Debt servicing cost, wages and related expenses are two big items that have prevented the Jamaican government from performing the role of government the way they ought as money expended on the excess staffing and by and large part of the debt servicing are non-productive expenditure that divert funds from areas of need. It is therefore not surprising that the International Monetary Fund (IMF) has placed a great deal of focus on these two areas in getting the government to reform the system and move the country intro economic equilibrium. The Fund is of the view that in spite of the move to contain the wage bill by constraints and attrition, more is needed to be done to restore balance in this area.
“Public sector reform is a key pillar of the fiscal consolidation effort over the medium term. The authorities aim to reduce the wage bill from a projected 9.9 percent of GDP in fiscal year 2015/16 to 9 percent of GDP in fiscal year 2016/17. To date, much of this lower spending has been driven by nominal wage freezes, and authorities aim to secure continued moderate wage increases in the context of the ongoing wage negotiations, mindful of the trade off with other spending priorities. There is, however, a need to refocus attention on modernizing the public sector and transitioning toward a smaller and more effective civil service”, the IMF review report says.
The target is steep a cut from 9.9 to 9 percent is a 10 percent change. The wage settlement for 2015 is 4 percent and if all of that was paid in the current fiscal year it would require nominal gross domestic product to rise around 5 to 6 percent. With inflation looking very subdued and real growth not looking robust, the target is likely be a big challenge. The other issue is that even if the government were to achieve the target is, will maintaining it be sustainable long term? The government can cut the number of workers and the wage bill by divesting some services rather than lay workers off.
IMF wants more in NIR
The central bank should also continue purchasing international reserves to provide insurance against external risks , particularly since reserves fall short of the Fund’s metric for reserve adequacy, the International Monetary Funds (IMF) states in the March assessment on Jamaica performance under the fund agreement.
The external risks are related to PetroCaribe inflows and the imminent U.S. monetary tightening, the IMF said.
“There was broad agreement on the need to replace, over time, borrowed reserves with owned reserves. The results from applying the IMF metric for Assessing Reserve Adequacy show that Jamaica’s level of international reserves, at 80.4 percent of benchmark in 2015, is still significantly below the suggested adequacy range of between 100 and 150 percent, pointing to the need for continued exchange rate flexibility”, the IMF report on Jamaica stated.
bringing the amount to 100 percent of the desired level would mean bring the amount close to US$3 billion and 150 percent would take it within the US$4 billion mark.
Lasco Financial’s Q1 Profit up 14%
Lasco Financial Services (LFSL) reported profit of $10 million for the March 2015 quarter, down from $41 million made in 2014 but revved things up to a 14 increase in June quarter to $54 million as revenues climbed 8 percent to $192 million and well over the $148 million generated in the March quarter.
For the March quarter revenue that compared with the 2014 quarter expenses grew by $28 million due mainly to increase spend on marketing and selling expenses. Jacinth Hall-Tracey, Managing director indicated that the period suffered from squeezed margins in March quarter on foreign exchange trading and foreign exchange losses in the quarter, resulting from the revaluation of the Jamaican dollar and greater stability of the exchange rate. Loan disbursements slowed as credit rating data used in assessing potential clients resulted in lower loan approvals.
Total expenses for the first quarter increased by 5.5 percent to $137 million compared to the corresponding period. This is primarily due to a 36 percent increase in administrative expenses and 16 percent decrease in selling and promotion expenses. “The net increase is reflecting the expansion of our network, staff cost and software support to manage operational efficiencies and to build customer relationships. LFSL continues to review its marketing tactics which gave rise to a reduction in selling and promotion expenses”, Hall-Tracey said. She went on to say “During the quarter, our growth initiatives included the launch of our motorcycle loan product and the opening of our new cambio branch in Port Antonio”. The opening of the new branch would have added to administrative cost against which revenues would not cover.
