Here is the latest weekly digest (Jun 5th – Jun 11th, 2017). A quick easy read of this week’s top and most relevant business news. No fluff, just the highlights.
This week we highlight a few stock picks (from local brokers). Sometimes deciding what and when to buy and sell can become a long drawn-out emotional process. Thankfully, with guidance, this process should be a lot easier. Plus, once you do your own analysis on each investment you will become more confident in your decisions.
Here are some recommended picks from some of Jamaica’s stock brokerage companies. Their rating and summary of their analysis are also highlighted. The ratings are from VMWM (Victoria Mutual Wealth Management Ltd) and JMMBGL (Jamaica Money Market Brokers Group Ltd).
|BUY||For the 1st quarter ended March 31, 2017, SJ recorded a Revenue increase of 11.30% to $15.26B and Profit growth of 36.19% to $2.59B. We expect Fee and Other Income to be a high growth area in the short to medium-term due to the increased contribution from the banking segment.|
|NCBFG (VMWM)||BUY||For the 2nd quarter ended March 31, 2017, Revenue rose 16.89% to $14.95B and Profits surged 63.08% to $5.87B. Additionally, the expansion into Barbados and the Dominican Republic by NCB Capital Markets could help boost long-term Group profitability|
|PJAM (VMWM)||BUY||PJAM reported a 31.55% increase in Revenue to $501.57M for the 1st quarter ended March 31, 2017. Investments and Property Income pushed Revenue growth higher. Profit growth was up 17.05% despite the fact the Company had a non-recurring Gain on Disposal of its Hardware and Lumber stake.|
|PULS (VMWM)||SELL||The Company reported Operating Profit of $66.08M. Of note, $28.38M of Revenue was “fair value appreciation on investment property.” PULS has plans to complete a 4 for 1 stock split shortly. However, the surge in the stock price warrants some profit-taking from investors.|
|SELL||KEX reported a 32.50% increase in Revenue and a 94.43% increase in Profits for its 3rd quarter ended February 28, 2017. The Company is building out its terminal at Sangster International Airport and this could further help profit growth. However, with the current elevated P/E of more than 40 times earnings, investors could consider locking in gains.|
(Reduce your exposure)
Moderate Sell / Weak Hold
|Their analysis is that at the current price the stock is overvalued (compared to their estimated intrinsic value at ~$10.10). While they believe the company is sound with strong revenues, earning growth and no debt, they believe the stock is trading above their determination of its fair value. Underweight means investors should consider reducing their holding so that it “weighs” less.|
(Reduce your exposure)
Moderate Sell / Weak Hold
|JAMT reported a 21% increase in revenues for the six months ended March 31, 2017. However, the recommendation is bearish at the moment as the stock is 49.9% above their estimate of its fair price (of $3.16). Despite the strong revenue growth and increased income from supermarket divestments, the stock is trading too far from its fair price.|
(Reduce your exposure)
Moderate Sell / Weak Hold
|The current Price to book of 1.35 times as at May 11 is slightly above its 9 year average of 1.0 times, the recent uptick being linked to a rise in investor confidence & optimism. However despite SGJ being a consistent dividend paying stock and their focus on improving efficiency and customer service, their analysis suggests an average target price of $35.45 using both the dividend discount and discounted cash flow models. This compared to the market price of $43.33 at the time of analysis, which represents a 18.18% capital loss to investors.|
This is only a summary, as each company has done a much more extensive analysis on the companies and would be able to give way more details on each decision. Speak to them as they can provide more guidance on your portfolio.
Here are some of the top performers this week.
Big movers this week were PAL (huge 47.8% jump), HONBUN (up 24.7%), SALF (+17.9%) and SRA up 10.29%. While declines were lead by EPLY (-16.58%), ISP (-13.61%) and CCC (-10.51%), DCOVE (-10.5%), and AFS (-10.31%).
As always, you can see the full list of companies and their stock price performance since the start of the year here.
In other news…
- Main Event finally reported their results this week. You can see that even the Gleaner was confused as to their reporting timeline, however, the JSE has confirmed to them that the results for newly listed companies are tied to when they list and not on the company’s quarter ends. Regardless, the results were not impressive. Net profit for the year decreased 6% to $56.50 million from $60.03 million in 2015. This is their first release since becoming a public company.
