Home' Trinidad and Tobago Guardian : March 30th 2017 Contents MARCH 30 • 2017 guardian.co.tt BUSINESS GUARDIAN
STOCKS | BG15
economy helps JSE'S results
Although not as robust as
2015's nearly 100 per cent
advance, the Jamaican Stock
Exchange's main index rose
by 27.6 per cent in 2016
to end at 192,276.64 from
150,692.13 at the start of the year. This increase
was fuelled by additional new listings, merg-
er and acquisition activity and several stock
splits; this activity was further underpinned
by increasing consumer confidence and an
The sole provider and regulator of securities
trading and allied services is the Jamaica Stock
Exchange Ltd (JSE), which results for the year
ended December 2016 we will now review.
Changes in financial position
Total assets advanced to J$1.12 billion from
J$791.3 million or by 41.4 per cent.
Long-term assets rose to J$646.5 million
from J$494.6 million. Within this category,
property, plant and equipment climbed to
J$257.1 million from J$86.2 million. This in-
crease mainly reflected a change in the policy of
carrying land and buildings at their fair market
values. This change was mainly reflected in the
revaluation of these assets (freehold land: J$75
million and freehold buildings: J$39.9 million),
while net current period additions comprised
Intangible assets rose from J$45.2 million
to J$51.7 million, which comprises computer
software (J$14.3 million) and computer soft-
ware development project (J$37.4 million).
Employee benefits increased to J$132.5 mil-
lion from J$118.8 million. This improvement
shows the excess of the fair value of the pen-
sion plans assets over the present value of its
future obligations; the plan's greater exposure
to equities helped this result.
Total investment in securities fell to J$261.8
million from J$296.3 million. The long-term
portion declined to J$196.4 million from
J$233.6 million while the current portion
closed at J$65.4 million from J$63 million.
Long-term receivables comprise loans to
employees; this balance fell to J$8.9 million
from J$11.1 million.
Current assets advanced to J$472.7 mil-
lion from J$296.7 million. The cash and cash
equivalents component rose to J$146.3 million
from J$64 million; higher profits and increases
in payables and accruals contributed to this
In addition, government securities pur-
chased under resale agreements climbed to
J$135 million from J$50.4 million. The current
balance includes US$0.09 million.
Trade and other receivables rose from J$119.2
million to J$126 million. At the gross level, the
two largest items were fees receivable (J$50.6
million) and cess receivable of J$21.4 million.
Concerning the latter, three brokers owe a total
of J$13.32 million.
Total liabilities rose from J$169.4 million to
Deferred tax liabilities increased to J$76.9
million from J$43.8 million while current in-
come tax payable advanced to J$21.8 million
from J$19 million.
Payables and accruals almost doubled to
J$212.3 million from J$106.6 million.
Shareholders' equity improved to J$808.1
million from J$622 million.
The revenue reserve (retained earnings) rose
from J$329.5 million to J$392.2 million. The
brought forward balance was boosted by the
current year's profit of J$223.6 million together
with a net positive re-measurement of em-
ployee benefits assets of J$4.4 million, while
dividends to owners of J$165.2 million lowered
the closing balance.
The property revaluation reserves advanced
from zero to J$118.5 million, which reflected
the net revaluation surplus on property, plant
The fair value reserve benefitted from J$4.9
million in net appreciation in the fair value of
investments to close at J$10.9 million from the
previous level of J$5.9 million.
The non-distributable revenue reserve was
unchanged at J$48.4 million. This item relates
to its subsidiary, JCSD Trustee Services Ltd,
which is required to hold a minimum non-dis-
tributable capital reserve of J$50 million.
Share capital was unchanged at J$238.2
million. However, on October 26, 2016,
shareholders approved a special resolution
to sub-divide the existing issued shares into
five; consequently, the number of issued
shares increased from the previous level of
140,250,000 to 701,205,000.
Using the larger number of shares outstand-
ing, the book value of each share rallied to J$1.15
from J$0.89 as at year-end 2015.
Revenues and profit
Total revenues rose by 22.2 per cent to
J$865.8 million from J$708.3 million.
The largest improvement was shown under
fee income, which advanced by 38.6 per cent
to J$457.5 million from J$330.1 million. This
increase was helped by higher earnings from
its retail repo division.
Cess income rose to J$330.2 million from
J$301.9 million or by 9.4 per cent while E-cam-
pus income improved to J$14.2 million from
almost J$10 million, reflecting a gain of 42.5
Other operating income fell by less than 4
per cent to J$63.8 million from J$66.3 million.
Here, the largest component was administra-
tive fees of J$28.3 million (2105: J$26.6 million).
