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Seprod Directors Recommend That Shareholders Accept Musson’s Offer for Take-Over Published: 08 February 2024

  • On January 19, 2024, the Directors of Seprod received a notice of the Take-Over Bid Offer from Musson Investments Limited (MIL) to purchase 13,948,000 ordinary shares in the capital of the company not owned by the Musson Group. The price being offered is J$78.00 per share.
  • MIL is a wholly-owned subsidiary of Musson (Jamaica) Limited. Prior to the Offer, Associates of MIL collectively owned 366,772,031 Shares, representing 49.99978% of the total issued shares of Seprod. Musson (Jamaica) Limited then acquired 1,630 Shares, which caused the total percentage held to be increased to 50.00000%. This resulted in MIL making the Offer pursuant to the Jamaica Take-Over Code.
  • After review of the Offer, Seprod’s Special Committee concluded that the Offer was fair to the shareholders of Seprod and recommended that the board of Directors issue a positive recommendation on same.
  • The Board of Directors made its recommendation based on the following reasons: The Offer Price is reasonable in relation to the multiple of comparable trading companies and recent trading history, MIL does not intend to make any changes to the management or business of Seprod, and MIL does not intend to seek de-listing of Seprod.
  • The Offer Price presents a 7.28% discount to the January 19, 2024, trading price of J$84.12. It also represents a 4.09% discount to the average trading price of J$81.33 for the last 30 days. The offer price implies a price-to-earnings (P/E) multiple of 16.50x above the Main Market Manufacturing & Distribution Sector Average of 15.38x.
  • The Offer Circular outlined that the offer opened on January 24, 2024, and will close at 4:00 p.m. on February 15, 2024.

(Source: JSE)

Project STAR Listed On Jamaica Social Stock Exchange Published: 08 February 2024

  • Project STAR (Social Transformation and Renewal) is now officially listed on the Jamaica Social Stock Exchange (JSSE). The JSSE provides a platform to assist social-sector organisations to attract long-term funding to make their projects sustainable.
  • Speaking at the official listing ceremony, at the Jamaica Stock Exchange’s offices in downtown Kingston on February 6, Minister of Industry, Investment and Commerce, Senator the Hon. Aubyn Hill, said the ceremony represents a significant milestone for both the JSSE and Project STAR. He further stated that through the programme, more persons will be employed, which will have a significant impact on the country’s low unemployment rate.
  • Managing Director of the Jamaica Stock Exchange, Dr. Marlene Street Forrest, noted that the historic listing marks the first listing ceremony of the JSSE for the year and its fifth listing to date.
  • By listing on the JSSE, the company will be required to follow similar regulatory guidelines as with companies on the JSE, such as financial reporting practices, which should provide comfort to investors who will be privy to the financial reports of the company highlighting how their investments are being used.
  • The shares will represent charity donations rather than tradeable shares, which will prevent investors in the security from selling to each other on the exchange.
  • Project STAR is a social and economic transformation programme created by the Private Sector Organisation of Jamaica (PSOJ), in partnership with the Jamaica Constabulary Force and driven by communities, to bring about societal transformation through targeted interventions in under-resourced areas of Jamaica.

(Sources: JIS & NCBCM Research)

