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Business Bites: The Hidden Story Behind Cable Bahamas Strange Share Price

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Richard Coulson

By RICHARD COULSON

Cable Bahamas is a strong company, with positive growth prospects, one of our best-known and most actively traded equities. Yet the share price quoted on BISX gives the impression of a severe loser, with a decline of about nearly 40 percent in the last year, from $3.68 to $2.29. Why?

Surely not because the recession has caused mass liquidations to meet household expenses or feed the kids. No - the real reason is Bahamian shareholders are uneasy about any company that does not pay a dividend, even during a period of capital growth when cash is needed for investment. Unlike in more sophisticated markets, we have no tradition of funding new ventures requiring long-term commitment. Until a few years ago, Cable’s initial price of $1.00 rose gradually towards $5.00, then began to fall as soon as the investments in ALIV and Summit Broadband in Florida were initiated, even though these new projects were essential for Cable’s success. Without them, Cable would have become a relatively stagnant business with minimal growth potential.

Instead of looking at the potential, it seems shareholders have focused exclusively on the metric of net income, which has declined from $14.1 million in 2013 to a loss of ($52.5 million) in 2018, with no consideration given to the increases in revenue to $224 million and EBITDA to $33 million (It should be noted that any direct comparisons between 2017 and 2018 fiscal years are not feasible since the former covered 18 months and the latter only 12 months) Clearly, the corporate objective is continue to raise revenue and reduce cash spent on investment, so that “the corner will be turned” to profitability, and net income will permit paying dividends once again, which should happen this year or next.

Although the 2018 Annual Report and the AGM held on January 15 portrayed a well-run company operating with imagination, management could have done more to explain these financial realities to shareholders. They could have put more emphasis on details of the various divisions, rather than just “Segment Information” buried in the auditor’s footnotes. They could have played up that over the last eight quarters revenue has increased from $45 million to $59 million, while net income and EPS were down.

In future, for a company as complex as Cable, shareholders need more frequent and more explanatory reporting than just the bare figure of quarterly statements. As with public companies in the US, periodic sessions should be held with securities analysts and the public, as arranged by a pro-active Investor Relations Department. This might well stimulate more BISX trading that would better reflect market value and improve liquidity.

Within a year or two, management must be prepared to report to shareholders a major change in Cable’s structure. Government has indicated it will make a public offering of its 81.75 percent of ALIV’s equity shares, as soon as ALIV is showing a profit and can meet all the requirements for an IPO governed by the Securities Commission and by BISX rules. The total value of the placement may well be more than $100 million, and all the detailed terms of disclosure, pricing and distribution will have to be carefully negotiated between Government, ALIV, Cable and the investment bankers handling the deal (with plenty of lawyers and accountants involved). At the end of the day, ALIV will be a separate company with its own BISX listing and management cadre. Its financials will no longer be consolidated with Cable but simply a major investment with a fluctuating market value. The Cable shareholders will be left with a security whose value is heavily determined by the market value of ALIV shares. Of course Cable shareholders will be free to buy ALIV shares, and vice versa, giving many arbitrage opportunities.

In our view, these pretty revolutionary changes could justify commencement of planning at an early date.

Disclosure Note: Richard Coulson is an owner of ordinary shares of Cable Bahamas.

Better Path towards WTO

It is now the official position of our Government that The Bahamas should join the World Trade Organization, following the rules for accession as soon as we are formally invited. This was made clear to me by reading the 16-page document published by our Ministry of Financial Services under the rubric “wtobah”. Terms of the Goods Offer and the Financial Services Offer from The Bahamas have already been presented to the WTO Secretariat. Although further consultations with private-sector stakeholders are in order, it’s expected that any serious sticking points will be resolved to allow Government to sign on without massive public disagreement.

The next WTO session for approving new members has just been delayed until March, probably because of the profound trade dispute continuing between China and the USA, a bilateral power struggle outside normal WTO procedures. This will allow more time for cultivating public awareness, a vital task for our Bahamas Chamber of Commerce and Employers’ Confederation (BCCEC), which recognizes that many Bahamians remain ignorant of WTO and its probable impact, or even hostile to it.

Therefore, I urge BCCEC take a new approach, serving as impartial educator rather than apparent advocate. The multi-member body, with its own budget, is in no way dependent on Government or obligated to follow the accepted party line. While I personally believe that our country will benefit from joining WTO, I speak to many Bahamians, often successful business owners. who are deeply sceptical. They deserve a venue where their views will be heard.

In past public seminars about WTO, BCCEC has presented the lead negotiators (originally accountant Ray Winder, now former Finance Minister Zhivago Laing) who described all the plus features, followed by a few comments or questions from the floor, often by people uneducated on the issues. Instead, the Chamber should adopt the role of moderator of a formal pro/con debate between articulate teams taking both sides on WTO. For the negative, we might hear from retail emporiums like Kelly’s Home Centre, or financial gadfly Paul Moss, or a struggling poultry breeder This procedure will allow a full and fair hearing on several prominent issue on which Bahamians need further clarification, such as

• How will Government fund the revenue shortfall resulting from the decline in the average import duty rate from 30 percent to 15 percent?

