February 2018 - Page 2 of 2

MedicanJa Ltd Looking at IPO

February 8, 2018May 8, 2018

MedicanJa Ltd has announced its intentions to list on the Jamaica Stock Exchange in a few weeks. At the helm of the company is Dr. Henry Lowe, a renowned Jamaican scientist who specialises in the development of edible products from Jamaican plants such as cannabis. He is optimistic that this listing will give Jamaicans at home and abroad the opportunity to earn money from their indirect involvement in medical marijuana through investments.

Lowe sees Jamaica as a future hub for medicinal plants as the island grows a majority of the world’s established medicinal plants that can be made into plant based medicinal products.

Marijuana is commercially unexploited in Jamaica. Despite extensive research conducted by the Biotech Research and Development Institute at the University of the West Indies, on its medicinal properties there seem to be very slow progress to changing the current situation. Lowe expressed that there are many possibilities for Jamaica in this area.

Lowe has been successful in making other medicinal plants into commercially accepted products. He has made quality products from bushes such as guinea hen weed, ball moss, moringa, bizzy and many other local products that have been around for many years.

The company has already received a license to operate from the Cannabis Licensing Authority and approval from the Ministry of Health to produce four topical and two oral products for sale.

MedicanJa Ltd was formed in 2013 and is a subsidiary of Eden Gardens Group. Other affiliates in the group include EG Wellness Brands, Bio Tech Research and Development Institute and FlavoCure Biotech LLC.

MedicanJa Ltd will now be a direct competitor to Lasvac, a new company formed by Lasco Manufacturing Ltd (JSE: LASM), which will also manufacture medicinal marijuana products in Jamaica.

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After the Market Storm, Comes the Rainbow

February 7, 2018May 8, 2018

The past three trading days have wreaked havoc on the nerves of investors across the globe. The major sellout that took place on Friday, February 2, 2018, rolling over to the following Monday, saw significant loss in market indices. What many feared was a market crash, was simply a market correction after a two-year period of appreciating of stock prices.

This phenomenon was not unexpected as analysts predicted that eventually, the market would have corrected itself.

Of course, other factors played a role in Tuesday’s panic, for example, the rising bonds yields which people assumed would lead to inflation and higher rates, and eventually erode companies’ profits.

Following the plunge of approximately 1500 points in the Dow Jones index, and the S&P 500 down by 0.9 percent, the market recovered the best they have since 2016 by the end of Tuesday.

The most affected industries such as technology, materials and consumer shares paced a 1.7 percent gain in the S&P 500 Index, while DowDuPont and Home Depot led a 567-point surge in the Dow Jones Industrial Average, the biggest gain in two years.

Notwithstanding the major losses from previous days, the market is starting to see and feel the efforts of investors to bring forth stability and return consumer confidence.

This last market correction does not indicate that investors should become complacent about markets’ volatility. We do believe that without solid economic growth, rising profits and a gradual pace of normalising policy by the central bank, this plunge is one we could experience again. Investors and traders must keep a keen eye on their holdings and the companies on which they have been bullish about for years.

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138 Student Living Partners with Sagicor

February 7, 2018May 8, 2018

Despite the University of the West Indies looking to construct 826 additional residential units on its Mona Campus, 138 Student Living Jamaica Limited [JSE: 138SL] has requested for all plans to cease. This request was made based on the fact that there have been too many empty rooms on the new residential hall.

The rooms are said to be unoccupied because students are not able to afford them. Hall fee for single rooms is $51,350.00, and double rooms are for $29,770.00. On this hall, students enter the rooms using the elevators with entry cards. If hall fees are not paid, then the key cards are blocked, preventing students from entering.

Therefore, 138 Student Living is partnering with Sagicor Group Jamaica through an employment model, where students will be able to gain income to help pay the hall fees. 138 Student Living expects this employment opportunity to benefit about 5 percent of Jamaican students as they are hired to process excess work off-site for the companies involved. To assist students in this venture, Sagicor would upgrade internet speed for students for them to be more efficient.

Since the inception of 138 Student Living in 2014, the company has constructed 1800 rooms at UWI under two agreements, but because of the lack of occupancy, these ventures have been unprofitable. Therefore, the company aim to increase occupancy by 10% to improve profitability.

