 2013 to $21.2 billion in 2017. Over the last five years the company’s year-to-year sales growth has ranged between 9 – 21% with a compound annual growth Rate (CAGR) of 11.06% over the same period. The business has a strong gross profit margins, averaging approximately 36% since 2012.
Wisynco’s revenues are just under the $22.8 billion generated by Lasco Manufacturing and Distributor combined. With the above profit margin, gross profit would be $7.5 billion. The two Lasco companies have administrative, selling and distribution cost of $4 billion to March this year. IC puts the cost for Wisynco at $4.5 billion per annum which would result in a pretax profit in the order of $3 million and after tax around $2.5 billion. If the company came to market around the mid-range of PE of 12, this would value it at $30 billion. An issue of 20 percent in the IPO, would target inflows be around $6 billion, but IC gathers that a vastly smaller sum is being targeted to be raised by the company but some existing shareholders may seek to divest some of their shares.
According to William Mahfood, Chairman of the Wisynco Group, “the IPO will allow us to share the growth and

Wata produced by Wisynco

success of our business with a wide cross section of our customers and employees, especially following on the outpouring of wishes and support after the fire last year”
With over 350,000 square feet of warehouse, 110,000 square feet of factory space the company has over 700 sales-related full time employees.
We are a proud Jamaican company with a deeply rooted commitment to the country’s development.” Mahfood said. “Our stated mission is to improve the lives of our people which extends to all stakeholders –team members, customers, partners and now with the planned IPO to fellow Jamaicans alike,” Mahfood said.
NCB Capital Markets has been engaged as arranger and broker for the transaction with PricewaterhouseCoopers acting as financial advisors to the company.

Pulse Investments cans Rights Issue

Kingsley Cooper Chairman of Pulse

Pulse Investments (PULS) has canned their previously proposed rights issue of ordinary shares, instead the company has resorted to bonds financing, the preferred approached minority shareholders had recommended at the 2016 annual General meeting.
The proposed debt financing did not find favour with the directors hence their attempt to seek equity funding. According a release of the company, “the Board decided that the Company will not pursue the previously announced rights issue, as it has now secured funding from a related party as well as a bond from NCB Capital Markets. The Directors decided, on reflection, that the funding now secured, is a less expensive alternative for the company than the rights issue would have been. Further, no shareholders run the risk of dilution of their Pulse shareholding as a result of the current course of action.”
PULS further states that it wishes to clearly indicate that the rights issue, which would have been arranged and brokered by NCB Capital Markets, had been approved, with sufficient commitments made to ensure that the issue would have been fully subscribed.

Wisynco could be the next big JSE IPO

In 2015, West Indies Synthetics Company Ltd (WISYNCO) celebrated 50 years of operations by early 2018 the company is set to celebrate another milestone, as the third Mahfood majority owned company to be listed on the Jamaican Stock Exchange. 
Wisynco was formed as a result of the amalgamation of the three companies – West Indies Synthetics, Wisynco Trading Limited, and Jamaica Drink Company Limited.
Prior to this, CMP Industries that was primarily a manufacturing company supplying office equipment and material, was listed but suffered declining fortunes with the switch in import policies in the 1980s and 1990 that saw incentives being removed or slashed to protect local manufacturing. CMP still operates but as a property owner and is now controlled by the Trustees in Bankruptcy.
Jamaican Teas, listed on the Junior Market is majority owned by another branch of the family, that includes John Mahfood and his parent.

Wata produced by Wisynco

In 2009, Partner Foods Limited and Wendico Jamaica Limited merged to form one company – Wisynco Foods Limited. Wisynco Foods represents the brands Wendy’s, Domino’s and Haagen Dazs. In 2014, Wisynco purchased fifty percent share in United Estates Ltd & Trade Winds Citrus Ltd.
According to Wisynco website, Saleem Mahfood was married to Evelyn Shammas in Lebanon, following which on his return to Jamaica he opened his own wholesale haberdashery at 132 Harbour Street in downtown Kingston. He named it Mahfood’s Commercial Limited. The store distributed goods to retailers — footwear, including the once popular BATA sneakers, Cebo water boots; along with yard goods, and a range of haberdashery items.
The brothers formed WISYNCO and borrowed £150,000 from Barclays Bank to build and equip a 6,000-square-foot factory at Twickenham Park in St. Catherine and hence the official birth of Wisynco. The new plant started production and manufactured 60 pairs of boots per hour. Soon farmers, casual labourers, factory workers, and anyone needing protection from the elements would be sporting Jamaican-made Iron Man water boots. Initially Wisynco introduced a double-shift system to keep up with growing demand, and when that still was not enough, expanded to three shifts.

