Month: November 2018

One very vital aim of any company is to grow in value and to return to its shareholders. That is exactly what our Junior Market player Access Financial Services Limited [JSE: AFS] is doing.

Operating through 25 branches and one of the leading providers of personal and business loans in Jamaica, Access Financial (AFS) has dispensed over J$ 15 billion dollars to its customers. The company has funded many individuals and SME businesses, which has aided in the development of the economy; the more money in circulation, the more money spent, and the more companies being funded, the higher the rate of creation of jobs.

In an effort to maintain market competitiveness, Access Financial (AFS) has a significant interest in a Florida based consumer finance firm. Though full details of the transaction are not yet available, we can confidently say ‘it’s a good look’. Not only has the company now broadened its access offshore but will now claim another piece of the market share, thus increasing market sentiment.

The Junior Market is known for holding companies that provide growth to its investors, and Access Financial (AFS) will certainly not be pardoned. Recently, two other acquisitions were finalized, Micro Credit Ltd and the assets of its rival, Damark Ltd, resulting in an 11% increase in their loan booked from J$ 26 billion. Even though all companies involved are within the Microfinancing industry, diversification in their risk profiles made a significant difference, growing loans 5% over what was expected in that period.

In the first quarter ended June 30, 2018 (Q1 2018), Access Financial (AFS) reported an exceptional 16% increase in Net Profit to J$ 217 million from J$ 188 million for the same period of 2017. This was attributable to the simultaneous increase in revenues and a decrease in expenses, something most companies dream of. Operating income increased by a whopping J$ 58 million in Q1 2018 over Q1 2017 and a just as good J$ 26 million decrease in Operating Expenses.

Can there be more?

Yes!

Though the company’s ROE fell by 8% year-over-year, they have still managed to boast an excellent 40% ROE in Q1 2018 and a J$ 0.10 or 15% increase in EPS year-over-year. There was also an increase of J$ 665 million in their asset base due to focusing on the betterment of their strategies and shifting their market positions.

With their positive news, growth and strong financials, Access Financials has now set a precedent for what is to come.

Over the past year, AFS’s stock price has seen a slow but steady growth of $5.30. Closing yesterday at J$ 45.50, we will have to watch and see how the market reacts.

Can the company maintain its momentum?

Will Access be denied the positive market reaction with its new ventures?

I am eager to see!

Are you?

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Jamaica’s Independence welcomed broadcast television on August 6, 1963, through successful execution by then public broadcasting firm Jamaica Broadcasting Corporation (JBC). Due to financial constraints, content was imported from the United States and UK. RJR Communications Group, now taking the spot as market leader in the industry, has introduced modern technologies, innovation and investigative journalism. The Group was established in 1897, and listed on the Jamaica Stock Exchange [JSE] in 1994.

But since then how has their presence in the market benefited shareholders?

RJR Communications Group is the largest communications group in Jamaica, boasting five radio stations, television channels such as; Television Jamaica (TVJ), Jamaica News Network (JNN) and RETV, The Gleaner, and The Star, and an online streaming platform One Spot Media. Subsidiary company Multimedia Jamaica Limited, also forms part of the group, geared towards providing new enhanced technologies and business solutions to the market. The company participated in a merger process between RJR communications and The Gleaner Company [JSE:1834] in 2016. Managing Director Gary Allen, stated that the intention of the merger was “…to accelerate the pace of innovation to deliver superior products and services within the marketplace..”

Has the company successfully achieved that?

Radio Jamaica Limited [JSE:RJR], home to over 12,000 shareholders is most notably challenged by a ‘soft market’, that is flooded with more sellers than buyers, who are unattracted by the company’s performance; noticeable in the slow movement in capital growth. Year-to-date, the stock price has fallen by 18%, and within the last 6 months the only stock that fell by 22%. Even with exclusive rights to the recently concluded FIFA World Cup 2018, the company reported a disappointing 10% increase in profits. The company’s unaudited financial statements for the quarter ending June 2018, reported an after-tax loss of $70 million, 48% higher than the corresponding quarter in 2017. RJR has also seen a reduction in income by 47%.

Why are shareholders still standing by RJR?