At the end of the September 2017 quarter, 138 Student Living reported a net profit of $51.7million, a 98 percent increase when compared to its previous quarter. While, the company experienced a 63 percent increase in expenses the overall financial performance was better than 2016, this stems from Gerald Lalor flats for which the company is building its brand.

Unfortunately, market sentiment need more convincing as no zero volumes were traded yesterday and the performance of the stock price has been lackluster.

Current price is JMD$6.15 with an extremely high P.E of 51.3x compared to the industry P.E of 31.0x.

While we would not recommend 138SL as a buy right now, we will be keeping an eye on it.

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There is No Need to Panic About Current Activities on the US Stock Market

February 6, 2018May 8, 2018

Despite many advancements made in trading since the 1940s, investors tend to overreact and may panic whenever the equity market moves down. Most investors are so fearful of another stock market crash, that they do everything humanly possible to prevent it.

What we would like to remind those investors is that making rash judgments and panicking is likely to affect market sentiment and that may directly affect the value of your portfolio.

Over the last few days, the markets globally are experiencing what economists call a market correction – temporary price declines of less than 10 percent. This market activity is predictably interrupting an uptrend in the market; while a market crash is when a stock index loses more than 10 percent over the course of a day or two.

See the difference?

A market correction is necessary to a functioning stock market as air is for us to live. Remember the Dow Jones industrial average increased by approximately 40 percent since the 2016 presidential elections and while the earnings and tax break support the increase. As a result of robust growth taking place in a relatively short period, a slight decrease in equities occurred: hence a market correction.

So rather than scream, the sky is falling also known as the market has crashed, let us look at the facts:

The Dow Jones declined by less than 5 percent compared to the Great Depression in 1929, where the Dow plunged by first day 13 percent and then 12 percent on the second day.

Why are markets down?

As mentioned before, markets have gone up too far too fast, and shares were ripe for a fall. But more importantly, it is because the bull market has been due to the willingness of central banks to supply copious amounts of money to the markets at ultra-low interest rates.

This correction should encourage all investors to utilise hedging and the necessity of taking gains instead of holding out and getting greedy.

Diversifying your portfolio with a combination of blue-chip companies and some aggressive stock picks is not dull but smart.

The fact about investing and we have advised many clients similarly, is that many times is panic is just as influential as economic factors, be careful of joining the crowd and look to facts, otherwise you may end up absorbing an unnecessary loss.

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Flotation

February 5, 2018May 8, 2018

Flotation is the first issue of shares to the public in a company new to the stock market. If you liked this article and want to read other great stories, try our Archives. Also if you are new to investing you can try our Investment Basics Blog.

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Outlook: China

February 5, 2018May 8, 2018

The current economic climate in China is leaving many investors uncertain as to what market activities will take place next. At this point, there are very few who are not aware that the noticeable slowdown in their economy is a potential issue.

Analysts have suggested that the weakness in China’s economy is in part related to government policy. The Chinese government has set itself the goal of implementing market returns, such as allowing its currency to be more responsive to market forces.

Unfortunately, we are discovering that the more reforms it tries to implement, the greater volatility there is in the market, at least for the moment. Perhaps in the long-term, their policies will prove to be beneficial in terms of redirecting economic forces in the right direction.

At present, however, it appears that moving in the direction of greater reform including attempts to move the economy from investment and export-led growth to consumption-led growth is only leading to increased volatility.

Additionally, Chinese government policy can change very quickly, and in a not particularly transparent manner. The government still has enormous resources at its disposal and could, should it so choose, implement a fiscal stimulus programme similar to that put in place in 2008. While I am not saying they will do this, it is important to remember that they could do it, should they so wish.

So, while it is reasonable to expect China to continue to be a source of market volatility, we must also bear in mind that there is a possibility, however small, that Chinese government policy may change. While the probability of this may seem slight, such a possibility existing at all suggests that on principle we should not be wholly pessimistic about China, even if the odds suggest that there will continue to be volatility associated with the Chinese economic situation.

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Lasco Financials On Fire

February 5, 2018May 8, 2018

Lasco Financials (JSE: LASF) has continued to exceed expectations this financial year. In the quarter ending September 30, 2017, LASF reported doubling its profits.

We also noted in December last year that the transaction to acquire CreditScotia was completed. The acquisition will extend LASF’s reach into 13 new locations across Jamaica.

Lasco Financials released its third-quarter financials, ending December 30, 2017, revealing a $1.8 billion loan book. LASF’s results showed a 36 percent increase in revenues when compared to the corresponding period.

