Tiny Caribbean islands, Antigua and Barbuda, have filed a complaint against the US at the  World Trade Organisation (WTO) in order to protect its internet gambling industry.

Antigua and Barbuda say laws blocking US residents from using online casinos breach global fair trade rules and threaten a valuable part of its economy. The move comes a fortnight after the US House of Representa-tives voted to ban credit-card payments to internet casinos, most of which are based overseas.  The US government has defended the need for controls on internet gambling to protect children and prevent financial crimes such as  money laundering. But Antigua’s government argues that its online casinos are some of  the best-regulated in the world. As a result of the US laws, winnings are not being paid as all the gaming industry’s financial transactions are being blocked, Antigua’s High Commissioner in London Sir Ronald Sanders told the BBC.

One person has already been jailed in the US for running an online  casino in Antigua, he said. Altogether about 3,000 people in the country’s two islands earn a  living from the gaming industry but some gaming companies have already had to close. “These are well paying jobs for very talented young people so it’s a great difficulty as to what we find for them to do,” said Sir  Ronald. Antigua’s financial regulators classify online casinos in the same bracket as banks and apply stricter rules than the US, he said.  “Because we classify them as financial institutions they are subject to intense regulation,” including laws on fraud, money laundering and terrorist finance,” said Sir Ronald. Atigua’s online gaming industry generated $37.5m in taxes in 2000.

The Rights Issue is in the ratio of one new share for every two shares held at a price of $7.70 per share. The total number of shares to be issued is 13,208,561 bringing the company’s total share capital to 39,625,684.

The Rights Issue would raise $100 million, net of expenses. The company has proposed to use the funds to:
1. Purchase port equipment including cranes — $81.069 million;
2. Computerisation — $1.367 million; and
3. Civil and other works — $16.736 million.

The company has projected for 2003 an earnings per share of 60 cents based on the post Rights Issue capital of 39,625,684 shares. The comparable figure for 2002 was 66 cents per share, adjusted for the increased capital. Going forward the company expects to earn 73 cents, 76 cents, 80 cents and 86 cents per share for the years 2004, 2005, 2006 and 2007 respectively. The company’s projected 2003 operating profit before interest and taxes is $54.334 million, which is an increase of 30.09 percent over the 2002 figure. However there is a dip in after tax earnings during the same period because of two reasons. In 2002 there was a tax credit of $5.402 million resulting from the reduction in the corporation tax rate. Secondly during the construction period for Berth V the interest cost was capitalised, however, it must now be expensed. This is the reason finance cost jumped from $18.549 million in 2002 to a projection of $25.012 million in 2003, an increase of 34.84 percent.

On a strict PE Multiple valuation basis, the Rights Issue is priced at a PE of 12.83 based on 2003 earnings, which is above the market average. However, because earnings are estimated to improve beyond 2003 when the benefits from Berth V begin to accrue we would recommend this share to medium and long-term investors. Short-term players would view the subscription price’s steep discount to the market price as an avenue for immediate gains. However, these investors should be wary of the market, which usually brings back into line shares with high PE ratios. We recommend that all shareholders should exercise their rights and where possible, acquire further shares at or near the $7.70 price.

The Company
PLIPDECO, which was incorporated in 1966, is a multifaceted organisation mainly involved in:
1. Industrial real estate management;
2. Cargo handling; and
3. Marine services.
The company’s real estate operations involve the tenanting of 850 hectares of land. The tenants on the estate are supported by a port operation whose principal business activities centre on the provision of harbour management services and the operations of tugs providing towage and other marine services. The port also offers specialised facilities for liquid and dry bulk loading as well as the handling of containerised, break bulk and general cargo.

Past Performance
The company has achieved a consistent increase in turnover during the last five years moving from $99.219 million in 1998 to $136.847 million in 2002, an increase of 37.92 percent. During this time, the company’s revenue streams have diversified to encompass tug and towage services mainly from the Atlantic LNG Plant. In 2002, these operations contributed $13.070 million in turnover and $1.858 million to profit after tax.

