The big winners from tourism rebound

Jamaica tourism arrival numbers are approaching 80 percent of the 2019 figures. That is good news for the country, workers in the industry, and businesses close to the hotel areas and has major implications for listed companies.  

Caribbean Producers back in TOP 10

Recent data of inward bound passengers through the country’s international airports suggest that tourist arrivals for 2021 will be robust and at levels that far surpass that of 2020. Not only will the numbers exceed that of 2020, but the most lucrative period of December to April when visitor arrival numbers are some of the best monthly patronages, but the rates paid to visit are at the highest for the year.
The rebound means more revenues for the government, more foreign exchange earnings for the country, more wages paid to workers and more income for persons and companies providing goods and services to the sector.
The big winners for listed companies are Caribbean Producers, a major supplier of goods to sector in Jamaica and St Lucia. Everything Fresh is also a significant supplier to the sector in Jamaica and should see a rise in sales, Express Catering generates all its income from the industry, with its locations within the Sangster International Airport and Dolphin Cove with its attractions being a big draw for tourists.

Dolphin Cove

Others to benefit to a lesser degree are GraceKennedy, Wisynco, Jamaica Broilers, Knutsford Express and Fontana, the latter, with stores in Ocho Rios and Montego that sell to the visitors.
The rebound has significant implications for the foreign exchange market in 2022. In 2019, the tourism sector earned around $3 billion and just $1 billion in 2020. A return to 2019 visitor arrival number should see another $2 billion gross generated by the country than for 2020 and 2021, along with the billion increase in remittances since 2019 if maintained into 2022, should result in one of the most buoyant foreign exchange environment for the county.

Wigton price collapses

Wigton Windfarms’ shares traded below the IPO price of 50 cents on Friday as attempts to shield the price from falling after announcing a drop in revenues is finally giving way to selling pressure. The Wigton syndrome continues to plaque the Jamaica Stock market with irrational behavior of investors to be seen in the prices of many stocks.

Wigton closed at anew high of $1

Wigton traded nearly 90% of shares on Thursday.

On August 25, investors bought 5 million shares of Future Energy, up to $2.85 and for the next two trading day’s they just over 10 million units up to $3.29, with 15 million shares trading on the 30th at an average of $2.96. The stock is now trading at $2.04, with a PE ratio of 16, to be one of the more highly priced Junior Market stocks. What is happening here, when viewed against stocks with much lower PEs and good growth prospects?
Radio Jamaica another stock that traded as high as $4.65 on August 25, traded on Friday at $3.11 at a PE ratio of 7. Salada Foods continues to trade around the $7 region at a PE ratio of 43 times current year’s earnings. Wigton Windfarms that investors were not informed until late last year that the contract for their number 2 turbine provide for a reduction in rates for the supplying of electricity to JPS, belatedly traded down to 46 cents on Friday with few bids left in the system, and now trades at a PE of 12.5.
The stock market is a wonderful creation that has helped to enrich participants over the years, like any endeavor the more time spent studying and understanding it the better off those investors will be.
There are thousands of new investors in the market brought on by several new listings on the market, with most listings creating good returns in a relatively short time for early investors.
In the past, investors and scholars developed systems and methods to act as a guide to better investment decisions and thus reduce the love or dislike for a stock or other types of investments and thus reduce emotional decisions.
Technical analysis is a very useful tool used in the investment arena that carries coded messages for persons who understand them. They help investors to avoid excessive behavior in markets and telegraph future trends by using past market movements as the base.
The recent price movements for Radio Jamaica and Fesco show them breaking out of a channel that goes back for months, both companies released results that were price movers and both broke out, with the market not fully there as yet as prices moved too far too fast as such prices pulled back.
A few months after Wigton shares were listed in 2019, wrote a piece to help investors better understand stock market behavior and prevent losses in the market. The piece captioned “Wigton price dreamers” was published in May of 2019. In light of the irrational trading in Fesco and Salada shares, elements of the article are highlighted below.

Salada Foods traded at a all-time high of $18 on Tuesday.

