JMMB Group forecasts $9b in annual profit in three years
Financial conglomerate JMMB Group Limited expects to more than double its annual profit by March 2022 to $9 billion, arising from the stake being acquired in Barbados-based regional insurance provider Sagicor Financial.
The Jamaican company is purchasing 22 per cent of Sagicor in a deal set to close by year end.
The transaction is a purchase of equity, which means JMMB will not be absorbing any costs, and the acquisition is being done below book value and will see profit or losses flow through the income statement, JMMB Group CEO Keith Duncan told shareholders during the company’s six-hour long annual general meeting on Wednesday.
“It is accretive to earnings,” said Duncan, explaining that initially, JMMB’s earnings per share in the year 2021 is expected to increase by 20 per cent.
JMMB Group made net profit of $3.9 billion, or $2.34 per share, at year ending March 2019. Profit grew 7.3 per cent, from $3.6 billion a year earlier.
“With the acquisitions, including Sagicor, we see in three year’s time that our profit after tax will increase by 2.38 times our current profit,” Duncan said, spurring shareholders’ to do the math. “So if you are earning $4 billion now and you are earning 2.38 times that amount, then we see profitability at over $9 billion in three year’s time,” he said.
The projected profit growth, compared with the earnings of its peers today, would still rank JMMB Group at number four among eight banking conglomerates. The top three and their most recent annual earnings are: NCB Financial Group, $28.6 billion; Sagicor Financial subsidiary, Sagicor Group Jamaica, $13.8 billion; and Scotia Group Jamaica, $12.8 billion.
The projection would however surpass other conglomerates: GraceKennedy at $5.6 billion, and PanJam Investments, which made $5 billion last year. Both groups hold financial and/or insurance assets.
At the annual meeting, Duncan said JMMB would spend up to US$250 million for 22 per cent of Sagicor Financial, which clarifies the precise stake involved in the transaction with Alignvest. JMMB has previously said it would have been ‘at least’ 20 per cent.
The deal will see JMMB investing in Alignvest Acquisition ll Corporation of Canada, the special-purpose vehicle used by foreign investors to acquire Sagicor Financial.
“We are proud of this transaction, which allows for regional expansion and positioning into new markets,” said Chief Capital Markets Officer for JMMB Group, Julian Mair.
“We are stepping into a transaction that is accretive, which will see it adding to shareholder value year-on-year,” said Mair. “It is a large ticket, but it positions us to where we want to go.”
Currently, JMMB Group earns the bulk of revenue from banking and financial securities services through companies spread across Jamaica, Trinidad & Tobago and the Dominican Republic.
Mair told shareholders that post acquisition of the Sagicor stake, the company’s revenue mix would be 30 per cent from insurance, 30 per cent from banking, 30 per cent from securities dealings and the rest from other services. It would also increase its geographic presence to more than 20 markets.
Separately, JMMB Group plans to enter Costa Rica by setting up a microfinance firm there, and is currently collecting market intelligence.
“That’s the model for us entering Central America. It is still early days,” Duncan said.
On Wednesday, shareholders approved plans to issue up to 325 million of additional ordinary shares to the public. JMMB currently has 1.63 billion ordinary shares in issue on the market valued at more than $76 billion.
While the price for the pending offer remains undisclosed, were the shares issued at the current trading price for the JMMBGL stock, $46.81, it would raise its market capitalisation above $90 billion.
JMMB executives at the annual general meeting said the share sale was specifically geared at financing the stake in Sagicor Financial.