85% gainer jumps ICTOP10

The Junior Market had an 85 percent winner during the past week, with only three stocks recording notable price changes in a market that remained fairly stable in the holiday-shortened week, with a slippage of only a few points. Price movements in the Main Market were moderate, with the highest being 5 percent at the end of the week, in which the JSE Index dropped more than 3,000 points, with the All Jamaica composite Index slipping just 90 points.
Edufocal was the star performer of the week with a big 85 percent surge in price to close at $2.50, following the company reporting that the board of directors is to meet on October 27 to discuss a possible rights issue and a stock split. Elite Diagnostic rose 13 percent to $1.77 and Everything Fresh dropped 11 percent to $1.40. The Main Market closed the week with JMMB Group falling 5 percent to $27.10, being the only stock with a notable change.
Market activity resulted in two new additions to the Junior Market ICTOP10 and one to the Main Market. Returning to the Junior Market TOP 10 are Lasco Financial Services and Lasco Manufacturing, replacing Caribbean Cream and Edufocal. Full year earnings for the former were downgraded to 55 cents per share following the release of second quarter results, which showed flat revenues for the August quarter and half year compared with 2022 and lower profit for the second quarter, with increased profit for the six months compared to 2022. Lasco Financial Services reported disappointing results for the first quarter of the new fiscal year to June. The company did not benefit as much from interest income as would be expected and had adequate funds on hand to expand the loan portfolio, development management indicated they would be pursuing for the rest of the year. Significant expansion of loans could radically transform both revenues and profit for the year. The extent of this improvement is unclear currently, however, the potential suggests that this is a stock to watch going forward as it could surprise to the upside. Lasco Manufacturing is, without question, a stock that is seriously undervalued, but investors pushed the price down during the week. This is clearly one for the future and one that investors should see continuous improvement in stock price over the next 12 months as the company rolls out improved profits in the quarters to come.
In the Main Market, Caribbean Producers returned to the ICTOP10 and replaced Scotia Group that was just squeezed out of the TOP10. CPJ performed well during the fiscal year ending June. The performance was obscured by a onetime charge related to past GCT claims that were booked in the past year, but for this charge, results would have been vastly better than reported, but investors may have been turned off by the results. The expectation is for profitability to improve during the current fiscal year ending in June 2024. The stock is clearly undervalued and has much room for growth over the next 12 months and beyond. Scotia Group, although out of the TOP10, reported a 74 percent in profit for the nine months to July and is terribly undervalued. Investors should be accumulated in the stock with the expectation for gradual appreciation, especially when the full year results are released with earnings expected to top $5.50 for the year to October 2023.
The average PE for the JSE Main Market ICTOP 10 stands at 5, well below the market average of 12. The Main Market ICTOP10 is projected to gain an average of 328 percent by May 2024, based on 2023 forecasted earnings.
A total of 15 of the most highly valued stocks representing 31 percent of the Main Market are priced at a PE of 15 to 105, with an average of 29 and 20 excluding the highest PE ratios, and a PE of 22 for the top half and 16 excluding the stocks with overweight valuations.
The PE of the Junior Market TOP10 sits at 6, just over half of the market at 10.7. There are 9 stocks or 19 percent of the market, with PEs from 15 to 26, averaging 19 that are well above the market’s average. The top half of the market has an average PE of 14, possibly the lowest fair value for Junior Market stocks currently, with the market projected to rise by 261 percent by May 2024.
The divergence between the average PE of the Main and Junior Markets and the overall market valuation are important indicators of the level of likely gains for ICTOP10 stocks.
ICTOP10 focuses on likely yearly winners, accordingly, the list includes some of the best companies in the market, but this is not always so. ICInsider.com ranks stocks based on projected earnings, allowing investors to focus on the most undervalued stocks and helping to remove emotions in selecting stocks for investments that often result in costly mistakes.
IC TOP10 stocks are likely to deliver the best returns up to the end of May 2024 and are ranked in order of potential gains, computed using projected earnings for the current fiscal year. Expected values will change as stock prices fluctuate and result in weekly movements in and out of the lists. Revisions to earnings are ongoing, based on receipt of new information.