Mayberry Jamaican Equities Limited (MJE) is increasing its short-term liquidity as it aims to capitalise on various opportunities on the Jamaica Stock Exchange (JSE) which is experiencing a reduction in value.

MJE has had a significant rebound for 2022 as its asset base grew from US$119.64 million ($18.41 billion) in December 2021 to US$150.21 million ($22.84 billion) up to the end of September. While this is below the 2019 balance of US$150.68 million, MJE’s equity portfolio stood at US$147.71 million ($22.45 billion) at the end of the third quarter with a net asset value (NAV) of US$0.10 ($15.70). MJE’s NAV peaked at $19.48 on April 22 but has retreated to $14.06 as of November 29 which is above its share price.

This rebound has augured well for shareholders since MJE’s stock price remains up 44 per cent to $12.94 compared to the JSE Index which is down 14 per cent year to date to 340,401.94 points. Trading value and volumes have significantly declined for the latter part of 2022 as higher interest rates and elevated inflation continue to impact the interest of investors. For context, November had half of the $4.15 billion in value traded for May.

“Some people might focus on where the stock is falling. We’re more interested in acquiring at a good price so that when it starts to rise, we can benefit from it. So, it kind of limits us at times how effectively and efficiently we can invest the cash. We look on all of those opportunities and so far, we have been able to invest in as best a way as we can,” said Mayberry Investments Limited Chief Executive Officer Gary Peart at MJE’s annual general meeting (AGM) held on Wednesday.

When asked by a shareholder why MJE doesn’t take advantage of some of the bonds or fixed income opportunities being offered at higher interest rates, Peart responded, “For example, if we take advantage of the Mayberry [Investments] bond IPO that’s in the marketplace right now, the lowest tenor is 13 months. If an opportunity comes up in three months’ time, you’d have locked up the money. Yes, the free cash that MJE will throw off, we invest it at the highest return that we can get given the liquidity constraints.”

MJE had a US$2.1 million ($319.61 million) cash and cash equivalents balance at the end of September. MJE has increased its position in companies such as Jamaica Broilers Group Limited, JMMB Group Limited and Express Catering Limited while decreasing its exposure to Caribbean Cement Company Limited, Lasco Manufacturing Limited and Wigton Windfarm Limited during 2022.

MJE currently has a $2.2-billion (US$14.27 million) bond set to mature in September 2023 along with a $1.2-billion promissory note due September 2026. With shareholders’ equity of $18.86 billion, this means that MJE’s debt-to-equity ratio currently stands at 0.17 times. Although some shareholders queried about the ability to repay the debt later in the year, Peart referenced the initial COVID-19 shock when its ratios remained around 0.20 times and how MJE’s conservative nature and resilience were demonstrated.

“The simple reality is that the portfolio has rebounded nicely, and I think we’re above $20 billion now. That debt represents less than 10 per cent of the portfolio. It doesn’t take much for us to liquidate some shares to pay down the debt, but there’s also the option to refinance or extend the debt. It’s a function of the opportunities are at the time. I think closer to the maturity of the bond, we’ll make a decision, but we’re not concerned about it,” Peart added.

“It is important to show that whilst leveraged returns can significantly increase your returns, we’re very conservative about how we take debt on and the little debt that we’ve taken on has served its purpose. It puts us in a position that if we see an opportunity, the company can take on significantly more debt to take advantage of that opportunity to significantly move its returns in the future,” Peart explained surrounding debt for enhancing returns.

While Supreme Ventures Limited (SVL) and Caribbean Producers Jamaica Limited (CPJ) make up 71.4 per cent of MJE’s portfolio value, Peart mentioned that both stocks carry inherent benefits for any portfolio. Peart referenced SVL’s ability to throw off cash to pay a dividend, debt and expenses along with it being able to provide growth and robustness in both a recessionary and growing environment. He also said that SVL has several characteristics that shows diversification and a robust business model. Peart referenced how CPJ has turned around after reigning in costs and was the best performing stock in 2021. SVL will pay MJE a dividend of $70.61 million next Thursday.

Peart added that MJE filed its economic substance returns earlier this year and has always been in compliance with the requirements and isn’t doing anything different than before.

All resolutions at the AGM were carried along with the reappointment of Konrad and Christopher Berry as directors of the company.

MJE is an investment company that invests in publicly listed equities in Jamaica with an objective of long-term capital appreciation and capital preservation. As such, it held 34 stocks across the Main and Junior markets of the JSE at the end of 2021, including a 0.52 per cent stake in its parent company Mayberry Investments. Mayberry Investments is the broker for MJE while Mayberry Asset Managers Limited (MAM) is the investment manager of MJE. MAM is controlled by both Berrys.