We are reiterating our SELL recommendation on Digicel Ltd and Digicel Group. Despite on-going efforts to reduce costs, generate cash through asset sales and a transition to the higher margin fibre business, financial performance continues to deteriorate.   In addition, the credit profiles of both entities remain weak and efforts so far to refinance impending maturities have not yet borne fruit. 

Investor sentiment surrounding the Digicel bonds has become even more negative given the company’s failure to secure refinancing for the 2020 bonds and deteriorating financial performance. In particular, the concerns stem from the limited time remaining for the Digicel entities to refinance debt which is expected to become even more challenging in the current rising interest rate environment.  Importantly, combined Digicel Limited and Digicel group has a total of US$6.5Bn in bonds with a maturity occurring every year from 2020 through 2023. The elevated risks are already being priced in with investors demanding higher yields on the telecom company’s bonds. Further, a recent conference call to discuss its latest financial performance did little to quell fears or inspire investor confidence.   The company’s performance for FY18 continued to deteriorate with revenue and EBITDA declining year-on-year despite cost-cutting measures that have been implemented. The company’s over-leveraged balance sheet also inhibits its ability to secure much-needed refinancing. 

Recommendation

Despite on-going efforts to reduce costs, no significant benefit has been realized in the company’s performance, and the company’s transition to fibre has not moved the needle on revenues or EBITDA.   In addition, the company’s credit profile remains weak and its efforts so far to refinance impending maturities have not been fruitful, causing much concern.  We therefore continue to recommend that investors reduce their exposure to (SELL) Digicel. Investors could consider purchasing Mexico’s Unifin Financiera[1] 7% 2025 (S&P Rating: BB/Stable) which is a higher quality credit offering a yield to call of 9.22% [2].

[1] Unifin Financiera is one of the largest unregulated non-bank financial institutions (NBFIs) in Latin America in terms of loans and assets. The company’s core business involves providing operating leases to the SME sector, factoring and auto loans.

[2] The next call date is July 15, 2021

The resignation of U.K. Foreign Secretary Boris Johnson on Monday afternoon has led to suggestions that the British government is on the brink of collapse.

Johnson stepped down after Prime Minister Theresa May outlined her government’s desire for a softer version of Brexit. He is the second cabinet minister to resign within 24 hours after the U.K.’s main Brexit negotiator, David Davis, quit late Sunday night.

A statement released by Downing Street confirmed Johnson’s departure and said a replacement would shortly be announced. Later, in a statement to parliament, May thanked the “work” of Davis and “passion” of Johnson while noting their differences in opinion with her over Brexit.

That gratitude may not last long with many seeing the resignation as a pre-cursor to a leadership challenge, which would bid to topple May and replace her with a more ardent supporter of Brexit.

The prime minister would have to conduct a leadership contest if at least 48 of her own lawmakers were to move against her. The process for that involves politicians sending letters calling for a vote of confidence to the powerful 1922 committee of backbenchers.

Once that threshold has been reached, the committee's chairman will announce the start of the contest and invite nominations.

Jeremy Corbyn, the leader of the opposition Labour Party, said it proved that Theresa May was incapable of negotiating a Brexit deal with the EU, given the splits within her own party.

In reaction to Johnson's resignation, the pound fell around 0.2 percent against the dollar to its lowest point of the day.

Source: CNBC

Derrimon Trading Co. Ltd (DTL) has advised that there will be three (3) Special Business Resolutions which is being placed forward for consideration at DTL’s Annual General Meeting on August 22, 2018:

Resolution # 5 – Increase of Authorised Share Capital  

“That the authorized share capital of the Company be increased from 800,400,000 shares to 8,200,400,000 shares by the creation of an additional 7,400,000,000 ordinary shares each ranking pari passu in all respects with the existing ordinary shares or stock units in the capital of the Company.”

Resolution 6 – 10:1 Stock Split

“That each of the issued ordinary shares in the capital of the Company be subdivided into 10 ordinary shares with effect from the close of business on August 22, 2018 resulting in the total issued shares in the capital of the Company being increased from 273,336,067 ordinary share of no par value to 2,733,360,670 ordinary shares of no par value.”

Resolution 7 – Conversion of Ordinary Shares to Stock Units

“That all ordinary shares in the capital of the Company once issued and allotted as of the date hereof and at any time hereafter be and are hereby converted into stock units.”

Stocks and Securities Limited has completed a block transfer of shares totaling 215,978,588 units. Shares have been transferred to Stocks and Securities Limited from two C2W Music Limited (MUSIC) directors, bringing Stocks and Securities Limited total ownership to 320,000,000 units or 80% of total issued shares.”

138 Student Living Jamaica Limited (138SL) has advised that Mr. John Lee has resigned from the position of Chairman of the Board of 138 Student Living and its subsidiary effective July 6, 2018, and Mr. Richard Byles has been simultaneously appointed to the Board and will take-up the position of Chairman of the Company, effective the same date.  138 SL has further advised that Mrs. Donnette Scarlett has also reigned from the Board effective July 6, 2018 and her position as Director will be assumed by Mr. Richard Byles.

“Mr. Lee will remain as a Director of the Board.  Mr. Lee is of the belief, that having held the position of Chairman since the inception of the project in July 2013, now 5 years, it is important for the company to have new leadership facilitating renewal on a regular basis and accordingly has vacated that position. During his five year tenure Mr. Lee and his Board conceptualized the project, negotiated 2 Concession Agreements and constructed and commenced operating 1,800 beds on the University of the West Indies Mona Campus.

“The Board wishes the express it sincere gratitude for the leadership and stewardship of the company by Mr. Lee during his five-year tenure and looks forward to Mr. Lee’s continued contribution on the board. In addition, the Board and Management of 138 Student Living look forward to the leadership of Mr. Byles, one of Jamaica’s most iconic business leaders,” states 138SL.

Source: JSE

Sterling Investments Limited (SIL) has advised that a director purchased 10,000 SIL shares on July 5, 2018, under the Company’s Complementary Share Purchase Plan.

Supreme Ventures Limited (SVL) has advised that a meeting of their Board of Directors will be held on Monday, July 23, 2018, at 10:30 am, to consider the payment of an interim dividend.

Sagicor Group Jamaica Limited (SJ) has advised that a Senior Officer and a connected party sold a total of 62,661 SJ shares during the period June 29 to July 2, 2018.

(Bloomberg) -- IMF releases statement by email on Trinidad & Tobago economy.

- Economy expected to return to 1.5% growth over medium term helped by energy projects coming online and recovery in the non-energy sector

- The economy improved in 2nd half of 2017 on a strong recovery in gas production

- GDP contracted 2.6% in 2017, 6.1% in 2016

- Fiscal deficit expected to narrow to avg of 4%/GDP as energy revenues rise

- Fiscal performance improved on spending cuts in 2017

- Total public debt reached 61%/GDP

- Risks include lower energy prices, disruptions in energy output, implementation of the reform of oil and gas tax regime

- IMF urges fiscal adjustments over the medium term to create fiscal space for future commodity shocks and put debt on a downward trajectory

The Stanley Motta Limited Initial Public Offering Prospectus and Investor Presentation are available for viewing.