Money is a medium of exchange or any generally accepted form of payment for goods, services and debt.

The earliest representation of money was portrayed in the barter system. Merchants exchanged goods for other goods whenever there was a double coincidence of wants. Obviously, this posed a huge problem as items were being used as payments for goods or services below its value. People began to use gold as payment, which proved inefficient as the value of gold wasn’t easily divisible and was difficult to carry around. With the emergence of the financial system, markets adopted paper notes which carried intrinsic value, representing wealth in the form of gold. This solved the problem of carrying the commodity around but did not do justice for the lack of divisibility.

The use of banknotes issued by private commercial banks as legal tender, has gradually been replaced by the issuance of bank notes authorized and controlled by national governments. The Bank of England was granted sole rights to issue banknotes in England after 1694. In the United States, the Federal Reserve Bank was granted similar rights after its establishment in 1913. This is what most markets have come to know and use as money.

What the advancement of technology has done is given societies a new tender, in the form of credit cards, debit cards and cryptocurrency. Many don’t trust the concept of cryptocurrency as it has proven to be highly volatile. While several digital currency systems were proposed since the 1980’s, the first successful decentralized peer-to-peer cryptocurrency, bitcoin, was proposed in 2008 by an unknown author or authors under the pseudonym of Satoshi Nakamoto. The protocol proposed by Nakamoto solved what is known as the double-spending problem without the need of a trusted third-party. Since bitcoin’s inception, thousands of other cryptocurrencies have been introduced.

Money has evolved to the point where Sweden is close to becoming a cashless society. They mostly use cards or digital currency for payment methods. It is important to note the contrast of this phenomenon when only 14 percent of Jamaicans have access to credit cards.

Will our country find the momentum to push towards being a society like Sweden? Or will we stick to the evil we know?

There are still many business places across the island who refuse to accept cards because they want to avoid the bank charges associated with it. However, the convenience of cashless payment methods far outweighs pulling money from an ATM. Jamaicans must acknowledge the benefits of these new forms of money, in order to upgrade our financial status.

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Low levels of raw material have prompted Caribbean Cement Company Limited to increase its gypsum and limestone quarries. The company is now in talks with the National Environment and Planning Agency (NEPA) to more than double its quarry operations.

Caribbean Cement currently has a quarry in close proximity to its plant in Rockfort, Kingston, which is the Halberstadt Gypsum Quarry. Plans are being put in place to expand that quarry from 2.0 kilometers to 6.7 kilometers. Additionally, Caribbean Cement hopes to establish a limestone quarry at Harbour Head across 50 acres of land.

Supplies at both quarries are described by Caribbean Cement as being critically low. Therefore, the expansion is needed. However, low defined by the company is as much as 20 years.

The 6.7 hectares of land at the Halberstadt quarry will process 200,000 tonnes of gypsum per year while the 20 hectares (50 acres) of land from the Harbour Head quarry will process 800,000 tonnes of limestone. Both quarries are 8.5 kilometers apart.

Halberstadt is the only known location of gypsum in Jamaica of such vast economic quantity while the limestone found in Harbour Head quarry was selected based on the chemical composition of the material.

Caribbean Cement recently released its financial statement for 2017 which indicated that the company pays approximately $700,000 annually to the government of Jamaica for leased lands used for limestone mining. Revenue for 2017 was $16.5 billion compared to $15.7 billion the previous year. While net profit for 2017 was $1.15 billion compared to $1.3 billion in 2016. Caribbean Cement is currently trading on the Jamaica Stock Exchange at $32.60.

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As part of Scotia Group’s vision for 2018, the company plans to increase its loan book and invest more in technology. This was announced shortly after Scotiabank released its financial report for the first quarter of 2018.

For the three months ending January 31, Scotia Group Jamaica reported a $0.40 increase in earnings per share to $1.10. Net income increased by 54 percent from $2.2 billion to $3.4 billion this year, which included a $753 million gain from the sale of Scotia’s microfinance business, CrediScotia, to Lasco Financial Services. Total revenue for the 2018 first quarter was $11.59 billion, up from $10 billion for the corresponding period in 2017.

