Hey Guys! Happy Friday!
First week of October complete! The year is almost over but the 4th quarter promises to be exciting!
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What’s up this week? Hmm, Let’s see.
Jamaica – Real Estate, Demand & Structures
Sygnus Real Estate Finance Limited (“SRF”) has joined the party, and is diving deeper into the real estate investment class. Shares of SRF are now listed and tradable on the Jamaica Stock Exchange (“JSE”).
We have spoken about real estate a few times, our thoughts, the demand phenomenon in Jamaica, etc. and will the boom end? At this stage, if one would say we are still in a “stage” investment companies like SRF and many others are now pumping Billions J$ into the asset class via structures. The reason we say “stage” is because a lot of analysts tend to use this, and we have been hearing about real estate and being at a stage since 2002 or before. In hindsight, the throttle and the trend has continued. It is actually similar to “many persons” opinion of the U.S. stock market since 2015 or before. Well not even a global pandemic could end that asset classes uptrend and phenomenal run. With the new, not only in Jamaica but also in the U.S. concerns about inflation, there is actually more new demand coming into real estate as a hedge. High oil, and other escalating costs, will actually benefit “real estate”, hence investment managers even at what some perceive to be high per square foot prices/ valuations are positioning themselves for the next few years.
With SRF coming to the market, they are the latest to take a defined “bet” on real estate in Jamaica.
It wouldn’t be surprising if at this “stage”, if Jamaica may see the next level, that is, foreign special purpose vehicles or larger type investment companies that are not domiciled in Jamaica to take a bigger picture look at this asset class in Jamaica. If that happens, that would provide a further level of support for the asset class and perhaps move the needle even further. U.S. funds, foreign investment vehicles, etc. tend to need large ticket sizes, per a minimum investment policy. In some cases, depending on their size, that could be US$ 10 million to US$ 50 million at a minimum to start or even US$ 100 million. This is on a per investment basis.
The possibilities or benefits of this are two-fold. Firstly, creates a larger “bid” for the overall market and asset class. Always good! Secondly, for all the current structures out there and where investors can garner information, example, Kingston Properties Limited, First Rock Capital Holdings, SRF, Eppley Caribbean Real Estate, etc, if they build enough size and of course the quality of their respective portfolio, they may just attract one of these players.
While we tend to speak more about & focus on the equites asset class and opportunistic equity, the real estate uptrend, continued demand, and even with a 1% uptick in rates by BoJ, still a low interest rate environment: it may well make one of these real estate structures on the JSE receive some capital gains or outsized gains in the future.
Market Moves:
- Cryptocurrency gets a boost with “Rainmaker” and well known investor coming out strong that he owns some Bitcoin. The markets have been quite alive with the announcement and it has sent Bitcoin higher and other well known cryptos / brands. Bitcoin is up 87% or more this year for 2021. The year isn’t finished yet, crypto bulls would shout! LOL! Soros’ team is downplaying it a bit, as they should or most well known investors do in the early stage. They have noted that they are not going all in or anything of the sort but the reality is they view it as an inflation hedge play, and like most, inflation is a large or outsized concern. Bottom line is the Market feeling is now – “Soros endorses Bitcoin.”
- General Motors (NYSE: GM)revving itself up again, and they did a recent presentation like they were the Steve Jobs of Apple Inc. In hindsight, the ground breaking presentations over the many years, brand of Apple Inc, and just the back drop of all those presentations has finally caught on with a lot more of the traditional companies many years later. Like, finally. It’s interesting as the Pandemic, COVID-19, has actually probably drove this to happen for some of these very underperforming traditional, industrial type companies that were profitable or always profitable but just not generating the ROE, ROI and ROA that shareholders desire. To add, especially with seeing the continued “technology” sector rage that has seemingly continued to the upside endlessly. Most U.S. brokerages and analysts have been historically and continue to be “negative” on Big Tech or when a new Tech debuts or enters the fold. However, Big Tech continues to monthly, quarterly and annually defy the odds! Each time, analysts blame the P/E ratio or something about the Company regarding it being outsized relative to the market or a crazy valuation. However with a proper historical review and even within the past 12 months: in most cases the Big Tech has performed to analyst expectations and then eventually outperformed lowering the P/E ratio to give its share price serious legs! In addition, it is that growth rate and continuous growth rate that has been happening for years and you just cannot find it in some of the more well known Dow 30, S&P 500 names. Well, General Motors has always said they are, and hinted more and more at the Electric Vehicle (“EV”) strategy. For a number of years, GM and Ford were left wanting but they were making many moves doing deals and hints in the EV space to catch up with Tesla Inc (NASDAQ: TSLA). So at the end GM has clearly accepted the TSLA moves as permanent (finally!!!) and have doubled down and come out with a hell of a presentation that forward looks to 2030! Wow. Interesting headline points and as a result, GM share price has rallied, but there may well be investors who are still skeptical. GM has illustrated to its audience, to double revenue by 2030, to approximately US$ 280 billion, with a focus on its “Cruise” or autonomous driving platform and the EV overall strategy.
