Nov 2006 Financial News

JMMB Releases Half Year Results

Nov 20, 2006

All figures quoted in Jamaica Dollars unless otherwise stated

Jamaica Money Market Brokers (JMMB) continued to be challenged in its second quarter as it reported Half Year Earnings Per Share (EPS) of 33 cents for the period ended September 30, 2006. This is 45.90 per cent less than the similar period in FY 2006. The second quarter was down 63.33 per cent compared to Q2-FY 2006. With respect to Q1-FY 2007 the EPS was also down with the second quarter accounting for only one third of the Half Year Profit.

According to the Directors’ Statement, though the Jamaican operating company achieved 4.7 per cent growth in profitability year on year, at the Group level, the results were negatively impacted by subsidiaries and associated companies’ contributions.

It was further stated that JMMB Securities Limited experienced a loss primarily from depressed prices in its equity portfolio but steps have been taken to minimize any further losses. JMMB Insurance Brokers Limited also realized a small loss. In addition, in this quarter, one-time expenses totalling $17.9 million related to international expansion activities also impacted the Group’s results. Associated companies were negatively impacted by increasing interest rates and a downturn in the equities market in Trinidad & Tobago.

Despite a 5.56 per cent increase in Interest Income to $4.226 billion for HY-FY 2007, Net Interest Income was down 28.68 per cent to $749.021 million as Interest Expenses increased by 17.73 per cent to $3.477 billion. With respect to Q2, Net Income was down 20.93 per cent to $392.326 million for FY 2007 from FY 2006.

On the positive side, the Group experienced a 103.03 per cent increase in Net Gains in Securities Trading to $448.882 million for HY-FY 2007, the majority of which was from the first quarter. Fee and Commission Income also increased 25.98 per cent to $66.303 million for the Half Year while Foreign Exchange Margins from Cambio Trading fell 14.03 per cent to $30.186 million.

Operating Revenue Net of Interest Expense fell 10.74 per cent to $616.773 million for Q2 and was down 4.76 per cent to $1.294 billion for the Half Year. As discussed before, Share of Profits of Associated Companies fell 83.91 per cent to $53.968 million for the Half Year under review.

A rise in Administrative Expenses of 14.88 per cent to $811.603 million further contributed negatively to the results with Profit Before Tax down 45.34 per cent to $539.888 million for the Half Year. Compared to Q2-FY 2006, Q2-FY 2007 saw a fall in Profit Before Tax of 64.34 per cent. The Effective Tax Rate moved from 10.20 per cent for HY-FY 2006 to 11.53 per cent for HY-FY 2007. Profit After Tax was ultimately down 65.23 per cent for Q2-FY 2007 compared to Q2-FY 2006 while it declined 46.15 per cent to $477.623 million for HY-FY 2007.

The Directors expect JMMB’s strategy to expand internationally as well as to offer new products, such as the Managed Global Bond Portfolio and the Trinidad Select Index Fund, would generate additional income in the short to medium term. In addition, they expect improved operational efficiencies as a result of the recent introduction of electronic transaction machines at two locations. They also have two machines slated for installation before the financial year-end and will continue to increase their presence in the Dominican Republic.

Over the past 52 weeks, JMMB has traded as high as TT$1.85 and as low as TT$1.04 in Trinidad and as high as $18.20 and as low as $9.45 in Jamaica. Given the current results and the challenges facing the business we are forecasting a year end EPS of TT$0.07. At the current price of TT$1.17 and the forecasted earnings, JMMB is currently trading at 16.71 times earnings. This price/earnings ratio is high for this Company and as such we recommend a SELL.

Sreshtha Tewari
WISE Research Team