Changes on the Horizon for the Bahamas Published: 08 February 2024

  • The Government of The Bahamas is planning tax reforms that will hit the cruise lines’ Bahamian private islands and end their nine-year value-add tax (VAT) free status, it was confirmed this week.
  • Simon Wilson, the Ministry of Finance’s financial secretary, confirmed the authenticity of a Department of Inland Revenue “guidance document” obtained by the newspaper, which reveals that, within weeks, the tax authorities plan to change the tax treatment of goods and services supplied to millions of tourists who visit these locations annually by levying VAT on all such transactions at the standard 10.0% rate.
  • Notably, the Government “disagrees” with the International Monetary Fund’s (IMF) assertion that it must introduce a personal income tax targeting “the top 10.0% of earners” and other reforms to hit its 25% revenue-to-GDP goal, according to Wilson. He further noted that there is sufficient “buoyancy” in the current tax system to achieve its revenue ratio ambitions. This came as the IMF called for changes that would generate revenue increases equal to 3.7% of economic output by 2027-2028.
  • That said, the IMF acknowledged that implementing corporate and personal income tax regimes could be a hard sell in The Bahamas, given that there is no history of such taxation and its implementation would require significant investment in training personnel as well as technology to administer such systems.
  • The Davis administration has already set a target for government revenues to equal 25.0% of GDP, or economic output, by the 2025-2026 fiscal year. However, the IMF implied that without the outlined reform package, The Bahamas will never achieve that goal as it unveiled projections showing this ratio would remain stubbornly just below 22.0% through 2032-2033.
  • This new VAT and talks around a corporate income tax might be a step in the right direction for The Bahamas, whose revenues have been highly reliant on tourism activity historically. This makes its economic activity and fiscal position very vulnerable to activities that adversely impact the industry, including climate related and other economic shocks. However, the fulfilment of these tax restructurings and their effects are left to be seen.

(Sources: The Tribune & NCBCM Research)

From El Nino to La Nina Published: 08 February 2024

  • After a strong El Nino, global weather is poised to transition to La Nina in the second half of 2024, a pattern typically bringing higher precipitation to Australia, Southeast Asia, and India and drier weather to grain and oilseed-producing regions of the Americas, meteorologists and agricultural analysts said.
  • While it is too early to predict its intensity or impact on crops, meteorologists said, a shift towards a mild occurrence of La Nina, when surface ocean waters cool off the tropical west coast of South America is looming.
  • "The vast majority of weather models are pointing towards a weak La Nina in the second half of the year or towards the last quarter. One out of maybe 25 weather models is showing a strong La Nina," said Chris Hyde, a meteorologist at U.S.-based Maxar.
  • Last year's El Nino, which followed three La Nina years, saw heavier rains in parts of the Americas that boosted farm output prospects in Argentina and the southern U.S. Plains.
  • The effects of El Niño will vary by geography and season, but its impact will be most apparent in the primary, infrastructure and electricity sectors amid changing precipitation patterns. For example, Peru’s economy is likely to suffer, owing to high temperatures and floods along the northern coast, which typically cause infrastructure damage, and reduce agricultural and fishing output. 
  • Meanwhile, Argentina’s fertile Pampas region will benefit from above-average rainfall, particularly. The opposite will occur in northern and northeastern Brazil, western Mexico, Colombia, Central America, and the Caribbean, where drier weather could hamper agricultural production and raise the risk of forest fires, especially in the Amazon rainforest.

 (Sources: Reuters & Economist Intelligence)

China's Consumer Prices Suffer Biggest Fall Since 2009 As Deflation Risks Stalk Economy Published: 08 February 2024

  • China's consumer prices fell at their steepest pace in more than 14 years in January, while producer prices also dropped, ramping up pressure on policymakers to do more to revive an economy low on confidence and facing deflationary risks.
  • The world's second-biggest economy has been grappling with slowing prices since early last year, forcing policymakers to cut interest rates to spur growth even as many developed economies were focused on taming stubbornly high inflation.
  • The consumer price index (CPI) fell 0.8% in January from a year earlier, after a 0.3% drop in December, data from the National Bureau of Statistics (NBS) showed on Thursday. The CPI rose 0.3% month-on-month from a 0.1% uptick the previous month. Economists polled by Reuters had forecast a 0.5% fall year-on-year and a 0.4% gain month-on-month.
  • The annual CPI decline in January was the biggest since September 2009, mainly led by a sharp drop in food prices, but analysts warn the overall deflationary impulse in the economy risks becoming entrenched in consumer behaviour.
  • "The CPI data today shows China faces persistent deflationary pressure," said Zhiwei Zhang, chief economist at Pinpoint Asset Management. "China needs to take actions quickly and aggressively to avoid the risk of deflationary expectation to be entrenched among consumers."
  • The Asian giant has struggled to regain economic momentum since the end of COVID curbs in late 2022, and nervous investors have dumped Chinese stocks amid a deepening property crisis and local government debt risks. Global demand has also remained relatively soft, with an official survey showing activity in China's vast manufacturing sector contracting in January.

