From left: Caribbean Producers Jamaica VP, Sales, Hugh Logan; Mayberry Investments CEO Gary Peart; CPJ CEO Tom Tyler and Jamaica Stock Exchange Deputy GM Robin Levy seen at the listing of CPJ on the junior market on July 20, 2011. – FILE

The local Junior Stock Exchange offered the highest index gain in the world in 2011 based on Financial Gleaner analysis of global stock performances in a period dominated by global declines.

Concurrently, the main index offered the sixth-best performance in the world. Local investors gained millions within days of investing in the flurry of a new listing of popular firms seeking to take advantage of tax breaks. The junior market investments climbed to J$23 billion by the close of the year.

The gains also allowed one local investment firm to offer a Christmas bonus to all staff equivalent to their annual pay.

The junior market index consisting of 12 listed companies gained 97 percent year-on-year to J$23.6 billion market capitalisation, according to Jamaica Stock Exchange data analysed by the Financial Gleaner.

The JSE, however, is not as optimistic about 2012, saying the push against the tax incentive offered for juniors to list makes the outlook uncertain.

The Jamaican junior market bettered Venezuela’s Caracas Stock Exchange, which was up 80.8 per cent year-on-year, Mongolia Stock Exchange up 32.6 per cent and Panama General Index up 29.2 percent, according to a report compiled by oversees-based Business Insider magazine published last week.

The report analysed 100 indexes worldwide but avoided disaggregating the junior exchange from the Jamaica Stock Exchange’s main Index – consisting of some 39 ordinary stocks – which gained 11.8 per cent year-on-year.

Five stocks doubled money for investors in 2011 with an additional 13 earning above double-digit returns on both local stock markets. This resulted in the biggest jump in market capitalisation on the JSE Main Index in four years to J$619.6 billion compared with the J$597.3 billion in 2008.

The wealth held in stocks climbed from J$573 billion to J$643 billion or 12 per cent.

Overall the top stocks included Lasco Distributors up 284 per cent, Jamaica Money Market Brokers Limited (JMMB) up 210 percent, Lasco Manufacturers up 142 percent, Lasco Financial up 140 percent, Barita Investments up 136 per cent and Pegasus Hotels Jamaica up 87 per cent.

Contextually, over 80 percent of global stock markets remain in negative territory year to date, and some have ratcheted up declines of 40 percent or greater, stated the Business Insider report.

“We calculated returns of 100 indices and culled the ones that lost 25 percent or more in value over the year. In total, there were 16 exchanges that made the list, compared to just four that posted gains of 25 percent or greater,” said the report.

Expansions

During the year, these top local stocks announced deals to expand or acquire assets which prompted increased demand for these stock. Lasco Financial in November announced that its revenues are expected to jump 40 percent from the doubling of its MoneyGram remittance locations to 155 from its acquisition of Supreme Ventures Limited’s (SVL) interest in that business.

Supreme Ventures earned J$81 million in revenue from its MoneyGram operations in 2010. SVL sold its MoneyGram remittance operations to Lasco Financial for nearly J$40 million subject to regulatory approval. Lasco operates some 67 locations and will expand to include SVL’s 88 locations. For SVL, the sale will allow it to focus on its core gambling operations.

In mid-2011, Lasco Manufacturing Limited announced that it would embark on a US$16-million (J$1.4b) upgrade of its factory. The Lasco Manufacturing project will expand the factory from 100,000 square feet to 240,000 square feet, allowing for the addition of 10 product lines atop the 300 already made there. LML projects that sales will climb to $6 billion by 2014 as a result.

In August, JMMB announced plans to acquire Capital and Credit Financial Group (CCFG) for some J$4.2 billion. JMMB’s cash and equivalents totalled J$3.1 billion at June, and the company was worth a net J$11 billion on its balance sheet. That same month, JMMB announced an aggressive plan to restart its securities business in Trinidad, a market it exited four years ago in the midst of the recession when it needed cash and sold out to partner CL Financial group.

The activity surrounding Pegasus involved its acquisition by the Kevin Hendrickson-led Quivin Holdings and its imminent delisting via paying shareholders a premium for their shareholding.

Minority shareholders previously rejected an offer by Hendrickson to buy some 30 percent of the outstanding shares at J$13.14, the same price at which the state-owned Urban Development Corporation sold its 59.81 per cent stake to Quivin Holdings in November 2010.

The management of the JSE told the Financial Gleaner last week that 2012 could bring disappointment if the Government removes the 10-year tax waiver for listings.

The measure is advocated in part by the Private Sector Organisation of Jamaica draft proposal on tax reform. Robin Levy, JSE deputy general manager, said removing the tax waiver could halt new listings and lead to a “less than optimistic” market performance in 2012.

The junior market, which aims to raise a maximum of J$500 million for medium-size entities, was launched in April 2009 and had its first listing in October of that year, pioneered by Access Financial Limited.

 

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Jamaica Gleaner
–Steven Jackson, Business Reporter