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Stocking up: What to Expect from the JSE in the Year Ahead
IPOs & APOs, oh my!
» Top Ten JSE Stock Picks for 2021 » 2021 Business Success Strategies » Market Update & Economic Overview - February 2021
What to Expect from the JSE in the Year Ahead
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IPOs and APOs, oh my!
Top Ten JSE Stock Picks for 2021
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Market Update and Economic Overview
Shereka McGhie MEET THE TEAM
Wealth Officer VM Wealth Management
Shereka McGhie, Wealth Officer at our Montego Bay office, joined the VM Wealth team in February 2020. Shereka is a customer-obsessed problem solver who is dedicated to giving the best possible customer experience to every investor, whether you are a seasoned veteran or even a novice. She believes that personalized service is essential when matching your needs with the right financial products. Shereka has a Bachelor of Science Degree in Business Administration from the University of Technology and has certification in Jamaica Securities from the Jamaica Stock Exchange. She is proficient in conversational Spanish and is passionate about teaching and coaching others to encourage personal development.
TOP 10 JSE STOCK PICKS FOR 2021
GK - GraceKennedy Ltd
JP - Jamaica Producers Limited
GK continues to produce a solid performance on the back of improvements to its food and money services business, coupled with improvements in operating efficiency. GK has performed well relative to our base case expectations given the current environment and we expect this to continue in the near-term.
JP has been assessing its businesses lines seeking to optimize its Revenue/Expense relationship overall. In keeping with this strategy, it recently opted to enter into a sale agreement to offload 22.1% of its stake in SAJE Logistics Infrastructure Limited, which is primarily focused on real estate and property management. This is expected to generate J$1.9 billion in cash, half of which is expected to represent gains on sale. Against this backdrop of boosted liquidity, we expect JP to be resilient to economic fallout from the pandemic and to have flexibility to take advantage of opportunities as they arise.
WIG - Wigton Windfarm Limited We remain bullish on WIG as we expect production to normalize in the long run. Despite the challenges likely to be faced in executing expansion projects and initiatives, we see substantial upside in WIG from the value of its current operations. As it sets it sights on expansion projects in Jamaica and across the region, we will continue to monitor the implications this may have on WIG’s performance and financial position. SEP - Seprod Limited We believe that Seprod is well positioned to experience rapid growth within the next few years due to its aggressive approach to sales and its push into the export market, which currently constitutes less than 2% of revenues. In addition, the company is undertaking several projects aimed at improving operating efficiency. We expect this approach to drive attractive returns from both top-line growth and profit margin expansion.
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MAILPAC - Mailpac Group Limited Social distancing measures related to COVID-19 have led to increased demand in MAILPAC’s services, which continue to positively impact earnings. We anticipate sustained growth on the back of increasing comfort with online shopping locally as well as MAILPAC’s local partnerships with grocery and office supply companies for online purchases and delivery of goods. SVL - Supreme Ventures Limited SVL has recently signaled its diversification strategy by taking a 51% controlling interest in microlender McKayla Financial Services. SVL will now gain access to seven locations and a customer base of over 3,000 people through its newly formed subsidiary called Venture Fintech
Debbie Ann Powell/Shutterstock.com
Limited. SVL is fully aware of the social barriers created by the pandemic and is prepared to improve on its innovation to allow customers to have a seamless interface on all their electronic devices. We anticipate that the company’s entry into the microfinancing space will set them apart from their competition. Also, we expect new financial products to be rolled out through its subsidiary and expect them to have a positive impact on the company’s financial performance. NCBFG - NCB Financial Group Limited NCBFG announced recently that it will not be disbursing any interim dividend payments for the first quarter of its financial year. In 2020, shareholders only received one dividend payment which was made in March, for the first quarter of 2020. Due to the adverse effects of the pandemic, NCBFG chose to focus on building its liquidity and remain sufficiently capitalized to withstand potential shocks from the current economic environment. Despite the subdued first quarter performance, we believe that NCBFG will recover as they did in past recessionary periods. LASM - Lasco Manufacturing Limited For the nine-months period ended December 31, 2020 LASM saw its revenues increase from J$5.8 billion to J$6.20 billion or 6% on the back of increases in the volume of products sold. Despite the negative impacts of the pandemic throughout the year, the company has been able to implement measures to protect its supply chain
and has ensured prudent cash management coupled with aggressive cost management. We anticipate that LASM will continue to improve on its profitability in the short-term. CCC - Caribbean Cement Limited For the nine months ended September, the company posted revenue of J$15.1 billion, which was 12% higher when compared to the corresponding period of the prior year (J$13.5 billion). This improvement in sales was primarily attributed to the increase in volume of cement sold. Despite the negative impacts of the pandemic, the company has shown some semblance of resilience. In the short-term, we are cautiously optimistic that the company will continue to improve on its performance in the shortterm. LAB - The Limners and Bards Like MAILPAC, social distancing measures related to COVID-19 have led to increased demand in LAB’s services. As crowd facing events were cancelled or postponed, large agencies turned to LAB’s streaming and production services which helped ramp up revenues as evidenced by its most recent financial results. The company’s profit showed improvement by 34% year-on-year to J$127 million with cash growing by a like amount to $380.4 million from $291.5 million a year earlier. As we continue to operate in the new norm, we anticipate that the social distancing protocols will continue to contribute to LAB’s profitability.
