Caribbean Cream trading on Friday

Caribbean Cream will commence trading of Friday under the ticker symbol Kremi. This confirms IC Insider report last week that the listing was set for this week. The company is the latest to be listed on the Jamaica Stock Exchange.

Stock outlook | The company which went to the market in April to raise $75.7 million was just oversubscribed on May 1, well ahead of the closing date of May 10. Not much is expected in terms of price movements when trading starts since there was not the usual demand and heavy subscription for the shares as has been the norm for majority of the junior listing stocks.

More cash for Lascelles’ former owners

Some 985 former Lascelles deMercado shareholders are once more pretty happy as they received another distribution from their old company. The payout was made through New Transport Group, the company formed to take over the companies that Campari did not acquire when they took over Lascelles last year.

The amount being paid works out at $18.6533 per share of which $13.62 has been paid over, leaving $4.29 left to be paid later. No date was disclosed for when the balance is to be paid.

The former majority holders had arranged that amounts in excess of working capital needs would be paid over by Lascelles to the new company. This distribution is being made under that arrangement.

The directors of the new company indicate that they have engaged experts to advise on the future of the company and that shareholders would be updated at the annual general meeting later this year.

D&G or C&WJ: to buy or not?

Hi John: Should I buy more Lime stock or D&G? I already own some Lime shares. What was the last dividend paid by D&G? Thanks for your advice.

Response | That is a tough question. By the way there is no such company as Lime. Unfortunately the stock exchange has, in their wisdom, bastardized the system by trying to suggest that Cable & Wireless has had a name change but that is not so. There is no legal limited liability company such as Lime listed on the exchange.  Lime is purely a brand name and not the real company name. It seems to me that the exchange is totally confused. They have the name Lime for the company with the ordinary shares but they did not change the name of the preference shares which are still listed as Cable & Wireless. Drawing a line from what they have done, anyone not knowing the true situation would assume that there are two separate telecom companies listed, one called Lime and one called Cable & Wireless. Why JSE persists with this aberration is yet to be determined as there is no rationale for it, but then the stock exchange is doing many strange things these days. It makes one wonder if they are really serious about running a stock exchange at all.

D&G | Now to the question you asked. My investment company owns shares in both Cable & Wireless and D&G. First, the last dividend paid by D&G was 20 cents in December last year and another should be paid in June or July this year. They normally pay out 80% of profits each year so the next dividend could be around 40 cents since we project about 80-85 cents earnings per share for the current year to June.

DG_logo150X150D&G’s quarterly results are expected next week and they should  have enough momentum to surprise the market and push the stock price up. I really like it as they have cut a lot of costs out of the operation with the switch of production of Red Stripe to the USA. The local market seems to be holding up well based on the last set of results released. We see further demand in the next fiscal year that should continue to move the stock price higher.

C&WJ | We still like and have great hopes for Cable & Wireless. If fact, we love turnaround companies because if we get it right and time the entry into the stock, we will make above average returns. They have been cutting costs and revenues should start rising from the new pricing strategy adopted for cell calls last year. These moves allowed them to pull in more than 250,000 new users. The revenue from those phones should be earned for the full 12 months this fiscal year instead of only part year as was the case for the 2013 fiscal. The calculations we’ve made indicate strong profits this year from increased revenues and reduced costs, the latter based on cost cutting as well as improved margins resulting from re-pricing when the interconnection rate were lowered last year.

cable&wireless280x150Our main concern in the short term is the redundancy charge that we estimate to be around $3 billion that could cause the market to react negatively when the final 2013 numbers are released in a few weeks’ time. That doesn’t really bother us, as that reaction in our estimation, will be short-lived as investors start to see major improvement in the operating results starting in the June quarter. One may want to hedge one’s bet, by buying more now but leave room to pick up some at lower prices should the market react negatively to the impact of the redundancy cost that will depress the results but won’t repeat in the new year. Not only will it not repeat, there should be cost savings from the move that will help boost profits. Either way, it’s a bit of a gamble but the price is so low now and the upside potential so great in our estimation, that there is less risk in buying now than to await the results.

Caribbean Cream over by 1,177 shares

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The latest IPO to hit the Jamaican market, Caribbean Cream producers of the Kremi brand of ice cream, was oversubscribed by 1,177 units at the close on May 1, 2013.

The application for listing on the stock exchange is now before them and a decision is expected by Monday after which listing should commence. No listing date as been determined as yet, the broker informed IC, but the view is that trading could commence in the stock towards the end of next week.