 (Source: Reuters)

Big Oil Offers Record Returns to Lure Investors Back Published: 08 February 2024

  • The top five Western oil and gas firms, including BP, Chevron, Exxon Mobil, Shell, and TotalEnergies, returned over $111Bn to shareholders in 2023 through dividends and share repurchases, slightly exceeding the $110Bn returned in 2022.
  • The oil and gas firms experienced a significant drop in net profits in 2023 to $123Bn, compared to the record $196Bn in 2022 when energy prices surged following geopolitical events. Despite the decrease, companies aim to reassure investors amid uncertain prospects for fossil fuels.
  • Amid geopolitical turmoil and economic uncertainty, Chevron CEO Mike Wirth emphasized the commitment to delivering higher returns and lower carbon, seeking to maintain confidence among investors, including pension funds traditionally attracted to the sector for steady dividends.
  • The energy sector's influence on the S&P 500 has diminished, accounting for 4.4% of the index by January 2024, down from around 14% in the last decade. Factors such as the tech sector's rise, oil majors' performance issues, and increasing environmental concerns contribute to the reduced interest in the energy sector.

(Source: Reuters)

Derrimon Secures Landmark Financing Partnership of Up to US$13Mn with IDB Invest Published: 07 February 2024

  • Derrimon Trading Company Limited (DTL) has successfully secured a landmark financing partnership of up to US$13.00Mn with IDB Invest, the private sector arm of the Inter-American Development Bank (IDB). The funds are expected to support Derrimon in achieving key initiatives focused on trade financing, brand building, employment generation, and green energy implementation.
  • The financing comprises three tranches: Tranche I: A committed senior financing of up to US$3.00Mn to finance the implementation of solar panels, and modernization of the company's warehouse and distribution center in Jamaica. Tranche II: A committed revolving credit line of up to US$5.00Mn to purchase goods from eligible suppliers in various jurisdictions, including Guyana, Suriname, and Norway. Tranche III: An uncommitted senior financing of up to US$5.00Mn to finance capital expenditure and/or working capital needs in Jamaica.
  • The proceeds will be used to support capital and capacity building, reusable green energy and the modernization and enhanced efficiency of the company’s warehouse and distribution channels. The usage of the proceeds aligns with Derrimon's commitment to sustainable practices and the development of local infrastructure.
  • The company’s stock price has increased by 4.17% since the start of 2024. It closed Tuesday’s trading session at $2.00 and currently trades at a P/E of 25.64x, which is above the Junior Market Distribution Sector Average of 16.12x. With planned investments with funds from this new partnership, we expect to see some improvement in Derrimon’s performance over the near to medium term.
  • DTL engages in the retail and wholesale distribution of consumer goods in Jamaica.

(Sources: JSE & NCBCM Research)

QWI Reports Improvement in Bottom-Line for Q1 2023-24 Published: 07 February 2024