“Buy now, Ride the $3 wave”. That is the advice of one online investor to another, regarding the likely performance of the Wigton Windfarm stock after trading, on the first day of listing at 83 cents with a PE of 14, placing the value in the upper half of the most valued main market stocks. The premium over net asset value another measure of valuation is 291 percent above the net asset value. At $3, the stock would trade at a stunningly high PE ratio of 50 times 2019 and 2020 earnings. The only main market stock close to that valuation is Kingston Wharves (KW) at 35 times 2019 earnings and that is coming down from more than 50 times 2018 earnings when it traded at $85.
Unlike KW, which has less than 10 percent of the shareholding that will trade, amounting to a few million units, Wigton has billion of shares that will trade. The high liquidity of the shares almost ensures that they will not become overvalued.
Most investors who would be big buyers are more professional and are versed in the valuation levels of stocks. Accordingly, they are unlikely to be buying a stock that has doubtful expansion credentials at an inflated value. The most popular valuation tool, the PE ratio does not support a price much higher than $1.20, with EPS of 60 cents per share. A price of $1.20 equates to a high PE ratio of 20. Only a few stocks are valued close to this multiple and many of them have prospects for profits to grow. Wigton has no immediate prospects for growth in earnings, pricing it at 20 times EPS would therefore be unwise. The market will speak but the heavy selling on Friday when it first traded is more in line with the thinking that the top is not far off. Investors who buy shares above the accepted market norm will likely get crushed.
In the investment world staying close to the crowd with pricing is a prudent investment practice that tends to be less costly than trying to predict lofty heights for stocks to reach.
PE ratios are there to give a sense of appropriate values, when investors try to break away from where the bulk of investors place a value of a stock, they usually end up regret the move.

Junior Market 64 points tumble

The Jamaica Stock Exchange Junior Market suffered a big reversal in the market index, pushing it down 64 points in early trading to 3,223.96 from the close on Tuesday at 3,287.50, with the fall of Express Catering from $5 close Tuesday to $3.65 this morning that led to an automatic freeze in the stock at 9.35 am.
At 10:30 am, the junior market index moved up to 3,235.59 points. Medical Disposables rose from $4.70 at the close on Tuesday to $5.25 as investors responded positively to 10 cents per share earnings in the June quarter versus a loss in 2020. The All Jamaican Composite Index trades at 458,039.67, up from 457,385.71 at the close on Tuesday. Guardian Holdings fell to $615 during the trading session, the lowest pointy since listing this year.

Timely data critical for proper market functioning

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Persons running the financial market seem not to understand the import of data to the proper functioning of the Jamaica market.
The Jamaica Stock Exchange has granted 45 days extension for companies to file their audited financial statements for 2021 to July 14, 2021. The extension assists management and auditors in managing the execution of audits at a challenging time and that may be fine, but what about the users of the reports?
While that can be appreciated, insufficient thought has gone into the decision. The companies and auditors are not the only persons to be accommodated in this issue. Investors need timely information to make decisions. Management of the companies are clearly not concerned about their shareholders either and the Jamaica Stock Exchange seems to care even less even though they will state otherwise.
This publication wonders why could the decision to extend the time by 45 days not have required the companies concerned to file interim results to obtain the extension, that way investors would be in a far better position than having to wait more than three months to get up to date position on the finances of such companies.
After all, minority shareholders have rights too and deserve better than what they are getting.

JSE Main Market jumps 7,426 points

Jamaica Stock Exchange Main Market All Jamaican Composite Index has shot up 7,426.02 points at the opening of trading on Monday with the index hitting 480,813.71 up from Friday’s close of 473,387.69.
The index has since slipped back to 477,682.72, after 20 minutes of trading.
Caribbean Cement is down to $90.89 from $94.14 on Friday. Grace Kennedy is trading at $100 up marginally from Friday’s close. JMMB Group trades up at $40 from $38.43 on Friday. MPC Energy Fund has jumped to $149 from $117.
The Junior Market Index was down slightly at the opening at 3,365.79 points from 3,367.03 at the close on Friday but has since inched up to 3,371.39 after 12 minutes of the opening of trading.

Junior Market at highest level since 2019

The Jamaica Stock Exchange Junior Market is trading at the highest point in over 18 months when the market index crossed into the 3,400 points mark and hitting a high for the early morning at 3404.24, helped by Tropical Battery that traded at a record high of $1.50.
The move pushes the Junior Market up, as it has now decisively broken through the resistance point around 3,300 level.
The previous high was recorded on December 16, 2019, when the market closed at 3,412.43.
The Main Market is up 464,059.44 from 462,144.64 points at the close on Monday, With Grace Kennedy trading at a record high of $100.

Fesco trades at $1.04

Fesco opened trading on the Junior Market of the Jamaica Stock exchange on Friday, trading 2.38 million shares at $1.04 up from 80 cents the share were sold to the market at.
The stock has 151,000 units on the bid at $1.04 with just 55 000 on offer at $1.06, but trading is frozen for an hour. The rise helped to push the Junior Market Index up to 3,155.07. The Main Market has climbed to 446,096.49 at 9.43 after rising to a high for the session of 446,591 points.

JSE main Market at 12 months high

The Jamaica Stock Exchange hit the highest points on Monday Morning trading since it closed above the 442,906 points level on April 14, 2020. The Junior Market now trades at the highest level since January 31, last year with the index now at 3090.76, up from the previous high of 3,098.16 at the close of January 29 2020.

