With Mayberry Investments Limited’s (MIL) third quarter profit declining by 25 per cent to $224.30 million, the company’s principals have indicated they are considering an associate stake in gaming and lottery company Supreme Ventures Limited (SVL) through its subsidiary Mayberry Jamaican Equities Limited (MJE).

MJE has increased its ownership in SVL from 15.242 per cent at the start of 2021 to 18.160 per cent at the end of September. MJE purchased an additional 2.842 per cent stake in SVL during the quarter for $1.42 billion or $19 per share from other connected parties. This leaves the overall Mayberry Group with 48,524,950 more shares to be able to change the recognition of SVL from an investment security to an associate company.

When Sunday Finance queried with MIL CEO Gary Peart at MJE’s annual general meeting (AGM) in June, he initially stated that MJE was comfortable with its SVL exposure and was not looking to increase its stake to make it an associate. However, at MIL’s AGM on Thursday, Peart stated, “At that point of the [MJE] AGM, it wasn’t something on our radar, but as you know, things change, values change and if the opportunity does arise, I think we would take the opportunity to go to 20 per cent.”

Peart is the executive chairman of SVL while chairman of MIL and MJE. Christopher Berry is a non-executive director on SVL’s board. SVL made up 86 per cent of MIL’s consolidated dividend income of $338.6 million in 2020 with MJE collecting an additional $52.68 million in dividends on November 18. SVL made up 51.6 per cent of MJE’s investment portfolio of $16.69 billion at the end of September.

An associate company as per International Accounting Standards (IAS) rules is an entity which an investor has significant influence, being the power to participate in the financial and operating policy decisions of the investee (but not control or joint control). It further discusses significant influence as being evidenced by things such as representation on the board of directors of the entity, participation in the policymaking process and potential voting rights as a factor. A 20 per cent stake is usually the typical barometer for a company to be considered an associate, but MJE has not classified Lumber Depot Limited as an associate where it held a 25.71 per cent stake up to July before disposing to net $134.67 million during the quarter.

Peart didn’t specify the purpose of the $1.16-billion MIL netted disposing of 10.73 per cent of MJE on August 20. He only stated that it would be used for investments.

Rate Hike Not a Concern

With the Bank of Jamaica raising its policy rate by one per cent in September and more hikes expected, Peart explained that MIL is fine whether or not rates move. He stated, “We’re in a position whether interest rates increase or come back down, we will be making money.”

Net interest income made up 45 per cent of MIL’s third quarter total income of $697.56 million, but only 22 per cent for the nine months with unrealised gains making up a larger portion of the income statement.

With a consolidated cash position of $1.52 billion, Peart announced to viewers that the board had approved a dividend of $0.32 per share to be paid on December 20. This totals $384.37 million and is the largest payment to date after its 2019 dividend. MIL has paid out $3 billion in dividends since being listed on the Jamaica Stock Exchange in 2005 with only three years seeing no payments.

Though Peart didn’t give much indications on any future plans, he did note that the disclosure surrounding the Chalmers Avenue joint venture with the Musson Group would be announced once completed. MIL’s net profit attributable to shareholders totalled $513.22 million for the nine months relative to the loss of $663.77 million. Total assets stood at $38 billion with equity attributable to shareholders closing at $13.28 billion.

“We think we’re very prepared, we have cash, we see where our main investments are coming back. We have significant opportunity for new investments and we think 2022 should be a better year than 2021,” Peart closed.