JSE stock up 887% could end higher

The Jamaica Stocks Exchange stock rocketed from $1.57 to a record $15.50 topping the market as the best performing stock over 52 weeks with gains of 887 percent. The JSE benefitted from a big jump in profits from $8 million in 2014 to $139 million in nine months to September this year, as revenues jumped from $242 million in 2014 to $521 million.
For the quarter, profit amounts to $37 million up from $11 million in 2014, from operating revenues of $157 million versus $89 million in 2014. In addition to operating revenues, the JSE earned $16 million from investment income in the latest quarter, compared to $8 million in the September 2014 quarter and $34 million in the nine months in both years.
Earlier in the year, IC Insider stated, “the stock remains IC Insider BUY RATED and is now available at $3.50 which it last traded at, but won’t remain that way forever and investors should be buying this one for big long-term gains,” since then the stock has shot up to $15.50 for a gain of 933 percent for the year.
For the September quarter, cost rose from $90 million to $109 million due mainly to staff cost jumping b $12 million. For the nine months, cost rose from $273 million to $340 million with staff cost accounting for $20 million of the increase and securities commission fees jumping to $37 million from $10 million in 2014.
The exchange has cash and investments of $448 million with a working capital ratio of 2.4:1 and equity of $624 million, there is no borrowed debt on the books.
Factors that investors should be considering looking forward which will be critical to the fortunes of the stock exchange are the levels of trading that could point them to future income and profit. Up to December 4, this year, the JSE traded $8.4 billion in normal trades compared to $3.7 billion in December 2014, in the September quarter, trading amounted to $8.68 billion up from $3.74 billion in the June 2015 quarter and $5.15 billion in September 2014. The increase in the 4th quarter stock trading activity to date, is just below the 3th quarter level, in addition there will be a full quarterly income from repo business.
In the March quarter 2015, a total of $4.9 billion was involved in trading up from $3.8 billion in March 2014. Both the December and the March quarters in 2015 have a few one off type trades, regardless the trend is pretty clear pointing to the possibility of a strong 2016. The last two quarters suggest that trading levels in dollar terms could be up around 40 percent and it could be more. That would mean a sharp increase in revenues for the exchange in addition the managing of the repo business will provide added income for the entire year compared with two months in the September quarter and 5 months for the year to December.
Back in 2004, the market traded $28 billion in regular trading activity when the Jamaican dollar was trading around $62 to the US dollar with trading in 2005 being slightly behind at $26 billion. Trading would need to get to $51-55 billion for a year to match trading levels back in 2004 and 2005.
Profit should close out the year on a high with monetary trading levels set to exceed that of the third quarter and well ahead of the fourth quarter of 2014. IC Insider is forecasting earnings of $1.40 for the 2015 not factoring the trade that could flow from the Heineken buyout of the minority shares in Desnoes and Geddes.