The Following Is A Summary Extract From QWI Investments Report For The Second Quarter Ending March 2022, Released By Chairman John Jackson
“QWI Investments generated profitable results during the March quarter and the half year, from growth in investments in the Jamaican, Trinidad and Tobago and USA markets. The increased revenues in our first quarter was not maintained at the same pace in the second, partly due to the effect of the war in Ukraine and turbulence in the USA market.”
The quarter ended on a positive note despite wide-ranging challenges including, higher inflation and fear of the damage on asset values from higher interest rates globally, which resulted in a contraction in many stock markets. Consequently, the US Market in which a part of QWI portfolio is invested, declined and pulled down some of our investments.
The local market remained relatively strong with the Junior Market performing well, while the Main Market lagged but started reflecting the price movements of a few stocks reporting positive news. Some of our local holdings enjoyed excellent gains, while others, though not at their peak were still higher than the start of the fiscal year. It should be noted that the performance of the portfolio will vary from one quarter to the next, depending on a number of factors and may or may not be fully reflective of the outturn for the full financial year.
For the second quarter, QWI reported profit before tax of $50.7 million compared to $112.6 million in the year ago quarter.
Our Net Asset Value per share increased 2.1 percent in the period before taking into account dividend of 3.5 cents declared in March 2022 and paid in early April. This growth in the value of the Company’s investments occurred despite a slight downturn in the JSE Main Market.
The dividend of 3.5 cents paid in April, if repeated in September, is equivalent to a yield of nearly 9 percent per annum based on the quoted closing price of 79 cents at the end of September 2021. Based on the decision to pay out approximately 20 to 25 percent of profit annually, both the payout and yield could increase further, if the positive profit trend continues.
During the quarter, the Company realized gains of almost $10 million, mainly in the Jamaican stock market. However, not all the markets in which the portfolio is invested contributed capital gains in the period.
The Jamaican portfolio produced $113.7 million of unrealized gains versus $127.4 million in the year ago quarter. This 10 percent reduction in investment gains primarily reflects the lower price performance of some leading Jamaican stocks in the portfolio.
The performance of the Company’s USA investment portfolio was a notable weakness this quarter and resulted in unrealized losses of almost $53 million. Much of the loss occurred in January 2022 and arose from a sharp fall in many of the large cap technology companies in which the company holds investments.
The tech decline in January was a direct result of the realization among investors that interest rates in the USA will be significantly higher into 2023. As interest rates rise, the multiples investors are willing to pay for future earnings decline, which is exacerbated in technology companies where the multiples on future earnings are the highest in the USA stock market.
In February, in response to the less favourable prospects for a number of our investments, as well as the uncertainties brought about by the conflict in Ukraine in addition to rising inflation rates globally, QWI’s Investment Committee sold approximately 23 percent of the USA portfolio. The sales proceeds were partially applied to reducing the Company’s margin loans and the balance is being held at our brokers pending reinvestment.
In addition to the net investment gains of $70 million in the quarter, there was an unrealized exchange gain of $6.6 million compared to a loss of $1 million in the year ago period.
Dividend income amounted to $5.5 million, down from $7.2 million.
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