The JMMB Group (JMMBGL) will be considering a share buy-back proposal. This was confirmed by Group Chief Executive Officer (CEO) Keith Duncan at the company’s eighth annual general meeting (AGM), which was held in virtual format last week.
Across LinkedIn, Twitter and other social media sites, investors have been questioning JMMBGL’s conservative nature with a large cash pile and why they weren’t implementing a share buy-back plan as the stock price stagnated.
JMMBGL’s stock price currently trades at a trailing price to earnings (PE) ratio of 8.25 times, which is well below the Main Market Financial Sector average of 16.83 times. JMMBGL also trades at a 40 per cent discount on a price to book metric against the same sector. This contrasts the rise in profits from JM$3.87 billion to JM$7.72 billion from March 2019 to March 2021. Total assets also grew from JM$320.04 billion to JM$513.71 billion over the same period.
A share buy-back is where a company buys shares on the open market and cancels them, thereby reducing the total number of shares in circulation. This benefits existing shareholders as it improves their nominal stake in the company and results in more cash coming to them as dividends when declared by the company. It also tends to improve the price of the stock as the supply is reduced on the market. JMMBGL itself has benefited from share buy-backs through its associate Sagicor Financial Company Limited (SFC), whose programme saw its initial 22.52 per cent stake rise to 22.73 between 2020 and 2021. Kingston Properties Limited and Eppley Caribbean Property Fund – Value Fund actively engage in share buy-backs.
“JMMB is a growth story and will continue to be a growth story, but we have not been communicating well with our analysts and with the market. We’re not communicating as much as we should and as a result, I believe, therefore, what we’re seeing is that JMMB is undervalued in relationship to the rest of the financial sector. We’re saying to you our shareholders and the media out there that this is where JMMB represents tremendous value at this point in time. Therefore, at [JM]$3.84, if you were to convert that price to earnings to where we should be trading as a stock, JMMB should be trading in excess of[JM]$60,” stated Duncan.
Duncan further projected that with an expected earnings per share of JM$5.22 and net profit of JM$10.22 billion by 2025, JMMBGL’s stock price should be trading above $110.
JMMBGL’s share price reacted quite handsomely to the news as it increased by 2.23 per cent to JM$35.74 on the Jamaica Stock Exchange (JSE) while it remained flat at TT$2.20 (JM$48.60) on the Trinidad and Tobago Stock Exchange (TTSE). JMMBGL’s share price is still below pre-COVID levels and has not seen new support points after the release of its first-quarter results.
When questioned by a shareholder on the details of the plan, Chief Marketing Officer Kerry-Ann Stimpson responded, “Of course, we can’t give any details about that right now…as it’s still very early as we would have shared. There’s a lot to be discussed, and of course, ultimately approved by the board of directors before we can give any further details. We’ll provide additional information once the requisite discussions and approvals have been given.” Some Trinidadian shareholders questioned if the buy-back would only take place on the JSE and whether the company would make more shares available on the TTSE.
Even without the consideration of a buy-back, CEO of Proven Management Limited Christopher Williams was comfortable with the outlook and profitability of the company. He also stated at its own AGM last week, “We think we got in a great price for JMMB and over the next five years, the price will improve significantly.”
Proven Investments Limited is the number one shareholder in JMMBGL with a 20.01 per cent stake.
With $59.03 billion in cash at the end of June, JMMBGL is currently in acquisition mode as it currently expects to close two transactions before March 2022. JMMBGL’s last major acquisition was its December 2019 acquisition of SFC for US$250 million. SFC contributed JM$318.7 million in share of profit to JMMBGL in June with the stake valued at JM$39.35 billion. Despite SFC providing JM$260.4 million in dividends for the first quarter and upwards projection in profitability, JMMBGL isn’t looking to increase its stake in the regional conglomerate.
Chief Financial Officer Patrick Ellis noted, “JMMB Group is not currently exploring increasing its stake in SFC. The company is pleased with the value that this investment has provided as an associate company, in terms of share of profit of all the core earnings of SFC; in addition the dividend accrued to JMMB Group, which positively impacts our cash flow and our liquidity.”
Chief Strategy Officer Claudine Tracey noted that the group’s acquisition would be focused on its banking segment which is currently in Jamaica, The Dominican Republic and Trinidad and Tobago.
“JMMB Group is actively exploring two acquisitions, in pursuit of the expansion of its banking business line and regional footprint, subject to regulatory approval. We expect to close on our transaction this [financial] year, which will see us going into a new territory. Although the company has prioritised the banking business line, it remains open to assessing viable opportunities and has an active pipeline that is being considered, in a bid to further drive shareholder value, in line with its regionally integrated financial services strategy.”
In closing out the AGM, Duncan spoke on JMMBGL’s strategy to navigate the novel coronavirus pandemic and pivoting to growth. These were underscored by the pillars of respond, reassess, rebound and reinforce.
“As we responded to COVID-19, we had to determine how defensive we had to get and where we’re going to look for growth opportunities. COVID is here to stay for the foreseeable future. We have to reconfigure our strategy to how you live with COVID. Financial disruption is going to take place at a rapid pace in the financial services area and we need to configure ourselves for that financial services group of the future. Going forward, we say one group, one client, one experience. I’d like to thank everyone from our board, management and team members for all their efforts in getting us to where we are today, ” said Duncan.