ICTOP10

85% gainer jumps ICTOP10

The Junior Market had an 85 percent winner during the past week, with only three stocks recording notable price changes in a market that remained fairly stable in the holiday-shortened week, with a slippage of only a few points. Price movements in the Main Market were moderate, with the highest being 5 percent at the end of the week, in which the JSE Index dropped more than 3,000 points, with the All Jamaica composite Index slipping just 90 points.
Edufocal was the star performer of the week with a big 85 percent surge in price to close at $2.50, following the company reporting that the board of directors is to meet on October 27 to discuss a possible rights issue and a stock split. Elite Diagnostic rose 13 percent to $1.77 and Everything Fresh dropped 11 percent to $1.40. The Main Market closed the week with JMMB Group falling 5 percent to $27.10, being the only stock with a notable change.
Market activity resulted in two new additions to the Junior Market ICTOP10 and one to the Main Market. Returning to the Junior Market TOP 10 are Lasco Financial Services and Lasco Manufacturing, replacing Caribbean Cream and Edufocal. Full year earnings for the former were downgraded to 55 cents per share following the release of second quarter results, which showed flat revenues for the August quarter and half year compared with 2022 and lower profit for the second quarter, with increased profit for the six months compared to 2022. Lasco Financial Services reported disappointing results for the first quarter of the new fiscal year to June. The company did not benefit as much from interest income as would be expected and had adequate funds on hand to expand the loan portfolio, development management indicated they would be pursuing for the rest of the year. Significant expansion of loans could radically transform both revenues and profit for the year. The extent of this improvement is unclear currently, however, the potential suggests that this is a stock to watch going forward as it could surprise to the upside. Lasco Manufacturing is, without question, a stock that is seriously undervalued, but investors pushed the price down during the week. This is clearly one for the future and one that investors should see continuous improvement in stock price over the next 12 months as the company rolls out improved profits in the quarters to come.
In the Main Market, Caribbean Producers returned to the ICTOP10 and replaced Scotia Group that was just squeezed out of the TOP10. CPJ performed well during the fiscal year ending June. The performance was obscured by a onetime charge related to past GCT claims that were booked in the past year, but for this charge, results would have been vastly better than reported, but investors may have been turned off by the results. The expectation is for profitability to improve during the current fiscal year ending in June 2024. The stock is clearly undervalued and has much room for growth over the next 12 months and beyond. Scotia Group, although out of the TOP10, reported a 74 percent in profit for the nine months to July and is terribly undervalued. Investors should be accumulated in the stock with the expectation for gradual appreciation, especially when the full year results are released with earnings expected to top $5.50 for the year to October 2023.
The average PE for the JSE Main Market ICTOP 10 stands at 5, well below the market average of 12. The Main Market ICTOP10 is projected to gain an average of 328 percent by May 2024, based on 2023 forecasted earnings.
A total of 15 of the most highly valued stocks representing 31 percent of the Main Market are priced at a PE of 15 to 105, with an average of 29 and 20 excluding the highest PE ratios, and a PE of 22 for the top half and 16 excluding the stocks with overweight valuations.
The PE of the Junior Market TOP10 sits at 6, just over half of the market at 10.7. There are 9 stocks or 19 percent of the market, with PEs from 15 to 26, averaging 19 that are well above the market’s average. The top half of the market has an average PE of 14, possibly the lowest fair value for Junior Market stocks currently, with the market projected to rise by 261 percent by May 2024.
The divergence between the average PE of the Main and Junior Markets and the overall market valuation are important indicators of the level of likely gains for ICTOP10 stocks.
ICTOP10 focuses on likely yearly winners, accordingly, the list includes some of the best companies in the market, but this is not always so. ICInsider.com ranks stocks based on projected earnings, allowing investors to focus on the most undervalued stocks and helping to remove emotions in selecting stocks for investments that often result in costly mistakes.
IC TOP10 stocks are likely to deliver the best returns up to the end of May 2024 and are ranked in order of potential gains, computed using projected earnings for the current fiscal year. Expected values will change as stock prices fluctuate and result in weekly movements in and out of the lists. Revisions to earnings are ongoing, based on receipt of new information.

Persons who compiled this report may have an interest in securities commented on in this report.

Jamaica Stock Exchange poised for solid gains in 2023

The Jamaican stocks are poised to record a solid performance in 2023 as interest rates commence their decent later in the year and profits of several companies enjoy significant gains. Inflation has passed its peak from 2021 and trended down in 2022 towards the 7 percent level and is set to fall further. The economy is growing as the critical important tourism sector enjoys a sharp recovery while certain input costs have normalized.
Investors should focus on the likely performance of individual companies rather than on the market. Even as interest rates rose sharply last year, it did not prevent the majority of stocks in the Junior Market from rising and nearly half those in the Main Market, as profit growth out weight pressure from rising interest rates. Careful looking at economic developments for 2023 points to another year when there will be significant gains for several companies as profits of many will rise and BOJ cut interest rates as inflation subsides and foreign exchange inflows jump.