In 1999, there was a fall of 39.98 percent in profit after tax. However, since then the company has achieved increases in profit for every year to 2002. The increase in 2000 over 1999 was 33.13 percent, 63.10 percent in 2001 over 2000 and by 14.09 percent in 2002 over 2001. During this time, the company has seen its tenant base grow to approximately 100 tenants. It has been the site for most of the phenomenal increases in the energy industry. This includes the development of multiple ammonia and methanol plants. There is also a world-scale gas processing facility. The company has also been actively expanding its port facilities while attracting new shipping lines. In the first phase, Berth IV was expanded to a draught of ten metres.  This was followed by the retrofitting and strengthening of the structure of the berth. The recent $160 million port expansion known as Berth V brings the combined dockside length to over 500 metres with Berth V measuring 200 metres and capable of accommodating Panamax-type vessels.

Future Prospects
The company’s strategic vision hinges on primarily two areas, the port and the industrial estate. The company’s goal is to achieve a throughput of 150,000 TEUs by 2004 and to grow incrementally by five percent thereafter. General and break bulk cargo is expected to grow to 600,000 tonnes. In 2002, the company’s throughput was 95,000 TEUs and 541,100 tonnes of general and break bulk cargo.

The catalyst for achieving this goal is the Berth V project, which not only includes the ability to accommodate Panamax-vessels but was also complemented by a major equipment upgrade, infrastructure expansions, and process improvements. The majority of the funds from the Rights Issue would be used for these upgrades. This propels the company into a new era because the majority of the world’s shipping lines are now acquiring the larger Panamax-vessels, which can carry as much as 9,000 TEUs. The challenge for the company is to attract these kinds of vessels to Point Lisas. It is an ideal platform to market Point Lisas as a major transhipment hub in the Caribbean. Most of the estate has already been successfully leased. The company is now seeking to establish greater strategic alliances with other landowners in the Couva area with a view of making additional industrial sites available.

The company has signed a Memorandum of Understanding with the company charged with the responsibility of developing Caroni land. While not in the projections, the company is the project leader for the development of Port Galeota, a multi-purpose facility servicing the gas and petroleum market. The company is also looking at the constructions of Berths 6 through 11 with the participation of strong and progressive joint venture partners. There is also the possibility of new strategic alliances with foreign ports. The towage service continues to expand as more LNG trains are developed. There is also the possibility of providing services at all local industrial and commercial ports. The company has many projects, which are on the verge of bearing fruit. Thus, the challenge is for the company to turn these projects into increased profitability. The company’s forecast for profit after tax calls for an annualised compounded growth rate of 7.43 percent over the next five years. This we believe is fairly conservative and achievable given the current favourable economic outlook.

Jonathan Adams, president of the Small Enterprising Business Association (SEBA), says the governmet shows no real initiatives when it comes to small business development. As a result, entrepreneurs lacked proper knowledge on how to manage a business, a deficiency which translated into high failure rates, he said.

Speaking recently at the relaunch of the National Entrepreneurship Company (NEDCO), he said lack of training was  responsible for the past trend of a 90% failure rate of SMEs in TT.
 “It is the genius of small business that will provide the greatest of opportunities to the greatest number of people in TT and indeed the world,” he says. He also picked up the cause of the small business, saying that although micro-enterprise has been greatly assisted by NEDCO as a financial resource, “small businesses are quietly awaiting their turn.” “It is not the size that you are now that matters, it is the size that you will become,” he noted. Still, there have been success stories.