A total of 387 applications covering units valued J$75,714,000 were received and processed for this Initial Public Offering (IPO). Of this number, 386 applicants covering 72,713,623 units received 100% of the total allotment requested.

The offer was for the subscription of 75,713,623 ordinary shares at the price of $1.00 per share. Applications in the public pool of up to 2,500,000 shares, received 100% allotment and one applicant over 2,500,000 shares was allocated 2.5 million shares plus approximately 0 .998446% of the excess.

Stock outlook | Investor’s Choice analysts project earnings per share of 17 cents for the year ended February 2013 and 39 cents for the 2014 year. The stock is likely to struggle at the issue price for a while with the less than robust reception to the issue. The annual results should be out soon, which should help the stock price once more financial data is released to the public.

Sharp moves up at BNS Jamaica

Scotia Group Jamaica Limited (SGJ) has advised that Mrs. Jacqueline Sharp, former Senior Vice President and Chief Financial Officer, has been appointed to the position of Executive Vice President and Chief Financial Officer and Chief Administrative Officer of SGJ effective May 1, 2013.

She served as Financial Controller in the Insurance arm for a number of years before taking over the top financial position of the group in 2008.

JSharp+BNSPrior to joining the banking group Mrs Sharp worked for a number of years at Security Brokers, a former member of the Jamaica Stock Exchange. Between 1988-91, she attended University of the West Indies and hold a BSC in accounting and CFA certification.

Debt swap for Caribbean Producers

CPJ is following the example of the Government of Jamaica in pursuing a debt swap. This one, unlike that of the government’s, will not result in any loss in capital for the holders of the debt. The board recently gave approval for the company to raise $500 million in floating rate secured promissory note. The proceeds will be used to retire loans they current have including related parties loans which climbed to US$12.3 million at the end of March.

But loan capital is not what the company needs, it needs more equity capital. At the end of March, loans and advances by related parties amounted to nearly US$24 million, equity is less than half of that at US$11.7 million. Cash flow is about US$5 million for this year most of which has already been utilized in long term capital expenditure.

Stock Outlook | The working capital on paper is well within accepted norms. The only problem is that liquid funds are not plentiful, with less than US$1 million dollars on the books. The directors are causing the company to skate on thin ice which is what is happening. Seeking a debt swap may save on the interest cost but will merely dent the poor debt to equity ratio, which is well out of line and prudence dictates should be put right fast, not later.

KREMI oversubscribed

When the public offer of Caribbean Cream Ltd (CCL) KREMI closed on Wednesday, it brought the total number of companies to raise funds using the Jamaica Stock Exchange’s junior market to seventeen (17).

Caribbean Cream Ltd (CCL) KREMI, seeking to list on the JSE Junior Market, closed on Wednesday morning, May 1, 2013 with applications amounting to more than 375. Word reaching was that the level of oversubscription was not high. This means that the stock will struggle in early trading to hold the $1 price but data suggest that earnings to be reported will beat a number of investors’ expectations when the annual results to February are released in a few weeks.

The Invitation for Subscription for 75,713,623 Ordinary Shares at J$1.00 opened on Thursday April 25, 2013 and was originally scheduled to close on closed May 10, 2013.

Stocks & Securities, the brokers to the deal, indicated that applicants (inclusive of Applicants for Reserved Shares) will be advised of the basis of allotment within three (3) business days in accordance with the Jamaica Stock Exchange Junior Market Rules.

The brokers also stated that the closing of the Invitation represents a landmark event for the company’s expansion as CCL recently signed a $13 million deal with Sandals Resorts International as the sole supplier of bulk ice cream to its Jamaican properties. CCL has also brokered a successful transaction with getting its products into Jewel Resorts.

CCL when it lists on the stock exchange later this month will bring the total listing on the junior market to 17 and will be the second since the start of 2013.

Talk Back | What were your reason for buying or not buying this IPO?

Kremi IPO to close today has been reliably advised that the initial public offer (IPO) of shares of Caribbean Cream which opened to the public for subscription on, 25th April 2013 will close today, Tuesday April 30, most likely on the morning, well ahead of the original propose close of 4:30 pm on the 10th May 2013. The early close was subject to the right of the Company to close the subscription list at any time after it opens on 9:00 a.m. on the Opening Date, once the issue is fully subscribed.  The shares which were priced at $1 each and meant to raise $75 million did not get the blessing of some brokerage houses as they saw the price as being too high, and in one case, they saw it as too risky based on inconsistent earnings amongst other issues.