Junior Market moving much higher Main Market poised for big break out

“The next big Junior Market run is near” was the caption of a late December post that suggested that the Junior Market Index could hit 3,100 points initially. Three months later, the market is a mere 45 points short of the 3,100 mark, a gain of 460 points or 18 percent.
The forecast was based on technical indicators pointing to the rally. The article stated “the last time this signal was flashed, the market rose 600 points and before that 500 points.
The Junior Market of the Jamaica Stock Exchange is sending out a strong signal that a big rally is ahead once more.” The article continued, “When technical readings for the Junior Market was going through a golden cross back in July 2019, the market rallied by more than 600 points and in 2018, the market put on 450 points after the signal was sent. How much gains will result in this round, is unclear, but it could well take the market up another 600 points, in a rally that could put it around 3,100 points, initially.”
What is the golden cross? This is when the short term moving average crosses over the medium moving average and both crosses over the long term moving average. The medium term moving average has crossed over the long-term one and the short term is making its way to cross the medium one with it already cross over the long term.
With nearly four months elapsing, the technical signal is still in place and gaining in strength. Investors should expect the Junior Market Index to hit 3,500 points before long, some 440 points away, after that the next target will be a resistance area of 4,100 points.
Fundamentals of companies will lend much support to the continuation of the rally, with some companies posting record profits and some displaying strong signs of recovery. So far, interest rates currently at historically low levels are cooperating with the current rally.
The Main Market is in the early stage of two bull signals, but it is bogged down in a narrow trading range based on closing prices, between 429,000 and 436,000 points of the All Jamaica Composite Index, with the very dominant financial sector going nowhere in the short term hobbling its growth. The market is currently steered slowly higher but it is waiting for some dynamic force to move it decisively out of the current range. A critical factor is that the market caught in a triangular formation currently, a very powerful indicator that is going to drive the Main Market sharply higher very soon. Forces seem poised to force it higher as it makes a big break following from the pent up force that the wedge is currently constraining. forecasting that the market will break sharply higher soon.
In this regard, the latest news out of Caribbean Cement of record production of over 100,000 tons of cement in March is the sort of news that will lift stock prices. Additionally, Jamaica Producers that just reported buying into the Geest Shipping Line company, moved up in price last week with very little supply evident in the market, which is a recipe for move price gains.

Junior Market jumps 47% since March 2020

The Junior Market climbed 47 percent in just over a year since the market collapsed by just over 39 percent in March last year from the close of 2019 when the market hit a multi-year low of 2,031.79 on March 18 last year.  
At the same time, the JSE Main Market, while trading above the March 2001 low, is nowhere near the 2020 high and closed out the first quarter marginally down on the 2020 closing.
The Junior Market is up 13 percent for 2021 to the end of March, clawing back most of 21 percent of the fall in 2020 and is now just 11 percent from the close of 3,348.97 at the end of December 2019.
In 2020, the Junior and Main Markets declined, with the Junior Market just edging out the Main Market index with a lower decline of 21 percent versus 22.6 percent for the year.
One year ago, to the end of March, the Junior Market Index dropped 29 percent to 2304.14 but was down a much steeper 47 percent to March 18, at 2031.79 points on the market index. The March 2020 low was the lowest point for the Junior Market since it closed at 2,032.77 points on July 1, 2016.
The market made some recovery last year from the year’s low when it moved higher on April 14, to 2,686.90 points but drifted down after some attempts to break over 2,600 points on a sustained level and closed out 2020 at 2,643.38.
In the meantime, the JSE Main Market failed to move higher in 2021, ending the first quarter 0.20 percent lower than the December close. It is still a bit lower than the 442,905.76 reached on the All Jamaica Composite Index after the early rebound from the 2020 low of 375,091.09 reached on March 25 last year, or the 438,045.18 reached subsequently on November 30.
The gains of eighteen stocks in the first quarter, this year, exceed that of the average of the market and just three performed worse, including CAC 2000 with a fall of 24 percent 19 percent decline for Dolphin Cove and 16 percent in the case of Knutsford Express. Five stocks contributing to the 2021 rebound for the Junior Market are Jamaican Teas up 60 percent, Indies Pharma 48 percent, Lumber Depot 47 percent, Blue Power 35 percent, Caribbean Flavours 35 percent and Fosrich 28 percent.
The Main Market recorded gains in 16 stocks that beat the market’s average move in 2021, with 26 falling below. Main market stocks with healthy gains are Ciboney with a stunning 142 percent rise, followed by Salada Foods with 125 percent gain aided by a 10 to one stock split, Grace Kennedy 37 percent, First Rock 31 percent and proven Investments 27 percent.  Palace Amusement Company that the Covid-19 dislocation has badly hurt is the worst-performing stock with a 51 percent decline, followed by Portland JSX with a loss of 25 percent and Radio Jamaica with 22 percent. Wisynco lost 14 percent and Wigton Windfarm 13 percent.