• Which of our many industries really deserve protection from foreign competition: Lawyers, by restrictive work permits? Farmers, by high agricultural tariffs?

• How can our retailers defend against vast marketers like Amazon, who have full internet access without ever opening a store here?

• Does the cumbersome Dispute Resolution process work fairly for small nations?

In answering these questions, Bahamians must be disabused of the opinion that we are not an exporting nation, with nothing to gain from WTO membership—a serious misconception. Although low on manufactured items, our goods and services external account provides about $400 million annually (mainly in agriculture and financial services), plus the millions of local expenditures by tourists and-resident foreigners. In economic terms, we are in effect exporting our invaluable climate, beaches and tropical way of life.

By giving all doubters and naysayers a formal opportunity to be heard and answered, the BCCEC will be rendering a major service towards democratic decision-making.

Comments

TheMadHatter 7 months, 2 weeks ago

"While I personally believe that our country will benefit from joining WTO, I speak to many Bahamians, often successful business owners. who are deeply skeptical..."

WHY? You are just another robotic zombie spewing off the tired old story we hear over and over again that it will be beneficial for the Bahamas to join the WTO without offering ONE single example of a benefit. Not one. The article claims that Mr. Laing held a conference where he outlined the benefits to us of joining - but again fails to mention ONE thing that he listed as a benefit.

Why is this a big secret? I know the benefit of putting fresh oil in my car twice a year. It prevents corrosion of the metal inside the engine - the piston rings and the piston chamber valves and the bearings of the crank shaft, all of which are very expensive to repair or replace if they are allowed to corrode and wear down. The clean new oil prevents this from happening. Oil itself wears down over time (due to complex chemical reactions of the hydrocarbons) - therefore it has a "shelf life" so to speak when inside your car's engine. To increase engine life by preventing the above listed wear and tear, it should be changed regularly, and at least twice a year.

The benefit to the Bahamas of joining the WTO is …………?????

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tetelestai 7 months, 1 week ago

MadHatter, respectfully, I am not certain you read the article in its entirety, or you missed the point of the article. The author acknowledges his own bias about joining the WTO, but strongly argues for a venue where dissenters can be heard! How is that a "robotic zombie"? Methinks the person that you should have the least problems with is Richard Coulson.

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TheMadHatter 7 months, 1 week ago

"In past public seminars about WTO, BCCEC has presented the lead negotiators (originally accountant Ray Winder, now former Finance Minister Zhivago Laing) who described all the plus features, followed by a few comments or questions from the floor, often by people uneducated on the issues."

Here he suggests that those asking questions are "uneducated on the issues". In other words if you dont just accept WTO without question, then you are an uneducated idiot.

Why would someone attend a seminar except to learn something new about a subject. Of course they dont know everything about WTO that's why they are there - to learn.

I would like to learn too. But there is ZERO information available about the benefits to us of joining WTO ecxept that we can export crayfish. We are already exporting crayfish and whoever in Europe chooses not to buy our crayfish because we are not a member of WTO can just go without. Our crayfish species does not live anywhere else in the world. If our defense force would start shooting Domicans dead on sight like you would any invading army then we will hold Europe in check.

But instead Europe sends us a blank WTO page to sign first and they fill in later and we are told if we dont agree with it then we are uneducated morons and not modern.

Why isnt everyone supporting WTO in this country promptly arrested as a traitor?

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tetelestai 7 months, 1 week ago

MadHatter, I think in your second paragraph, Richard is suggesting - and I stand to be corrected - that where there was a formal seminar for people who proposed joining WTO, there should equally be a formal venue where dissenters can offer their objections. And, I think he further, correctly - in my opinion - that dissenters views should not be limited to the everyday person (like me) who attend these events and asks questions. If you are allowing formal pro-WTO speakers, then you should allow formal anti-WTO speakers. I think that was his point. But, yes, I do agree perhaps he needn't have had to say they were "uneducated", although I think most of them would probably say that there are uneducated.

I also agree that both government and private sector should do a better job of explaining the pros and cons to the Bahamian people. Though, I will also add that a quick google of "WTO" provides a very good, albeit basic, starting point for the pros/cons of joining. Bahamians should take some initiative as well.

Your penultimate paragraph is well taken.

Your last sentence is...

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TheMadHatter 7 months, 1 week ago

My apologies to Richard. Sincerely. This is just a totally disgusting situation and i really dont think government realizes how many Bahamians are getting down to their last straws.

That little pipsqueak taxi strike a week ago is only the beginning. If only we had real unions like used to have in the 80s - this country would be shut down right now. These wimps dont know how to strike.

We need a national strike until govt withdraws from all discussion and action toward WTO and until they tell us what has happened to all the VAT money collected since Jan 2015.

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Well_mudda_take_sic 6 months, 3 weeks ago

Didn't even both to read knowing it's likely only more garbage as usual from RC. Like Laing, he's probably now on a hefty retainer from Red China to sell out our nation. LMAO

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