The main market of Jamaica Stock Market indices chalked up more records last and closed the week at another record high on Friday and the Junior Market closed at a 9 months’ high as the markets continue the usual summer bounce.
A number of positive results and chronic shortage of many of the stocks are helping in putting upward pressure on prices resulting in three changes to the IC TOP 10 at the end of the week.
Medical Disposables rose to $6.40 at the end of the week and was the sole stock moving out of the TOP 10 and AMG Packaging returned to the TOP 10.
Caribbean Cement traded as high as $50 on Friday as supply has virtually dried up, not surprising with the company cutting finance cost and reports of several projects slated to come on stream later this year. Berger Paints also moved higher to $21 on Friday and remains scarce. Iron Rock jumped to a new high of $4.07 on Friday as the company shows promise of making a profit sooner than later.
The coming days will see a flood of quarterly results be released and could impact the prices of stocks.
The PE ratio for Junior Market Top stocks averages 7.9 compared to an average PE for the overall market of 12, based on 2018 estimated earnings and the main market PE stands at 8.2 for the top stocks, compared to a market average of 13, a good indicator of the level of undervaluation of these stocks. Work done by IC Insider.com 
suggest that the PE ratio is likely to end around 16 times earnings by year as investors continue to gradually upgrade the multiple they are prepared to pay for stocks, which would lift prices sharply over the next several months from current levels.
The TOP 10 stocks now trade at an average discount of 34 percent to the average for the Junior Market Top stocks but it’s a third of what the average PE for the year is likely to be of 20 times earnings and main market stocks traded at a discount of 39 percent to the market.
TOP 10 stocks are likely to deliver the best returns within a 12 months period. Stocks are selected based on projected earnings for each company’s current fiscal year. 
Based on an assumed PE for each, the likely gains are determined and then ranked, with the stocks with the highest potential gains ranked first followed by the rest, in descending order. Potential values will change as stock prices fluctuate and will result in movements of the selection in and out of the lists for most weeks. Earnings per share are revised on an ongoing basis based on new information received that can result in changes in and out of the list as well.
Medical Disposables back in IC TOP 10
Medical Disposables back in IC TOP 10
The main market of Jamaica Stock Exchange ended at a record close on Friday and the Junior Market closed at a 9 months’ high as the markets keep moving higher resulting changes to the IC TOP 10.
At the close on Friday, Proven Investments ended at 19 US cents and fell out of the top list and is replaced by Victoria Mutual Investments. Jetcon Corporation and Paramount Trading dropped out of the top flight, to be replaced by Fosrich Group and Medical Disposables. IC insider.com lowered profit forecast for Paramount with the company showing only a small profit of less than a million
dollars in the fourth quarter compared to nearly $11 million in 2017 after gross profit rose 29 percent or $28 million. Jetcon squeezed out by price changes, elsewhere Medical Disposables rose to $5.80 but made it back in the list with strong profit out turn for the first quarter to June and an upgrade of earnings for the full year, of 65 cents per share from 60 cents.
The PE ratio for Junior Market Top stocks averages 7.4 compared to an average PE for the overall market of 12, based on 2018 estimated earnings and the main market PE stands at 8 for the top 
stocks, compared to a market average of 13, a good indicator of the level of undervaluation of these stocks.
The TOP 10 stocks now trade at an average discount of 38 percent to the average for the Junior Market Top stocks but it’s a third of what the average PE for the year is likely to be of 20 times earnings and main market stocks traded at a discount of 40 percent to the market.
TOP 10 stocks are likely to deliver the best returns within a 12 months period. Stocks are selected based on projected earnings for each company’s current fiscal year. 
Based on an assumed PE for each, the likely gains are determined and then ranked, with the stocks with the highest potential gains ranked first followed by the rest, in descending order. Potential values will change as stock prices fluctuate and will result in movements of the selection in and out of the lists for most weeks. Earnings per share are revised on an ongoing basis based on new information received that can result in changes in and out of the list as well.
