Vantage PointWith KEITH COLLISTER

Digicel managed to raise US$1.4 billion on February 23 just before the international market correction, in what is certainly one of the largest corporate deals ever out of Latin America and the Caribbean.

Jamaica managed to raise a quarter of that, us$350million, last Thursday morning, just as the international financial markets appeared to be stabilising.

Citigroup was the lead manager in both deals (shared with others in the case of Digicel), and while Citi clearly got very fine pricing for Digicel, some international bankers believe Jamaica paid a premium of slightly less than half a per cent in terms of the interest rate on the Jamaica deal.

Nevertheless, the Jamaica deal is positive for our local financial markets. It means we have again pre-funded the vast majority of our external borrowing requirements for the coming fiscal year, so that despite valid concerns about the likely growth in tourism receipts this year, the Bank of Jamaica should have ample reserves for foreign exchange intervention if necessary.

As a consequence, I expect a more stable dollar, at least for the next few months, which should also help limit the size of any further correction in our local stock market.

MARKET FALL LIKELY

This does not of course mean that our local market can't go down more in March in the run-up to the budget, reflecting the fact that domestic business confidence is currently somewhat depressed.

Part of the sharp fall in our local stock market in February reflected local investors? growing realisation of our ongoing fiscal difficulties.

Strong business confidence makes for a strong stock market. Currently, business confidence is at best flat ? as revealed by the last Jamaica Chamber of Commerce (JCC) survey in January ? and possibly even falling mildly.

However, while a further stock market correction is certainly possible, I expect it to be limited to a price fall of no more than 5-10 per cent, and should represent an eventual buying opportunity, as I expect the market to be up this year.

In any case, we will have a non-anecdotal understanding of the level of business confidence after the JCC's next quarterly confidence survey, and it is certainly very possible that the hoopla surrounding the Cricket World Cup could have a mild positive impact on confidence in the second half of March and April, particularly as by then, the uncertainty of mid-April's Government budget will be past us.

STOCK PICK OF THE WEEK

Readers of this column will already know that I have strongly recommended Lascelles and NCB on a long-term basis.

Prices are down significantly from recent highs, but I think that reflects weak market conditions.

In such a market, I would only be looking to buy stocks with proven strong earnings growth, which both stocks have.

Today, I would also like to add Pan Caribbean Financial Services (PCFS) to my list of recommended stocks for the long term, partly due to the improvement in its valuation.

With earnings per share of $2.06, it is already trading at less than 10 times earnings, and has a relatively high dividend payout ratio of 33 per cent, up from 23 per cent last year.

In my view, investors should pull the trigger if it falls significantly below $19, even in our negative market environment.

Pan Caribbean recently reported net income of $1.11 billion Jamaican dollars for its financial year to December 2006, up eight per cent over 2005.

This performance was extremely creditable considering that all its 'money market' peers, with exception of Mayberry (which was really recovering from a very difficult 2005), had flat or down years.

Pan Caribbean is also extremely well capitalised, with shareholders equity of $7.2 billion supporting a $45 billion balance sheet.

One of the reasons for its better performance is its diversified portfolio of businesses, which in addition to money market, includes their top-performing unit trusts and the number two stockbroker by market share, soon to be joined by commercial banking products after their recent banking licence grant.

The latter is particularly noteworthy as it is the first new commercial banking licence since the end of Jamaica's financial crisis, signalling the authorities? high level of confidence in Pan Caribbean.

While Pan Caribbean's parent, Life of Jamaica ? owned by now U.K-listed Sagicor ? produced very creditable core earnings growth of 27 per cent, and longer term may be a better growth story than its subsidiary Pan Caribbean, I would still not buy it quite yet.

I have great confidence in LoJ chief executive Richard Byles, but LoJ's earnings per share at 69 cents were flat, reflecting the enormous dilution of its previous share-financed acquisitions and the price looks soft above $7, particularly in our current market.

I have deliberately refrained from commenting on LoJ in the past, as I thought that while it is a very good company ? I used to work there ? the multiple looked high.

I now believe the multiple is no longer elevated and that further market weakness will soon make it an excellent buy for long-term investors, particularly below $7.

keithcollister@cwjamaica.com