The buy rated list now has Knutsford Express, and AMG Packaging is moved back into the list. One Caribbean Media is moved to the Watch List as its valuation moved up considerably from when we crowned it BUY RATED in 2013.
Knutsford Express is moved in based on good May quarter revenue and profit growth which augurs well for profit going forward and AMG Packaging continued growth in sales flowing from increased volumes and a near doubling in profit in the May quarter and partial recover in profit margins. Jamaica junior market listed Caribbean Cream, posted strong gains in profit for its first quarter to May, to reinforce the Buy Rating placed on them.
In Trinidad ScotiaBank was removed from the watch list, with much lower profits reported in their second quarter.
The Jamaican BUY rated stocks overall did not do well but signs are showing that the usual summer recover is at hand. In addition IC Insider gathers that a least one big investor is looking to buy stocks now. Coupled with that, the two companies mentioned above, show that profits may be on the improve for Jamaican companies, and with likely stability not far off for the Jamaican dollar, above average gains can only be made in stocks.
Knutsford & AMG Packaging – Buy Rated
AMG profit up 93% in Q3
Junior market listed company, AMG Packaging, enjoyed increased revenues and profits in the May quarter than they did in the same period, the previous year.
Revenues rose 36 percent in the quarter, to $151.6 million and 40 percent in the nine months to May, to reach $442.4 million, but profits were up by a very strong 93 percent in the quarter to $13.37 million from $6.9 million in 2013, and just moderately better in the year to date period, with $36.87 million versus $35.5 in 2013. Units sold increased by an impressive 23.4 percent, management sated in a release accompanying the results.
There is a noted build-up of inventory from $93 million to $174 million which would be a combination of rising import cost resulting from the devaluation of the local currency, as well as a hedge against continued devaluation and the need for more inventory to service increased demand for the company’s products.
While profit is up, an area of concern is the slippage in the gross profit margin, with the latest quarter, coming in at 25.95 percent, down from 31.19 percent in 2013, and for the nine months, it fell from 34.62 percent in 2013, to 24.20 percent in 2014.
For the three months, gross profit grew by 17.95 percent, much slower than the sales growth. For the nine months, the growth was a mere 6 percent. Fall in administrative cost from $13.38 million to $10.6 million in the May quarter and a decline in the nine months period, from $32.98 million down to $30 million, helped in boosting net profit. Other areas of cost savings, include finance by $4.4 million and depreciation $2.5 million, for the nine months.
Return on equity is around 18 percent, down from 20 percent in 2013 and could be accepted as being good, but there appear to be room for improvement. Receivables are up by $19.5 million over the company’s previous fiscal year ending of August, and so too is amounts in payables, climbing by $63 million, which seems to be helping to fund the inventory build while cash is down from $34 million to $8 million.
The continued increase in volume sales and cost containment augurs well for profit improvement going forward. With increased through put, unit cost of production will fall, allowing more growth in gross profit to flow into overall profits. AMG has to continue to grow its business by continued strong volume growth, to become a more cost competitive producer with lower unit cost.
IC Insider’s forecast for 2014 is 60 cents per share and $1.20 for 2015 on the assumption that volume sales continue close to current growth levels. The stock has been restored to the Buy Rated list, based on the forecast for 2014 and 2015.
Phillips & Wynter kill inflation in Jamaica
Many Jamaicans may be feeling the negative effect of the economic pressures the country is undergoing. One area in which it is seen, is the official data on inflation as the overall measure of consumer price movements, went virtually nowhere, in June.
Inflation in Jamaica is set to hit the lowest level, in years if the trend for the first six months of the year continues. According to data put out by the Statistical Institute of Jamaica, the inflation rate for June is 0.1 percent, when compared to the index for May 2014. This is 0.9 percentage points lower, than the 1.0 percent recorded for May this year. The lower movement was mainly due, to a decline in the cost of electricity which resulted in the index for the group ‘Electricity, Gas and Other Fuels’ moving down by 4.2 percent. This fall was tempered by an increase of 3.6 percent, due to an increase in the cost of water. Food and Non-Alcoholic Beverages rose by 0.6 percent. Upward movement in the prices of ‘Meat, ‘Milk, Cheese and Eggs’ and ‘Bread and Cereals’ were the chief contributors.
The movement in the index for June 2014 resulted in a calendar year- to-date inflation rate of 2.5 percent.
Mean quarterly inflation rate for the second quarter of 2014 was 1.1 percent, 0.3 percentage points lower than the first quarter which had an inflation rate of 1.4 percent.
Investment special issue coming shortly
Many investors may not be aware of it, but the local stock market is poised for a huge rally, interest rates are poised to fall and stability return to the forex market. No one really knows exactly when the local stock market will start the powerful run, but it could well be in the second half of this year.
