Profit drops at Cargo Handlers

Adage has it that markets know best, but the performance of Cargo Handlers profit performance and stock price movements put the concept in greave doubt. The company reports lower revenues and profit for the June quarter this year compared to 2016 while the stock price tanked from serious overvaluation.
Profit for the nine months, dipped to $116 million from $124.5 million in 2016 after tax, even as revenues climbed from $234 million to $255 million. For the June quarter revenues fell to $74 million from $81 million in 2016 and profit after tax dropped sharply by 32 percent, from $46 million to $31 million. Earnings per share ended at 8 cents for the quarter and 31 cents for the nine months, for the full year earnings should end around the 40 cents range. Such earnings would put the price earnings ratio at a very high 33 and the stock price at great risk of falling.
In 2016, the company earned $6.3 million in other income in the June quarter with gains of $2.2 million in foreign exchange earnings in 2017, for the quarter and year to date and $3.4 million versus $10.5 million for the nine months to June last year. While revenues fell in the June quarter, compared to 2016, operating expenses jumped $5 million to $35.4 million and $20 million for the nine months to $112 million. $7 million of the increase, management reported, is due to “adjustments to some vessels’ rescheduling.” Management also stated that “the petroleum division will in the ensuing quarter begin to introduce newly acquired equipment that will give us the capacity to comfortably service additional business.”
The company’s is strong financially, with cash on hands of $237 million, current liabilities of just $25 million and shareholders’ equity of $366 million and generated cash flows from operations of $137 million for the nine months period.
An interim dividend of 11 cents per stock unit was declared by the directors to be paid on September 8.
Montego Bay is said to be the fastest growing region in Jamaica currently, if the pace continues, should provide the company will a solid base for growth. The big concern now is the need for the stock price to adjust downwards to mirror the values in the rest of the market. The stock peaked at $30 earlier this year and last traded at $13.20. It is going to take a few years for those who bought at the top of the market to recover their investment and opportunity cost expended on it. Cargo Handler is not a recommended buy currently.

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