True Juice orange juice bottled by Wisynco

Growth continued even during the 1970s when Wisynco required 60,000 square feet of production and warehouse space in order to supply the Jamaican market with its expanding range of products.
Wisynco started production of cups and containers, in the old offices at West Indies Synthetics, Twickenham Park being brought into use as the thermoforming hall. In 1996, the company borrowed US$3 million and set up a 10,000 square-foot carbonated soft drink manufacturing plant and the start of BIGGA Soft Drink. In 2000 Wisynco introduced its own brand of purified artesian well water WATA to the Jamaican market.
in 2006, Wisynco began distributing Coca-Cola products on a non-exclusive basis.
Wisynco, recently opened its new distribution centre after fire gutted its Lakes Pen, St Catherine warehouse last year May. Chief Executive Officer Andrew Mahfood anticipates that the US$2 million ($2.6 billion) investment in the 360,000-square-foot distribution centre will further position the company to move aggressively after the export market. In fact, Wisynco plans to build a new beverage plant valued at US$8 million over the next six months to increase production numbers by 50 per cent as the company seeks to take on the Caribbean market.
IC has been reliable advised that the company is estimated to have a market value around $38 billion at approximately the current average PE of the market. At this valuation when listed would rank as one of the largest company c on the exchange several bigger than any Junior Market company and about two thirds the size of Grace Kennedy and several times bigger than Jamaica Producers. NCB Capital Markets is said to be the brokers to the offering.

NCB Capital assesses JSE market

The stock market continued its upward trajectory in 2017. Year to date, market performance has been significantly stronger than 2016 with the Main Market Index returning 32.94 percent as at August 2017 compared to 6.43 percent for the corresponding period last year.
The Combined, returned 31.2 percent, Junior Market 19.48 percent and All Jamaica Composite Index and 33.6 percent, for the calendar year to August 31, 2017 relative to increases of 8.4 percent, 23.78 percent and 6.6 percent, respectively for the 2016 corresponding period.
Improvement in Jamaica’s macroeconomic fundamentals have boosted business confidence and contributed to a positive outlook for corporate earnings. In addition, increased investor confidence and appetite for riskier assets continue to drive market activity despite the run up in prices.
Stock price appreciation was broad-based with the strongest performers being in the main sectors of manufacturing, financial services and conglomerates. In particular, the manufacturing and financial sectors accounted for six of the top ten advancing stocks during the period. Financials continue to churn out positive earnings on the backdrop of significant growth in private sector credit.

NCB Financial Group profit surged in 2017, helping with other financial stocks to push the JSE higher.

The annual growth in private sector credit at end-February 2017 was 30.7 percent, which was stronger than the expansion of 10 percent in February 2016. Financials have been successful in weathering the low interest rate environment as margins have generally remained stable and fee income growth has been robust. Furthermore, low rates have helped to drive loan portfolio growth while fees and commission income have played a major role in income diversification. The manufacturing sector experienced some expansion buoyed by strong local demand for consumer products and growing export markets in the Food and Beverages segment. Additionally, Jamaican dollar appreciation within the earlier part of Q1 supported the performance of firms with a more concentrated focus on domestic operations. Of note inflation has remained subdued which has also assisted in increasing efficiency and improving margins.
While economic growth outturn was flat during the first quarter of the year, macroeconomic conditions remain stable and augers well for business operating environment. Against this background, the market should see improved activity and an uptick in the number of listed firms aided by the reinstatement of the Junior Market incentives in the last quarter of 2016.

The above is an extract  from The NCB Capital Markets’ September 2017 stock market recommendations.