NCB jumps out Indies in IC TOP 10
The main market of Jamaica Stock Market ended at a record close on Friday with NCB Financial jumping $3.01 to $100.01 as Jamaica’s largest financial group dropped out of the IC Insider.com’ Top 10 main market stock list.
NCB price jumped on Friday, as investors responded positively to the group’s June results and was replaced by Carreras at 9th position. NCB remains an excellent stock to hold for long term growth and increased dividends. In the Junior market Caribbean Producers rose to $5.80 and Medical Disposables to $5.51 to ease out of the top listing and were replaced by recent Initial Public Offer, Indies Pharma at number 9 and Jetcon at 10.
The PE ratio for Junior Market Top stocks averages 7.4 compared to an average PE for the overall market of 12, based on 2018 estimated earnings and the main market PE stands at 7.8 for the top stocks, compared to a market average of 13, 
a good indicator of the level of undervaluation of these stocks.
The TOP 10 stocks now trade at an average discount of 37 percent to the average for the Junior Market Top stocks but it’s a third of what the average PE for the year is likely to be of 20 times earnings and main market stocks traded at a discount of 40 percent to the market.
TOP 10 stocks are likely to deliver the best returns within a 12 months period. Stocks are selected based on projected earnings for each company’s current fiscal year. Based on an assumed PE for each, the likely gains are determined and then ranked, with the stocks with the highest potential gains ranked first followed by the rest, in descending order.
Potential values will change as stock prices fluctuate and will result in movements of the selection in and out of the lists for most weeks. Earnings per share are revised on an ongoing basis based on new information received that can result in changes in and out of the list as well.
2 new IC TOP 10 listings
This weeks’ review comes against the back drop of the main market hitting a record high on Friday in the morning session and the Junior market continuing to eke out modest gains.
Unlike last week when there are several changes to the TOP stocks, there are only two new additions this week. Victoria Mutual Investments and Jamaican Teas are out of the TOP 10 with Berger Paints that fell in price to $18.76 and Caribbean Cream are back in the TOP 10 lists.
TOP 10 stocks are likely to deliver the best returns within a 12 months period. Stocks are selected based on projected earnings for each company’s current fiscal year. 
Based on an assumed PE for each, the likely gains are determined and then ranked, with the stocks with the highest potential gains ranked first followed by the rest, in descending order. Potential values will change as stock prices fluctuate and will result in movements of the selection in and out of the lists for most weeks. Earnings per share are revised on an ongoing basis based on new information received that can result in changes in and out of the list as well.
The past week saw a few results being posted and more are expected this week, including NCB Financial and Proven Investments that entered the TOP 10 last week, 
both are expected to report positive gains with NCB continuing from increases seen up to the second quarter and Proven that President, Christopher Williams informed IC Insider.com is performing well in all divisions, see Collapse of the JSE US market.
The PE ratio for Junior Market Top stocks averages 7.4 compared to an average PE for the overall market of 11.8, based on 2018 estimated earnings and the main market PE stands at 7.5 for the top stocks, compared to a market average of 12.5, this is a good indication of the level of undervaluation of these stocks.
IC Insider.com last week stated that there are warning signs of a tsunami that is on the way for the market. During last week one more sign came to the fore with a sharp drop in Treasury bill rates again, this coupled with scarcity of supply for many stocks. Investors seem to be going about their business as if prices will remain around current levels for a prolonged period. 
Late comers to buying stocks who try to join the party will find get stocks but at a much higher prices as the year rolls on and that is confirmed by technical indicators in both the Main and Junior markets.
The TOP 10 stocks now trade at an average discount of 37 percent to the average for the Junior Market Top stocks but it’s a third of what the average PE for the year is likely to be of 20 times earnings and main market stocks traded at a discount of 40 percent to the market.
$9.20 offered for 75% of Barita shares
Barita last traded on the JSE on Wednesday at $9.
