Paramount on a role profit jumps 79%

Profit after tax at Paramount Trading jumped 108 percent in the May quarter, on a pretax basis, and was up 73 percent after corporation tax in 2013 and has now jumped 79 percent to $34 million, for the August quarter, from $19 million for the similar period last year.
The improved results for the latest quarter, came from a 19 percent climb in revenues over the similar period in 2013, with revenues of $207 million versus $173 million in 2013. The latest quarter’s revenues are the highest the company has had, since listing in 2013. Gross profit margin was maintained at 46 percent the same as in the 2013 August quarter but slightly down on the full 2014 fiscal year’s 48 percent. Of import, is a new line of lubricants launched during the quarter but sales are in their infancy. According to a company executive, the increased sales is mostly from new customers added as well as increased sales of a product to an existing customer, who was not supplied with that product last year.
Administrative, selling and distribution cost, fell from $32 million last year to $31 million in this year’s August quarter. Profit is projected to by IC Insider to come in around $152 million in 2014/15 year or around $1.15 per share. At the current price of $2.50 the stock would be priced at a PE of only 2.2 making it a very good buy, bearing in mind that that many junior listings have been valued around 8 times earnings in the recent past, and around 6 times now.
Financials| The profit for the August quarter provided a strong 39 percent annualized return on the equity, based on $345 million at the end of May. Borrowed funds amounted to only $40 million, compared to the level of equity. Cash is up from $56 million at May to $90 million, while receivables climbed to $178 million from $172 million at May, this year. But the figures include more than just trade receivables, with the latter being under $150 million. Still high but one of the company’s executive stated that they are actively managing this area and have put in place measures to mitigate losses. Inventory at $203 million is flat with the amount at the end of May, this year, but payables moved up to $137 million from $128 million at May. With a new level of stability in the value for the Jamaican dollar, inventory levels may be reduced going forward as there would be little need to hedge against the devaluation of the local dollar.
The performance of the company during the quarter, and for the 2014 year would normally elevate the stock to BUY RATED status but the high level of receivables of more than two months, is a concern, especially in an economy, as tight and difficult as the Jamaican one at this time.