$100,000 invested in NCB would be worth $1.3 million in 5 years if price rose to $1,200 per share.
“Unless something changes, NCB Financial Group is the best buy on the Jamaica Stock Exchange and will be for the next 5 years. My exit price? $1,200!” That is a recent quote from a seasoned financial analyst.
That is astounding, for a stock that traded on the Jamaica Stock Exchange just below $90 this past week and around $95 on the Trinidad market and was selling at $19 at the start of 2015. To reach $1,200 in 5 years, would require growth in profits averaging close to 30 percent per annum and the PE ratio rising to match that growth rate. If that were to happen it would mean that $100,000 invested now in the stock, would be worth $1,348,314 in 5 years.
How possible is that? First with interest rates receding to lower levels than they have been recently and seems poised to fall some more, PE ratios for stocks will increase. Not only will they increase but demand will increase for good quality stocks that are enjoying robust growth.
NCB delivered net profit of $14.7 billion for the nine months to June, this year, an increase of 48 percent over the prior year’s nine months profit of $9.9 billion. In the June quarter, profit grew 33 percent over 2016. Loans, the major fuel for growth in profits, increased a very strong 18 percent, year over year, in an economy that is probably growing around 2 percent in real terms.
Sagicor should be watched for strong gains over the next 5 years.
If growth were to pick up, and that seems likely, with several major projects on the drawing board to commence sooner than later, with some already started, then lending could picked up even more, boosting profit in the process.
In this regard, investors should not ignore Sagicor Group that reported profit jumping 31 percent to $5.65 billion, for the six months to June this year over 2016, with a 5 percent rise in revenues to $30.36 billion and was negatively affected by realized losses on securities that were sold. In the June quarter revenues slipped to $15.1 billion from $15.29 billion in 2016, as net investment income dropped from $5.55 billion to $4.24 billion, but net profit increased from $2.4 billion to $3.06 billion. While growth in insurance premium is important to fuel continued gains in profit, it is the ability to manage the investment funds effectively that will generate the growth that will make the stock price move.
Sagicor not only has the life assurance arm, but a commercial bank as well, health insurance and manages pension and other funds and a property development and management division.
Interestingly, these two companies are heavy dividend payers, investors stand to gain from sharply higher dividend income if the profit continue to grow close to current levels.