Lasco Financial’s assets also grew by 98.8 percent and can be credited to acquisitions and strategic alliances. As expected, the company’s liabilities increased due to acquisitions and short-term loans.

While LASF P/E (26.06x) is higher than the market(22.5x), I believe that out of the three leading microfinance companies that LASF has the most room to grow. CreditScotia, now called Lasco Microfinance Limited, along with the collaboration with Guardian Life I expect even more impressive results.

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Microsoft: Not Much Excitement

February 3, 2018May 8, 2018

Despite announcing a decent 12% growth in revenue in the second quarter of its fiscal year, Microsoft stock price fell by more than 2% on Wednesday. Investors are not excited about this measly growth. Microsoft’s More Personal Computing Department which includes all Windows devices and gaming and advertising grew by 2%. Beating analysts estimated prediction of US$12.02 billion in revenue to close at US$12.17 billion.

Gaming revenue was up 8%, however, even with this increase Microsoft Xbox gaming console still trails behind the PlayStation gaming console from Sony. Other segments such as Productivity and Business grew by an impressive 25% with revenue of USS$8.95 billion, above the estimated US$8.86 billion. While the Intelligent Cloud segment which consists of Azure, Windows Server and SQL Server grew by 15% to close at US$7.80 billion in revenue, still surpassing the estimate US$7.51 billion in revenue.

The cloud computing service of Microsoft, Azure, doubled in sales as businesses seem to prefer to store data and run applications in Microsoft Data Centers. Azure’s revenue was up a whopping 98%. With such a positive response from customers, Microsoft is now looking at ways to improve Azure to better compete or even to surpass the performance of their competitor Amazon. Microsoft announced that it will be adding machine learning and data analysis features to Azure. Additionally, in an effort to continue to improve its Office 365 service, Microsoft will be switching some customers to an online subscription version of programs such as Word and Excel.

Even though Microsoft’s performance this quarter may be lacking in zeal, it is important to note that the Microsoft stock price has increased by an estimated 10% since the beginning of the year and many investors still believe the stock is worth holding onto as it has been consistent over the years.

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Blue Chip

February 2, 2018May 8, 2018

Blue Chip is the name used to describe companies that are perceived to be high quality.

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Barbell Portfolio

February 1, 2018May 8, 2018

The Barbell Portfolio is a portfolio of bonds which is concentrated in short and long-dated bonds with little or no exposure to intermediate maturity bonds.

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Buy Apple as Share Price Dips

February 1, 2018May 8, 2018

With news that Apple will be cutting the production of the IPhone X by half, investors are rushing to sell Apple shares. Apple shares are down almost 6 percent within 5 days of trading with a possible 10 percent decline if the stock price should reach US$162.

Even though the stock price has seemingly decreased in value over the past few days, it is important to note that Apple stock increased by 37 percent over the past year. In a similar case, in the first quarter of 2017, Apple cut the production of the IPhone by 10 percent. Prior to the cut in 2017, the production of the IPhone 7 was cut by 20 percent.

With this news, IPhone sales increased to US$79.29 million, resulting in the stock price increasing from US$120 to US$140 in a month. This continued with increases in sales for the following quarters in 2017.

Apple releases its annual report on February 1, 2018 and analysts are optimistic that the review will be positive. Reason being, the IPhone X is the most expensive iPhone Apple has made and this should increase the average selling price compared to last year. In addition, customers are still purchasing earlier models.

It is argued that even if the IPhone X is a disappointment in terms of a decrease in sales in 2018, there is no need for investors to panic. Apple has very high cash reserves when compared to other tech companies and should be able to repurchase its own stock and innovate other products in the event it suffers from a terrible decline in sales.

Any decline in a stock price is reason for concern, however, this is a great buying opportunity for many investors. But since these rumours have not yet been confirmed by Apple, would you sell your Apple shares fearing the stock price will continue decreasing?

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Samsung Announces Stock Split

February 1, 2018May 8, 2018

With a current stock price of US$2,320.35 per unit, an 80 percent increase in 24 hours, Samsung announced a 50:1 stock split this morning. Samsung Electronics experienced a 64.3 percent increase in profits, totaling US$14.15 billion for the fourth quarter of 2017 ending December.

Seeing that the current market price is so high, a stock split would make Samsung more accessible to others who could not afford the steep stock price before. In addition to the stock split, Samsung announced a dividend price of US$20 per common share.

