Why accountants cant compute earnings per share?

January 28, 2023 by

The latest company to get the computation of earnings per share wrong is the last to list on the Jamaica Stock Exchange, but it is not the only one that has accountants and auditors that cannot compute earnings per share properly. The other most recent listing got it terribly wrong, not only did this happen for the interim accounts, most likely produced internally but the audited report had the wrong computation as well.

Dr. Karlene McDonnough – Chairman of Image Consultants Ltd.

The correct computation of earnings per share is so critical, with investors using it to value shares of companies. A wrong calculation can result in distorted valuation by investors placed on a stock and it only needs to be in the marketplace for a few days for enormous potential damage to be done.
The Jamaica Stock Exchange in publishing reports with woefully inaccurate earnings per share figures should place a bold note with the release of the results that there is an error in the EPS so that all investors can be aware of it upfront. This approach is recommended rather than waiting for the company to re-compute it as the release of profits is also of much import to the market. this will require a different approach by the JSE than the current practice.
Image Plus Consultants which was listed just over a week ago reported a strong increase in revenues and profits but spoilt it by reporting excessively overstated earnings per share as they used the incorrect number of shares in the computation. Rather than 29 cents per share for the quarter and $1.84, it reported the computation is 2.3 cents and 15 cents for the nine months. One on One Education did the same thing for both their audited accounts and the first quarter results, both of which were corrected this past week after it was in the public domain for several days before the revision. This publication has been critical of the boards of both companies. The latest error shows the lack of experience on behalf of the board members as well as their accountant and the stock exchange must share the blame as well.

Ricardo Allen CEO of One to One

It is one thing for a company to get the computation wrong, it is an entirely different issue for auditors to do the same. The problem is that on too many occasions this error is cropping up and the situation seems to get worse as the Junior Market listings grow.
Stock splits or stock bonuses do not result in averaging shares issued. All that is needed in such cases is to use the new number of shares in computing EPS and all past periods are to be adjusted likewise. Only when new shares are issued for a consideration of value that the time weighted average number of shares would be used.
We have written on more than one occasion that investors in Jamaica are not properly protected, the above errors are just some of the matters that need to be addressed, but like the Stocks and Securities issue and others similar, those in authority fail to move with alacrity in correcting the fault.

Filed Under: Initial Public Offers, JSE Junior Market, Stock Market Tagged With: , , , , , , , ,

A Lasco company exists ICTOP10

January 28, 2023 by

The Jamaica stock market continues to consolidate, awaiting a dynamic development to push it decisively in one direction or another as the Bank of Jamaica quietly tightened the money supply further in January, drying up buying power in the short run. The first big likely move is unlikely to be a reduction of interest rates which is seemingly set to occur in the second quarter, but the reporting of substantially increased profits to flow from some companies.
Tropical Battery returns to the ICTOP10 list for this week with projected earnings of 30 cents for the current year, up from 15 cents last fiscal year and replaces Lasco Manufacturing which dropped out with a rise in price during the week as the supply of the stock has drooped sharply recently, with just 11 offers to sell now in the system.
Image Plus Consultants reported nine months results with revenues rising 27 percent in the November quarter to $248 million and 43 percent in the nine months to $803 million, while profit  rose moderately to $24 million from $22 million in 2021 and for the nine months profits nearly tripled that of 2021 to reach $148 million. The company reported incorrect earnings per share for the periods, using the incorrect number of shares. As a result, rather than 29 cents per share for the quarter and $1.84, it is 2.3 cents and 15 cents for the nine months. Regardless, the stock is cheap based on these earnings and those to come.
Honey Bun rose 10 percent to $7.69, with the December quarter results due any time now, Lasco Financial gained 9 percent to $2.84 and Lasco Manufacturing gained 5 percent to $4.79. General Accident rallied 6 percent to $4.99. Image Plus Consultants entered the ICTOP10 after just one day of trading and fell to a low of $1.86 during the past week before rebounding to close this past week with a fall of 12 percent to $1.93, Caribbean Assurance Brokers lost 6 percent of its value to close at $2 and Paramount Trading fell 5 percent to $2.10.
All other movements in the Junior Market TOP10 were 3 percent or less. The Main Market Berger Paints popped 12 percent to $10.60, followed by a 9 percent rise for Jamaica Broilers to close at $31.50 and Guardian Holdings with a gain of 4 percent to $535. There were no notable losses.
At the end of the week, the average PE for the JSE Main Market TOP10 is 5.6, well below the market average of 15, while the Junior Market Top 10 PE sits at 6.5 versus the market at 12.6, critical indicators of the level of the undervaluation of the ICTOP10 stocks currently. The Junior Market is projected to rise by 211 percent and the Main Market TOP10 by an average of 274 percent to May this year. The primary concern for the Main Market achieving such gains by May is that the list is dominated by financial companies that are out of favour and may need to see the summer months before the full interest of investor start to show.
The Junior Market has 15 stocks representing 31 percent of the market, with PEs from 15 to 29, averaging 21 compared with the above average of the market. The top half of the market has an average PE of 18, with prices of Fosrich and Future Energy adjusting downwards closer to the average of the TOP15. The above average shows the extent of potential gains for the TOP 10 stocks. The situation in the Main Market is similar, with the 18 highest valued stocks priced at a PE of 15 to 116, with an average of 27 and 20 excluding the highest valued stocks and 27 for the top half excluding the highest valued stock.
ICTOP10 focuses on likely yearly winners, accordingly, the list includes some of the best companies in the market but not always. 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 will likely deliver the best returns up to the end of May 2023 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, resulting 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.