  • QWI Investments Limited (QWI) reported a net profit of $17.99Mn for its Q1 ending December 2023, which is a significant turnaround from the $64.92Mn net loss recorded in Q1 last year. The results reflected a slowdown in the pace of decline in the local stock market, but strong performance in its overseas portfolios.
  • QWI overseas portfolio appreciated 13.9% during the quarter and produced unrealized gains of $71.69Mn. Market conditions in Jamaica remained unfavourable resulting in unrealised losses of $30.76Mn and realized losses of $3.92Mn.
  • QWI's investment portfolio has high exposure to Jamaica equities (70% of its total portfolio). Throughout the December quarter, the Jamaican stock market declined as reflected in the -0.7% movement in the JSE Combined index. Although there were standouts, there was a general decline in stock prices due to the high interest rate environment and tight market liquidity, and this negatively impacted the growth in the company’s topline.
  • In contrast US stocks defied expectations and posted a strong increase in share prices as buoyed by easing inflation, a resilient economy and the prospect of lower interest rates, especially in the last two months of the year. As such, QWI reported a $37.66Mn gain from its US investments portfolio compared to the $76.71Mn loss recorded in Q1 of the prior year.
  • Earnings were tempered by the rise in administrative and selling expenses for the quarter, which amounted to $5.51Mn or 40.19% more than the $13.70Mn reported in the corresponding period of 2023. Admin costs were also higher largely due to higher accruals for investment management costs.
  • QWI’s stock price has declined by 4.92% since the start of the calendar year to $0.58 on February 6, 2024, and it currently trades at a 53.6% discount to its net asset value (NAV). The most recent NAV per share was $ 1.25 as at December 2023.

(Sources: QWI Financials & NCBCM Research)

IMF Staff Appraisal on The Bahamas Published: 07 February 2024

  • On January 19, 2024, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with The Bahamas and endorsed the staff appraisal without a meeting on a lapse-of-time basis.
  • The Bahamas’ economy continues to rebound vigorously, driven by large tourism inflows. Real GDP growth is estimated to have reached 4.3% in 2023 (from 14.4% in 2022), while the unemployment rate fell below 9%.
  • Inflation has been on a downward path since mid-2022. Backed by a strong recovery of tourism, the current account deficit is projected to have narrowed to 6.2% of GDP in 2023 (from 8.2% in 2022).
  • Furthermore, the report noted that a strong cyclical recovery in revenues and a wind-down of pandemic-related spending improved the fiscal balance of the Bahamas. The fiscal deficit narrowed to 3.9% of GDP in 2022/23, while central government debt fell to 84% of GDP. Under current policies, the IMF staff projects a deficit of 2.6% of GDP in 2023/24 with debt falling to 78% of GDP by 2027/28.
  • The economic outlook is favourable, albeit with downside risks. Tourist arrivals and real average spending, which surpassed pre-pandemic levels in 2023, should continue to rise in the near term, boosting real GDP and helping to narrow external and fiscal imbalances. Risks to the outlook include an economic slowdown in tourism source markets and the potential for costly natural disasters. Furthermore, raising potential growth beyond 1.5% is conditional on addressing bottlenecks in the energy sector and labour markets.
  • That said, building fiscal buffers and investing in renewable energy infrastructure will help address downside risks stemming from natural disasters, global economic uncertainty, and climate change.

(Source: International Monetary Fund)

Barbados Welcomes Back Delta Air Lines Published: 07 February 2024

  • Barbados says it expects its tourism sector to receive a boost of 25,000 seats for the 2024/2025 winter season after Delta Air Lines announced it was returning to the island with scheduled flights out of Hartsfield-Jackson Atlanta International and John F Kennedy (JFK) International Airports.
  • Barbados' Tourism and International Transport Minister Ian Gooding- Edghill told a news conference that over the past few months, the Barbados Tourism Marketing Inc. (BTMI) had been engaged in a consistent and aggressive strategy of increasing and improving airline connections with the rest of the world.
  • He said as a result, the government has finalised an agreement resulting in the return of Delta Air Lines from November this year.
  • Effective November 23, 2024, Delta will provide a seven-day-a-week service from Atlanta, Georgia, and provide once-weekly services on Saturdays from New York, commencing December 21 of this year.
  • Overall real GDP is largely being driven by the revival of the international tourism sector amidst the lingering effects of domestic inflation. Continued demand for Barbados’ tourism products, supported by intensified marketing campaigns in key source markets, increased airlift, sporting events, and a full return to Crop-Over Festivities; are expected to continue to provide tailwinds to Barbadian economic growth in 2024 (forecast: 3.4%).

(Source: CariCris)