The shareholders that remain loyal to the company are optimistic that the company’s broad stream of income and presence within the diaspora, will eventually make a turnaround in the future.

Are shareholders willing to go further with RJR?

Between 2014 and 2018, the stock has traded at a high of $6.00 in January 2016-assumed to be in anticipation of the merger and a low of $0.87 on October 23, 2018. Since the merger, the share price has fluctuated significantly.

As the market moves away from print media and television, it is imperative that RJR constantly adjusts its strategy to keep up with these changes to remain competitive. Without this adjustment, the share price and profits will continue to fall, as shareholders loses interest in the company. The potential to rise to become a top performing stock is possible, however is RJR willing to be reactive and utilize its resources to make an improvement?

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One of our technology giants International Business Machines Corporation (IBM) [NYSE: IBM], headquartered in New York, is now another company that has been added to the list as acquiring.

IBM’s business includes, but not limited to, manufacturing and marketing hardware and software products. The company has invented several products we have used in the past and are now using, including the floppy disk, hard disk drive, dynamic random-access memory and one of the most widely used technologies for bank transactions, the automated teller machine (ATM). They also specialize in research and holds the record, as of 2018 and for 25 consecutive years, for the most U.S. patents generated by a business.

As we know, one strategy companies use in order to deepen their market penetration and sentiment, is by acquiring or merging with companies that are sharper in different key areas of a company.

This is one strategy IBM is using.

According to numerous financial sites and blogs, including Bloomberg, IBM has made an announcement that they are soon to have significant interest in an open-source software company, Red Hat [NYSE: RHT]. The deal includes IBM purchasing the company for US$ 190.00 per share.

How much does this work out to?

US$ 34 Billion! Yes, Billion. That is approximately J$ 4.63 Trillion! That figure would cover the cost  of 184,000 houses at J$ 25 Million, send over 300,000 students to medical school or just money to do or buy absolutely anything you wanted for the rest of your life. This would be life changing money to secure generations’.

But! That is nothing for IBM. They see it as an investment and it sure is one.

Recently, market sentiment had decreased for Red Hat, even with a market cap of almost US$ 20.5 Billion and being the leading Linux company, they had not only missed its revenue estimates but missed the target set by Wall Street.

However, this is going to be the biggest open-source business deal ever!

One person who would more than be confident about this acquisition would be the CEO of IBM. Ginni Rometty, CEO of IBM, is more than confident about the deal and expressed how he feels about the it and the benefits it will bring. He said “The acquisition of Red Hat is a game-changer. It changes everything about the cloud market. IBM will become the world’s #1 hybrid cloud provider, offering companies the only cloud solution that will unlock the full value of the cloud for their businesses.”

This gives IBM the cutting edge over many companies who have not even reached half way through their cloud journey. Here, the company has found a way to not only drive growth but also boost the value of its business. It is through this, that the company can also establish different strategies and processes, creating more efficiency through the integration of all parts of the business; pushing them to their highest level possible, all from the beginning of the process chain to the very end.

Red Hat’s CEO also commented and is pleased with the deal being conducted with IBM. He believes that this acquisition will provide them with the resources and capabilities needed to broaden market share and bring more knowledge about open source in today’s world. Despite this acquisition however, Red Hat still wishes to maintain their commitment and uniqueness they brought to the technology world.

Though IBM’s revenue has decreased by a little over 2% year-over-year to 18.76 Billion for their last quarter, the company still has 5.5 times the market share of Red Hat, provides investors with a 38% return based on stock price and is a great dividend play of 5%. This of course is a stock for investors with a risky appetite but is also great for income.

IBM closed on October 26, 2018 at 124.79, just 1 dollar away from its 52-week low. It may just be a time to BUY!

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The term veganism is used to define a lifestyle adopted by an individual that excludes all animal by-products, inclusive of dairy, meat, materials made from animal skin, as well as anything that has been clinically tested on animals.

In recent years, the decision to go ‘vegan’ has become quite popular amongst consumers, and for various reasons. While most have chosen the vegan lifestyle for the sake of animal-cruelty, others have adopted this route as a healthier way of life.