JMMB‘s Forecast and Valuation | The company is expected to remain profitable despite the uncertainties in the local economy. The macro-economic instability may subside following an International Monetary Fund (IMF) agreement with Jamaica against the background of foreign exchange inflows and a slight improvement in the net international reserves. Further, listing on the Junior Stock Exchange will give the company a tax break for the next ten years, which should boost earnings attributable to shareholders. Revenues will continue to improve over the short term, while the enhancements and expansion in productive capacity of the company’s facility will likely improve its operational efficiency.

Within this context, the net earnings for the 2013 financial year end are expected to reach $29.81M (or EPS of $0.08). Meanwhile, net profits for the 2014 financial year end are projected to reach $40.99M (or EPS of $0.12). At the initial public offering price, the price-to-earnings ratio will be 12.70 times. The average trailing price-to-earnings ratio for the Junior market is approximately 6.41 times (Main market has a P/E of 6.58 times). Further, the average trailing price-to-earnings ratio for manufacturers and retailers listed on the Junior market is roughly 6.75 times (Manufacturing sector on the main market has a P/E of 6.06 times). Therefore, assuming a forward P/E ratio of 8.0 times for the 2014 financial year against the background of improved investor sentiments and stability in the local economy; the intrinsic value for Caribbean Cream Limited’s share based on estimated earnings is approximately $0.94.

The capital base of the company is expected to improve to $195.16M or a book value per share of $0.52 by 2014 financial year end. Assuming a forward P/BV of 1.8 times, the intrinsic value of stock is $0.93.

NCB Capital Markets‘ assessment of the prospectus | “For the nine months to November, the company increased net profit by 103% and boosted its equity base by increasing its share capital. Caribbean Cream Ltd ended the March 2012FY with earnings of $31.36Mn, the highest profit the company has recorded over the past five years and a sizable improvement to the $5Mn loss experienced in the previous year.


  • Earnings have been extremely volatile over the last 5 years
  • Earnings for the nine months period of $23.67 was driven almost entirely by a $21.0Mn revaluation gain following an $11.62Mn profit in the prior year period. This further confirms the earnings volatility
  • Company is highly leveraged which could impede its growth prospects
  • Current ratio of 0.79X raises liquidity concerns
  • Free cash flow is negative which could restrict the company’s ability to follow through on its dividend policy which is to pay out at least 20% of earnings.

There is no clear growth strategy even amidst the company’s rapid expansion As a result of the aforementioned, we are not recommending this investment at this time”.

KremiBanner600X250IC Insider considers that both assessments are way off the mark. Assessment of the company’s performance must be based on pretax profit, not after tax which has varying taxation elements that has nothing to do with operating activities. Profit before tax has been very consistent since the commencement of the company, Earnings for 2013 is more likely to hit 17 per share if the trend in revenues continues after November last year. If the company makes $29.8 million as indicated above in profit for 2013, earnings per share would be 9.8 cents not 8 cents before tax based on the 302.85 million shares issued for the year to February this year.

The company’s rapid growth has helped to put pressure on working capital. New cash to come from the IPO, will help address some of the issue rightly pointed out above.

Talk Back | What do you think? Was the IPO overvalued?

Is the real estate market bullish?

Jamaican Teas is reporting that its first real estate development, Carmen’s
 Court was sold out in 2 days when the units went on sale in mid-April, as
 buyers said a resounding, Yes!

This very first real estate project brought to market by H Mahfood & Sons Limited, a subsidiary of Jamaican Tea. Billed as charming, contemporary and ideal for property virgins and investors, the gated community on Kingsway in the prime Kingston 10 area, offered eighteen super studios of approximately 630 sq ft, with added features of private parking, a water tank and generator.

“Fifteen of the units were sold in one weekend and the remaining three are spoken for”, according to John Mahfood, Managing Director, Jamaican Teas, who believes that the development was a big winner because it had great timing, is quality real estate in a great location and affordably priced at
$10.5m to $11.9m.

Since its listing on the Junior Market of the Jamaica Stock Exchange in
2010, Jamaican Teas has demonstrated that it has its finger on the pulse, in terms of innovation and expansion. The group has plans for future real estate projects, as well as growth in its supermarkets and consumer brands of Tetley Teas, Caribbean Dreams and Jamaica Blue Spring Water products.

Talk Back | But investors are wondering if the quick sell off of units is an indication that investors are opening their wallets again to invest locally as opposed to putting money in foreign assets.  More importantly, is this move heralding a revival of the real estate market?

20/20 Hindsight: Access Financial IPO

Your decision to invest in a company should be based on a full assessment of  all the facts. Case in point, the Access Financial Services IPO offer. Below is the full text of my response to an article published in the Jamaica Observer in October, 2009 that I felt was flawed in its valuation of the IPO offer. Rather than the stock being overvalued, the facts indicated that the stock had an above average growth potential that could “far exceed any other stock on the market.” Needless to say, my BUY recommendation was not greeted favuorably by readers.

