• For the month of January, the All-Jamaica Consumer Price Index (CPI) increased by 0.6%. January’s outturn meant that point-to-point inflation was 9.7% in the 12 months to January 2022, up from the 7.3% reported in December 2021. This puts inflation outside the BOJ’s target range of 4% to 6%, for the 6^th consecutive month. 
• For the month of January, the rise in inflation was largely driven by the 8.4% increase in the index for the ‘Restaurants and Accommodation Services’ division as tourism activity increased relative to the prior period. The inflation rate was also impacted by a 0.6% increase in the ‘Transport’ division which resulted from increased petrol prices. However, the rise in the point to point inflation rate was influenced by increased prices in the: Food and Non-Alcoholic Beverages (9.9%), Transport’ (13.8%) and Housing, Water, Electricity, Gas and Other Fuels (10.9%), divisions. 
• The current breach in the inflation range is in-keeping with expectations, as the BOJ noted on December 20, 2021, that inflation was projected to successively breach the target for the next 8 to 10 months. The elevated rates will likely be driven by continued transmission of high international commodity and shipping prices to domestic processed food, food-related services and energy price inflation, as well as a recovery in domestic demand. 
• The BOJ has already increased its policy rate by 200 basis points to 2.5% per annum, and it is anticipated that it will increase the rate further at its next policy decision meeting on February 18^th. This decision will be driven by the sustained expectation for future breaches of the inflation range. It will also be influenced by high inflation expectations for the 12 months ahead, which rose to 8.9% in the November Survey from 8.2% in the prior survey. Fitch Solutions currently forecasts another 25bps increase in the rate in 2022, but we expect the total rate hike for this year to surpass this amount.

(Source: Statin and NCBCM Research)

• JMMBGL reported a net profit attributed to equity holders of $8.28Bn for its 9 months ending December 31, 2021, which represents a 115.1% or $4.43Bn increase relative to the prior period. 
• All revenue lines increased, including net interest income, trading gains and fees and commission income. This was facilitated by increased economic activity relative to the prior period, as well as accommodative monetary policies for most of the period (since BOJ did not start raising rates until the last quarter of this 9-month period). 
• In particular, a growth in the loans and investment portfolios bolstered the 18.4% increase in net interest income, and an improvement in investor sentiments and demand for emerging market assets as global interest rates remained low, influenced the 44.7% increase in gains on traded securities. Fees and commission income was 58% higher and reflected increased economic activity as well as significant growth in managed funds and collective investment schemes across the Group. 
• The Group also recorded a 24.2% (or $2.58Bn) increase in operating costs as it transitioned to growth mode from a cost-containment strategy in the prior year, which was incorporated to dampen the effects of the pandemic. It was however able to convert the strategic spend into higher revenues relative to costs, as its operating revenues increased by 32.9%, and operating efficiency improved to 60.2% from 64.4%. 
• We expect JMMBGL to continue to benefit from the economic recovery in its main operating markets, in particular Jamaica and the Dominican Republic. Both economies are forecasted to experience real GDP growth of 5.5% and 2.7%, respectively, in 2022, which will help to fuel greater employment and corporate financial recovery, and in turn raise demand for financial services. It could realise an increase in net interest income from banking services as central banks have switched from their more accommodative policy. However, its securities business could simultaneously record reduced net interest income as its cost of funds may rise faster than its asset yields, contracting spreads and tempering the overall improvement in profitability. 
• JMMBGL’s stock price has increased by 11.8% since the start of the calendar year. The stock closed Tuesday’s trading session at $44.09 and currently trades at a P/E of 7.2x earnings which is below the Main Market Financial Sector Average of 15.1x

(Source: Company Financials and NCBCM Research)

• The Barbados Private Sector Association (BPSA) hopes the latest adjustments to the COVID-19 Directives mark the beginning of the end of harsh restrictions which severely affected the local business community over the last two years. 
• Association President, Trisha Tann, is pleased with what she believes is a clear indication of the Government’s intention to manage the pandemic and its economic effects much differently than before. 
• Highlighting the deleterious impact of the pandemic period on the business sector, Tannis acknowledged that the road to recovery would be long and winding. It is expected that full and sustainable recovery will still take another couple of years. This recovery will be dependent on the uptake of vaccine and a sustainable inclusive growth agenda that focuses on effectively, and holistically addressing the issues affecting the key growth sectors in Barbados, such as tourism and financial services. 
• Considering the recent move by the government, to lift restrictions, the association is of the view that the focus should now be on monitoring monetary policy to ensure that inflation remains at manageable levels.

(Source: Barbados Today)

• Head of state in Guyana, President Dr Irfaan Ali, has stated that Guyana and Barbados are working to create a success model for the region that will focus heavily on mitigating aspects of climate change and on enhanced food-security measures. 
• He noted that the two countries want to build a model of success for the rest of CARICOM, that will be able to address important issues and challenges being faced by all members, including climate change, environmental issues, water scarcity, food security, and the switch to renewable energy. 
• Both countries are working to remove the bureaucratic obstacles in order to provide a policy framework to enhance cooperation and movement of products and people through the Caribbean Community. This agreement between Guyana and Barbados will enhance the economic opportunities for both countries and ultimately benefit the Caribbean region.

(Source: Guyana Chronicle & NCBCM Research)

• U.S. producer prices increased by the most in eight months in January amid a surge in the cost of hospital outpatient care and goods such as food and motor vehicles, another sign that high inflation could persist through much of this year. 
• The producer price index for final demand jumped 1.0% last month, the biggest advance since May, after climbing 0.4% in December, the Labour Department said. 
• In the 12 months through January, the PPI rose 9.7%. That followed a 9.8% surge in December. Year-on-year PPI is slowing as last year's large increases drop out of the calculation.