Of course, the option to go vegan has definitely put a damper on sales for dairy and meat producers. In 2017, after 92 years of operations, Elmhurst, one of America’s longest-running dairies made the decision to switch to entirely produce and distribute plant-based milk. This was after being impacted by the 7% decline in the index in 2015, and a projected 11% through to 2020. Dairy producers succumbed to trying different methods of manufacturing milk, such as drying, donating the excess, along with additional sales, to try and appeal to consumers.

However, this has not ceased the significant fall in sales leaving a vast surplus of milk. The fall in demand for milk can be used as a strategy for creameries to reinvent themselves. After conducting extensive research, beverage analyst, Elizabeth Sisel, concludes “While consumer trends are not favouring dairy milk, brands have an opportunity to re-engage consumers by developing innovative offerings that focus on improving already favourable aspects such as taste profile and nutritional value. It’s also important for brands to highlight that dairy milk is not just beneficial for bone health, but may also provide other benefits for consumers’ overall well-being as compared to non-dairy milk”.

On a brighter note, veganism has made some positive changes to the market. Now operating as Elmhurst Milked, CEO Henry Schwartz is in full support of the direction the market is moving towards, stating “We strongly believe that plant-based foods are the future and our goal is to vastly improve upon non-dairy alternatives by making them more delicious and nutritious, thus bringing more sustainable and healthful options to households across America.” Plant-based dairy alternatives have made a notable profit on the market. With a surge of 20% in growth, producing $700million in sales, producers are building a solid foundation for investors.

In 2018, the US Vegan Climate Index (VEGAN) was established to differentiate companies that contribute to the usage of animals for production from those trying to decrease their carbon footprint. This is done through a screening process where investment professionals look in depth into corporations that may be associated with or that partakes in activities involving the exploitation of animals.

Any company that is found to be capitalizing on the endangerment of animals is excluded from this index. Since 2013 VEGAN has unfailingly scored higher returns than that of the Solactive US Large Cap Index. VEGAN’s 10% return since the beginning of 2018 is above 8.7% for Solactive.

According to Bruce Friedrich, executive director at the Good Food Institute, a US-based non-profit organization that promotes the use of plant-based products, “The growth of the plant-based sector in 2017 exceeded even my optimistic projections. The news from the meat industry itself was especially encouraging and 2018 is sure to continue the accelerating growth of plant-based meat.”

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Once known as the largest retailer in America, Sears Holding Corporation [NASDAQ: SHLD] filed for bankruptcy last week,  after a long wave of excessive borrowing, drastic fall in sales and an inability to compete within the booming e-commerce market.

Founder Richard Sears started the business by selling jewellery. The creativity and successful business model executed by Sears, led to the opening of many retail stores, the first in 1925.  Soon after, competitors of the large conglomerate were wiped out of business as Sears provided what the market wanted in one location.

Throughout its lifespan, Sears has made many acquisitions the most notably is K-Mart in 2005.  K-Mart grew as quickly as Sears, opening 3,500 stores across the 50 states dominating the retail market.

On October 15, 2018, the 125-year-old company filed a Chapter 11- Business Bankruptcy, with an estimated $1 billion in assets and $10 billion in debt. For years, the company has suffered from record low sales, increase competition and snowballing debt.

The recent announcement by outgoing CEO Edward Lampert states that “…a difficult retail environment, unsatisfactory operating performance, and legacy liabilities…” has impacted the business and resulted in filing for bankruptcy. Some features of the restructuring plan include, Lampert, stepping down as CEO, and 142 stores to close by year-end, with the fate of 250 stores still unknown.

In 2004, a business week story named Lampert “the next Warren Buffet”, however that positive sentiment was short-lived as news spread about poor management practices and limited knowledge of business operations has contributed to the business failure even as he generously injected $1B into the business to keep Sears afloat.

Similar to Sears obliterating many general stores back when it started, the same is happening to the American retailers as competitors like Amazon take over.

Amazon.com Inc [NASDAQ: AMZN] success, comes from Jeff Bezos ability to keep abreast of the shifts from in-store shopping to online shopping and have consistently been adjusting [AMZN’s] business model to accommodate these changes.