There are big investors out in the market trying to get blocks of shares. Many others pocketed some at attractive prices earlier and stocks are scares as we write. The Investor’s Choice special issue covers, investment opportunities, in real estate, stocks in Trinidad and Jamaica, unit trusts investments and the best performing ones, money market the economy and more and will be off the press in days. Investors Choice is the publication that can best be used as a tool to help investors identify some of the best investments opportunities out there now. To purchase a copy call 926-2204.
Jamaican stocks flashing positive signal
At the end of trading on Friday, the Investor’s Choice bid-offer indicator had 9 stocks with bids higher than their last selling prices and only 1 stock with the offer lower.
This is the strongest signal flashed for some time, but investors would need to see a continuation of this positive ratio to say whether this is an indication of what can be expected in the not too distant future. With Bank of Jamaica sending a powerful signal in the forex market that the top for the Jamaican dollar may be nigh, investors could well be sensing that the time for buying stocks may not be far off. What is known is that the majority of market rallies have their genesis in July or August.
Main Market| In Friday’s trading on the Jamaica Stock Exchange the main market indices advanced, with The JSE Market Index rising by 193.15 points to 70,617.93, up more than 700 points for the wee and the JSE All Jamaican Composite index moved up by 215.98 points to close at 77,671.87, to be up 800 points for the week. The prices of 4 stocks rose and 6 declined as 20 securities changed hands, resulting in 8,773,022 shares trading, valued at $20,787,406. KLE Group dominated trading with 7,181,043 units sold by Craig Powell, one of the company’s directors.
Gains| Stocks recording gains at the end of trading in the main market, are Sagicor Group with 586,363 shares, to close with a gain of 4 cents at $9.09 and Sagicor Real Estate Fund, with 20,000 units changing hands, as the price gained 15 cents at to end at $6.25.
Firm| The stocks in the main market to close without a change in price, are Caribbean Cement with 18,248 shares to end at $2.20, Desnoes & Geddes 4,017 units to close at $4.25, Grace Kennedy with 13,251 shares to end at $56, Jamaica Broilers 3,920 units, to close at $4.57, National Commercial Bank 9,160 shares, to end at $18 and Scotia Group with 900 units, to close at $18.40.
Preference| There was no trading in the preference section.
Declines| The stocks that declined in the main market, are Carreras that traded 22,764 shares to close 5 cents down, at $35, followed by Jamaica Producers with 2,062 shares trading, for a fall of 50 cents, in closing at $17.50 and Jamaica Stock Exchange with 250 shares, declined by a cent, to close $1.88.
Junior Market| The JSE Junior Market Index declined sharply by 3.81 percent as it lost 26.75 points to close at 675.01 with 9 stocks traded, with 2 advancing and 3 declining.
Gains| Stocks recording gains at the end of trading in the junior market, are Blue Power with 718,136 units to close up 4 cents, at $9.05 and Lasco Financial with 12,500 units as the price gained 5 cents, to 95 cents.
Firm Trades| Stocks in the junior market that traded to close at the same price as the day before, are AMG Packaging that traded 1,500 shares as the price closed at $3.10, Dolphin Cove with 14,071 units, to close at $8.30, General Accident with 25,000 shares, to end at $1.50 and Jamaican Teas with 22,000 ordinary shares, to close at $3.25
Declines| Stocks declining in the junior market at the end of trading, are Access Financial trading 541 units, to close down $3.50, at $10, Caribbean Producers dropped a cent in trading 117,296 shares, to close at $2.65, and KLE Group lost 3 cents, with 7,181,043 changing hands, to end a an all-time low of 90 cents.
Gary Powell KLE director dumps shares
Craig Powell, a director and second largest shareholder in KLE Group dumped part of his holdings in the floundering group, during Friday’s trading on the Jamaica Stock Exchange.
Stocks and Securities acting as brokers, on behalf of the seller and buyer executed the trade at 90 cents each, for the 7,181,043 units that Powell owned. Powell should pocket just under $6,462,938 from the sale, down substantially, from the $26.6 million value placed on it, at the time of the IPO. The amount represents a portion of 10,693,750 that the company’s prospectus said he held prior to the issuing shares to the public in 2012, and now leaves him holding 3,201,343 units. At the time of the IPO, the amount represented 14.64 percent of the total issued shares, after the issue it would have come down to 10.70 percent, the prospectus stated. Powell’s holding after the public issue was second only to Gary Matalon’s holdings of 13.69 percent. At the time of the public issue Usain Bolt’s Sherwood Holdings Limited held 6,757,000 in the company. KLE’s 2013 annual report, lists Sherwood as still owning them.
Who is Powell?| The KLE prospectus list Powell’s credentials as follows: “Non-Executive Director he was appointed September 8th, 2008. Powell has over twenty-four (24) years’ experience in management and event marketing and promotions. Powell’s work experience spans operations management at the Sunset Jamaica Grande Hotel, regional sales and marketing at Amalgamated Distributors Limited and management at Midel Distributors Limited.
Powell also has a wealth of experience in the event-planning and entertainment industry, having been a principal in many of Jamaica’s premier entertainment attractions and events, such as The Appleton Estate All-Jamaica Grill-Off, which is perhaps the only event of its kind in Jamaica.