Analysts are suggesting that Samsung’s high stock price is partly the result of a shortage of memory chips the company experienced in 2017. This impacted supply and demand thus increasing revenue by a whopping 64 percent. There is a strong demand for Samsung’s memory chips used in smartphones and data centers.

Furthermore, Samsung is now the largest supplier of semiconductor in the world since 2017, commanding an outstanding 14.6 percent share of the market above Intel at 13.8 percent. The demand for Samsung’s semiconductor also contributed to the company’s impressive earnings last year.

On the flip side, analysts are suggesting that the success in the memory market may be short lived, as China will be increasing its memory production this year, which will decrease Samsung’s market influence. Samsung is already anticipating this decrease in their first quarterly review due March 31, 2018 due to a weak seasonal demand. This will be further compounded by the decrease in smartphone sales for the lower end models and a further decline in overall mobile business due to high marketing costs. However, with plans to launch the Galaxy S9 soon, Samsung expects its earnings to increase dramatically for 2018.

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Amazon, Berkshire Hathaway and JP Morgan’s Healthcare Project

February 1, 2018May 8, 2018

With growing concerns about the healthcare costs plaguing employees, Amazon, Berkshire Hathaway and JP Morgan Chase are forming a new company to address these concerns. Though in the early stages of development, investors reacted negatively to the news. Stock prices fell for health insurers and healthcare providers significantly. 6 out of the 10 companies on the S&P 500 are healthcare providers and the news dislocated their position on that table.

Despite the lack of information on this new venture, it is reported that the health initiative will be an independent entity, free from profit incentives and limitations. The company will focus on all the employees of Amazon, Berkshire Hathaway and JP Morgan Chase in the US, an estimated 1 million. However, analysts are claiming that Amazon and JP Morgan employees should already have great health coverage. Perhaps one that is better than any other industry in the US. If this is true then questions will be asked; such as why would an employee risk a great healthcare package for an experiment? Will this venture be more cost effective? Or even will this new initiative affect employees at other companies positively or negatively?

Moreover, the companies’ expertise in the healthcare sector is questionable. Would you trust healthcare coverage from a retail company, an insurance company or even a bank over companies that have been in the healthcare business for decades?

It is nothing new for large companies to fund their own health insurance but will they take over the responsibilities of the administrative duties or will they hire a third party on contract to take care of those responsibilities? Will this be an avenue for them to test new models of payment and care delivery?

With the high cost of healthcare in the US, employees are in dire need of a better solution as employers have increased deductibles and expenses. Leaving them with less money to spend. We patiently await the details of this venture and how it will improve the lives of employees.

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Beware of Adding these Stock Options to Your Portfolios in 2018

February 1, 2018May 8, 2018

It is often said that the numbers don’t lie. After careful examination, we earmarked a few stock options that investors should be cautious about investing in, as they diversify their portfolios in 2018. See more below:

Tesla [NYSE: TSLA], has been a favourite among many investors. Some experts fear that the company’s story has reached its pinnacle since it has not transformed itself into the mass auto market. This company is a money loser and its recent delays, plus the almost fantastical vision of the battery-powered truck leads me to believe that CEO Elon Musk is played out and the operations need to start meeting the otherworldly promises of a dynamic economy.

The Long Island Ice Tea Corp. shifted its focus from manufacturing beverages to blockchain technology. The company changed its name to Long Blockchain Corp. [NYSE: LBCC] and its stock shot up on the news. While the stock reached a high of $6.24 on Jan. 9, it is now trading at $4.22. The company appears to be a speculative bet on blockchain technology simply. While blockchain may be a significant innovation and change the way we transact, there is no guarantee.

Elite Diagnostic IPO back and forth is enough to give investors whiplash. The initial prospectus illustrated incompetence from the auditors to the two brokers. The report had a discrepancy of approximately $15 million re depreciation and fixed assets. This profoundly troubled investors, and we are seeing clients withdraw their applications.

Ciboney Group [JSE: CBNY], despite what Errol Campbell believes the stock market is not attracting investors into the now out-of-business entity. As the company sells it last asset, the Culloden Land for $250 million, they are left with significant debt. Despite the rise in price after the news broke of the transaction, the price has declined by 12 percent. At this point, Ciboney is a placeholder on the stock market and not worth real consideration.

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