Archives for March 2022

Most Junior Market listed companies don’t have the depth of management that most Main Market companies have. What most may lack in Management they make for by their agility and ability to grow faster than the more matured counterparts in the Main Market and this feature can deliver above average growth for stock prices. This factor alone can determine winners from losers in business.

Junior Market trades

Some elements are common to companies in both markets; as such, the investors who don’t have the time and inclination to monitor their investments regularly may want to invest for the long haul with the expectation that their investment will grow appreciably over time. There are some factors to consider in investing long term, these include continued growth of companies, inflation, possible shifts in government policies as well as social and economic policy changes that can affect investment returns in the short and long term.

Over the next ten years, many of the companies in the Junior Market could see changes in the leadership of many of the Junior Market companies and change in ownership as some of the majority owners retire. The ownership shift may be negative or positive, but it is a major factor. Continuity of ownership is a major factor to consider and this is more critical for Junior Market companies, with the largest shareholders being the lead executive management.

Access Financial Services is the first company to list on the Jamaica Stock Exchange Junior Market and enjoyed years of growing revenues and profit, but the stock price declined sharply in 2020 and 2021 as profits fell in the fiscal year 2020 and 2021 due to heightened provision for doubtful loans and slowdown in lending. Corrective measures were put in place and loans and profits are growing again, with improvement in the economy and a reduction in unemployment. The company stands a great chance of continuing to grow to provide the unbanked with alternative financing. The potential for tapping into this underserved area would position AFS as an interesting company to follow over the next ten years.

Elite Diagnostic – Health care services are a never ending need and demand will continue to grow as the local population ages and individual wealth improves. The company recently expanded from one location to three. They encountered major operating problems with machinery that increased cost and negatively affected revenues but now seems over that, with revenues growing again. They have plans for another branch to be established, which is delayed for the time being, but they added to machinery at the Hope Road branch to meet increasing demand. This company should be able to innovate and stay relevant for years to come. The company has the potential to expand into other areas of the country, bringing services closer to the consumers and generating higher income and profit.

Express Catering provides services directly to the tourism industry, with its restaurant operations housed within the Sangster International Airport. The future is tied into the growth in that industry, seemingly poised for more growth with the continued expansion of hotel rooms on the country’s north coast. The airport in Montego Bay is expanding and will provide opportunities for greater expansion for the company. Now focused solely on Montego Bay but could well move into Kingston, bringing additional growth possibilities.

Fontana stock is richly priced currently, as such, the time may not be right to buy into it as it could well fall back in price. It stood the test of time and seemed set for the next level of expansion and performance. It possesses good management has room for expansion by adding new products or acquiring others pharmacies as current owners of other existing pharmacies retire. A new branch is planned for the Portmore to come on stream in late 2022. The area with a growing population in Jamaica and therefore company’s expansion should attract good and profitable business. Spanish Town, another area, earmarked, with Montego Bay, could follow. The company is well positioned to acquire the many family owned pharmacies when the owners decide to retire.

General Accident has an excellent track record of growing the business and has adequate liquid funds to fund expansion and meet its operating commitments. The Jamaican operation is very profitable. Recently they expanded into Trinidad and Barbados, which could add to profits in 2022 but will be highly beneficial to the growth in revenues and profits in the years to come. This expansion will result in reduced reinsurance costs as the company spreads the risk over a wider geographical area. Further regional expansion is expected and will improve revenue and profit growth and swell cash funds for continued attractive dividend payments leaving sufficient amounts for investments and helping in reducing reinsurance costs. Guyana is growing strongly from oil production and will be enticing for the company to expand into that market, either directly or through one of the entities in the eastern Caribbean.

Fosrich has diversified into manufacturing pipes and has also gone into refurbishing electrical transformers, two new areas that it has a competitive advantage and is generating profits from. These ventures resulted in diversification away from being solely a retailer in the construction and energy sectors. With a growing Jamaican economy, that company will find room to increase revenues and profits as the years roll on and sales within the region.

The Beechwood Av. gas station

Future Energy is relatively a small player in the sector and has much room for growth, with only 16 service stations under its brand. The company is branching out into LNG and LPG gas sales to expand revenues in the future. The company plan to grow the number of service station under its name to 22, within three years, including one more to be owned and operated by the company. The great scope for expansion across the country makes FESCO one to watch over the next ten years as it could expand service stations in many more areas within the country. The stock is currently highly overvalued, and any investment should await a big pullback in price.

Honey Bun has made great strides since it was listed on the Junior Market in 2011. In 2009 sales were $404 million and has climbed to $1.67 billion in 2020 and rose climbed 28 percent to $2.145 billion for the 2021 fiscal year, with profit before tax moving from $191 million to $290 million. The impressive growth continued for the first quarter to December last year, with a net profit of $45.5 million that rose 31 percent above the prior year from sales that grew 44 percent to $665 million over the prior year. The company enjoys good Management that is expected to continue guiding the operations successfully, resulting in increased revenues and profit at attractive rates.

Jamaican Teas.

Jamaican Teas is a diversified group and continues to add new products. Exporting has been a strong growth area, with North America and the Eastern Caribbean being big markets for them, with sales exceeding those on the Jamaican market. The group spun off its investment arm into a separately listed company, allowing for greater focus on an area that has been very profitable for them. The manufacturing arm is to be spun off into a separate company that will allow for greater focus on that operation and provide greater exposure for the Caribbean Dreams brand. The group is unique amongst the Junior Market companies due to its diverse business. The strong and continued growth in exports is a great asset that is expected to provide a good basis for continued growth. The group is cash flow positive and possesses the ability to expand from mergers and acquisitions. The investment arm offers good prospects to add to profit going forward.

SOS anticipates maximising profits from every business line in 2022

Lasco Manufacturing is a low cost manufacturer with room for expansion either by producing its own brands or products under license from others. The business is cash flow positive and is building up cash at a healthy pace, with loans taken on to expand the factory almost fully paid off. They are in a good position to acquire brands or other entities and do production for third parties. It could be the subject of an acquisition by others, considering the main owner cannot be very far from retirement.

Stationery and Office Supplies is more than the name implies. While stationery and office equipment are the main lines, it also has a book manufacturing business that manufactures exercise books for children’s note pads. It also operates a paper shredding business with banks being clients of theirs and other entities, which is a high profit margin part of the business. They have stood the test of time and seem set for the next level. They possess good management that will deliver strong gains in the years ahead. The company posted its best fourth quarter results in the past year and that performance is said to have carried over into 2022, with revenues for the first two months running ahead of 2021. Looking forward, expect to see expansion by acquisitions and adding new products.