June 2018 - Page 2 of 2

First Caribbean Bank Withdraws IPO Registration

June 11, 2018

First Caribbean Bank (FCIB) has withdrawn its registration to list its shares on the New York Stock Exchange (NYSE). The bank, which has its headquarter in Barbados, explained on Thursday that the submission has been withdrawn due to ‘market conditions’ in the US. It did not specify the US ‘market condition’ it was troubled by.

First Caribbean Bank filed a registration for its IPO, with the symbol FCI, in December 2017. In its prospectus to potential investors, FCIB indicated the growth the company has achieved over the years. It made mention of the growth in markets in Jamaica, Trinidad and the Dutch Caribbean. An example was provided of the company’s loan book which grew by double digits in Jamaica, compared to the other banks whose loan books grew by single digits in 2017. Growth was also mentioned in retail banking and investment banking.

It was reported that First Caribbean Bank (FCIB) withdrew its application to list, the same day the New York Stock Exchange notified the United States Securities and Exchange Commission that the IPO was approved. FCIB had made changes to its registration statement stating the company would offer 9.6 million common shares between USD$22 and USD$25 and also that it intended to sell 1.4 million common shares outside the IPO.

For the financial year ending October 2017, FCIB reported net income of US$151.3 million from US$143 million two years before, a 6 percent increase. FCIB holds US$12 billion in assets in 2017 compared to US$11 billion the previous year, with a market capitalization of US$2 billion. Total revenue for 2017 was USD$547.4 million compared to USD$533.8 million; a 3 percent year over year increase.

First Caribbean Bank (FCIB) is not the first Caribbean based bank to withdraw its IPO registration on the NYSE. In 2013, NCB Group aborted its IPO and had to absorb $680 million in costs relating to financial fees. The bank has however recovered significantly from that situation as it has reported record profits in 2017.

Could FCIB be withdrawing its registration because of market volatility in the U.S.?

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Morgan Stanley has Golden Performance

June 11, 2018

Morgan Stanley (NYSE: MS) reported a stellar first quarter with all segments delivering record revenue growth. When combined the company achieved an USD$11.1 billion revenue increase for the first time when compared to USD$9.7 billion a year ago. Also, corporate tax cuts also aided in its stellar performance.

Morgan Stanley saw robust increases in its institutional securities net revenues of USD$6.1 billion compared to USD$5.2 billion, reflecting strength across its sales and trading segment which rose to USD$4.4 billion from USD$3.5 billion. Furthermore, the company’s investment bank segment which is ranked #1 in completed mergers and acquisitions and global equity so far this year with the use of data compiled by the Bloomberg saw an increase of USD$1.5 billion in comparison to the USD$1.4 billion reported in the prior year.

In addition, pre-tax income helped to drive this stellar performance with an increase of USD$2.1 billion from USD$1.7 billion one year ago. Wealth Management reported net revenues of USD$4.4 billion when compared with USD$4.1 billion a year ago.

This is due to an increase in pre-tax income from continuing operations of USD$1.2 billion compared to 973 million last year. Besides, Asset management reported a rise of USD$2.5 billion from USD$2.2 billion a year ago, reflecting higher asset levels and positive flows.

Investment Management which recorded the smallest increase but, nonetheless noteworthy of USD$718 million from USD$609 million due to higher management fees and continued positive long-term net flows in the quarter. Moreover, MS also reported March 31, 2018, an increase in its total assets under management of USD$469 billion compared with USD$421 billion a year ago.

Also, James P. Gorman, Chairman and Chief Executive Officer, stated, We delivered powerful results this quarter, with record revenues and net income – and an ROE above our target range. Each of our businesses performed well, with significant client engagement across our global franchise, and Sales and Trading a particular highlight in a more active environment.

Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, wealth management and investment management services. With offices in more than 41 countries, the Firm’s employees serve clients worldwide including corporations, governments, institutions and individuals.

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Lasco Distributors Achieve Record Profit

June 7, 2018June 7, 2018

Recently, we have seen an increase in the number of companies reporting record profit and sales in the history of the Jamaica Stock Exchange (JSE) and Lasco Distributors Limited (LASD) is no different. For the financial year ending March 31, 2018, LASD reported the highest net profit in the history of the company of JMD$1.004 billion. This is a 65 percent increase in profit compared to JMD$609.68 million in 2017.

