BY STEVEN JACKSON Business reporter jacksons@jamaicaobserver.com
Friday, January 09, 2015
Loss-making telecom LIME offered the highest returns to investors in 2014 based on its 200 per cent price gain on the Jamaica Stock Exchange (JSE).
But some stock analysts are unsure of the precise impact on LIME’s valuation given the announced acquisition by its parent, Cable and Wireless Communications Plc, of Columbus Communications, the parent company of Flow.
“We credit this performance to the steadily improving commercial story that we are developing at LIME, characterised by solid market share and revenue improvements across most lines of business and a continued focus on ensuring our operating model is optimally structured to meet the demands of our constantly changing, extremely competitive environment,” said LIME Chief Executive Officer Garfield Sinclair in an e-mailed response to Jamaica Observer queries.
“When the proposed C&W Communications (CWC)/Columbus merger is also considered, investors would obviously anticipate additional future growth,” added Sinclair, who sits on the boards of the three top-earning stocks of 2014.
Concurrently, the Fayval Williams-led Kingston Properties Ltd, of which Sinclair is chairman, offered the second highest gains on the JSE, up 66 per cent between January and December. Sinclair also sits on the board of the Chris Williams-led Proven Investments, which gained 46 per cent in 2014.
But LIME’s share price increased at a greater pace, starting 2014 at $0.16 and closing at $0.48. Even without the announcement, LIME led the market by mid-year, gaining 103 per cent at the end of June before doubling that gain with the announcement.
In November, CWC announced that it would acquire Columbus Communications for US$3 billion pending regulatory approval.
“LIME Jamaica’s stock price has reacted positively during 2014,” Ryan Strachan, fund manager at Stocks and Securities Limited (SSL), noted in an e-mailed response to Caribbean Business Report queries. “However, LIME is not on our buy list, and it has traded erratically between 17 cents and 70 cents during the 2014 calendar year. Also, we are [un]sure if and what the financial benefit will be from the acquisition, if any, to the local company. Lastly, LIME continues to make losses, and the parent company has to continue to make guarantees re going concern.”
Wade Mars, assistant vice-president, asset management at Mayberry Investments Limited, also acknowledges that the acquisition benefits remain unclear.
“It’s a little strange — the rationale that people would use to buy… However, what I can say is that the volumes traded and the different number of purchasers over a time period are not one-off. [There is] genuine demand out there,” Mars reasoned. “For that acquisition to benefit Jamaica there has to be some reorganisation of the group structure itself. And you really don’t know how it’s going to end up, if and when they do that reorganisation.”
In December, LIME Jamaica Chairman Chris Dehring told the Observer that LIME Jamaica expects to grow annual revenues to US$281 million with the Flow acquisition. It was a signal to investors vying to evaluate possible earnings arising from the local leg of the regional merger. The increase would equate to a two-thirds jump in LIME Jamaica’s $18.4 billion (US$170 million) total revenues earned at its March year end. The merger would not affect mobile revenues but augment other revenues currently at $12 billion (US$110 million) per annum.
Mars, however, added that LIME’s rise was commendable despite its losses. “LIME’s movement was impressive. They have made moves to turn around the company. But still, they are in the red. The majority of the price movement occurred after the Columbus acquisition announcement,” Mars said.
For the September second-quarter 2014, LIME grew its total revenue 15 per cent, and its earnings before interest, taxes, depreciation and amortisation (EBITDA) jumped 95 per cent year-on-year. Additionally, its mobile customer base grew 13 per cent and its mobile service revenue grew 42 per cent year-on-year.
However, the company made a $612 million net loss. Over 12 months ending March 2014 it made a net loss of $3.5 billion.
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LIME offered highest returns to investors last year
