$6.95 much for Sagicor X fund rights
The stock closed at $8.50 on the Jamaica Stock Exchange on Friday August 7th with 34,000 shares changing hands. The closing date for the issue is September 2, 2015, with the opening on August 19. The gross funds expected to be raised is J$4,157,036,165 and are intended to be used to assist Fund to acquire a convention hotel in Orlando, Florida, which is affiliated with a major hotel chain. The rights issue document states that the “resort has 742 rooms with over 62,800 square feet of meeting and convention space. It is located in Orlando at the entrance to the Universal Theme Park. The balance of the purchase price is expected to be funded by way of a loan”.
Sagicor Pooled Diversified Investment Fund and other connected Sagicor entities which together own approximately 80% of the stock units of the Company have stated that they intend to take up all their Rights. Shareholders who do not take up any of their Rights will be diluted by 28.57% assuming that all the Rights Shares are taken up and the Rights Issue is not up-sized.
The Fund reserves the right, in the event of over-subscription for shares from the Un-allocated Pool to upsize the Rights Issue by releasing up to maximum of 149,533,675 shares into the Un-allocated Pool to meet demand from its shareholders. X Fund does not intend to up-size the Rights Issue beyond the aforesaid maximum. If the Rights Issue is up-sized to the maximum the issued share capital of the Company would be increased by 50% over the current amount of shares in issue of 1,495,336,750 stock units and a shareholder who did not take up any of his Rights Shares would be diluted by 33⅓%.
Buoyed by an abnormal first quarter results, earnings ended at 46 cents per share to June versus 27 cents for the six months to June last year. Unfortunately, the rights issue document fails to indicate what income and profit is expected from the property being acquired nor what the forecast is for the rest of 2015 for the overall operations, to allow investors an insight into what is to be expected.
The stock which is overvalued is unlikely to enjoy the generation of profits in the short run from ongoing operations to justify the price being asked. In a market where few stocks are selling at a premium to net asset value, it is difficult to see why rational investors would want to pay a premium to the market for such an investment and suffer later the prospects of disappointing earnings that will justify the price either. One only has to look at Proven Investments shares, where investors gobbled up the stock at inflated prices as high as 22 US cents only to see few buyers for it now at 18 US cents to realise that hype will often will out in the short run but reality sets in after.
Investors should know what they are buying but that is not clear from the offer document but Sagicor Group selling at a PE of 6-7 times this year’s earnings with a book value of $12.17 versus last traded price of $13 is a far better buy. The issue is taking place in a bull market so who knows what will happen?
Noose tightening around Cambios
The noose continues to tighten around the necks of Cambios. According to a recent release from Jamaica’s central bank, the Jamaica Bankers’ Association has given notice that some of its members will discontinue accepting foreign currency banknotes from or issuing foreign currency banknotes to Money Service Businesses (MSBs), effective on or before 8 September 2015.
As a consequence, deposit-taking institutions (DTIs) who act as surrender agents, by accepting funds on behalf of BOJ under the Bank’s Surrender Requirement, will not be accepting surrenders from cambios in cash.
Cambios that will be impacted by this action will be granted a 6-month moratorium on surrenders to BOJ, effective 17 August 2015, while alternative options are being explored to facilitate cambios to comply with the surrender requirement. At the end of the moratorium period on 17 February 2016, or before, BOJ will communicate with affected cambios on the new arrangements.
“Note that non-cash surrenders are unaffected by the banks’ decision, and in that regard, the moratorium does not apply to cambios that surrender via the use of noncash instruments” the BOJ release concluded.
Huge jump in National Flour’s profit
Trinidad’s National Flour Mills reported a 200 percent jump in profit for the six months to June to $20.57 million versus only $6.79 million in 2014 and earnings per share of 17 cents and 10 cents for the quarter.
Profit fell in the June quarter from that of last year to $11.7 million versus $14.3 million but from higher revenues as profit margin shrank to 23 percent from 26 percent. Revenues climbed 15 percent for the six months to $245 million and a 10 percent gain to $124 million for the June quarter.
Helping the company is the sharp fall in the price of wheat on the world market from a high of more than US$700 to just over US$500 now but below US$500 per tonnes for quite a bit of the reporting period this year. National Flour earnings for the full year to December should end around 40 cents per share. The stock trades at $2.10 around 5 times earnings, a low valuation and if the company can maintain the level of profit now being generated and hopefully improve on that in 2016, the stock stands to generated a good level of appreciation. Investing in the stock is not without risk. The largest item of cost, wheat and the ability for management to adjust prices if wheat prices increase can be critical.
Borrowings have declined from $122 million at the end of the financial year in December last year to $57 million at the end of June while cash fuds are at $57 million while equity stands at $215 million.
The company shares are listed on the Trinidad Stock Exchange.
J$ makes gains on Friday
Purchases by dealers of foreign currencies on Friday, resulted in the Jamaican currency gaining value against the British Pound, the Canadian and the US. The market closed with dealers buying the equivalent of US$34,870,069 in contrast to US$33,887,651 on Wednesday, while they sold the equivalent of US$29,135,013, previously US$$39,804,866. The market was closed on Thursday, the country’s independence day.