LASD attributes its performance to successful strategies, growth in its key business categories, management of margins, cost efficiencies and proceeds from the ongoing Pfizer case. The company’s successful strategies include an expansion in the market, cost efficiencies, the development of new products and a strong management and operational team.

The development of new products was seen in the third quarter when the company produced an adult energy drink called Konka and a carbonate beverage called Lyrix. According to LASD, they both received favourable response from consumers. The products were manufactured by affiliate Lasco Manufacturing Limited. Additionally, during the financial year, LASD launched a healthier version of the LASCO Food Drink by reducing its sugar content by 50 percent. Its liquid beverage, iCool, sugar content was also reduced.

Lasco received JMD$273 million paid in damages and interest in the Pfizer case during the financial year but the company says it expects to receive more money and has since filed an appeal with the courts.

A total of JMD$16.3 billion was earned in revenue, an increase of 3.16 percent from the JMD$15.8 billion earned in 2017. Total assets for the year increased by 15 percent from JMD$7.4 billion in 2017 to JMD$8.5 billion in 2018.

The stock currently trades at JMD$4.00 on the JSE and we at SSL continue to recommend Lasco Distributors Limited to our clients.

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Medical Disposables and Supplies Hits $2 billion Sales Mark

June 5, 2018

Medical Disposables and Supplies Limited, a healthcare and consumer products distributor based in Kingston, Jamaica, has reported over JMD$2 billion in revenue for the financial period ending March 31, 2018. This is the first for the company which is listed on the Junior Market of the Jamaica Stock Exchange. Medical Disposables began its operations in 1999 on a small scale and today, are able to celebrate record revenue numbers.

The company has inventory ranging from pharmaceuticals, vaccines, injectables, to beauty items. Its brands are displayed and sold in health and personal care stores islandwide.

Medical Disposables and Supplies reported an increase in revenue of 19.3 percent, up from JMD$1.71 billion in 2017 to JMD$2.05 billion in 2018. The company attributes this exceptional performance to the increase in product offerings, price increases and growth in new consumer business segment.

Gross profit, although still impressive, was affected by JMD$8.8 million worth of expired products which were written off during the financial year. Therefore, gross profit only increased by 12.4 percent to JMD$461.5 million in 2018 compared to JMD$410.7 million in 2017.

Total assets grew by 21.4 percent from JMD$1.214 billion in 2017 to JMD$1.474 billion in 2018.

The company reported that its liquidity position is still healthy and because of this it will continue to capitalize on reinvestments in order to continue developing.

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Did Crime Contribute to Knutsford Express Loss?

June 5, 2018

Crime has plagued Jamaica at a higher level since the start of 2018. As a means to combat this issue, the government has implemented a State of Emergency in areas that recorded the highest murder rates, causing a ripple effect throughout the economy as different sectors were significantly affected by the crime surge and increased security presence across the island. News of the state of public emergency in St James resulted in fewer tourist arrivals, according to Jamaica Tourist Board for February 2018. While the new security detail was welcomed by residents, the current state of affairs has proven to be wrong for businesses in and around the affected parishes. Specifically, Knutsford Express [JSE: KEX], whose earnings declined for the third quarter of their fiscal year. Managing, Director Oliver Townsend, reported that this could be attributed to the lockdown that the parish of St. James has been under for the past four months. The company has been recording remarkable growth but ended with an increase of only 14% in revenue for the three-month period ending February 28, as opposed to the rise of 18% that they saw in the previous quarter.

Regardless of this decrease, Knutsford Express [JSE: KEX] has tried to mitigate any further loss in value to their share price that could be induced by decline in investor confidence, by showing significant effort in the expansion of the business through new investments.

For the quarter in question, the company reported a 24 percent increase in total assets, through the acquisition of additional buses that will take on new/ other routes across the island. They also established a depot at the Donald Sangster International Airport which added to passenger growth. Furthermore, they are set to expand their Kingston terminal to include a new entity, “Knutsford Connect”, which will provide airport transfers to have a car rental for passengers and a high-end, luxury transfer service for corporate clients.