(Source: Reuters)

• Oil tumbled over 4% from a seven-year high on Tuesday after Russia said some of its military units were returning to their bases after exercises near Ukraine, a move that appeared to de-escalate tension between Moscow and the West. 
• It was not clear how many units were being withdrawn, and by what distance, after a build-up of an estimated 130,000 Russian troops. The report on the troop movements prompted an extension of oil losses. Brent crude fell $3.99, or 4.1%, to $92.49 a barrel by 11:11 a.m. EST and the U.S. West Texas Intermediate (WTI) crude fell $4.28, or 4.5%, to $91.18 a barrel. 
• Both oil benchmarks hit their highest since September 2014 on Monday, with Brent touching $96.78 and WTI reaching $95.82. The price of Brent jumped 50% in 2021, while WTI soared around 60%, as a global recovery in demand from the COVID-19 pandemic strained supply.

(Source: Reuters)

• Buoyed by robust revenue growth(44.1%), Honey Bun reported a net profit of $ 45.51Mn for its 3 months ending December 31, 2021,  a 30.9% increase relative to the prior period. Sales of its Shorty Bread products, which continued to be well received by customers, were a significant driver of the expansion in revenues. 
• There was also a 64.5% rise in direct costs, in part due to the increased production. However, significant price increases on all inputs, supply shortages and shipping delays also contributed to the overall increase in direct expenses. The increase resulted in a reduction in the company’s gross margin by 7.5 percentage points to 39.81%. 
• Nonetheless, despite cost pressures, Honey Bun’s operating profit increased by 44.5%, as the rise in revenues outweighed the higher direct costs, administrative (+23.1%) and selling and distribution (17.2%) expenses, supporting growth in its bottom-line. 
• Going forward, Honey Bun is expected to see continued buoyancy in the demand for its products, but cost pressures are also expected to remain elevated. Demand will be driven by a recovery in both its domestic and international market segments. The relaxation of restriction measures in Jamaica along with expected real GDP growth will support sales growth along with economic recovery in key export markets such as the U.S. However, margins are expected to decrease owing to higher input price increases that are expected to continue throughout 2022 as energy prices increase and supply challenges persist. 
• Honey Bun’s stock price has increased by 7.6% since the start of the calendar year. The stock closed Monday’s trading session at $9.98 and currently trades at a P/E of 20.4x earnings which is almost in line with the Junior Market Manufacturing Sector Average of 20.9x.

(Sources: Company Financials & NCBCM Research)

• For the 9 months ending December 31, 2021, RJR reported a net profit attributable to shareholders of $251.80Mn, a 62.60% increase year over year. Additionally this outturn surpassed the pre-pandemic outturn of $134.39Mn. The net profit outturn was primarily supported by revenue growth of 13.6%, with revenues moving from $3.79Bn to $4.31Bn. 
• The company’s performance was influenced by growth in its three divisions: audio, audio-visual, and print and online divisions. The company also highlighted that it surpassed key revenue targets for its digital services, which is a positive as it transitions to a digital company. However, it also realized a 29.4% increase in direct expenses, though this increase was not enough to temper its bottom-line growth. 
• We anticipate that RJR will see further bottom-line growth supported by new initiatives to improve technological efficiencies and increase revenues. This includes its new ecommerce website, Gcommerceja.com, which was developed through its partnership with ePost Caribbean Limited. Further, the company should see earnings growth through the share of income from its associate companies due to its recent acquisitions such as its 15% stake in Starapple Analytics. 
• RJR’s stock price has increased by 18.9% since the start of the calendar year. The stock closed Monday’s trading session at $3.65 and currently trades at a P/E of 30.7x earnings which is above the Main Market average of 18.7x.

(Sources: Company Financials & NCBCM Research)

• A Jamaican-based company is set to invest US$45 million in the local renewable energy market. The clean energy projects planned by Soleco Energy Limited will see the construction of three 10 MW (total capacity of 30MW) solar photovoltaic plants in Barbados. 
• Upon completion this will be the largest solar plant in the English-speaking Caribbean and plans to sell electricity to the Barbados Light & Power equivalent in Jamaica (JPS), at a price of U$8.50/ kWh. 
• Angella Rainford, CEO and Founder of Soleco Energy stated: “The Paradise Park Project exemplified the potential for other emerging markets such as Barbados to achieve such cost savings while supporting sustainability and resilience in their economies through the adoption of renewables.” 
• The project will help to increase investment, and tax revenues for the country, and support growth in economic output.

(Source: Barbados Today)

• A crackdown that aims to reverse “non-existent” consumer protection from unregulated money lenders will take effect in the 2022 second quarter. The Bahamas intends to close what is considered to be “a very big gap” in safeguarding its citizens from predatory lending practices by persons and entities operating outside the established financial services supervisory environment.
• Executive Director at Securities Commission, Christina Rolle spoke out after the regulator, which oversees the capital markets, financial and corporate services providers, and investment fund sectors. The draft Money Lenders rules was released for the third round of industry consultation amid hopes it will prevent Bahamians from falling prey to practices such as sky-high interest rates that exceed the lawfully allowed 20% maximum. 
• The rules, which will capture all money lenders and require them to operate as companies or other legal entities, rather than as individuals, also prohibit such persons/firms from using physical violence, threats or other forms of intimidation against a borrower or their family members when collecting loan repayments and debts.
• She explains that no penalties for such ‘loan shark’ type tactics are contained in the rules, which make clear that both guilt and punishment is to be determined by the Supreme Court, but they do impose far more stringent transparency requirements on non-bank lenders not covered by the Financial and Corporate Services Providers or any other financial services-related Act.
• This crackdown could however reduce access to financing for citizens in the lower-income brackets and could adversely impact consumption.

 (Sources: The Tribune & NCBCM Research)