However, Scotia’s loan book decreased from $168.2 billion last year to $167.5 billion, but the company is optimistic that they can improve. Whilst not releasing a loan growth target, Scotiabank believes there are various opportunities to take advantage of in the banking industry for  improved performance next year.

Additionally, Scotiabank is looking to move more service offerings to its online platforms to avoid constructing physical locations. Plans are being put in place to improve branch networks. This decision was made as the company reported that online transactions surpassed in- branch transactions for the first time last year.

We strongly recommend investors to buy Scotia Group as the company continues to boast the number 2 spot in the local banking industry.

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Having bought out its Canadian partners for $403 million, PanJam Investments Limited has now fully acquired the Oceana Hotel project located by the Waterfront Downtown. PanJam made this decision in light of the fact that Downtown Kingston is slowly transforming into a hospitality market and soon significant revenue can be made from the hotel and condo complex. Additionally, the company sees the complex as their contribution to the revitalization of the city.

PanJam recently completed the first phase of the Oceana project which includes commercial spaces on the ground floor which will be leased and a parking garage. The company is looking to start the second phase of the project as soon as they receive the necessary funds to do so and the approval.

Oceana was acquired by PanJam and the Canadian company in 2014 for $385 million but the continuation of the project will see PanJam spending up to $6 billion for its redevelopment. PanJam is optimistic that with the restoration of Downtown Kingston, this will be a worthwhile investment.

In its financial report for 2017, PanJam noted that investment properties represented 20.9 percent of total assets. Revenue for 2017 increased by a whopping 38 per cent from $1.74 billion to $2.41 billion. While net profit for 2017 was $4.19 billion compared to $4.35 billion in the previous year, a 3.6 percent decrease.

Currently we do not recommend PanJam to our clients but we continue to watch the stock as a possible buy option. PanJam is now trading at $41.21.

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In recent times, Toys “R” Us’ reputation has many questioning if play time is almost over. The company filed for Bankruptcy in September of last year and has missed paying their debts to their suppliers.

With a private company, information can be withheld and not shared with the public although at times, it is in their supplier’s best interest to do so.

These payments to suppliers stopped abruptly, not giving any real explanation as to why it has happened. They have even stopped trying to retrieve money from vendors before filing for bankruptcy.

Could this mean that the company plans on closing?

When companies struggle, they usually seek another company to acquire it, issue bonds or preference shares or even speak to lenders for refinancing debt. However, Toys “R” Us has a defaulted bond that was slated to mature October of this year with its current price at $14.38, when being issued at $98.40.

With this bad news, two of the United States largest toy markers Mattel Inc. and Hasbro, Inc.  has felt the impact as it relates to their stock prices.

MAT dropped 3.4 percent to $14.49 yesterday and closed lower today at $14.47 per share, with their day low of $14.44. Additionally, HAS fell a little below 1 percent to $89.32 yesterday and closed today at $89.35, with a day low of $89.15.

All these signs point to the direction of the closure of the business, however we will watch this company a little more to see what their strategies will be.

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President Donald Trump’s move to impose an import tariff of 25 percent on steel and 10 percent on aluminum, will significantly push back Exxon’s investment plans. The plan was to spend US$20 million to 2022 in order to expand chemical and oil refinery plants along the Gulf Coast. This plan would have been more easily facilitated by the lowered tax rates imposed recently.

This has caused Exxon to increase their annual earnings goal by 2025. Exxon plans to invest US$24 billion in capital expenditures this year, US$28 billion in 2019 and another US$30 billion between 2023 and 2025. Even though Exxon announced that the increase in spending will not boost production in the short term, the company hopes to increase oil production from 1 million barrels a day to 5 million barrels per day in 2025.

Following news of Exxon’s announcement that the increased expenditure would not boost production in the short term, Exxon shares fell to their lowest in two years. This comes in light of the fact that Exxon failed to announce the opportunity for investors to participate in large share buybacks.