The American e-commerce company reported an increase in net income by 1186.3% when compared to the same quarter one year prior. Sears,  however, has underperformed in both the S&P 500 and the Retail industry, with a net income -$508m, a 103.2%decrease, when compared to the same quarter last year. The stock’s performance over the last year has fallen by 94.56%.

Chapter 11 is not the dark hole where businesses go to die. There have been successful restructuring as in the case of General Motors [NYSE: GM], who triumphantly exited Chapter 11-Bankruptcy after 40 days.

Regardless of the result, this is a strong warning to businesses and investors alike to pay attention to industry trends? Consumers are no longer following the traditional means of shopping, brick and mortar no longer has the pull and no business is too big to fail.

Who’s next?

Macy [NYSE: M]?

J.C. Penney [NYSE: JCP]?

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If you want to start investing with SSL but don’t have the time to monitor the market or to conduct the trades yourself then you can choose one of SSL’s managed Financial Planning products. We offer a variety of products for every type of investor and if you are interested in managing online trades yourself and having complete control over your investment portfolio then you can try SSL’s Brokerage account.

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What started out as a small company utilizing the advantages of sea transportation in Downtown Kingston in 1945, Kingston Wharves Limited [JSE: KW] has transformed into a group of companies offering services that include inventory management, warehousing, warehousing rental arrangements, product repackaging, inventory control and distribution for international clients, with labelling and assembling.

In the last 12 years, Kingston Wharves has been named the Caribbean’s leading multipurpose port six (6) times. Considered one of the largest, state of the art ports in the English-speaking Caribbean, this multi-purpose port is now well on its way to earning yet another title by utilising the increasing popularity of technology to become paperless.

KW in collaborating with the Government of Jamaica (GOJ) announced plans to build a 300,000 sq. ft. warehouse in the Special Economic Zone. The Special Economic Zone (SEZ) is an area designated for businesses that will receive subsidies/ incentives from the government. In addition to tax holidays, companies within the SEZ adhere to policies that include increases in investing, trading, job creation and effective administration along with labour and customs regulations.

Chief Operating Officer, Mark Williams, “(KW) has made considerable investments in its infrastructure including the opening of its state-of-the-art US$30million total logistic facility which offers a more efficient retrieval and delivery process.”

Trading as low as J$30.05 earlier this year, Kingston Wharves price has increased by 146%!

In Quarter 2 of this year, KW net profits increased by 14%. Terminal Operations recorded $855 million in profit, 18% or $128million more than 2017’s. Kingston Wharves’ Logistics & Services Department was not left out of the race with an increase of 22%  in revenues and a 3% increase to $197million in profits.

Not limited to just the Caribbean, KW currently partners with over 40 shipping ports worldwide and several local businesses such as Automotive Logistics, the evolution of their clientele since launching the 2 logistics hubs in December of last year.

The development of the Global Auto Logistics Centre (GALC) at the end of 2017 aids local automotive dealers, such as JetCon and ATL Automotive, to increase revenue by putting in place a channel to increase the volume of vehicles being brought into the company  and capitalizing on lower pre-inspection rates and storage facilities that fall under the SEZ.

Shareholders are eager to witness the future profitability of Kingston Wharves Limited. “I believe that the synergies at KW will allow for a window to better serve customers and grow our presence in the Jamaican market.” – William Brown, Chairman of Pas Cargo Jamaica.

Contributing writer: Abigail Coke

Several thousands of supporters globally joined forces on Thursday, November 1, 2018, to protest Google Inc. [NASDAQ: GOOGL] following a recent New York Times publication highlighting the way in which one of the world’s largest corporations handles sexual misconduct.

The case of Andrew “Andy” Rubin shocked the world, initiating a global walkout. After multiple reports of inappropriate relationships with subordinates going back to decades.

As the ‘father of Androids’, it was no secret that Rubin had significant leverage in the companies he is a part.

In 2014, his many reports came to light, Google gave him the option of resigning with a compensation package of US$90m to be paid out in monthly installments over 4 years, the $360 million worth of shares that were given to him over the years, and the delayed repayment of the $14 million that they had lent him to purchase a beach estate in Japan, and investing heavily in his next business venture still intact.

