Ashford W. Meikle, Business Reporter

Rezworth Burchenson: Investors need more disclosure from public companies. - File

Managing director of pension fund managers, Prime Asset Management, Rezworth Burchenson, hit hard at listed companies Wednesday, saying they were cagey with information and suggested that senior managers and board directors need to bone up on their subject area before they face investors.

Burchenson also criticised the Jamaica Stock Exchange for its apparent inertia in reviewing its rules.

"The level of corporate disclosure has to be increased. I have seen companies come to Mayberry forums and the level of presentation is sadly lacking," he said, speaking at the monthly Mayberry's Investors Forum at the Knutsford Court Hotel in New Kingston.

No confidence

"Most analysts would ask questions, but the responses do not give the investing public any confidence or any information for persons to properly analyse companies. I want to encourage chief executive officers and [board members] to ensure that the level of corporate disclosure does improve."

There is some truth in the executive's claims. For example, one of the more established listed companies, Lascelles de Mercado, had its last property valuation in 1984, and except for periodic notices advising the JSE of the availability of their financial statements, the public is relatively uninformed about the operations of companies such as Caribbean Metal Products, Ciboney Group, Pulse Investments, MoBay Ice, and Montego Freeport.

Moreover, some companies are consistently late in submitting their financial statements to the stock exchange, as periodic notices by the JSE attest.

Burchenson said it was disappointing that companies were not taking advantage of the bear market.

Repurchasing shares

"Even though stock prices are down 50 per cent, I am not seeing a lot of companies buying back their own shares or seeking to repurchase their own shares, certainly in an environment where interest rates are falling."

But, at least one listed company, GraceKennedy, which has lost about 50 per cent of its value since January 2005 - the company traded at $55 on Wednesday compared to a high of $120, some 22 months ago - has signalled its intention to buy back 2.5 per cent of its outstanding shares, roughly 8.1 million units, which its executives said demonstrates management's confidence in the company as well as facilitating a more efficient equities market for shareholders.

Chief financial officer of GraceKennedy, Don Wehby, had previously told The Gleaner that the share buy-back would "drive the multiples of the stock which would result in increased value for shareholders," since excess liquidity in a weak market would be mopped up.

In February this year, the JSE amended Rule 413 to allow companies to buy back their shares. But the companies must give the JSE 21-day notice of its decision.

On Wednesday, Burchenson appeared to suggest that this was not enough.

"I would have thought that the JSE would have reviewed [its] rules to try and build a more liquid market, a more efficient and a more transparent market [to conform] with best practices internationally ... to ensure that when the CSME comes in the Jamaican market will be the stock market of choice - but that is not happening."

Specifically, notwithstanding a recommendation from a New York Stock Exchange executive, the JSE does not allow pension funds to short sell stocks, which is in fact prohibited under the new Pension (Superannuation and Retirement Schemes) Act, which falls under a different regulator, the Financial Services Commission.

Looking at the current performance of equities, Burchenson encouraged investors to be patient, although he admitted that the bear market might last another year.

"No one can tell you how long it will take before you enter into a full-blown rally," he said. "Based on where I stand, the market will take another 12-15 months to recover."

ashford.meikle@gleanerjm.com