Publicly traded companies can highly benefit from benchmarking aspects of Knutsford’s business strategy. Businesses underestimate the power of market sentiment and how it can seriously affect share value. Regardless of the loss incurred by an external factor that they have no control over, the company sought to reassure their shareholders by displaying why their confidence should not be swayed due to a reduction in revenues. Both existing and potential shareholders need to see evidence of how their capital can gain value in times to come, and Knutsford Express has shown the potential to generate massive growth in months to come, owing to their present investments.

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Your Money Habits Are Holding You Back

June 5, 2018

Financial success does not come easy, you can say it as many times you want, but without the actions, nothing will change. People tend to handle money in different ways.

Actions, tell the real story.

Are you on the road to financial success, or are you still hanging on to one or two of these tell-tale financial disaster behaviours?

Here’s how you can tell:

Do You Pay Full Price for Everything?

After all, you’ve got plenty of extra money. It’s fun to see something you want and buy it right away. You have to be a little more strategic to save.

Develop a habit of taking 24 hours to comparison shop before you buy. Consistent savings on both big items — and things you buy regularly — can add up to hundreds, even thousands over a year.

Not Thinking About Retirement.

You’re living for the now, not for the later. When you put money away for retirement, you are saving for a “future you”. That “you” is going to want to enjoy life as much as the current you. As you work toward finding a balance between now and later put as much as you reasonably can into your retirement accounts. I promise you no one gets to the future and thinks, “Oh my, we saved too much.”

You Keep Doing Business with the Same People.

Entrepreneurs! No matter what. You have to separate business decisions from friendships. That means periodically revisiting your professional relationships as far as insurance agents, financial advisors, accountants, or attorneys. Did you hire the person thoughtfully and objectively, or simply because you knew them?

Once in a while, you’ll want to take a step back and re-assess your business relationships.

You Don’t Ever Say, That’s Not in My Budget This Month.

You’ve got an image to uphold. It is so refreshing to hear people reply to a social request with something genuine like, “I have other priorities for my money this month.” Choose how to spend your money based on your values. When a decision doesn’t fit, recognise that — and acknowledge it with a statement that reflects what is important to you.

You Set No Goals.

You want to be in the same place next year as you are right now. Imagine yourself one year from now. What would you like to have accomplished? Do you want the same amount of money in the bank or more? Write down where you want to be. Then write down the action steps you’ll need to take to get there. Now, schedule dedicated time on your calendar to do these tasks. Do this consistently, and financial success will be yours.

Securing a solid financial future takes good money habits and lots of self discipline. You can achieve your goals once you take consistent action and pay attention to what’s happening in the world of finance.

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Ciboney Up For Grabs

June 5, 2018

In recent news, it was announced that the Financial Sector Adjustment Company or FINSAC was interested in abandoning their interest in Ciboney Group Limited [JSE: CBNY] by the sale of their shares.

The company is currently inactive, but the line of business had included acquisition, development and rental of resort properties. However, due to debt issues, the company was forced to sell off their assets for repayment. All but one was sold.

Ciboney currently has one piece of land on the south coast, very close to the Sandals Whitehouse resort in Negril which is now up for sale once again. It is described as beachfront property, a little over 16 acres, suitable for the construction of villas or a residential area and is valued anywhere between JMD$200- 250 Million. Investors are invited to bid for this piece of land.

Most importantly, FINSAC has majority interest in Ciboney through three other companies. They have invited interested investors to submit their offers for acquisition of its entire shareholding on April 30, 2018. If a purchaser is found and the transaction is successful, majority ownership of the company will be diverted from Finsac to the successful party within Q1 of the new financial year beginning on June 1, 2018.

This majority stake transfer can be somewhat of a good sign for Ciboney. This shifts management and decision making to another party or entity that can make positive changes for the company. It can enable the company to restore operations and allow for a 360-degree turn.

SSL is currently not bullish on CBNY; we do not recommend investors to buy. However, we must watch to see who acquires the company and what this move will do for the company’s lifespan, spare price and overall business.

The current bid and offer of CBNY are $0.12 and $0.14 respectively.

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