The sad state of the capital market

Investors are not protected even as money is taken from them to funds protection. We recently pointed out the problem investors in Wigton face with revenues and profit set to nosedive starting April this year.

Wigton closed at anew high of $1

Wigton traded at 63 cents on Friday.

This publication did not endorse the Wigton issue as we saw no growth in revenue for a prolonged period, others were not so inclined. We also of the view that Transjamaican Highway was highly overpriced. National Insurance Fund (NIF) was not only happy with the initial 50 cents price for Wigton they went into the market at higher prices and challenged ICInsider’s article written after the release of the first quarter report to June 2019. That report indicated the following:
The capital market got a huge body blow with the release of Wigton Windfarm quarterly results for the first quarter to June, which suggests a bright future outcome but the reality is vastly different.
Analysis of the results and historical data show clearly that investors have been unwittingly, duped into believing that the earnings of the company had blasted off sharply from 5.5 cents reported for the 2019 fiscal year, but nothing could be further from the truth. The directors’ report accompanying the quarterly results is just inadequate, as it does not clearly communicate what investors can expect for the rest of the year. There is just very limited historical information to go by to help.
The problem is that the situation with inadequate reporting by the company continues into 2021. With a member of the board who is also a director of the Financial Services Commission, the big question; will investors who need protection in this matter ever get it?
The company’s stock has been trading around 65 cents region for some time, recently it closed at 63 cents, trading as low as 60 cents. At the close on Friday, there was only one decent bid to buy 4,847,000 shares at 60 cents each, with just six other bids to buy 872,000 shares from 50 cents to 59 cents with the bulk at 50 cents.  Selling offers start at 63 cents with 204,000 units and climb to over six million at 65 cents. With the stock having no serious bids but the 4.85 million units at 60 cents sellers may not want to press selling as there will be little support to buy their shares as such the selloff may be prolonged.
The company’s directors have spoken about the fall in revenues for the number 2 turbine but nothing is said to the investing public as to the immediate future and what sort of profit investors can look to with the revenue fall out. What assurance can investors now have that there may not be more shocking information to come re revenues or costs? The deck needs clearing.
In the meantime, NIF the third largest shareholder in the company is going to take a shellacking on the investment of 706.8 million shares, for some time to come. This development cannot be pleasing to the managers of the NIF who were very bullish on the investment and then think about the NIS beneficiaries who will be out of pocket for a poor investment decision.
The other government divestment that is of questionable nature is TransJamaican Highway (TJH). The stock came to market around 22 times earnings last year when the average PE ratio for the market was no more than 15, but experts suddenly came up with all sorts of formulas and reasoning to justify the high pricing. While a large number of local stocks have gone on to record gains since last year, TJH is currently selling lower than the IPO price of $1.41. Unlike Wigton, the NIF name is nowhere to be found in the top 100 list of THJ, word is persons at NIF considered the stock to be highly overpriced as such the fund did not participate in the issue.
THJ last sold at $1.26 and the stock is trending negatively with the price seeming set to fall lower as selling pressure hits it while the company grapples with recovering revenues and profitability. For these two government stocks, it looks like a long hot summer for investors in them. But then unlike Wigton, there is now a top 10 shareholder who has been growing its holdings in the company from being outside the top 10 with less than 177.3 million shares at the end of March last year to 614 million at the end of December, with an increase at the of March this year to 665 million shares to be the fourth largest shareholder with five percent of the total number of shares.
The stock exchange should request Wigton to make full disclosure to the public as to the impact that the revenue cut will have on income, profit and earnings per share. They should also be required to stage categorically if there are any contracts that the company signed that will negatively affect profits and there are actions that the FSC needs to take as well.

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