The long awaited formal offer to acquire majority shares in Barita Investments has been released.
Cornerstone Investments Holdings is offering $9.20 per share for 334.4 million Barita shares to acquire no more and no less than 75 percent of the company. The intention is for the company to remain listed on the Jamaica Stock Exchange
The offer opens on July 26 will cost $3 billion. The company signed a lock up agreement with Rita Humphries-Lewin and Karl Lewin who have 77.5 percent of the shares to sell amounts to allow for the 75 percent acquisition as such the offer is all but done.
The company has 445.877 million shares issued contributing to shareholders’ equity of $2.86 billion or $6.40 per share.
For the March quarter comprehensive income was $165 million and $492 million for the half year or just over $1 per share and puts the purchase price at about 5 times earnings. But the acquisition is even more attractive to the buyers. Both Humphries will cease being executives that will result in cost savings. The new link up could see a more aggressive stance taken in increasing business and profit within a relatively short time frame from existing offerings as well as new ones. The Unit Trust business is a potential storehouse of huge income down the road while more can be eked out of the portfolio of investments. Investors who hold on to their shares will benefit from a promised 80 percent pay out of profit going forward.
Several changes to IC TOP stocks
There are several changes to the TOP stocks, following an eventful week of trading on the Jamaican Stock Exchange, with the main market posting records on all five days and closing at record highs, on four of them.
Former TOP 10 Junior Market listing, Derrimon Trading ordinary share, traded at an all-time high of $23 during the week, while former TOP 10 main market listings also hit new highs during the week, these are Jamaica Broilers trading briefly at a record high of $33, PanJam Investment at $58.99 and Pulse Investments trading up to $3.50 and current TOP 10 listing, 
CAC2000 hits a new record high of $10.
The TOP 10 listings at the end of the week, have a number of changes. Caribbean Producers returns with after the price slipped back to $5.30 from $5.50 and Caribbean Cream that was shunned by investors based on poor 2018 full year results, jumped 29 percent to $6.25 following the release of the first quarter results, with profit rising 59 percent. Medical Disposables renters the TOP 10 as well as Elite Diagnostic, replacing AMG Packaging and Caribbean Flavours both with earnings downgrade. 
Proven Investments US dollar listed stock is now in the TOP 10 with the price closing down to 18 US cents during the week and Victoria Mutual Investments return to the list, replacing Salada Foods and Grace Kennedy that rose from $52 to $54.
The PE ratio for Junior Market Top stocks averages 6.7 compared to an average PE for the overall market of 11.4, based on 2018 estimated earnings and the main market PE stands at 7.8 for the top stocks, compared to a market average of 13, this is a good indication of the level of undervaluation of these stocks.
The sharp movement in the prices of some main market stocks this past week, encouraged by minimal supplies, is a warning sign of a tsunami that is on the way for the market. Late comers to buying stocks who try to join the party will find get stocks but at a much higher prices than weeks ago.
The TOP 10 stocks now trade at an average discount of 41 percent to the average for the Junior Market Top stocks but it’s a third of what the average PE for the year is likely to be of 20 times earnings and main market stocks traded at a discount of 40 percent to the market.
Record run for IC TOP stocks
Kingsley Cooper Chairman of Pulse that gained 67% during the past week.
Pulse Investments, in the main market TOP 10, up to the week starting June 25, jumped 67 percent this past week, to close at $3. Current listings, Caribbean Cement traded at $45 and Grace Kennedy at $56 both at 52 weeks’ highs during the week.
Former listing, Derrimon Trading ordinary share traded at an all-time high of $20.50 during the week while, the preference share traded at $2.45 for at a new high. The week closed out with 138 Student Living, falling to a 52 weeks’ low of $4.40 but C2W Music climbed to a 52 weeks’ high of $1.30 as the main market moved within just 300 points of the record high reached on June 13, while the Junior Market traded at the highest level during the week, since December last year.
