JSE 9 months profit surge demands caution

Profit after Tax surged 156 percent for Jamaica Stock Exchange in the 2021 third quarter to $187 million over the  $73 million generated in 2020, as revenues jumped 66.5 percent to $621 million, from $373 million earned in the  September 2020 quarter. 
Revenues and profit for the above period got a healthy injection from a significant $14 billion trade in National Financial Group in July and a sizable exchange of Barita Investments shares of 38,808,202 million units on September 28, valued at $3.99 billion that made up 47 percent of overall trading in the month.
The NCB trade pushed trading in the Main Market in July to $16 billion, well up on the over $8.5 billion regular tradings that occurred in August and up September $8.37 that benefited from the one-time Barita trade. Regardless of the one-off trades, the third quarter trading is well up on the first half of the year with an average of $2.8 billion per month. Junior Market trading for the quarter is well up on that for 2020 and is up 53 percent in dollar terms for the nine months to September, with the September quarter up a robust 114 percent over last year. Junior Market trading is $5.2 billion for the year to September and represents less than the trading in the Main Market in September alone.
Performance for the nine months was less spectacular, with total revenues rising 17 percent to $1.47 billion from $1.26 billion and profit climbing a respectable 32 percent to $378 million from $286 million.
Income from cess grew sharply to $232 million from just $57 million in the September 2020 quarter and $366 million from $232 million in the 2020 nine months. Fee Income rose from $298 million to $369 for the September quarter and from $933 million to $1.02 billion this year to September.
Total Expenses increased by 33.7 percent to $352 million from $263 million to the September 2020 quarter but increased by 11 percent in the nine months to $942 million from $839 million in 2020.in 2020. Staff Cost increased by $53 million due to salary adjustments and additional staffing, Property Expenses increased by $22 million attributed to increases in maintenance costs and licenses expense and Securities Commission Fees climbed by $23 million over the prior year.
Total current assets amount to $980,975, with cash and investments standing at $642 million and receivables of $335 million. Total current liabilities stood at $336 million. The group has long term investments of $221 million.
Shareholders’ Equity rose to $1.72 billion from $1.39 billion at the end of September 2020 and $1.53 at the end of December last year.
The company paid a dividend of $191 million during the year compared to $365 million in 2020.

Operating cash flow before movements in working capital brought in $601 million, but the group ended up with $430 million from operating activities after paying corporate taxes of $195 million.
Looking forward earnings per share that are up to 54 cents for the nine months from 41 cents in 2020 could end the year at 70 cents, but the signs are not very good with main market trading less than half of trading in August and September, but trading could pick up in the two remaining months of the year, helping to improve the company’s fortunes.
For 2021, there are positives and negatives with the expected rebound in the economy with tourism number rapidly growing BPO expansion and hopefully more new listing on the exchange. On the negative side, increased interest rates that are now in place could crimp trading activity they move much high in 2022. If confidence returns that could boost trading and generate more revenues and profits for the exchange currently at $17.50, the stock trades at a rich PE of 25, not excessively rich, but there is no room for growth presently, with the market average at 15.5.

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