Allyson McLeod, owner of the hairdressing salon Nappy Roots and a grateful NEDCO beneficiary, had been conducting business in her field for eleven years but had stagnated. Since 2001 she had been trying to expand the business on her own to no avail, but with NEDCO she was able to receive the necessary financing to “move up to a different level.” Lincoln and Shanti Dwarika, a husband and wife team who own a restaurant and bar and who desired to start a laundry  turned to NEDCO as well. Having no security, they were unable to get a bank loan but NEDCO provided them with both advice and funds to purchase machines. Annette James, a dressmaker, admits that it was only with NEDCO’s help that she was able to “get back on her feet.” She was able to purchase a new serger and buy more expensive material, facilitating a move from selling on the streets to selling to retailers. As a result of NEDCO’s assistance, she says, she is able to produce more. The latest NEDCO offering, “Training Enterpreneurs for the Future” will offer diverse training modules, including, but not limited to, Strategies for Success, Basic Business Skills, Effective Methods of Marketing, Time Management Techniques, Stress Reduction Techniques and Business Networking.

Last week, I dealt with the subject of the FTAA and GATS and the state of preparedness by the insurance industry in the Caribbean to cope with the liberalised trading environment. At the recently concluded 23rd Conference of the Insurance Association of the Caribbean (IAC) held in Punta Cana, Dominican Republic, the organisers felt that there was a need to place this topic on the agenda and clearly the decision makers in insurance industry in the region are now sitting up and taking an interest in the negotiations as there will be far reaching consequences in the future.

This week I am again returning to the FTAA, GATS and the CSME since many commentators in the media have been expressing views and it has reached a stage where it now appears that national awareness has been heightened and much more will be said and written in the months ahead leading up to the implementation of the FTAA. The labour movement has now added its voice to the debate where there is a great degree of concern over the strategies adopted by the government negotiators and their fear of the country’s inability to compete successfully in the FTAA and ultimately the demise of some businesses and the loss of jobs. There is a widely held view that too much will be given away without a commensurate benefit in return and in the final analysis the developed countries have more to gain in the FTAA  than the small under developed countries that simply do not have the capacity to compete.

In all these negotiations it is the government and their officials that are the key players and they sign agreements but it is the private sector that trade and have to conform to the rules. The developed countries possess skills and resources both financial and human and they know what they want out of these negotiations while the developing countries have neither the human or financial resources to negotiate on an equal footing. That is the reality and it is for this reason that enlightened commentators and labour feel that a liberalised trading regime favours the larger and more powerful countries who are able to extract terms and conditions that are likely to put smaller and less endowed countries at a disadvantage. The ultimate result is closure and consequently loss of jobs which lead to the poor countries becoming poorer.

The financial services sector has been pro-active in tracking the developments for some considerable time and therefore is better placed to press its case as far as Trinidad and Tobago interests are concerned.  That being said, the insurance industry is made up of many ancillary services e.g. insurance broking, loss adjusters, actuaries but the emphasis has been on the insurance companies since there appears to be a marked lack of interest by those suppliers of these services. The problem for the negotiators is to know what interests must be defended. Unless those businesses that can be affected understand the consequences that will flow from these new trading arrangements and make their position known then they must accept whatever is agreed without complaining.

The developed countries and the USA in particular ultimately want to negotiate trade in insurance services generally without any restrictions across the border — i.e. to remain in their home base and supply Trinidad and Tobago consumers without even having a physical presence here or having to comply with local regulations. This has been their posture for some time now but they are prepared to achieve that position over a period of time since they are fully aware that it is impossible to reach there at this early stage of liberalisation. It is difficult to dismantle structures that have been built up over several decades but the developed countries want to signal their objectives (it might take a whole decade to finally achieve their goal) in order to get developing countries to remove barriers and to open their markets.

