MAYBERRY Jamaican Equities (MJE) is hopeful that with the recent announcement of a reduction in interest rates, its equities portfolio will see more profits this year.

Despite the recent increase in interest rates, MJE reported that the pullback still resulted in an investment portfolio with equities exceeding US$112.1 million.

“We think looking forward to the end of 2024, especially with the reduction of interest rates, we’re expecting that come year-end we should see a profit year-to-date for MJE based on the expectations that we see right now and the continued reduction in interest rates,” said MJE’s investment manager representative, Gary Peart, at the company’s recent annual general meeting held at AC Hotel in Kingston on Thursday.

Peart says the resilience of its equities portfolio reflects the potential for long-term value in the Jamaican market. The high-interest regime led to a decline in equity value as investors shifted from equities to fixed-income markets. However, MJE seized this opportunity to issue bonds and shore up its cash reserves during the year. Now, with interest rates declining, MJE expects to reap the benefits this year. Mayberry Jamaican Equities’ net profit was better than the prior year, although not yet at the level desired by the company. MJE reported a net profit of 799 million Jamaican dollars for three months from April to June 2024. This compares to a loss of 43 million Jamaican dollars for the corresponding period in 2023. This performance was attributed mainly to an increase in net unrealised gains on investments in associates of 592.8 million Jamaican dollars and higher dividend income by 598 per cent compared to the last year.

“I think this portfolio is now pregnant, and it’s just a matter of time before we deliver this baby, and this baby is going to weigh a lot of pounds,” Peart said. “We took the opportunity to actually buy additional equities or assets, and we think we will earn significantly from those.”

During the presentation, Peart provided a breakdown of the portfolio’s performance and announced to shareholders that Mayberry Jamaican Equities sold its 20 per cent ownership stake in CPJ at a price of $10.50, which was higher than the market value of $9.00 at the time. This sale, which took place on July 6, represented a 15 per cent premium above the market price.

“We have used those proceeds to both reduce debt, and we’ve also used some of the cash to acquire other assets and also hold cash in reserve for the opportunities that may come,” said Peart while divulging plans for the cash from the sale.

During the AGM, a shareholder questioned the directors’ decision to continue holding shares in EduFocal. Executive Director Christopher Berry justified the holding by explaining that EduFocal, despite its slow stock performance, aligns with Mayberry’s values. He noted that the company’s holdings in EduFocal had been significantly reduced but emphasised that Mayberry intends to maintain a stake in the company due to its social benefits, particularly in providing affordable education to underprivileged children. Berry described EduFocal as a “dream stock” for Mayberry, citing its core values and commitment to giving back to society.

“Based on a recent government report, 40 per cent of Jamaican kids with 10 years or more of schooling are functionally illiterate, and EduFocal is a big player in helping kids learn remotely online,” Berry started. “The big thing in Jamaica is that uptown kids attend great schools, have the best teachers, and receive extra lessons, whereas EduFocal’s platform is designed to be accessible to all Jamaican kids, especially those who cannot afford extra lessons, so I’m in that,” said Berry.

EduFocal makes up less than a half per cent of MJE’s portfolio. Peart further justified MJE’s continued investments in other companies that have been performing on the slower side on the Jamaica Stock Exchange, such as Wigton Windfarm and NCB Financial Group. Wigton, in which Mayberry is now the largest shareholder, now occupies 3.7 per cent of the total value of investments in Mayberry’s portfolio. Investment manager representative Peart anticipates that the wind energy company will diversify after recently winning a bid in Jamaica to expand. He believes the company is on the right track, with significant value expected to be unlocked in the future.

As for NCB Group, a sleeper stock that has been underperforming, Peart believes it has hidden potential to surpass SVL as a leading player in its portfolio, which accounts for 54.8 per cent of its total value of investments. Once the true dividend yield reveals itself, Peart expects NCB Group to emerge as a top performer.