There is just one change to the TOP 10 listings at the end of the week, with Stationery and Office Supplies that just slipped off the Junior Market list at the end of the previous week returning after Caribbean Producers that dethroned it in the previous week was squeezed it out, as Carib Producers rose to $5.50 from $5.10 at the end of the previous week.
With the average PE ratio for Junior Market Top stocks at 6.2 compared to an average PE for the overall market of 11, based on 2018 estimated earnings and the main market PE at 7.9 for the top stocks, compared to a market average of 13, suggest that the rest of the year should deliver better returns than the first half. A look back on the markets shows that they made noticeable rise in August last year, a pattern that goes back several years and could well do so again.
The sharp reduction in Bank of Jamaica policy rate to an unprecedented 2 percent and Treasury bill interest rates to record lows of 2.5 percent, is set to push stocks values much higher unless profits for most of the listed companies decline. The shortage of supply of many listings continues and is set to result in a big rise in prices going forward before supplies will be able to satisfy what is likely to be a rising demand.
Last week prospectuses for Stanley Motta and Mayberry Jamaican Equities were published and this week Indies Pharma is released. The first two are not priced to bounce based on the underlying nature of these companies. Stanley Motta is a real estate play that will provide income that is better than most fixed interest securities with moderate capital appreciation going forward, while Mayberry Jamaican Equities is a closed end mutual fund, growth is going to depend of appreciation in the investments held or to be acquired. Indies Pharma, with IC Insider.com preliminary earnings estimate for 2018 of 16 cents per share, could get a bounce sometime after listing and could reach $2.40. The stock sits in the mid-range of IC Insider.com’s ranking of Junior Market stocks with a PE of 10 just a bit less than the average of 11 for the market but most IPOs have traded around 15 times the current year’s earnings.
IC Insider.com’s TOP 10 stocks now trade at an average discount of 45 percent to the average for the Junior Market Top stocks but it’s a third of what the average PE for the year is likely to be of 20 times earnings and main market stocks traded at a discount of 39 percent to the market.
Stocks to Watch The stocks to watch this week include, NCB Financial. PanJam Investment could move higher again, as there continues to be buying but there is very limited supply of the stock on offer. Radio Jamaica that came for increased buying recently seems to be seeing supplies coming to market at $1.20 or higher and could get more attention with the network broadcasting the popular world cup matches as adverting revenues should climb from the coverage. Others worth watching include Caribbean Cement, Berger Paints with little selling, Grace Kennedy for which there is also limited supply and Pulse Investments. In the Junior market, Demand for Derrimon Trading should continue with a resolution to be voted on at the upcoming AGM to split each share into 10 units. Supplies for Stationery and Office continue to trade around the $8 mark with limited supply, the stock could move higher in coming days or weeks. Jamaican Teas pulled back in the past week from $5.50 to $5 this week, but with limited stocks being offered for sale, is worth watching.
Grace, CPJ, Palace & Salada in TOP 10
Jamaican stocks have not had a spectacular year with six months having elapsed so far. The main market grew 6 percent and the Junior Market is up just over 11 percent for the year to date.
Palace Amusement with an increase of 164 percent was the only stock to double in price, C2W Music and Express Catering came close with more than 90 percent gain, while former TOP 10, Stationery and Office Supplies came in with an attractive 63 percent.
With the average PE ratio for Junior Market Top stocks at 6.2 compared to an average PE for the overall main market, of 11, based on 2018 estimated earnings and the main market PE is 7.9 for the top stocks, compared to a market average of 13, suggest that the rest of the year should deliver better returns than the first half. The sharp reduction in Bank of Jamaica policy rate to an unprecedented 2 percent and Treasury bill interest rates to record lows of 2.5 percent, is set to push stocks values much higher unless profits for most of the listed companies were to fall. A factor that is at play that is not known to the vast majority of investors, is the lack of supply for many stocks. 
The shortage of supply is set to result in a big rise in prices going forward before supplies will be able to satisfy what is likely to be a rising demand.