Analysts are researching Exxon’s ability to rejuvenate its portfolio and how they will turn increased investments into higher profits, revenue and cash flow. Exxon’s operating margins, which is profit after expenses, decreased by 5.1 percent in 2017, significantly below industry median of 13.5 percent.

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Netflix (NYSE: NFLX) wants to incorporate a round icon on its mobile app that vaguely gives the customer a preview of movies or series on Netflix. This will be executed by the customer who taps the icon of those previews and then swipes through them to explore more.

Todd Yellin Vice President of Product said previews would be available “many hundreds of titles,” including both originals and licensed shows. According to NASDAQ Yellin also stated the 30-second previews would be a massive part of the Netflix catalogue.

These new previews were shared at Netflix’s two-day event, Lab Day’s, which is used by the company to showcase some of its technology. According to NASDAQ Yellin said that the company was looking at the further expansion into mobile innovations as it has proven to be an integral part of viewing for Netflix’s user base.

The company has made recent enhancements to its viewing capabilities such as the launch of mobile downloads as well as codec optimisation to enable higher-resolution viewing with as little as 200 kilobytes per second (kbps). This move was because of Netflix reporting a 20 percent viewing on mobile devices while half of Netflix members access the mobile services month over month.

Netflix (NFLX) has been leading the way for digital content since 1997. Netflix is the world’s leading internet entertainment service with over 117 million members in over 190 countries enjoying more than 140 million hours of TV shows and movies per day, including original series, documentaries and feature films. Members can watch as much as they want, on nearly any Internet-connected screen at anytime. Members can play, pause and resume watching, all without commercials or commitments.

Currently, the stock is being traded at $316.10, and analysts at SSL recommends a hold on this stock at the moment.

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GraceKennedy Limited [JSE: GK] released their audited financial statement for the year ended December 2017, passing the 90-billion-dollar mark for revenue.

The company itself had a challenging year. SSL recommended clients to sell their holdings in GraceKennedy as the stock was not maintaining is normal performance. It was noted that the stock was merely stagnant, not providing much growth or even income to investors, thus being a pointless cash and portfolio space holder. However, amidst their challenging year, some sectors stood strong; its Financial and Food sectors. The increase in revenue to JMD $92.47 billion was attributable to the growth, better marketing strategies and innovations in those sectors that kept their feet on the ground.

The company stood through hurricanes and a ban on one of their best-selling products, corned beef in Brazil but still managed to prove resilient.

The company saw a 4.8 percent increase in revenue over 2016 and reported a 5.2 percent increase in Net Profit to JMD 4.77 billion, even their assets grew by a little over JMD 3 million for the year.

The group’s CEO commended her team for staying focused and proactive through the difficult times, still achieving the company’s objectives like launching new products and discovering new ways of distribution.

GraceKennedy acquired Consumer Brands and is very pleased with how both companies have meshed. Consumer Brands has contributed to the overall increase in revenue and profit from just September of last year.

Every company has its difficult times; however, every company’s aim is to not allow such adversities to let them fall. Opportunities were maximized, and revenue and profit grew through one of their toughest times.

When a company produces good results, their investors will see those results in dividends. Their earnings per share increased by 33% to $0.40 in 2017.

With proposed investment in a new headquarters, the company also received tax credits of over JMD 400 million.

The stock closed at $44 per share yesterday and has been trading around this price for some time. Investors are encouraged to add this stock in their portfolios as capital preservation with the expectation that the brand of the company will help maintain its value.

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An asset, whether a gold nugget or a working farm, can and should be compared to others when making purchasing or investing decisions.

This is known as opportunity cost.

By putting money to work for you in the most rational, fulfilling way, you can enjoy success earlier in life and with less risk.

Asset Type #1: Those That Generate High Returns On Capital

These are the second best investment because you can earn significant returns on very little money. The downfall is that you have to pay out all of the profits as dividends or reinvest in lower returning assets because the core operation can’t be expanded through organic capital additions.

Asset Type #2:  Those That Appreciate Far Above the Rate of Inflation but Generate No Cash Flow

Think of a rare coin or excellent art collection.