In US dollar trading , dealers bought US$31,870,265 compared to US$31,012,046 on Wednesday. The buying rate for the US dollar rose 11 cents to $116.64 and US$27,464,923 was sold versus US$38,461,884 on Wednesday, the selling rate fell 2 cents to $117.36. The Canadian dollar buying rate declined 70 cents to $86.73 with dealers buying C$1,062,270 and selling C$651,724, at an average rate that fell 44 cents to $88.90. The rate for buying the British Pound dropped $1.23 to $179.31 for the purchase of £1,246,745, while £641,270 was sold, at an average rate that fell 50 cents to $182.18. At the end of trading, it took J$127.56 to purchase the Euro, with a fall of $1.11 from Wednesday’s rate, according to data from Bank of Jamaica, while dealers purchased the European common currency at J$124.73 for a fall of $1.42 from Wednesday’s rate. Other currencies bought, amounted to the equivalent of US$293,253, while the equivalent of US$180,980 was sold.
Highs & Lows| The highest buying rate for the US dollar, gained 5 cents to $117.60, the lowest buying, the highest and the lowest selling rates remained at $96.15, $123.21, and $96.15 respectively. The highest buying rate for the Canadian dollar dropped $7.65 to $89.45. The lowest buying rate eased 34 cents to $70.63, the highest selling rate fell $2.30 to $93.50 and the lowest selling rate declined 50 cents to $86. The highest buying rate for the British Pound, rose 70 cents to $184.10, the lowest buying rate inched up 16 cents to $147.49, the highest selling rate rose 22 cents to $190.14 and the lowest selling rate dropped $1.55 cents to $177.45.
Bearish tone continues on TTSE
At the close of the market, the Composite Index fell 1.03 points to close at 1,151.31, the All T&T Index lost 1.70 points to 1,958.27 and the Cross Listed Index dipped 0.05 at 45.17.
Gains| In trading, West Indian Tobacco gained 1 cent, in trading 4,921 units valued at $430,486 to end at $125.37.
Declines| Grace Kennedy closed with 16,318 shares changing hands at $3.60 for a 5 cents decline, Guardian Holdings had 6,000 shares trading at the close at $13.09 down I cent, Massy Holdings closed with 33,938 shares changing hands, 1 cent lower at $63.09 carrying a value of $2,141,487 and National Enterprises ended with 6,600 shares changing hands with a fall of 13 cents to $17.05 for a new 52 weeks low.
Firm Trades| Angostura Holdings closed with 8,173 shares changing hands to end at $14, ANSA McAL with 2,838 shares ended at $67.25, Clico Investment Fund traded just 760 units at $22.51. Firstcaribbean International Bank traded 4,008 units and closed at $5, First Citizens Bank closed at $35 with 5,753 shares changing hands valued at $201,355. National Flour trade 200,000 units at $2.10 for a value of $420,000. Praetorian Property Mutual Fund contributed 10,000 shares at $3.05, Point Lisas traded 10,000 shares at $4.06, Sagicor Financial with 200 units trading, closed at $6, Scotiabank traded unchanged to end at $62.31 with 734 shares, Scotia Investments traded 17,000 units and closed at $1.50 and Unilever Caribbean with 100 units changing hands, ended at $67.
IC bid-offer Indicator| At the end of trading the Investor’s Choice bid-offer indicator had 3 stocks with the bid higher than their last selling prices and 4 stocks with offers that were lower.
All JSE Index up 1,611 to 111,366 points
Gleaner Company traded at $1.53 at the opening with 28,300 units and now has a bid to buy 170,000 units at $1.50 and an offer to sell 99,000 at $1.88, the maximum price the stock can trade at is $1.69 today.
The big trade is 793,675 units in Scotia Group, with the price rising $2 to $26, with Scotia Investments being the aggressive broker on the buy side. The stock was on offer at $26 with the bid at $23.66. Lasco Financial Services traded 1,350,000 units at 1.98.
In the process the All Jamaica Index trades at 111,366.23 up 1,611.70 points JSE Market Index fell 1,441.92 points to 100,585.24. The combined index gained 1,359.38 to be at 104,001.49 and the junior market index with only one stock trading was unchanged but with Lasco Manufacturing having a bid of $1.85 to but 8,500 units and an offer to sell at $2 the index could see changes soon.
Four stocks have declined at 10.30 am versus only two that rose out of just six that have traded, carrying a volume of 2,226,126 units.
Scotia in big index push
The real big issue is the trade of 793,675 units in Scotia Group rising $2 to $26 with Scotia Investments being the aggressive broker on the buy side. Lasco Financial Services traded 1,350,000 units at 1.98.
In the process the All Jamaica Index trades at 111,449.70 up 1,695.17 points JSE Market Index fell 1,516.60 points to 100,659.92.