Out of the top lists are JMMB Group that rose by week end while Jamaica Broilers earnings was downgraded to $2 per share based on lower 2018 results from ongoing business operation and Pulse inched up in price to be squeezed out of the main market list. Stationery and Office Supplies slipped off the Junior Market list after Caribbean Producers just got squeezed in, with the price slipping to $5.10. Grace Kennedy, Palace Amusement and Salada Foods return to the top list with the latter price falling from $14.25 at the close of the previous week to $11.70 now. Importantly, Palace implemented price increases mainly between 4.8 and just over 8 percent for the movies, effective at the start of July, this resulted in projected earnings for 2019 now put at $150 per share, up from $140 at our last revision.
On Friday, prospectuses for Stanley Motta and Mayberry Jamaican Equity were published. These issues are not priced to bounce based on the underlying nature of these companies. Stanley Motta is a real estate play that will provide income that is better than most fixed interest securities with growth moderate going forward, while Mayberry is a close end mutual fund that growth is going to depend of appreciation in the investments held or to be acquired.
IC Insider.com’s TOP 10 stocks now trade at an average discount of 45 percent to the average for the Junior Market Top stocks but it’s a third of what the average PE for the year is likely to be of 20 times earnings and main market stocks traded at a discount of 39 percent to the market.
Stocks to Watch The stock closed without an offer at the close of the week. NCB Financial, PanJam Investment could move higher again this week as there continues to be buying but there is very limited supply of the stock on offer. 
Radio Jamaica that came for increased buying in the past week could get more attention with the network broadcasting the popular world cup matches as adverting revenues should climb as a result from the coverage. Others worth watching include Caribbean Cement, Berger Paints with little selling, Grace Kennedy for which there is also limited supply and Pulse Investments that traded a large volume on Wednesday and Thursday with the price shooting to $2.28 before pulling back on Friday. In the Junior market, demand for Derrimon Trading closed the week at a new high, during the past week and seems poised to move higher. Stationery and Office Supplies settled down during the week is set to rebound soon as selling around the $8 level starts to ease. Jamaican Teas pulled back in the past week to $5.50 but with limited stocks being offered for sale, it is worth watching.
NCB & JMMB back in TOP 10
JMMB Group, NCB Financial and Pulse Investments moved into the IC Insider.com TOP 10 at the close of the past week as Berger Paints and Palace Amusement exited the main market TOP 10.
There was no new entry to the Junior Market listing but Jamaican Teas climbed to a new high of $6 during the week and closed just below, at $5.95 and Stationery and Office traded down to $6.85 as an investor moved more than 400,000 shares at that price, the stock rebounded to $8 on low volumes as active supply has declined below this price level. Grace Kennedy rose to a new all-time high and Berger Paints rose to $22 during the week and were eased out of the top list. Earnings for Palace for 2018 and 2019 were revised lower even with the report that the company plans on opening a new cinema in the fast growing Portmore area, in 2019 and just eased out of the listing. 
Barita Investments fell by 25 percent during the week from $12 down to $9 as demand at the higher price evaporated.
Recent TOP 10 member PanJam Investment traded at a new high during the week and remains a buy with very limited supply of stock for sale while former TOP 10 listings jumped sharply during the week from $28.50 to $42.18 after the company announced that the directors will meet to discuss a dividend and stock split.
During the week Sygnus Credit was listed on the main and US dollar markets and Everything Fresh became fresh new listing on the Junior market. 
The shares of both, traded higher than the Initial Public Issue price. Sygnus US dollar listing remains above the IPO price while the Jamaican dollar denominated stock is trading below the IPO price.
At the close of Friday, the average PE ratio for Junior Market Top stocks ended at 6.3 compared to an average PE for the overall main market of 11, based on 2018 estimated earnings. The main market PE is 7.7 for the top stocks, compared to a market average of 12.7.