Many Jamaicans remain poor because they never take the time to find out the facts. The same seems true of an unfortunate assessment of the value of the shares of Access Financial Services in its current IPO carried in the Friday business section of your paper.

Share valuation is not about looking back at pass earnings but at likely future earnings. The article, deals well with many of the attributes of the company, but fails to indicate clearly, a full assessment of the true worth of the shares. In so doing, there seems to no focus on the impact of the removal of the tax on profits and the growth in earnings this year so far that will sharply boost earnings, as well as making the earnings for last year on a performa basis, better than reported.  To attempt to cast aspersions at Mayberry’s integrity in the offer price, is far too unfortunate as there is no evidence to suggest that the broker is trying to milk funds from the proceeds. In fact Mayberry is not selling any of their holdings in the offer and indicates that they have no plans to do so in the future. The gains from their initial investment, is purely on paper at this time.

Critical facts: What are some critical facts? First off the shares are not overvalued. An honest comparison with other listed companies will show that there are none that have the potential to grow as fast. The writer makes some unfortunate comparisons with JMMB and Scotia Group. The former has no chance of growing anywhere close to Access while Scotia Group’s possible growth is around 15-20% per annum. Those who fully understand share valuation know that the higher the growth rate, the higher the valuation.

The market targeted provides very high profit margin not even credit cards offer these margins. The history shows that the company has had very little bad debt even while lending to the riskier clientele. The market here is huge.

Big profit jump: Most importantly, Access earnings for last year, which came in at $69 million, was earned after writing off amounts incurred as loss of funds due to theft of $17m. When the earnings are adjusted for such losses and the tax free profits are factored in, then the earnings last year is around $3 per share. At $18 per share, the PE is 6, a little higher than the market average. But look what is happening in 2009. For the 6 month period from January to June 2009 the Company recorded total revenue of $151 million, an increase of 47% over 2008. Pre-tax net income for the period was $37 million, a 205% increase over the previous year. These 2009 figures clearly indicate that earnings for the full year should jump sharply, all things being equal. By my recognizing earnings for the full year could exceed $100 million or $4 to $5 per share. At just over $18 per share that a PE of 3 or 4, the shares are far from overvalued.

Stock to perform: Investors need also to be aware of the small number of shares that will be in the public’s hands that will exert upward pressure on the price once the company delivers. If management continues to keep bad loans at bay the way they have done so far, the sky is the limit. Investors in the stock will be extremely happy as the return on their investment will far exceed any other stock on the market. Investors who refrain from buying the stock are making a grave error if they really think it is vastly overvalued as the article suggests.

  || End  ||


10/18/2009 8:47 AM

I profoundly disagree with John’s assessment of Access.
John has sought to suggest that the stock is fairly valued, but his assessment is based on future value of existing stock.
I cannot see how one could be willing to be $18.43 per share today, which is what the stock should probably be valued 4-5 years from now.
One never knows what the future hold especially in the financial market hence should never pay so much upfront especially for an IPO.
John has failed to look at the fact the growth rate of this company is most likely to fall once it has gone public, due to a different type of corporate structure and reporting requirement required for a public vs a private company.
The “new” company is likely to be more conservative in risk taking position thus likely to slow down its growth rate.
Based on the above I see the growth rate slowing down, making those who purchased this stock at this inflated rate, likely to lose at least 60% of its valuation weeks are listing.
If Access intends to sustain a pretty good growth rate, it means plowing back the profits into the company, which virtually assures that the investor has no dividend to receive at least in the first 2-3 yrs depending on management plans.
If access intends to pay dividends, this alone means less retained profits to be used in the expansionary mode, this slowing its growth.
Regardless of what John thinks, asking investors to pay so much upfront for a future value which may be justified in the next 4yrs, means investors are in for a raw deal.
I will look to buy when the stock reaches a value lower than its net current assets, which lowers my downside losses.
Persons who bought this stock at 4.35 its net current assets, have zero protection on the downside losses, and are likely to suffer very serious losses once trading begins.

Overvalued IPO
10/18/2009 9:10 AM

This stock is priced at 4.35 its book value per share, meaning it is 4.35 times its net current assets or put another way 4.35 its valuation.
Scotia Group on the other hand @ $17.96 is valued at 1.21 price to book. Scotia group earns close to a billion dollars in profit each month and pays close to a $1.00 per share in dividend each year.
Now access is being offered at a price of $18 per share, a price which is not only greater than a well run and profitable company as Scotia current price of $17.96, but at a value is almost 4 times higher than Scotia, amazing.
Price is what you pay, value is what you get and I fail to see one getting value out of paying $18.43 per share for such a small company as Access.
Personally I would not buy this stock for more than a price to book of 0.75 , which works out to just about $4.60 per share.