What is certain is that these developed countries will not settle for the present status quo since at this stage of the negotiations they want us to move from the current commitments and to agree to more liberalisation. It means therefore that there cannot be any strategies to insulate the industry from more competition. The trick is to find a balance that will allow for increased liberalisation without unduly disadvantaging the domestic insurance industry. The Trinidad and Tobago insurance industry has been preparing itself for increased competition since the dismantling of the exchange control regime to the point where it has survived inspite of the suitcase trade i.e. competition from companies that are not licenced to do business here. Unlike many countries around the world where the insurance industry is protected, this is not the case of Trinidad and Tobago. The insurance industry had been localised where local capital bought out foreign interests as a matter of official policy in the past 20-30 years. In the new rules this would not have been permitted since there must be no reduction of acquired rights. Cross border trade in reinsurance has already been agreed so this is not new. There are no reinsurance monopolies and mandatory share of business to any local reinsurance company since this ended almost 10 years ago.

The issue is the pressing for cross border trade. The local insurance companies are prepared for foreign competition but these foreign must establish a commercial presence here in Trinidad and Tobago and meet all the legal requirements under our insurance legislation and therefore be part of the local market. The present entry barrier is low and this is not a prohibition for any serious player. However, the developed countries want more than that. They want to stay where they are and compete in our home market. This must be resisted and there is every indication that the developed countries will accept our position at this stage. This is what negotiations are all about.

(Part 11)

Some investors will put their money in various investments that are fraught with risk. Had these investors been fully informed of these risks, they most certainly would not have gone forward. The main problem is that the majority of investors are not aware of all the various risks involved with most investment programmes.

Add to this, the fact that most investors have never completed a risk profile questionnaire. This type of fact finder will help you to determine how much risk you are willing to tolerate in order to achieve certain results. The more accurate you are in determining your true risk profile, the better investor you will be. Many times, these questionnaires will tell you or your financial advisor if you have the ability to hold on to your portfolio during tough times. This could also serve as a wake-up call to tone down your current portfolio before market volatility shakes you up so much that you end up selling in a down market. This phenomenon of panic selling has the ability of turning normal market fluctuation (volatility) into financial risk (the loss of principal).

Quantify your knowledge level
Many people feel that they have to know everything about every investment. This, of course, is simply impossible. You would be well served to limit your circle of enterprise to areas that you feel comfortable and knowledgeable navigating. Investing in the unfamiliar is a common mistake that investors make. You increase the likelihood of losses when you invest in the areas about which you lack good and reliable information. Investment advisors report on how common it is to see people investing in areas in which they lack knowledge. Physicians will insist on investing in real estate ventures which they know next to nothing about while ignoring the very drug companies of which they have detailed knowledge.

Perhaps this is simply the story of the grass always looking greener on the other side. Make sure you take time to research opportunities within your field of experience. Chances are that many great investment opportunities are waiting right there. Research the investments you are familiar with and find out as much as possible before you invest, not afterward. Make sure you water your own grass! Many successful investors stick to one or two types of investments. Perhaps they switch back and forth between Treasury bills and Government bonds depending on the outlook of interest rates. They are often able to generate returns in the double digits with little room for financial loss. These investors believe in keeping it simple. Other investors will focus on just one family of mutual funds, moving from one type of fund to another within the family of funds. Many times, they are able to increase their overall return by several additional percentage points each year. Compare this to the investor who simply stays with the same fund, year in and year out. Still other investors have found success simply by watching their employer’s stock within their profit sharing plan. When they see their company’s stock reaching a new high for no apparent reason, they sell in this market rally. Once the stock drops in price, they move back in at the low price after evaluating that the company is financially strong and on the right track. This strategy of buying one or more company stocks during that stock’s high point and selling during the low point is known as the rolling stock strategy. It is also known as “buy what you understand.” Through the informal network of coworkers and your own knowledge, you may be more tuned in to the future and prospects of your company than many stock analysts.