- Ciboney Group Limited (JSE: CBNY), making a splash and making some moves. We need to watch some more and see the outcome but it’s fun following the Company. Not just Ciboney, but the market craves this type of disclosure and information.No one wants to only get information at a Company’s Annual General Meeting (“AGM”). The Market seems to really enjoy Ciboney, almost in a way similar to the euphoria around MEME stocks, like GameStop or the euphoria around US$ penny stocks, when they are doing well… Ciboney has released some updates that we believe will find favour with the Market. The Company has disclosed that their registered address & operations will now be relocated to 30 National Heroes Circle, Kingston 4. In addition, the designated Executive Director post will be no longer be and this will cease to exist. Lastly Ciboney is separating the Chairman, from the Audit Committee, who will remain as the Chair. Mr. Errol Campbell therefore continues in the role as Chairman and he is well known in financial services and corporate governance circles. To refresh our thinking caps, Ciboney had at one stage sought to sell its majority stake of approximately 72% of the issued share capital of the Company as mentioned in their 2020 Annual Report.They had done a document or something of this nature and put it out transparently to the marketplace that if someone saw value in having a listed company or in Ciboney as is – with no assets essentially and limited to no revenues then “come and buy the shares!” In the end no deal occurred. There were either no takers at the price the Board of Ciboney desired or just no interest… We think it’s the former as with well over 100 securities on the Market now on the Jamaica Stock Exchange (“JSE”) and with 14 securities listed in 2021, there is or will be a buyer for Ciboney, and more and more with the growth of the JSE, there is always a “buyer”. These moves seem to demonstrate the expected further consolidation of Ciboney and lowering as much as possible the already limited administrative expenses. With all of that said, there is only so much, a Public Company’s Board & Audit Committee can carve away at expenses. So a deal or something “next” seems inevitable for minority shareholders of Ciboney soon.
- Victoria Mutual Investments Limited (JSE: VMIL) has just come out with another major announcement. Of course it’s about $$$, as that’s the business they are in. The VM Group and JN Group for years, let’s even extend it to the last 10 years have been “sleeping giants”. Most whom analyze the Market, will contend and argue that VM Group or the VM brand was lagging and perceived to always be behind JN Group and the JN brand. Now, over the last few years it has emerged as a powerhouse not only financially but have now strategically and properly utilized their powerful brand. The true “goodwill” or the BooYah Feeling behind VM has risen to the top over the past few years and every time they announce a big deal via whichever VM company, the strength of their balance sheet and strength of their brand is increasing. Besides all the massive private placement deals, and private deals that VM Wealth (separate from VMIL), collectively VM, have done over the years, example, Kingston Properties, AIC or Portland Equity Companies (we may get confused with the issuer name), this deal means they and their Boards respectively are taking care of themselves (VMIL shareholders) and even if long term, the clear shift in strategy that is not overnight is taking fold! With that said, VMIL just got J$ 2.5 billion arranged form VM Wealth. That’s a nice chunk of change in any market but in particular in these Pandemic Times. VMIL has stated, “they intend to use the funding that comes with terms: bond offering for 18 months at 5.5%” for “deals/ investments in SMEs and well as other asset classes.” We have long said and contended that there is no FI – financial institution or deal house or fund focused on SMEs since Mayberry upped their ante and clearly focused more on large caps or bigger deals. You can’t blame them, as you keep pushing and it’s just the next level and you keep leveling up, as each deal takes the same time. With that said, there was enough market share out there for other players to get “equity deals – SMEs” also, but with Mayberry more or less not as focused there anymore or in recent years, the space is wide open! We like the move by VMIL: we feel that once VMIL has a strong pipeline and understands how to maximize their relationships for this pursuit, they will do well. There is a market here with major upside.
- RevUp Caribbean gets booming! Launched on September 24th 2021 by the team at First Angels Jamaica… Sandra Glasgow continues to spearhead and drive this, for start-ups & young companies in Jamaica. Well needed! For quite some time, we have had The Branson Centre (continues to do awesome!), JN and other partners had conducted something along the lines of an incubator in downtown Kingston (it had a short life), and there have been a few others. Anyway you look at it, all of these endeavours and ventures are brave, and you have to take your hat off to them! RevUp (nice name) intends to do all of the above and more and will be an “incubator”. It seems in absorbing it, First Angels Jamaica is quoted as deploying millions of US$ and their history & track record. RevUp’s Board says it all, and one to be taken heavily in the financial markets, but to be clear, RevUp is not a Private Equity outfit or Hedge Fund: it’s an “incubator.” Their Board carries names from First Angels such as Joe M. Matalon, (RJR Chairman and Principal of ICD Group), Sandra Glasgow, the “Boss” here and CEO, Sanya Goffe, well known attorney and partner at Hart Muirhead Fatta as well as some new heavyweight names, particularly Mr Mark Kovinsky of Kova Capital Ventures, LLC. Jamaica needs more of this, and the future data if available to the Public from RevUp, will be interesting and super important for the development of this segment of the financial market.
Make the best of October and see you next week!
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