Following its most recent round of equity injections in September 2021, Barita Investments Limited has increased its exposure to listed companies on the Jamaica Stock Exchange (JSE), adding to the investment firm's already growing alternative asset management portfolio.
Barita received $34.5 billion over the last three financial years (FY) from two rights issues, two additional public offerings and a non-redeemable preference shares issue, pushing its equity/capital base from $3.07 billion in September 2018 to $32.34 billion in September 2021. This has enabled it to pursue a strategy of building up its traditional investment portfolio on the JSE and in other markets which hit $23.84 billion at the end of September.
Barita is the largest shareholder in Proven Group Limited with a 4.28 per cent stake worth US$6.51 million ($994.55 million) and the company increased its stake in Derrimon Trading Company Limited to 20.26 per cent valued at $2.06 billion. It also spent $1.43 billion on a stake in Future Energy Source Company Limited (Fesco) on July 5, making it the third-largest shareholder with a 9.57 per cent stake. The investment firm's stake in Pulse Investments Limited increased to $1.47 billion or 6.10 per cent of the company.
Barita's other top 10 stakes in 138 Student Living Limited, FirstRock Real Estate Investments Limited, FosRich Company Limited, the JSE Limited, Mailpac Group Limited, and QWI Investments Limited were worth $1.24 billion.
"Our results were achieved in an operating environment characterised by rising inflation and correspondingly rising interest rates consistent with global policy responses, including those by the Bank of Jamaica [BOJ]. Despite the current headwinds, which was preceded by the effects of COVID, our profits increased for a fourth-straight year. Our success was largely attributed to investments made in real estate and private equity, which enhanced returns and provided much-needed diversification as values of traditional assets weakened," Chairman Mark Myers said in a report on the company's fourth quarter results.
Barita's net interest income improved by eight per cent to $1.65 billion as a result of higher interest rates on funding liabilities across the securities sector due to the higher policy rate by the BOJ. Barita increased the rates offered on repurchase agreement products during the year, which would have resulted in a higher interest expense.
Its non-interest income grew 10 per cent to $7.22 billion, which was influenced by the 111 per cent rise in gains in investment activities from $1.57 billion to $3.33 billion. These gains arose from its traditional proprietary trading portfolio and others related to alternative investments in real estate and private equity through equity call options.
Revenue from its fees and commission income and foreign exchange (FX) trading and translation gains declined during the year due to lower performance fees on its asset management business and volatility in the FX market.
Despite a 25 per cent rise in operating expenses to $3.80 billion as the group increases its staffing and operations, higher share of profit from associate company Derrimon Trading and lower taxes saw its net profit marginally increase from $4.06 billion to $4.14 billion. With more shares in issue, its earnings per share decreased from $3.73 to $3.44.
"This resilience has enabled Barita to comfortably weather the adverse market conditions existing over the past year and more so over the last six months and withstand far more severe market conditions if they were to occur. As a result, it remained undistracted in its focus on building the value of its business and pursuing its more capital-intensive investments in alternative asset classes; meanwhile maintaining the ability to remain safe and sound while continuing its dividend payments," the report added on Barita's capital management.
Barita's capital base declined 11 per cent year over year to $32.34 billion due to $3.53 billion in unrealised losses on its securities measured by fair value through other comprehensive income. After accounting for its larger total liabilities of $77.46 billion and $3.82 billion in ordinary and preference dividends paid, Barita's regulatory capital to risk weighted assets decreased from 52 per cent to 37.2 per cent. However, this was above the industry average of 24.6 per cent and minimum regulatory amount of 10 per cent.
Barita embarked on creating an alternative investment platform during the FY 2022, during which it originated, sourced and deployed approximately $5.5 billion in private credit investments along with seeding MJR Real Estate Holdings Limited, which is an off-balance sheet asset. MJR acquired the 1,600-acre Greencastle Estate and the 258-acre Reggae Beach property in St Mary, as well as Eden Gardens in Kingston and other properties in Jamaica. Barita also gained exposure to Ecommerce Property Services Limited through mezzanine investments as well. Barita Finance Limited's balance sheet has decreased from US$71.2 million to US$23.7 million with the structured note issuance platform being the tenth-largest owner in Access Financial Services Limited.
Barita's total assets grew 22 per cent from $90.21 billion to $109.80 billion, with pledged assets totalling $61.60 billion making up the bulk of the assets. Its total liabilities rose 44 per cent to $77.46 billion as $59.01 billion in securities sold under repurchase agreements made up the bulk of the liabilities.
During the fourth quarter, Tweedside Holdings Limited and Trevor Heaven Holdings Limited became the sixth and eighth largest shareholders, respectively, with combined holdings of 21,860,423 shares valued at $2.36 billion. Tweedside is related to Fesco founder and Cornerstone Financial Holdings Limited director Hugh Coore while Lyden "Trevor" Heaven is the director and founder of the other holding company. Cornerstone Financial owns 74.52 per cent of Barita.
The Cornerstone Group is currently undergoing a reorganisation for the two major companies to fall under one financial holding company. It has satisfied all requests to date including the pro forma consolidated accounts for the financial holding company and ultimate holding company.
"As we celebrated our 45th year, we did so in a difficult operating environment where the post-COVID realities of inflation and rising rates reversed trends observed in our operating environment over the previous decade. We are cognisant of the risks going forward, particularly in light of growing geopolitical uncertainty, and will ensure prudence in the management of resources as we navigate a difficult environment. Nevertheless, we will remain focused on strengthening the foundations of our business while we pursue our investment strategy," the report closed.