Income from a regional conference contribut-
ed J$14.5 million (2015: J$11.4 million) while
other income came in at J$21.0 million (2015:
Total expenses increased by 17.5 per cent
to J$582.9 million from J$495.9 million. The
largest component, staff costs, rose by 27.1 per
cent to J$273.4 million from J$215.1 million.
This increase reflected both increased head
count and salary improvements; it was influ-
enced by the exchange's continuous expansion
and the development of a new trading platform.
Interestingly, the pension contribution com-
ponent declined to J$1.6 million from J$2.6
million; this is consistent with the plans better
The revaluation of the freehold buildings
helped push up the depreciation and amortiza-
tion costs to J$25.8 million from J$18.8 million.
Property expenses also increased, advancing
to J$95.2 million from J$87.6 million.
Notably, the bad debts cost improved from
J$6.8 million to a negative J$2.1 million.
These changes resulted in an operating profit
of J$282.9 million, which reflects an increase
of 33.2 per cent over the J$212.4 million re-
ported for 2015.
Investment income rose to J$51.8 million
from J$42.4 million or by 22.1 per cent. In-
terest income registered at J$27.3 million (2015:
J$26 million) while foreign exchange gains con-
tributed J$13.1 million (2105: J$10.7 million).
Finally, the gain on sale of available-for-sale
investments climbed to J$11.4 million from
After this inclusion, pre-tax profit registered
at J$334.7 million; this reflects an improvement
of J$79.9 million over the J$254.8 million re-
ported for 2015.
The effective tax rate rose narrowly to 33.2
per cent from 31.33 per cent; consequently,
income taxes increased to J$111.1 million from
J$79.8 million. The absence of income that is
not taxable contributed to the rate increase;
in 2015, such income was J$7.9 million, which
was used to reduce the current tax liability.
These changes produced an after-tax profit
of J$223.6 million; this outcome reflected an
improvement of 27.8 per cent over 2015's J$175
These results translated to EPS of J$0.32
versus J$0.25 for 2015.
Driving the performance of the JSE were
healthy increases in volume and values of trad-
ed shares. For example, regular (non-block)
transactions on the main market rose to 30,684
from 21,757. These transactions comprised 1.81
billion shares (2015: 1.88 billion shares) for a
traded value of J$25.53 billion (2015: J$20.43
billion). The value of block transactions fell
from J$44.22 billion in 2015 to J$22.92 billion;
the 2015 value was boosted by the takeover of
Red Stripe brewers, Desnoes and Geddes.
During 2016, one new stock was listed on the
main exchange while six new stocks joined the
junior market. Also, four companies effected
stock splits, while one security made a bonus
issue (see box).
Exchange operations reflect the operation
and regulation of the stock exchange; its greater
revenues and higher profits manifest strong in-
creases in both trading activity and new issues.
Similarly, the depositary services provided
by JCSD Services benefitted from this greater
The improvement in investment income was
detailed in the previous section.
Trustee services registered a 78 per cent rev-
enue growth along with a 117 per cent profit
surge. Share price and dividends
JSE's share price ended at J$18.60 on De-
cember 31, 2015 and continued to close at in-
creasingly higher prices throughout the year.
For example, it reached J$23.50 on February
26, 2016 and closed at J$25.10 on July 1, 2016.
As investors increasingly anticipated a stock
split, the price jumped to J$28.15 on Septem-
ber 8, 2016.
After the 5 for 1 split became effective on
November 8, 2016, the price briefly touched
J$8.01, but then closed 2016 at J$5.50. For the
year, investors enjoyed a capital appreciation
of 47.85 per cent. (Note: the opening price of
J$18.60 is divided by 5 to obtain the adjusted
opening price of J$3.72.)
In early 2017, the share price experienced
a sharp run up to reach a high of J$12.39 on
February 10, but then starting to lose steam;
it was recently quoted at J$7.96.
Dividends for the 2015 calendar year were
J$0.20 (pre-split J$1.00) while, for 2016,
J$0.236 was paid. At a recent price of J$7.96,
the yield is 2.97 per cent. That price also re-
flects a high P/E multiple of 24.9.
In the next article, we will review Sagicor Real
Estate X Fund Ltd.'s 2016 results.
Stock split versus
A stock split subdivides the exist-
ing capital into a greater number
of shares; this makes the shares
less expensive and easier for
small investors to acquire.
With a bonus issue, retained
earnings (or other reserves)
are used to create new shares.
More precisely, a bonus issue is a
capitalisation of reserves. Some
companies issue bonus shares in
lieu of paying dividends.
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