Sat | Dec 4, 2021

JMMB to enter new market, mulls share buy-back to increase value

Published:Friday | September 24, 2021 | 12:10 AM
JMMB Group Chief Financial Officer Patrick Ellis.
JMMB Group Chief Financial Officer Patrick Ellis.
JMMB Group CEO Keith Duncan
File JMMB Group CEO Keith Duncan

Financial conglomerate JMMB Group Limited, living up to its group CEO Keith Duncan’s mantra of not wasting a crisis, is expanding its business and intends to enter a new Caribbean country this financial year as part of a slate of upcoming acquisitions.

Group officials say they want to close two acquisitions this year, while others are under consideration.

JMMB Group currently operates 22 branches spread across Jamaica, Dominican Republic, and Trinidad & Tobago.

JMMB executives did not reveal the name of the company set for acquisition, nor the country that it would enter. They are also keeping close to their chests, the purchases under consideration.

“There are two acquisitions in the closing phase, and we have several in the exploratory phase,” Duncan said in his presentation at the JMMB Group annual general meeting, held on Wednesday.

Group Chief Strategy Officer Claudine Tracey was a little more specific, saying the acquisition would be in the Caribbean region.

“The region that we are targeting is the Caribbean. We are actively looking out for opportunities for growth in the Caribbean. We have an active pipeline and we intend to close on a transaction this year, which would see us going into a new territory,” she said.

Jamaica dominates profits

Currently, JMMB Group earns the bulk of its revenue from banking and financial securities services through companies spread across three territories. The Jamaican operations earn 79 per cent of profit, followed by Dominican Republic with 14 per cent and Trinidad & Tobago with seven per cent.

Company executives did not specifically give an update on previously announced plans to enter Costa Rica through the setting up of a microfinance company. It wasn’t immediately clear if that plan is on the current radar or included in the pipeline of potential opportunities alluded to.

In 2019, the group made its largest acquisition to date buying a 22.5 per cent stake in regional insurance business Sagicor Financial Company for US$250 million.

“The investment cost JMMB US$250 million and now represents J$39 billion on the balance sheet. It continues to do well,” said Group Chief Financial Officer Patrick Ellis.

At current exchange rates, the investment is valued at about US$260 million.

JMMB indicated in 2019 that it expects to more than double its annual profit by March 2022 to $9 billion, arising from the stake in Sagicor Financial. The group earned $1.9 billion in net profit for its first quarter ending June 2021, or more than double the $780 million in profit a year earlier, and higher than the $1.1 billion earned in 2019 prior to the pandemic.

Stock price half of fair value

The 2021 profit benefited from ongoing operations, but also Sagicor dividends and increased trading gains. When annualised, the profit equates to $8.8 billion before tax, and $7.6 billion profit after tax.

On Wednesday, Duncan argued that the market continues to ignore the value created by the acquisition. JMMB shares are listed on the Jamaica Stock Exchange and also cross-listed on the Trinidad Stock Exchange. The JMMB management believes that the stock price trades at half of its fair value. JMMB shares traded at $34.96 on Wednesday, reflecting a downward trend from $40 over the last 30 days. Duncan argued that this lags value from a profit and balance sheet perspective. JMMB’s equity, or capital, stands at $64.3 billion, compared to the market value of its the shares which is at $68.4 billion.

Consequently, JMMB said it is considering a share buy-back, but did not indicate the maximum amount it would buy nor the time frame in which it would enter the market.

“It makes sense, and this is what companies do to optimise the management of their capital. This is what we have to do as a company to optimise shareholder value,” he pointed out.

“In principle, there is alignment between the board and management, and a specific programme will be considered for board approval,” Duncan said of the proposed share buy-back.