Jan 2007 Financial News

'JMMB a good sell' - Stock dominated Trinidad market at year-end, analysts say

Jan 31, 2007

Jamaica Money Market Brokers (JMMB) rode out 2006 on a high, accounting, analysts say, for nearly half the equities traded on the Trinidad and Tobago Stock Exchange (TTSE).

Much of the activity in JMMB, came late in the year, to push the stock's current price to 24 times earnings, nearly doubling its customary PE on the Port-of-Spain market.

But despite JMMB's robust performance in recent months, some analysts apparently believe that the stock is riding on unsustainable steroids and are telling clients that it is time to sell, among them the brokerage house, West Indies Stock Brokers Ltd (WISE).

"This is based on the company's forecast earnings per share (EPS) which we have as seven cents for the financial year ended March 31, 2007, " said Sreshtha Tewari, a research analyst at WISE.

High price/earnings

"Based on this forecast and the current price of TT$1.67, JMMB is trading at a high price/earnings ratio of 24 times earnings compared to its usual trading range of 10 to 15 times earnings," she said.

Up to near the end of 2006, as volume on the T&T exchange remained sluggish, JMMB had, by and large, moved sideways.

In the end, according to Bourse Securities, overall volume in the market was roughtly equivalent to that of 2005.

"One big difference, however, is that over 44 per cent of the volume was accounted for by just one stock, Jamaica Money Market Brokers Limited (JMMB)," Bourse Securities said.

In three months since October, the stock price has gained about 59 per cent.

share interest increase

"I can't really say why there was increased interest in the price of the share coming to November 2006. The share however reached a low of TT$1.05 in October and was deemed a speculative buy based on the probability that the company's diversification strategy will eventually bear fruit," Tewarie told Wednesday Business.

"However, as we have seen in our market, numerically low prices are attractive to speculators and sometimes this fosters enough demand to drive up a share price."

Tewarie, however, could not say who has been buying up JMMB shares, adding that she could not reveal the information even if she did know as it would breach confidentiality.

But Jamaican sources said there has been a lot of inter-company selling, and that JMMB's related company CLICO had bought about seven million shares.

At the current price, WISE has recommended JMMB as a 'sell'.

"This is based on the company's forecasted earnings per share (EPS) which we have as seven cents for the financial year ended March 31, 2007, " she said.

"Based on this forecast and the current price of TT$1.67, JMMB is trading at a high price/earnings ratio of 24 times earnings compared to its usual trading range of 10 to 15 times earnings."

Tewarie also said at JMMB's current price there was still some supply on the market.

"I do not think that the price has stabilised, " she added.

Yesterday, JMMB's CEO Keith Duncan said the activity on the stock suggested that it was a good medium to long term 'buy' and highlighted the financial services firm's planned movement into Dominican Republic and the roll out of products like the TT Select Index as signs the company's prospects were good..

"It's not a speculative buy," he said of the stock. "Clients see value in JMMB."

Asked about the activity on the stock, Duncan said there has been "no significant movement in the ownership structure" as a result.

In a recent review on JMMB's half-year results, WISE said the group 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 45.9 per cent less than the similar period in FY 2006. The second quarter was down 63.33 per cent compared to second quarter of FY 2006. With respect to the first quarter of the current financial year, the EPS was also down with the second quarter accounting for only one third of the half-year profit.

Growth in profitability

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 minimise any further losses.

JMMB Insurance Brokers Limited also realised 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 and Tobago.

Share of profits of associated companies fell 83.91 per cent to J$53.968 million for the half-year.

"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."


Source:
Linda Hutchinson-Jafar, Business Writer
The Jamaica Gleaner
Wednesday 31, January, 2007

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