The company has cash of $563 million and is generating over $200 million per year. If the company can find the formula to ramp up good quality lending successfully, the profit outlook can be transformed considerably with high profit margins for lending. “We are working on a number of initiatives that will help in the transition from lower income in foreign exchange activity” Hall-Tracey said in response to questions posed after the company released the Full year results to March. The area of credit approval is one that they is being revisited as the use of credit rating information is stymying lending. But Hall-Tracey expects profit for this year that ends March 2016 to be higher than for the year just ended, subject to taxes on profit which the company will start bearing at fifty percent of the official tax rate of 25 percent.
The equity capital of Lasco is $868 million and is well below that of its two siblings who have equity in equity of more than $2.4 billion each, as such the possibility for strong growth is probably more present here than with the bigger entities over time.
The company has done well from the money remittance and cambio operations but it is in the lending that the future growth prospects seems to rest. Hence the connection between Mayberry Investments with the know-how having been exposed at Access Financial. The company has adequate free capital to increase lending with only $147 million in loans at March. Earnings per share of 0.45 cents for the quarter should end around 20 cents for the year to March 2016. The stock last traded at $1.80, investors need to keep an eye for the possibility that Mayberry Investments could increase their holdings in the company.
Kingston Wharves Q2 profit up 10%
Revenues shot up 15 percent for the six months to June this year to $2.33 billion at Kingston Wharves from $1.94 billion over the corresponding period of 2014. Revenues for the quarter reflected an increased 19 percent to $1.19 billion or over the June quarter last year.
The increased revenues, generated net profit attributable to shareholders that grew by 21 percent over in the prior year, from $354 million to $427 million for the half year and for the June quarter and only 10 percent to $240 million and resulted in earnings per stock of 17 cents for the quarter and 30 cents for the half year. Earnings for the full year should end around 70 cents per share compared to 59 cents for 2014.
The Group experienced lower foreign exchange gains associated with the depreciation of the Jamaica dollar resulting in a reduction in other income.
Direct operating expenses rose faster than growth in revenues with an increase of 26 percent from $1 billion in 2014 to $1.26 billion for the six months period and jumped 30 percent from $510 million to $663 million for the June 2015 quarter. 
Administrative expenses rose marginally from $393 million in 2014 to $397 million for the six months period and fell slightly from $200 million to $198 million for the June 2015 quarter.
“Transhipment container volumes handled at the KWL Terminal, during the six months period, increased by 20 percent over the prior year, while domestic container volumes and motor units grew by a further 22 percent and 7 percent respectively” Jeffery Hall, Chairman for the group said in a report to shareholders.
Purchase of property, plant and equipment amounts to $437 million up to June compared to $513 million in the 2014 half year period as the company expands and modernize to attract more business with the opening up of the Panama canal.
The company’s stock closed on Friday with a price of $7.10 compared a net book value of $12 a sells at a PE around 10 this year’s earnings. Less than 5 percent of the company’s shares are held by shareholders outside of the top 10 shareholders. That has helped with the relative higher price of the stock compared with the overall market with a much lower PE.
Profit jumps 45% at Lasco Distributors
Lasco Distributors” hot new “I Cool” drink.
“The main contributing factors to the increase revenues were the increase in volumes of iCool beverages and additional revenue from the distribution of the full range of Unilever Products”, Peter M. Chin, Managing Director reported to shareholders in the directors’ report accompanying the financial data.
“Increase logistics costs for the period and the continued aggressive selling and marketing activities resulting in the gross profit margin being lower by 1.4 percentage points than the prior year. The aggressive efforts to drive demand for our newly launched iCool brand of beverages has been successful as the company achieved a significant increase in volumes’, Chin went on to say.
Cost of sales rose 41 percent to $1.75 billion faster than revenue growth but still allowed for the strong increase in profit. Gross profit margin came out at 16.9 percent down from 18.25 percent in 2014 and declined to 17.94 percent for the 12 months to March 2015 from 19.37 percent in 2014. Administrative, selling and other expenses rose 22 percent to $441 million during the June quarter, from $361 million in 2014.“For the reporting period Current Assets increased by 24.5 percent or $951 million. The major contributory factor was Trade and Other Receivables category which increased by 48.1 percent or $776 million, this was a result of the increased Credit Sales and Principal activities. Inventories increased by 33.6 percent or $436.7 million due to new products to market and new business agreements, Trade and Other Payables increased by 34.4 percent or $615 million over the corresponding period,” Peter M. Chin, reported.
