In Jamaica, the JSE rose by a robust 97.36 per cent to end at 150,692.13 from its opening value of 76,353.39. In stark contrast to our Jamaican counterparts, investors on the local stock market had a tough time registering many capital gains in 2015.
Last years' returns, as measured by capital gains, from only two local manufacturers and two cross-listed Jamaican financial companies, far outperformed any of the other listed companies on the local exchange.
Although the composite index eked out an almost one per cent increase in value, this result was hugely influenced by the nearly 19 per cent gain delivered by the cross-listed index. Not surprisingly, given recent and continuing challenging economic conditions, the local index contracted by almost 35 points or 1.75 per cent.
Let us now review the major factors that influenced the gains on the local exchange, starting first with the locally based companies.
National Flour Mills Ltd
NFM benefitted from a variety of positive factors, including lower food commodity prices. Its results were also influenced by improved plant productivity, more refined grain procurement, improved working capital management and higher sales.
Its third quarter EPS registered at $0.25, which compares favourably with $0.12 for the comparative 2014 period. The fourth quarter, just concluded, should see a continuation of that improvement.
The 2014 dividend of $0.06 was paid on December 22, 2015 and represented an improvement over the $0.05 paid for the 2013 fiscal year. If we project a 2015 dividend of at least $0.10, then the year-end price would give investors a yield of 3.7 per cent.
Being a state controlled enterprise, one variable that will always hang over this company, is if, when food prices start to rise, it will be "allowed" to raise its prices commensurate with the then-current market conditions.
Trinidad Cement Ltd
Despite an imperfect rights issue in the early part of the year, TCL was able to solidify Cemex's role as a significant shareholder. The proceeds from this transaction helped to reduce its total debt and, eventually, led to the successful renegotiation of its remaining lower debt.
Its third quarter results were boosted by a one-off $205.8 million net debt restructuring credit. This boosted its EPS to $1.19 for the period. Even after excluding this restructuring credit, the adjusted EPS came in at $0.72, which is three times the $0.24 EPS for the 2014 comparative period.
The company's hoard of cash improved from less than $97 million as at December 2014 to $302 million last September. Similar to many companies, the October to December quarter is likely to provide its largest profit.
The release of its third quarter results in the third week of October stimulated investors interest in this share. The share price advanced strongly, reaching as high as $4.75, as investors anticipated the return of dividend income in the coming months.
After peaking at $4.75, some investors may have decided to take some profits as they contemplated financing their upcoming Christmas, New Year's and Carnival expenditures. This selling activity pulled down the share price, which ended at $3.99.
T&T NGL Ltd
After a reasonably successful IPO at $20.00, the NGL's share price initially spurted up to $25.00. This rise was hugely influenced by the purchases of the NIB, which bought a total of 8,118,342 additional shares at different prices.
The lack of further new institutional demand resulted in the price drifting downward, eventually closing the year at $21.50.
With its EPS for the first nine months registering at $0.85, it is likely that the full-years' EPS could register at $1.10 or thereabouts. On that basis, the final dividend could be $0.50. This would bring the total dividend for the year up to $1.00. Based on the recent price of $21.50, that would translate into a yield of 4.65 per cent. For investors at the IPO price of $20.00, the yield would be 5.0 per cent.
Unilever Caribbean Ltd
Despite a challenging start to 2015–which mostly related to getting a new computer system fully operational–UCL proved as resilient as ever.
Lower sales, up to the end of the third quarter, were attributed to a weaker local economy influenced by a more cautious election season and pre-budget period.
The EPS for the nine months to September 2015 registered at $1.10 versus $1.70 for the comparative period in 2014. Both the computer problems and weak consumer behaviour were major factors that influenced this result. A modest recovery was expected in the last quarter. UCL's cash balances declined modestly to $60.2 million from December 2014's $69.7 million.
Although UCL does have a dividend policy–similar to Witco–it can disburse sums equal to or exceeding its current year's profit as dividends; this may be dependent on its wish to maintain its lofty share price and/or the needs of its parent company.
Prestige Holding Ltd
Even in an economy weakened by lower energy prices, sporadic foreign exchange supplies and associated challenges, consumers need to be adequately fed in a reasonably friendly manner.
PHL is one of the companies that do this to a creditable degree, earning profits for its shareholders, customers and employees.
Although revenues for the nine months to August 2015 improved by only 4.0 per cent, EPS advanced by more than 13 per cent to register at $0.66 versus $0.58 for the comparative 2014 period. This result was helped by lower finance costs and reduced income taxes.
PHL's cash balances improved from $57.3 million as at November 2014 to $68.7 million last August. In October, it increased its interim dividend to $0.16 from last year's $0.15.
The higher share price supports the view that its final dividend would also be greater than the $0.17 paid for 2014.
We now turn to the cross listed companies, all of whom exhibited year on year gains.
National Commercial Bank Jamaica Ltd
Despite essentially flat profits and EPS, NCBJ's share price managed to post a gain of 82.61 per cent on the local exchange.
Is it that investors recognised that the share price was previously under-valued? Or, perhaps, the market has great hopes for its recently announced link up with Guardian Holdings Ltd?
It was only in early December that investors made the connection between the proposed new investment in GHL and NCBJ raising US$250 million back in May 2015.
How was this money raised?
In my December 13, 2015 article I pointed out that its obligations under securitisation arrangements exploded from J$13.9 billion to J$44.9 billion. Much of this was explained by the sale of its future cash flows from its Jamaican credit card operations. On May 18, 2015, NCBJ raised US$250 million (J$29.68 billion) via this method at an interest rate of 5.875 per cent; this is commonly called financial engineering.
Investors in both Jamaica and T&T await further details about the approved version of the proposed deal between NCBJ and GHL.
JMMB Group Ltd
Effective April 13, 2015, the former JMMB was re-listed as JMMB Group Ltd, having adopted a group structure. Interestingly, its closing price of TT$0.55 was first attained on May 7, 2015, less than one month after the changeover.
Although some slippage occurred in its second quarter, JMMBGL's results for the half-year to September 2015 showed an improvement over the 2014 result. EPS for half-year 2015 registered at J$0.72 versus J$0.63. An interim dividend of J$0.19 was paid on November 26, 2015.
In the not-too-distant future, JMMBGL expects to have a banking operation in its home country; this would add to its existing banking operations in the Dominican Republic and T&T.
NCBJ owns 26.3 per cent of JMMBGL.
GraceKennedy Ltd
Towards the end of the year GKC confirmed the finalisation of its sale of its majority stake in Hardware & Lumber Ltd at J$18.50 per share.
In mid-December, GKC announced that work will start on a US$25 million commercial centre in downtown Kingston, which will also house its corporate headquarters. Interestingly, ownership of the project will eventually be transferred to a Real Estate Investment Trust (REIT), thus expanding investors' options.
Despite recent one-off profit challenges, GKC continues to improve its dividend payments.
Next week, we will review how last year's picks fared and select a few shares that could do well this year.