History shows that the company has a habit of giving male executives who have been reported for sexual harassment hefty exit packages to “sweep the problem under the rug”. In the last decade, three (3) of the company’s top male executives have been the subject of credible reports made by female staff, two (2) of which have since left the company, with compensation.

The third, on the other hand, remains as one of the top executives. David Drummond’s career at the organization has not slowed down. Joining the company in 2002 as a legal counsel, the now Chief Legal Officer for Alphabet Inc. and Chairman of Google’s Venture Capital Fund, CapitalG seems to be reaping benefits, not accountability.

Employees, as well as outsiders, are enraged with the tactless way Google handles sexual misconducts. With 1,500 confirmed supporters, organizers were warmed by the support of several thousand worldwide. Arranged to start in Tokyo, employees from the various offices in Europe and the United States began to protest at 11:10 am across the respective time zones.

“Time’s up”, “Not O.K. Google” and “Don’t be evil” are just some of the terms written on hundreds of thousands of signs. An email sent out by Google to its employees stated that since 2016 over 48 people have been fired without any compensation from the company for sexual misconduct claims.

This email, however, only fuelled the angered protestors more.

One of Google’s engineers for over 10 years, Liz Fong-Jones, an activist on workplace issues, spoke out saying “When Google covers up harassment and passes the trash, it contributes to an environment where people don’t feel safe in reporting misconduct. They suspect that nothing will happen, or worse, that the men will be paid, and the women will be pushed aside.”

The time for women to tolerate unwanted advances has ended.

The time for excuses like, “oh that’s just how he is”.

The time for being silent has ended.

The time for inequality has ended.

The time for bias has ended.

Time’s Up.

FosRich Company Limited (JSE: FOSRICH) is at again!

On December 19, 2017, the company officially listing on the Jamaica Stock Exchange (JSE) junior market after a successful public offering led by Jamaica’s second oldest brokerage house, Stocks and Securities Limited (SSL).

The lighting, electrical and solar energy products company led by managing director and founder, Mr Cecil Foster, was oversubscribed by $100 million and closed within a minute after opening. The aim was to raise over $200 million at $2 per share with an offer of 20% of the company or 100,455,111 shares. The intended use of the proceeds was to expand the industrial electrical and energy solutions divisions which leads one to speculate that talks of becoming a manufacturer may be in that area.

At the recent monthly Mayberry Investor Forum, Mr Foster was tight-lipped about the product they will be manufacturing however he had this to say, “We are going to be engaged in local manufacturing of a certain product line that is used every day in Jamaica”.

At this point, your guess is as good mine as to what that may be. This bold step to venture into the manufacturing industry is a part of FosRich’s three-year growth plan.

According to Mr Foster, the company “lose about 30 – 35%  from not manufacturing it here, so that alone puts us in a spot to approach the market. The market is $20 billion to $30 billion and all we want to do within the first year and a half is get 3%  of the market. I cannot tell you what it is now, but we eventually want to export to the Caribbean”. With hopes to start as early as next year, Mr Foster made it clear that financing the expansion will be done in a “unique way”.

Despite fierce competition, FosRich is determined to shine bright and grab a niche in the market segment for itself. The plan to go all out in the sale of industrial cables, wall and floor panelling will see the company going up against competitor giants led by the Chinese, Spanish and local developers who service large projects.

But they have done well for themselves and undertaken projects which includes a partnership with financial institutions to helping homeowners go green through renewable energy solutions. FosRich served as the local contractor to supply floodlights at Sabina Park in Kingston and supplied the Jamaica Public Service Company Limited (JPSCo) with LED energy saving smart streetlights among others.

As FosRich continues on its successful path, it saw profit going up 153% at $10.4 million the third quarter of the year when compared to $4.1 million of the same period last year. Revenue also grew to $353 million when compared to $232 million.

In spite of this incredible performance, Mr. Foster stated that “We feel if we strengthen the core business at FosRich, then we can do numbers that don’t look like baby numbers. We are positioning ourselves to be that preferred credible person in the market”.