Earnings per share ended at 4 cents, and IC Insider is forecasting 35 cents per share for the full year which would be well ahead of the 16 cents earned for the 2015 fiscal year.
While the stock is trading at $1.90 or 5.5 times current year’s earnings, making the stock attractive especially as profits are likely enjoy a big uptick in 2017 as well with more products to distribute. Investors need to bear in mind that profits become taxable at 12.5 percent starting in the second half of this fiscal year, for five years.
FX market back to normal – Friday
The foreign exchange market returned to normal on Friday the day after Bank of Jamaica had a massive intervention with over the US$100 million market on Thursday. The local currency moved even closer to $120 to the US dollar with a 6 cents fall. Purchases by dealers of foreign currencies saw buying of the equivalent of US$34,967,631 in contrast to large sum of US$124,150,664 on Thursday, while they sold the equivalent of US$28,565,935, well down from US$118,010,252 previously.
In US dollar trading , dealers bought US$30,769,583 compared to US$121,494,099 on Thursday. The buying rate for the US dollar declined 36 cents to $118.08 and US$26,705,554 was sold versus US$116,060,844 on Thursday, the selling rate rose 6 cents to close at $118.68. 
The Canadian dollar buying rate fell 17 cents to $86.80, with dealers buying C$789,575 and selling C$779,936, at an average rate that dipped 25 cents to $89.56. The rate for buying the British Pound gained 85 cents to $180.43 for the purchase of £2,171,885, while £784,302 was sold, at an average rate that rose 51 cents to end at $183.09. At the end of trading, it took J$133.12 to purchase the Euro, a rise of 69 cents on Thursday’s rate, according to data from Bank of Jamaica, while dealers purchased the European common currency at J$130.92, for an increase on Thursday’s rate by $1.47. Other currencies bought,
Highs & Lows| The highest and lowest rates for trading the US dollarwere all unchanged on Friday. The highest and lowest buying, the highest and 
lowest selling rates ended at $117.60, $96.19, $123.26 and $96.15 respectively. The highest buying rate for the Canadian dollar fell 90 cents to $90.10, the lowest buying rate remained unchanged at $71.63, the highest selling rate fell 16 cents to end at $92.34 and the lowest selling rate added 70 cents to end at $87. The highest buying rate for the British Pound, remained unchanged at $183.20, the lowest buying rate gained 5 cents to $147.33, the highest selling rate jumped $3 to $189.92 and the lowest selling rate climbed $2 to $178.
Sagicor Real Estate Fund tops trading on JSE
Sagicor Real Estate Fund traded 12,553,254 units days after the company reported a successful rights issue that raised $5.2 billion. Most trading took place at $6.95, in shares crossed by Scotia Investments as brokers for clients. The stock price ended at $7.50 at the close, after losing 50 cents.
Market activity generally,
on the Jamaica Stock Exchange ended with just 31 securities changing hands as 19,174,117 units, valued at $129,515,704 were exchanged. Sagicor Real Estate Fund accounted for a large portion of the monetary consideration. Seprod also chipped in with a fair amount. At the end, 8 stocks gained, compared to 11 that declined in all market segments. The JSE Market Index declined 648.07 points to 98,149.98, the JSE All Jamaican Composite index fell 724.25 points to 108,644.42 and the JSE combined index lost 916.38 points to end at 101,195.27.
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 13 stocks with bids higher than their last selling prices and 4 with offers that were lower.