If your great-grandparents owned a Rembrandt or a Monet, it’s going to be worth millions of dollars today versus a relatively small investment on their part.  Despite this, over the years your family owned it, you wouldn’t have been able to use the appreciation in the asset to pay the rent or buy food unless you borrowed against it, suffering interest expense.

That is the reason these types of assets are often best left to those who can either:

A.) Afford to hold because they have substantial wealth and liquid assets elsewhere so that tying the money up in the investment is not a burden or hardship on the family.

B.) Those who have an intense passion for the underlying collection market and derive considerable pleasure from the art of collecting whatever it is they enjoy collecting.

I’d go so far as to say you should never collect anything about which you are not personally excited.

Asset Type #3: Those That are Stores of Value and Will Keep Pace With Inflation

Certain assets are intrinsically valuable enough that they can keep pace with inflation, assuming you bought them intelligently at the lowest price you can.  While not true investments, they do provide a bulwark that can be used in dire emergencies such as a Great Depression.

A classic example of this sort of asset is high-quality furniture bought in the secondary market from antique dealers or at auction; it very well may end up not only retaining its value but beating bond yields over the holding period!

Asset Type #4: Stores of Value That Will Keep Pace With Inflation but Have Frictional Costs

This is where gold and real estate fall.

These assets classes might keep you rich, but they won’t make you rich unless you deploy massive amounts of leverage to amplify the underlying return on equity.  In practical terms, that means if we were going to experience extreme inflation, it would be best to utilize leverage by either borrowing to purchase real estate or acquiring gold futures which has its drawbacks.

This is why you see a lot of wealthy families engage in something known as equity stripping (there are some asset protection reasons for doing it, but the economic returns are equally, if not far more, relevant, in my opinion).

Asset Type #5: Consumer Goods or Other Assets that Depreciate Rapidly with Little or No Resale Value

Without a doubt, when you look at the data and research, this is how most people spend their paycheck. From video game consoles to cars that lose tens of thousands of dollars the moment you drive them off the lot, new clothes to some new must-have gadget you’ll forget about in two years, this is what you find in the homes of most Americans.

Perhaps the quickest way to guarantee poverty or at least a paycheck-to-paycheck lifestyle is to purchase this asset with debt.

This is the reason lottery winners go broke.

This is the reason NFL, and NBA stars end up back in the poorhouse following eight and nine-figure career earnings.

This is the reason trust funds are exhausted.

Be very careful with the percentage of your cash flow you put to work in this category as it’s a sunk cost.

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On Thursday, PepsiCo Inc. reported its quarterly review which was better than expected. Pepsi recorded double digit growth in some markets but failed to improve its results in the soda market in the U.S. as many persons are now more health conscious than ever before. Current trends are recording a shift in lifestyle behaviours where consumers are limiting their consumption of carbonated soft drinks.and are leaning more towards healthier juices. According to Beverage Digest, the consumption of sodas fell to a 31 year low in the US in 2016.

In an effort to combat this development, PepsiCo has introduced new drinks to the U.S. market that have yet to meet wild commercial success reminiscent of campaigns past . However, since Pepsi introduced four new flavours of Diet Coke there has been an increase in demand for its Coke Zero sugar beverage. Sales for Coke has outperformed other beverages and because of this, Pepsi has decided to increase its marketing spend on colas.

Revenue in PepsiCo’s beverage unit in the U.S. fell by 1 per cent; as soft drinks account for nearly a third of total revenue for PepsiCo. Overall revenue was USD$12.6 billion compared to the forecasted value of USD$12.4 billion. There was a 14 per cent increase in sales in Europe and the sub-Saharan African markets. On the other side of the globe, sales in North Africa the Middle East and Asia increased by 7 per cent.

In addition to beverages, PepsiCo also markets popular brands such as Frito Lay chips and Quaker Foods, which have done better on the market than beverages. Frito Lay sales increased by 3.4 per cent while Quaker sales remained unchanged due to negative pricing.

PepsiCo is currently trading on the NASDAQ at USD$103.26 per share.