Dolphin Cove stock projected to a big 2023 winner.

A key investment observation reveals that good stocks deliver optimal returns over an extended period. They do not usually make huge moves over a short period that is clearly the case with ICTOP15 stocks that may deliver good gains over more than a one year period. Investors need to take this approach to benefit fully from the attractive bargains that currently exist in the Jamaica Stock Market, with uncertainty as to the exact timing of the market takeoff.
The past year ably demonstrated the need to focus on companies, not the markets. The Junior Market managed to record gains of 16.3 percent for the year, but it turned out to be lower than the 29.7 percent gain in 2021. The main market declined at the end of the year as investors forsook the financial institutions in the market and essentially pushed the market down due to rising interest rates.
2022 started off quite brightly for the Jamaica stock market, especially Junior stocks that were up 27 percent by May, but increasing interest rates placed a damper on the performance of stocks, even then, 31 stocks in the Junior Market rose, with 21 gaining 11 percent to a high of 312 percent and 15 stocks gaining over 50 percent, while 7 gained 100 percent or more.

Caribbean Producers to be a big 2023 winner

While the main market index fell 10 percent for the year, the market ended the year with gains in 22 stocks, with gains between two and 82 percent compared with 25 losers that fell from 3 percent to 40 percent. Increased profits were the primary reason for the gains in both markets.
In some cases, some stocks that did spectacularly well in the early part of the year pulled back markedly after Treasury bill rates surged to 8.5 percent in April and remained at that level to the end of the year.
The 80:20 rule of investing shows an average of only 20 percent of stocks that end in the TOP10 in a year repeat in the following one, while around 40 percent of the 10 worst performers end up in the TOP10 in the following year that is supported by data going back 40 years in the local market. The clear message is that investors should not get carried away with an outstanding winner and miss out on other opportunities.
The ICTOP15 are chosen based on the best information available, but there are many other factors to be aware of in 2023 that could swing in favour of or against the selections. Shipping rates that were very high for some time in 2022 are almost back to normal and will result in lower input costs for many listed companies.

Everything Fresh to enjoy gains from tourism in 2023.

Interest rates have been hiked appreciably to contain inflation and foreign exchange demand. With inflation subsiding, interest rates could start a downward trek in the first half of the year and probably before the first quarter ends, when this happens it will be a positive sign for stocks. Worldwide, many prices are declining. Locally, tourism has bounced back strongly but could jump around 50 percent up to April and have significant implications for the broader economy and several listed companies. Bear in mind that the revenues and profits of companies will be affected in different ways and it will be challenging for forecasts to be always close to the mark. 2023 will be a year to key keen eyes on ongoing developments that could affect companies and their operations.
Two key features of the stock market in 2023 will be the strong rebound in tourism traffic in the first half of the year compared with 2022, this development will contribute to above average GDP growth in the first half but will also result in a significant jump in revenues and profits for a number of companies, Caribbean Producers, Dolphin Cove, Everything Fresh and Express Catering that are heavily involved in trading in that sector.

NCB Financial could move from worst performer to TOP10 2023 performer

For the first quarter of 2022 visitor arrivals to Jamaica averaged approximately 72 percent compared to 2019 and 97 percent in the April to June period but in September and October the numbers climbed approximately 12 percent over that for 2019 when this level of recovery is factored into the equation for 2023 visitor arrivals in the first half of the year quit drum by 30 percent or more.
Banks benefited from increased interest rates in 2022 and will continue to do so in 2023 and should see some reversal in losses recorded last year as other comprehensive income. Other companies that would benefit but to a lesser degree are companies such as Wisynco and Jamaica Broilers in addition ICInsider.com expect interest rates to decline during the course of the year and that should provide added stimulus to the market.
A lot of potential gains were not factored into stock prices in 2022 many attractive ones are cheap, investors only task is to make the right choices to pick up gains in 2023 that could be much more exciting than normal.
The Junior Market has 15 stocks representing 32 percent of the market, with PEs from 15 to 35, averaging 21 compared with the above average of the market. The top half of the market has an average PE of 18 and shows the extent of potential gains that lie ahead for the TOP 10 stocks. The situation in the Main Market is similar, with the 20 highest valued stocks priced at a PE of 15 to 110, with an average of 33.5 and 24 excluding the highest valued ones and 22 for the top half excluding the highest valued stock.
Some of the above gains will not be fully reflected until May 2023 as stocks move primarily in response to the release of results. Companies with earlier year ends will discount most of the earnings before those with later periods.
Main Market stocks did poorly as a group in 2022, but they should enjoy a better year in 2023 with interest rates falling during the year and investors are presented with many choices of undervalued stocks. Regardless, Junior Markets stocks are points to outperform those of the more mature companies in the Main Market.