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IPOs and APOs, oh my! Here’s what you need to know about the market terms that are all the rage right now.
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ike many people, your head may be spinning from all this talk about IPOs and APOs. The prevalence of initial public offerings (IPOs) in the five years leading up to the pandemic helped make the Jamaica Stock Exchange the top stock exchange in the world, as reported by Bloomberg. They tend to generate a lot of interest, even with first-time investors, due to the potential for returns that are hard to find elsewhere. If you aren’t really sure what they are, don’t worry. We’ll explain.
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An IPO is the point at which a company moves from private ownership to being publicly traded. Before an IPO, the shares of a company are usually owned by a relatively small number of private investors, like the founders, select investors and possibly family and friends. When the company is ready , offering shares, or equity, to the public, is one way of obtaining the funding needed to take the company to a new level of growth. So, these companies get listed on the Jamaica Stock Exchange (JSE). The public is able to buy and trade the shares and the company gets an influx of cash to make good on the promise of growth. To have an IPO, companies must first meet a set of requirements by the JSE. Some of these include having articles of incorporation, prospectus/offer documents, listing agreements and audited financial statements. Private companies seeking to be listed on the JSE must commission investment banks to arrange the deal as well as set the IPO share price, dates and more. For the private investors, the IPO can be an exit strategy, as the influx will allow them to realise optimal profits from their private investment. For the new public investors, it’s a chance to get in on the ground floor and own a piece of a company at the start of what could be a very lucrative journey. If all goes well, as the company grows, so will the value of their shares. They may also receive dividends – their share of the company’s profits – over time. An additional public offering (APO) is similar to an IPO, with the main difference being that an APO is the sale of new or closely held shares by a company that has already made an IPO. In these cases the shares are made available to the public in order to allow the company to raise capital to finance debt or make growth acquisitions.
When the company is ready to IPO, offering shares, or equity, to the public, is one way of obtaining the funding needed to take the company to a new level of growth.
Now, there are two types of APOs – dilutive and non-dilutive offerings. In a non-dilutive offering, the shares of one of the company’s major stockholders are sold to the public, with no effect on the value of shares owned by other shareholders. In a dilutive offering, new shares are created and offered for sale, which can affect the value of existing shares. Public offerings are one way for companies to raise the equity they need while providing value to investors. Like all investments, IPOs and APOs carry an element of risk, but as long as investors do their due diligence and pay attention to the fundamentals, public offerings will continue to be a win-win solution for companies seeking growth and investors looking for returns they can sink their teeth into.
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VMWM HOSTS SUCCESSFUL WEALTH TALKS
2021 Business Success Strategies On Tuesday (February 16), Victoria Mutual Wealth Management Limited (VM Wealth) successfully staged the first installment in its Wealth Talk series for the year. Under the theme, 2021 Business Success Strategies, business owners were provided with a roadmap to recovering from the impact of the pandemic. Rezworth Burchenson, CEO, Victoria Mutual Investment Limited (VMIL) and VM Wealth, used the occasion to highlight the most pressing concerns for companies during the pandemic, which includes whether they are pivoting for new opportunities, what is the status of their cash flow and whether they are revamping their business model to close existing gaps.
“An attitude of resilience and determination [will be required] to emerge from this dark period better than before. Because much is at stake, we must reimagine our approach to the demands of the moment and capitalise on the opportunities while charting new paths,” he said. financial education mandate and is particularly crucial given the current global economic context.
Click here to read the full article. Click here to view the pictures from the event.
Urging businesses to be strategic in their approach at this time, he said the Wealth Talk series forms part of the VM Wealth’s
Wealth Knows
Liquidity 10
Liquidity refers to the ease with which an asset or security, can be converted into ready cash without affecting its market price.
Market Update and Economic Overiew January 2021
Fixed Income The yield on the benchmark US 10-year Treasury increased marginally by 15 basis points to 1.06% in January as investors assessed the progress on the US$1.9 billion Relief Aid package being pushed by the new Biden Administration to combat the fallout in the economy due to the Coronavirus. Read the full report
Money Market The JMD 30-day broker-to-broker repo rate ranged from a low of 1.80% to a high of 3.10% this month. Brokers sought funding to cover existing obligations and prepare for the auction of the re-opened GOJ FR 2029 and GOJ FR 2050, due for payment on February 2, 2021. Read the full report
Equities January saw the Main Market continue its downward trajectory, while the Junior and USD markets made a turn. The latter smaller markets may have been boosted by the increased interest from the APOs, Derrimon Trading and Proven, both of which were successfully floated in January and Sygnus, which was offered in December. Read the full report
Foreign Exchange The USDJMD rate declined by more than 4.00% in the first month of trading this year. The Jamaican dollar took a hammering throughout the month of January, posting losses in the Broker market, which opened trading at 142.00 on January 4th and closed on the 29th a JMD150.00:USD1.00, an $8.00 loss. Read the full report
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