INVESTMENT firm MFS Capital Partners is undergoing major diversification of its investment portfolio from mainly foreign exchange (FX) trading-based income to include stocks, bonds, and real estate.

Dino Hinds, chief executive officer of MFS Capital Partners, said the decision comes after experiencing a significant decrease in income last year following its $500-million acquisition of Micro-Finance Solutions, which resulted in regulators changing the licence, a process that took one month and resulted in foreign exchange trading revenue being down for that quarter. For the three months ended June 30, 2024, MFS Capital Partners reported revenues of $32.4 million, compared to $1.7 million in the corresponding period.

“The $32.4 million represents just two months of those activities being consolidated,” he explained during an investor briefing.

MFS Capital Partners reported a total income of $163.3 million last year, primarily driven by FX gains, with commissions at $7.5 million and other income, including equity trading gains, at $6.6 million. This year, the company’s total income rose to $177.5 million. As part of its strategy, MFS Capital Partners aims to diversify its revenues over the next 9-24 months, targeting FX gains to account for no more than 50 per cent of total earnings. According to CEO Hinds, the company is poised to capitalise on emerging opportunities. Citing the Bank of Jamaica’s (BOJ) interest rate reduction announcement, Hinds noted its potential to boost market performance.

“We expect that the stock market will rebound later this year into next year, so we have been building a conservative equity portfolio, and we intend to speed up in terms of building on this portfolio,” Hinds said.

MFS Capital Partners is unlocking value on its balance sheet by developing its investment properties, valued at $405 million, primarily comprising 27.5 acres in Whitehouse, Westmoreland. Hinds describes this project as “shovel-ready” since the property is already subdivided into 90 service lots, with necessary approvals from the Westmoreland Municipal Corporation and relevant authorities in place. Infrastructure work is expected to be completed within 9-12 months, which will significantly boost cash and profits.

“If we can complete this in the timeline, it will bring significant cash and significant profits to our financials. What we would do with that cash is invest some of it back into other properties and repeat the process,” Hinds explained.

MFS Capital Partners will focus on homes priced below $30 million, which it identifies as its sweet spot, delivering more homes and lots in this price range. The company is also expanding its trading operations to include bonds and other financial instruments. Currently, MFS generates significant trading activity from back-to-back FX trading. However, it plans to increase proprietary trading by taking positions on its balance sheet through its stake in an associate company. As Hinds unveiled further diversification plans, he announced that MFS Capital Partners is growing its private credit portfolio, targeting $50 million in net interest income over the next nine months.

“We think that private equity and credit are now a part of our core revenue, and we are looking to build that to provide a more stable revenue stream for the company,” Hinds further highlighted.

MFS Capital Partners aims to become a leading trading house in Jamaica, competing across the Caribbean. The company’s strategy focuses on matching demand with supply, avoiding risky trading. To achieve this goal, MFS plans to build its branch network and grow its fee income. A new branch location has been identified and a licensing application submitted, pending regulatory approval.

“It’s a location that will generate a lot of fees for us. Remittances do very well in certain areas, so we definitely think that based on where that branch is projected to be located, it will be a winner,” he shared.

Additionally, MFS is pursuing a second acquisition, having already completed one. Further details will be announced once the deal is finalised.

MFS Capital Partners incurred a net loss of $10 million for the period, despite stronger revenues, due to expenses related to its recent acquisition. These costs, totalling over $10 million, primarily consisted of legal fees, stamp duty, and other associated expenses. However, the company’s consolidated balance sheet shows significant improvement, with total assets reaching $752 million. This represents a more diversified holdings portfolio compared to the previous year. Hinds noted that the equity position is also strengthening, following shareholders’ approval to convert some acquisition-related debt to equity. This conversion has transformed the company’s balance sheet from a negative to a positive position, a milestone achieved after several years. Looking ahead, Hinds anticipates further improvement over the next nine months as the company executes its diversification strategy. MFS Capital Partners has received approval for a rights issue but is waiting for optimal market conditions to proceed. While no definitive timeline was provided, Hinds confirmed that accessing capital through the market will happen soon.