- Express Catering, Stationery and Office Supplies Limited and Productive Business Solutions are all expected to list shortly.
- In April this year, The Gleaner reported that Express Catering had annual revenues of US$14 million from being an exclusive provider of food and beverage products in the post-security lounge of the Sangster International Airport. The company has a diverse group of proprietary brands and international franchises to include such brands as Quiznos Subs and Salads, Aunt Annie’s Pretzels, Nathans Famous Hot Dogs, Cinnabon, Moe’s South Western Grill, Wendy’s, Dominos and Dairy Queen.
- NCB Capital Markets (NCBCM), achieved a historic feat on Wednesday, May 31 when the local brokerage house closed its bond offering at over $10 billion. This is the largest Jamaican dollar issue under the Financial Securities Commission’s (FSC) Exempt Distribution Guidelines, which came into effect in 2008.
- Fixed line phone costs to fall further – Termination charges for phone calls that connect to fixed-line phones, or wholesale rates, are to be cut by 70-90 percent, starting next month.
- Ackee exports from Jamaica rose to their highest level in 2016 to total roughly US$20 million, up from the US$4.4 million the country totaled back in 2000 when it broke into the US market. The trends are expected to continue this year.
- The Prime Minister has announced the establishment of a new town centre for the St. Thomas capital of Morant Bay. He said the Government intends to transform the 25-acre property that previously housed the Goodyear tyre factory into a modern-day township. The new town centre will be well organised, with space for local government, and commercial activities, among others.
- The Factories Corporation of Jamaica (FCJ) said $4.8 billion will be invested to convert the old Goodyear factory in St. Thomas into a facility to be known as the Morant Bay Urban Centre. Ground is expected to be broken with the next six months for the development which is expected to be undertaken over a two year period. They are currently seeking a developer.
- Guardian Life Limited (GLL) will launch its first real estate development project in mid-June, a $6-billion initiative intended to speed up investment returns for the life insurance company
- The strategy by cigarette distributor, Carreras Limited to widen its sales network within inner-city and rural areas contributed to double-digit income growth for the company, a performance that it pulled off despite falling sales volumes.
- Richard Branson opened the new Branson Centre in Kingston this week. The move also shifts the centre from an incubator to a business accelerator. Proven will take the lead with the support of PanJam Investment, GraceKennedy, NCB Capital Markets, Norbrook Capital, along with two or three private individuals. The accelerator model will take existing businesses and help them explode into large businesses by providing governance from the Branson Centre and capital from Proven along with other partners.
- Prime Asset Management Ltd was officially renamed Victoria Mutual (VM) Pensions Management Ltd this week at a ceremony held at VM Group’s corporate offices on Half-Way-Tree Road in Kingston. According to a press release from VM Group, the renaming of the pension fund investment, management and administration arm of the financial services conglomerate is in keeping with the strategic goals, thus creating a “strong, integrated financial group”.
- Jammin Java Corp, based in the United States, is expected to pay out nearly US$2.46 million for trademark infringement to two Marley family-controlled companies that own the intellectual property to the Marley name. The award from the California District Court amounted to full gross revenue from Marley Coffee products over a six-month period. Jammin Java, which once traded as Marley Coffee, was sued by 56 Hope Road Music Limited and Hope Road Merchandising LLC for alleged breach of contract, interference with prospective economic advantage, trademark infringement, among other claims.
- Scotiabank Trinidad & Tobago this week reported net income after taxation of TT$332.7 million for the six months ended April 30, 2017, an increase of $25 million or 8 per cent over the comparative period in 2016.
Here are some key market and economic figures
- Stock Market Movement (Combined Index):
- Week to date: -1.42% | 2.40% Last week
- Month to date: -0.93% Jun | 3.33% May | 4.08% Apr | -3.09% Mar | 9.26% Feb | 10.09% Jan
- Year to date: 23.75% (27.6% YTD 2016)
- Year to date (Dec 16 – Apr 17) 1.3%
- Unemployment: 12.7% – Jan 2017 (12.9% as at Oct 2016)
- GDP: 1.1% Oct – Dec 2016 (2.0% – Jul – Sep 2016) – Rate of Growth of Value Added at Constant (2007) Prices Seasonally Unadjusted
Thanks for reading our weekly digest. (Jun 5th – Jun 11th, 2017). All weekly reviews can be viewed here.