Know What You Own
Knowledge is power — if it is knowledge worth knowing and properly used. Knowing what you own is one of your best defenses to avoiding mistakes. This assumes you have evaluated what you own beforehand and made the tactical decision to proceed with your purchase based on your knowledge level and research. You should weigh the many pros and cons of making such a commitment to any investment before investing. Many retirees confuse gambling with investing. They will take a position in a company’s stock based on what they hear and not on what they know. Perhaps a favourable news story motivated them. This is very common and is nothing short of gambling. This still can produce favourable results, if the stock market continues to increase at a torrid pace and if somebody is willing to pay a higher price for your investment than what you paid for it. There are a lot of ifs, however. True investors know why they should buy a certain investment. They know if a company is being properly managed as well as other important aspects of a company’s business. Typically, they know who the company’s largest customers are, as well as who the company’s competitors are. They will have a firm grasp on the company’s marketing and business plan. In addition, they will be firmly familiar with the company’s financials. They will have evaluated the company’s debt level, profit margins, cashflow, and any pending actions against the company. They will know what a reasonable price might be for that company’s stock and when it may be overvalued.

Know Why You Own It
Purchasing stock in a company or buying in a particular mutual fund should only be done when you have answered the question, “Why do you want to own these shares?” A prudent investor will know what an investment is capable of and, in general terms, what this investment will achieve in the near future and, more importantly, in the long term. Will your investment provide a steady stream of dividend income or a steady steam of profits to be retained by the company for future growth? Is this company or fund situated to take advantage of our changing economy or to profit from the current improvements in technology that are being seen daily? What is this mutual fund investing in ? Am I being pigeon-holed into this investment?

As a current example, many retirees have purchased stocks in companies or funds  that specialise in real estate investments. They are typically given a very high cash dividend of over eight percent plus the prospects of capital appreciation. These stocks typically do very well during times of moderate to high inflation. These investors know why they have purchased these stocks. They are able to garner current income to live on as well as having an excellent inflation hedge against future price increases from the ravages of inflation. Other investors will purchase fixed annuities instead of time deposits  because they are targeting a different agenda. They want security of principal along with higher interest rates. Because they know that fixed annuities are also tax deferred until funds are withdrawn, they know that their money will grow much more quickly in most cases. Therefore, they know why they are buying these types of investments and the benefits that they are reaping. Many of today’s investors are jumping on the current trend of owning  mutual funds.  It could be that an individually-tailored portfolio may better suit their risk tolerance. Prudent investors will stop to analyse how they can take advantage of the technology boom in a safer and more reasonable manner. They may see that the safe money is to be made by owning the companies that supply the many start-up companies. They may decide that communication companies are a better choice because all of these new companies will need phone lines, fax lines, Internet lines, and other related equipment. Furthermore, they may see that communication companies will further benefit from the increased usage of this type of equipment.

As a business and, consequently, as an investor, it may be more prudent to focus on high-tech supply companies instead of high-tech companies. Take the case of Internet companies in the United States. Their goods have to be delivered. Often this favours companies such as United Parcel Service and Airborne Express instead of the actual Internet companies. The competition is simply too fierce among most Internet retailers. A compelling example: during the California Gold Rush, it was the stores and equipment suppliers that became rich, not the miners. The first part of this article was published in Business Day on June 19

The thought of a cheaper fuel in the petroleum retail sector was an illusive dream which time and technology has almost put to rest. If we should reflect upon the touting of CNG as the cheaper fuel of tomorrow we should realise the capital injection via high cost compression compressors and dispensing pumps did not realise the return on capital investment. This could have been easily averted if appropriate marketing research would have revealed that the shift from carburetor fuel system to gasoline injection system would have made Compressed Natural Gas a non-optional fuel.

The ad-hoc availability of unleaded fuel at service station outlets in Trinidad and Tobago is way behind the needs of the consumer as it relates to convenience and demand. Added to the above, the quality of unleaded fuel available to motorists in Trinidad and Tobago is of a questionable standard. This observation is based upon the consumption of fuel additives sold through the service station and automotive retail sector, specifically as it relates to vehicles equipped with gasoline injection systems. Today’s technology as related to gasoline fuel injection systems is one of precision, requiring a fuel not only of octane rating and combustible qualities but one free of gum and free of impurities, so as to not reduce the efficiency of the fuel injection system.

