Express Catering A ‘Buy’ – JMMB

Analysts at the Jamaica Money Market Brokers Group Ltd have released their analysis on the initial public offer for Express Catering Ltd. Based on their insight, they have put an overweight / buy rating on the offer. Today is the last day to sign up for what is expected to be another oversubscribed offer from Mayberry Investments Ltd.

Based on their analysis

  • They believe the shares are under-priced relative to shares currently listed on the Jamaica Stock Exchange at the offer price of $1.50.
  • They view the company positively as it is a foreign exchange income generator with an exclusive contract to provide its services in a high traffic airport.
  • Plans to expand the offerings to include the Starbucks brand, the international coffee food chain, popular in the United States and Canadian markets, should augur well for continued growth.

However they advise that the stock is suitable for shareholders who have a medium-to-high risk tolerance and a medium term horizon as

  • the Company faces diversification risk as it operates only in the Sangster International Airport and,
  • is dependent on tourist and other visitor numbers to that particular airport.
  • The long-term growth potential is also limited by the fact that the company operates several franchises for which extensions of the franchise agreements will have to be negotiated at the end of their current terms.

They further express that they anticipate continued revenue growth for Express Catering Limited in the short-term with the cessation of management fees to the parent.

  • From January 2011 to May 2017, the company paid 9% of the total net revenue of the Company to Margaritaville Caribbean Limited in exchange for the performance of certain services. However this agreement was terminated on 31 May 2017, which should lead to an immediate increase in profitability for the company in the 2017/18 financial year.

For full details please consult the analysis done by JMMB.

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