Powell also has substantial agricultural investments, which includes the production and export of produce and has an interest in Jamaica Hydroponics Ltd., a company that grows and distributes vegetables to hotels and retail outlets. Jamaica Hydroponics Limited owns and operates the largest hydroponics farm in Jamaica.”
KLE Group has been bleeding badly, having made a loss of $56 million in 2013, it followed that up with a loss of $13 million in the March quarter this year, but this was an improvement on the $17 million loss they suffered in the March 2013 period.
Dealers buy US$81m, sold US$77
Image courtesy of Marcus/FreeDigitalPhotos.net
Jamaica Broiler paid J$1.18 billion for US operation
Jamaica Broiler paid J$1.18 billion for England Packaging Company Inc, the group’s US acquisition last year and $111 million for the Hamilton Smoke House, a meat processing operation locally.
According to the company’s latest audited accounts, the two new operations contributed revenues of $1.78 billion and profits of $140 million to the group results for 2014. If they were owned from the start of the fiscal year, they would have accounted for revenues of $2.22 billion and profits of $202.6 million.
Segments| Best Dressed Foods contributed sales of $15.47 billion and segment profit of $1.25 billion, for 2014 fiscal year, Hipro-Ace, $8.85 billion in revenues, and segment profit of $798 million. Ethanol made a loss of $66 million from revenues of $578 million, the US operations reported a profit of $333 million from revenues of $4.7 billion and other revenues accounted for $1.25 billion and profit of $453 million.
In the prior year, Best Dressed Foods contributed sales of $13.2 billion and segment profit of $929 million, Hipro-Ace, $8.75 billion in revenues and higher segment profit of $910 million. Ethanol made a profit of $21 million from revenues of $1.73 million, the US operations reported a profit of only $21 million from revenues of $1.7 billion and other revenues contributed $920 million and profit of $335 million. Segment profit is arrived at before group charges and finance cost.
Full year|Jamaica Broiler reported lower profits for the year ended April 2014 from revenues of $30.85 billion, up from $26.5 billion in 2013, for a 16 percent revenue growth. Some of the growth in revenue came from the acquired companies but ethanol robbed the group of a larger revenue increase and better profit.
Gross profit| Gross profit increased from $5.5 billion, to $6.7 billion as gross profit margin climbed from 25.93 percent, to 27.88 percent in 2014. Gross profit grew by 23 percent but administrative cost jumped by nearly a third or $1 billion to negate the improved contribution in gross profit. In the end finance cost rose by $100 million and dragged profit down to $919 million versus $1 billion in 2013, resulting in earnings per share of 79.8 cents. The increase finance cost is due primarily to a shrinkage in cash funds of $1.14 billion and increased borrowings of $757 million.
The stock last traded at $4.57, giving it a PE of 5.7 based on the 2014 results, but IC Insider is forecasting $1.13 per shares earnings for the 2015 fiscal year, which would put the PE at just 4, based on these forecasted earnings.
NIR jumps US$211M to US$1.376 Billion
The net International reserves (NIR) jumped US$211 million in June to reach US$1.376 billion. The NIR now represents 19.90 weeks of goods imports and 14.57 weeks of goods and services imports.
The Gross NIR amounts to US$2.016 billion at the end of June. During the month the central bank offered a series of US dollar based bonds and this would have helped to swell the numbers.
Huge 61% JSE fee hike but stocks drop 45%
Investors in public listed companies on the Jamaica Stock Exchange got a huge 25 percent hike in cess they have to pay for trading on the stock exchange effective July 1, 2014. The Jamaican Stock Exchange hiked the fee investors are charged by when trading shares from 0.20 percent on each side of a trade to 0.25 percent. Since 2004 the exchange hiked fees by 61 percent while stock values are down around 45 percent since peaking in 2005.
Worse, stock investors who were getting dividends tax free, saw the re-enactment of two tax increases in the past three years. Stock market investors have gotten hit on all fronts with less income form share ownership over the past several year as they see their investment shrink in most cases. Customers of the exchange without whom the stock exchange cannot be viable, have been buffeted on all sides with no entity looking after their interest.
The fee levied on transactions across the floor of the Exchange will be increased by 0.10 percentage points or 0.05 percentage points on each side of a transaction.
The cess charge will be reflected on brokers, Contract Notes for each transaction will be 0.25 percentage points on each side of a transaction effective July 1, 2014 a release from the Jamaican Stock Exchange stated. The recent increase the second such increase from 2012 and the third since 2004.
In 2012 shareholders of public listed Companies on the Jamaica Stock Exchange started paying additional charges effective March 1, 2012 when the cess levied on transactions across the floor of the Exchange was increased by 0.0075 percentage points, or 0.00375 percentage points on each side of a transaction. The cess charge will be 0.2 percentage point on each side of a transaction. On October 1, 2004 the JSE increased its cess from 0.15625 percent to 0.19625 percent.