From its inception in 1972 National Petroleum’s focus as a Marketing Company was never proactive. The management of the company and members of staff who then found themselves under the NP monopoly brought with them retail marketing knowledge from the former multinational corporations whose operations were acquired by the Government of the day. Over the years the company did not see it imperative to have their marketing staff benefit from long term Diploma courses or University qualifications in the areas of marketing, advertising, lubrication engineering or fuel technology. As a consequence, members of staff departing from the company by virtue of age or seeking greener pastures, created a chasm as the company found itself with depleted skills in its core business, resulting in a situation of inadequate knowledge and inexperienced management staff.

As a state-owned company, National Petroleum’s decision to operate as a wholesaler and retailer has not met with success. The disappearance of cash and stock from its operated outlets; wholesale purchasing by the company from middlemen, company and service  station managers abrogating their responsibilities, when added up contributes to the company’s inability to realise an acceptable return on the investment. The marketing architects of the company departed in silence or left with the political tide after putting their plans for failure into action, with NP as the sacrificial lamb. Sometimes half a loaf is better than none. The tunnel vision introduced by NP’s Visionaries to the old NP Board remains on the same channel of the new NP Board. The company continues its pursuit for wholesale and retail profit margins as NP lubricant oil sales slides to its lowest ebb and another foreign lubricant wolf stalks at the doorstep of the house. It is time for the company’s marketing focus to be re-assessed rather than have its sales representatives spin in paper work.

For some illogical reason the planners of the new NP dispensation did not see it feasible to construct and develop service stations on new sites. Demographics, traffic flow and larger sites for further expansion were unable to capture their imagination as they planned toward the future. Today their planning and policies can only be viewed as an indictment against their incompetence. Space for saleable goods, fuel and office at the newly constructed service stations is now inadequate. The locating of diesel pumps on the same island as gasoline, has resulted in a liability for the company of more than half a million dollars as a result of the mix up of fuels into customer vehicles. The planners were forewarned about this situation.

The decision by National Petroleum to concentrate its focus on managing its newly constructed and renovated service stations, and those which were formally leased to dealers, so as to capture the wholesale and retail profit margins can only be described as the futile killing of the goose. In the process, the dealers who have excellent performance records and were subsequently given managerial portfolios, departed or were kicked out of the system. Expert managers brought in did not last, and in the case of one service station, six managers were changed. In the whole scenario one private dealer constructed a service station on a new site in Central Trinidad. The outlet can be described as multifaceted since it caters for more than fuel and a Quik Shoppe, since its construction expansion has been necessary because of the growth in business. This is an example of the potential of a new strategically located site.

Thirty years after the departure of NP’s predecessors from the petroleum retail sector, the company has not seen it fit to brand name some of its products sold through the service station network. For example, consumers still refer to 20 lb LPG cooking gas as Texgas and Shellane. It is time NP brand name some of its own products, for example, automotive chemicals, car batteries, gasoline, dieseline and LPG. At present there is a small local wholesaler-retailer on the marketing horizon. National Petroleum must remember that the great oak was once a seed. Although National Petroleum has been able to blend its lubricants to API and SAE standards, the Company nevertheless continues to experience declining sales in the lubricating oil market, with sales now less than 50 percent. The irony of this situation is compounded by the fact that its competitors do not operate service stations and are unable to have the consumer as a captive customer.

It is time National Petroleum review its business and marketing strategies. There is need for a concerted effort from advertising to the point-of-sale. The lubricant factor must enjoy an advertising presence as the need and occasion demands. For example, service station point-of-sale, the Great Race and Wallerfield Car Racing are without an NP lubricant advertising presence and promotion. The business section of the print media could also be used to highlight the technological capability of National Petroleum lubricants. Consideration must be given to the return of service station dealerships with a focus on equity and viability for the Company and the dealer.