10/18/2009 9:12 AM

I looked over their prospectus the very day it was released and came to the very same conclusion that this price is pie in the sky!! I have a degree in Finance and I invest in companies on the JSE including Mayberry and I think this is a sad day in IPO valuation. They had the opportunity to set the standard for the Jr. JSE and they are muggin it up.
The conclusion I draw from their pricing is that they take the Jamaican investor for idiots, like so many companies in Jamaica. And they are playing on peoples greed. I would love to invest in this company and if it hits the market I will wait for the price to realign to it’s proper valuation before buying.
Mayberry’s behaviour is nothing new as mentioned in the article beyond CCFG look what they did to Salada over the from 2007-08 even though they had no hope whatsover of taking over the company because the majority share holder refused to sell they kept on putting news out into the market about them taking it over. This drove up the price on Salada shares to on speakable heights for a company barely eeking out a profit and not paying any dividend. Salada had to enact a split to create liquidity and something of a normal valuation. Mayberry is a hype machine and this is coming from an investor.

10/18/2009 12:01 PM

John, I hope you are not doing a favor to yout friends at Access and Mayberry. What you have written about Access share price is pure nonsense. The price is grossly overpriced.

10/18/2009 5:46 PM

John shame on you, this is the worse crap I have heard since CASH MINUS and OFLINT. How can you look at yourself in the mirror? Bro you and your organization are worst than the THREE CARD man.
Now where the hell is the FSC dont they see the fraud that is been perpetuated on the nation. This is corporate malpractice. SHAME ON YOU ALL

10/18/2009 7:26 PM

Access financial may have great growth potential, but not great valuation just yet. This is a IPO for the balance sheet valuation somewhere else as an Associated Company. The Lead Broker could have done a better job with this IPO in more ways than one. There is no long term benefit from this IPO and all the initial investors in this IPO will lose money. The stocks will be bought back from the market when the price of the shares hit rock bottom. That is a strategy.

10/18/2009 7:49 PM

No value. I will repeat, NO VALUE

10/18/2009 9:17 PM

Mayberry is reporting that this IPO has been oversubscribed!!

10/18/2009 10:50 PM

Mr. Jackson everyone has a right to his or her opinion, you Sir should have done your homework. I am not a stock broker, but I was interested in the offer and did my research, after reading the Prospectus I decided not to take up the offer.
Look at likely future earnings, the future of Access Financial looks BAD. WHAT IS THEIR BUSINESS?????? SUB-PRIME LOANS. In the USA a company such as this would be called a predatory Lender.
The business model looked okay 3 to 4 years ago, but now it just looks dismal. Most of the clients the foward looking statement alludes to are people who live paycheck to paycheck. With all the talk of layoffs and cutback in the Jamaican economy, how does the principal of Access expect their business to grow?
One point made in the prospectus is that Government does not regulate this particular company, and therefore they can keep their interest rate on their products higher. Look at the percentage of bad loans recorded for 2008, and then compare that to the 9.09% projected non-performing loans in the prospectus. Come now Mr Jackson, does this sound right to you?
How is the market huge when this company’s business model caters to small and micro business sector? Take an informal survey on how many micro business have pulled down their shutter since the year started.
If i did not have access to information I might have called you for guidance as a stockbroker.,what a disappointment that would have been.

10/19/2009 8:17 AM

Does anyone still have the Mayberry IPO. Well it is the same way before they go public two years before they have a MASSIVE growth. I read the ACCESS IPO and and decided that i would wait or investigate the financial details. I am in a WAITING mood

Chris Berry
10/19/2009 9:46 AM

Your recollection of what happened with Salada is not correct. The current owners made an offer to purchase the outstanding shares of the company, we made an offer which was substantially higher than the current owners offer. At the time many said our offer was too high yet the price passed our offer and remains substantially higher to this day. We sought to purchase an undervalued asset and we were unsuccessful in acquiring it.

10/19/2009 11:15 AM

John – A couple of quick questions for you and possibly the Observer. Who is responsible for regulating financial analyst commentary on securities in Jamaica? Are there any rules around disclosure either for the publisher or the analyst? Don’t you think regulation in this area would be welcome? Comments from the BOJ, FSC, FDIC or the JSE would be welcome.