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Recently, it was reported in international media that two black men were arrested in a Philadelphia Starbucks after the store’s manager called the police. It was later reported that they were waiting for an associate for a business meeting. A video recording of the incident went viral as customers expressed outrage and disbelief at what happened.

According to YouGov Brand Index, Starbuck’s reputation has been damaged as the company’s Buzz score fell from 13 to negative 8 since the news of the incident became public. YouGov measures the public’s perception of company brands based on what they hear or experience. Scores can range from -100 to +100 with zero being neutral. YouGov interviews 4,800 people every day and conducts over 1.5 million interviews per year.

Starbucks has since been trying as hard as possible to tackle the ‘negative press.’ They first apologized and then reported that all 8000 plus stores in the US will be closed in the afternoon on May 29 in order for employees to undergo anti-bias training. They will be trained on how to make all customers feel welcomed. This training will be critical to the future success of Starbucks.

Surprisingly, Starbucks’ share price did not fall significantly. On Monday, the stock closed at USD$59.43 and on Thursday closed at USD$59.22. Evidently, the company’s response to the incident has somewhat appeased customers and investors. However, the company’s bottom line may be affected as it is estimated they may lose between USD$6 million to USD$8.7 million in sales once the stores are temporarily closed.

Many persons describe Starbucks as a ‘third space;’ a comfort space which is neither home nor work. The coffee may be expensive and not well known for being of superior quality but customers enjoy the brand and the space. This is why it is crucial for Starbucks to effectively address the situation and ensure it does not repeat itself.

Even though the incident is not a one- off situation, we at SSL continue to recommend the stock to our clients as it has consistently performed well over the years.

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With a total of nine initial public offerings (IPO) confirmed so far to be launched in the first quarter of 2018, the volume of listings to the Jamaica Stock Exchange strongly indicates that the total number of companies to list will surpass that of 2017. 

There has been noted increase in companies choosing to raise capital by offering part ownership through shares on the stock exchange. This is partly due to fringe benefits of listing which include an entity avoiding taking on additional debt, and five years break from paying income taxes. 

What kind of companies tend to go to market you wonder? Firms ideally should have a marketable value proposition and have at least a few years financial statements to help fulfill the process of filing a prospectus. They should be willing to adhere to the regulations that govern publicly traded entities and should be prepared to offer long term value to shareholders. 

The Jamaica Stock Exchange got a boost of confidence in 2015 when Bloomberg noted the 39 year old entity as the best performing exchange in the world. For this year, medical tech company Elite Diagnostics and new financial entity Sygnus Capital are among the first expected to launch prospectuses in January. For the first time ever in the stock exchange’s history, an educational institution- University College of the Caribbean will seek to offer shares to investors. 

Additional proposed entities on the roster for a 2018 listing are Caribbean Insurance Brokers, Everything Fresh, Winchester Medical, Medican JA and others.

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PanJam Investment Limited has expanded its interests recently to include a 20 percent minority stake in a micro financing company, Term Finance Jamaica Limited. The micro financing company is a subsidiary of Term Finance Holding Limited, which has an 80 percent stake in the  company. Term Finance operates in six other Caribbean countries in addition to Costa Rica.

But what makes Term Finance Jamaica Limited stand out when there are many other similar micro financing companies?

Term Finance operates solely online and who wouldn’t prefer that approach. We live in a technological age where the click of a button on a smartphone or a computer is more widely acceptable than walking into an office. It is more efficient, faster and saves time. This is not only beneficial to clients but also to the company as they save money from not having to set up and operate a physical branch.

Term Finance began operating online in Jamaica in September 2017 but went live in November and in just four hours of business, the company issued its first loan. The secret is in checking the applicant’s credit score. Once this is completed the process takes little to no time. The company achieves this through algorithms and proprietary systems and technology that help to reduce costs. Term Finance wants to ensure that their customers are able to save money in the application process  and also through the low interest rates. The company’s three months loan is priced below 10 per cent but in other countries the rate is at 12 per cent.

Term Finance Jamaica Limited is looking to increase its loan book in 2018 and hopes to achieve this through more frequent engagements with the public.

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