In trading, Cable and Wireless had 1,700,000 shares changing hands to close at 48 cents, Caribbean Cement traded 10,000 shares at $8, for a 38 cents gain. Desnoes & Geddes traded 779,322 shares at $7, JMMB Group had 13,100 shares changing hands at $7.70 after gaining 5 cents, 
Sagicor Group with 32,614 shares changing hands, closed at $13 with a 30 cents increase. Scotia Group traded 110,575 units in closing at $23.80, for a fall of 32 cents, Seprod traded 1,813,740 shares at $14 while losing 60 cents. Supreme Ventures traded 210.509 shares but lost 24 cents in ending at $3.90, Proven Investments ordinary share traded 91,890 units at 19.9 US cents after rising 0.004 cents and Jamaica Money Market Brokers 7.50% preference share traded 200,000 units at $2.
Junior index drops 3.5% on Friday
Lasco Manufacturing fell 15 cents to help pull the index down
The large decline in the index would be due a lot, to the fall of Lasco Manufacturing with a large number of issued shares.
At the close, 5 securities ended with no bids to buy, while 7 had no stocks being offered for sale and 6 stocks closed with bids higher than the last traded prices and 1 closed with a lower offer.
Stocks trading are, Access Financial traded 2,500 shares to close with a 2 cents fall to $12, Caribbean Cream lost 30 cents with 14,300 shares changing hands at $1.60, Dolphin Cove
traded just 1,210 shares with a loss of 65 cents to end at $12.25, Knutsford Express had 1,500 shares changing hands at $6.10 for a 10 cents gain. Lasco Distributors closed with 490,000 units trading at $1.90 to gain 5 cents, Lasco Financial ended with 629,255 shares changing hands at $1.80. Lasco Manufacturing closed with 191,077 units trading, ending with a loss of 15 cents at $1.80, Medical Disposables ended with 141,958 shares changing hands to close at $2.36 after gaining 1 cent and Eppley preference share 2019 traded 103,836 units at $6.05.
1 new high 1 new low on TTSE
The Trinidad & Tobago Stock Exchange closed with only 8 securities changing hands with one stock reaching a 52 weeks’ high and another at a52 weeks’ low. The price of 1 stock rose, 3 declined and 4 traded with price unchanged as a total of 392,499 units traded, valued at $7,370,770.
At the close, the Composite Index rose 0.33 points to 1,146.70, the All T&T Index gained 0.66 points to 1,950.15 and the Cross Listed Index remained at 45.03.
Gains| Agostini’s gained 74 cents with 819 shares changing hands to close at a new 52 weeks’ high $18.
Losses| Clico Investment Fund trade with a volume of 309,118 shares valued at $6,961,307, at the close the price slipped 3 cents to $22.52. Massy Holdings closed with 700 units trading at a new 52 weeks’ low of $62.48 with a 1 cent loss and National Enterprises with 290 shares changing hands, lost 5 cents.
Firm Trades|. First Citizens Bank had 1,454 shares changing hands to end at $35, National Commercial Bank traded 64,318 shares at $1.63, Sagicor Financial Corporation closed with 15,000 shares changing hands at $6 and West Indian Tobacco traded just 100 shares to closed at $125.42.
IC bid-offer Indicator| At the end of trading the Investor’s Choice bid-offer indicator had 7 stocks with the bid higher than their last selling prices and 4 stocks with offers that were lower.
Slow trading on JSE Friday
Trading activities on the Jamaica Stock Exchange has been slow in the early morning session with few trades of significant volumes. The market has so far have trading in 21 securities with a volume of 4,065,693 units, with 6 stocks declining and 5 rising.
Trading activity resulted the JSE Market Index rising 102.04 points to 98,900.09. The JSE All Jamaican Composite index gained 114.03 points to 109,482.70 and the JSE combined index rose 55.04 points to be at 102,166.69. The junior market slipped 4.63 points to 984.39
The main trades so far are Cable & Wireless with 1,700,000 units at 48 cents, Seprod traded 1,813,740 at $14 while losing 60 cents, Proven Investments 86,890 units trading was at 19.9 US cents. In the junior market Lasco Distributors with 253,000 units at $1.85 and Eppley preference Shares 2019 traded 103,836 units at $6.05.