IC Insider.com’s TOP 10 stocks now trade at an average discount of 42 percent to the average for the Junior Market Top stocks but it’s a third of what the average PE for the year is likely to be of 20 times earnings and main market stocks traded at a discount of 39 percent to the market.
Stocks to Watch The stock closed without an offer at the close of the week. NCB has good growth prospects for patient investors, the stock continues to trade around $100 where there is some selling but that level could be taken out soon and pave the way for more gains. 
PanJam Investment could move higher this week as there continue to be very limited supply of the stock on offer. Radio Jamaica could come in for increased attention with the network broadcasting the popular world cup matches as adverting revenues should climb as a result from the coverage. Others worth watching include Caribbean Cement, Berger Paints with little selling and Grace Kennedy for which there is also limited supply. In the Junior market, Demand for Derrimon Trading has been increasing recently and pushing the stock to new high during the past week. Stationery and Office Supplies settle down during the week before rebounding. Jamaican Teas came in for more buying in the week but with limited stocks being offered for sale is worth watching.
2018 interest rate cut was big buy signal
Apartment complex in Kingston – Real estate values to benefit from low interest rates.
Declining interest rate is a huge buy signal for both stocks and real estate investments. If the decline in rates is expected to be prolonged then investors will swicth their investments to take advantage of opportunities elsewhere.
Last year this publication boldly advise readers that the drop in interest rates by the central bank was a huge buy signal for stocks and that investors should be piling into stocks and real estate. Some were skeptical, clearly unaware that there are really two major factors driving stock prices – interest rates and profits. Interest rates have fallen to the lowest levels on record, in Jamaica.
Many who consider the present values of stock to be ioverpriced not factoring the major cahnge the falling rates will have on valuations of both stocks and real estate. A few companies may overpriced currently, but not the vast majority. The incredibly low interest rates being enjoyed by many Jaamicans are not about to change substantially, any time soon. While the low rate of 1.7 percent on treasury bills reached in 2018 won’t last forever, it is expected that it will not go up too far from current levels of just over 2 percent, any time soon.
In May last year, Bank of Jamaica cut the overnight policy rate, by 25 basis points to 2.5 percent that along with a decline in short term Treasury bill rates at the same time.
IC Insider.com stated then, that the moves provided more ammunition for a big surge for Jamaican stocks. The piece went on to state that with a 15 percent fall in BOJ’s policy rate in 2018 so far, stocks are lagging behind, with an increase of just 6.6 percent for the Junior Market and 4 percent for the main market.
The fall in Treasury bill rates was far greater than the rise of the All Jamaica Composite Index, an indication of a lot more upside for stocks based on the downward movement of interest rates.
Investors seem then to be focusing more on profits in valuing stocks than on interest rates so far. That will change the article suggested. The fall in the overnight rate at that time, translated to a 9 percent rise in stock market prices, but rates seem likely to decline some more before settling off, providing more ammunition for greater gains in stock prices.
We stated that with the fall in interest rates, the PE of money is at the high end 40 times income and using corporate bond rates around 12 times, but the PE ratio should be more tied to Treasury Bill rates and that PE is now in 30 range but stocks are mostly in the low teens and below. IC Insider.com further stated that most investors did not appear to be paying much attention to the tsunami that was on the way that will see prices move sharply higher.
With just over five months of 2018 passing, investors have not only warmed to the fall in rates but many are not willing to part with their stocks. Late comers to the party will pay much higher prices than in May and June. Then the Junior Market was up 24 percent and the Main market 31.7 percent and rising. Technical reading of the market suggest that the Main market has another 25 percent run to make before probably cooling for a charge to 720,000 points on the All Jamaica Composite Index in 2019.
The fall in interest rates makes it cheaper to buy real estate with lower interest rates for each dollar borrowed. Additionally, investors will switch funds from fixed interest investments into stocks and real estate thus driving up their values.
Note that this is an updated version of an article posted last year after Bank of Jamaica cut their overnight policy rate.