 

 

 

Filed Under: Buy Rated Tagged With: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

ICTOP10 buy rated Knutsford gains 44%

January 23, 2023 by

Shares of Image Plus Consultants were listed on the Junior Market of the Jamaica Stock Exchange on Friday to become the 48 listed company on the exchange and the 52nd company to be listed since the market commenced operations in 2010.

Knutsford Express

The stock failed to sparkle on listing, rising just 10 percent at the close and could come under selling pressure as investors exit for what they see as greener pastures. Regardless, the stock climbed into the ICTOP10 list for this week and replaces Caribbean Cream got an earnings downgrade.
Knutsford Express dropped out of the ICTOP10 at the end of the prior week and closed this past week at $12.49 to be up a solid 44 percent since it entered the TOP10 on the end of December. It still has much more room to rise with a current PE of just 12.5 and less, based on next fiscal years’ earnings. The move shows, the power that increased earnings have on price movement, with the company posting a profit of $143 million for the six months to November up from $13 million in 2021.
The Junior Market rose this past week t into poo record a rise for the first time this year, the move resulted in three solid gains and three sizable losses for the ICTOP10. Iron Rock Insurance jumped 19 percent to $2.40, Lasco Manufacturing gained 13 percent to $4.55 and Paramount Trading climbed 11 percent to $2.20, after release of strong second quarter results that showed continued improvement in profit, jumping 212 percent for the half year to $149 million. Caribbean Cream reported improving results but the overall profit was light and the stock fell 20 percent to $3.20, Lasco Financial shed 8 percent to $2.60 and General Accident slipped 7 percent to $4.71. All other movements in the Junior Market TOP10 were 3 percent or less. The Main Market only major mover was Berger Paints with an 11 percent loss to $9.50.
At the end of the week, the average PE for the JSE Main Market TOP 10 is 5.5, well below the market average of 15.9, while the Junior Market Top 10 PE sits at 6.5 versus the market at 13, important indicators of the level of the undervaluation of the ICTOP10 stocks currently. The Junior Market is projected to rise by 212 percent and the Main Market TOP10 an average now of 285 percent, to May this year.
The Junior Market has 17 stocks representing 35 percent of the market, with PEs from 15 to 30, averaging 20.7 compared with the above average of the market. The top half of the market has an average PE of 19 and shows the extent of potential gains for the TOP 10 stocks. The situation in the Main Market is similar, with the 18 highest valued stocks priced at a PE of 15 to 104, with an average of 32 and 23 excluding the highest valued stocks and 27 for the top half excluding the highest valued stock.
ICTOP10 focuses on likely yearly winners, accordingly, the list includes some of the best companies in the market but not always. 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 2023 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.

Filed Under: Buy Rated Tagged With: , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Heavy IPO first day trading bad for stock

January 23, 2023 by

Investors seem to accept that shares of Junior Market companies offered to the public will be oversubscribed and would go on to hit the circuit breaker of the first day of trading and take a few trading days before liquidity starts to emerge and deliver significant gains. The latest listing on the market that was oversubscribed was not greeted with the euphoria usually associated with IPOs and struggled on debut, with heavy trading in the stock.  
Since 2019, the Junior Market added 13 new listings, with Image Plus Consultants being the last with its listing on Friday.  Trading was unusually heavy on the first day with an exchange of 12.4 million units, accounting for 61.3 percent of the day’s trade with the price moving 10 percent to $2.20 from a listed price of $2. Image Plus although significant for a first trade is not the largest volume for an opening day.
The biggest volume on debut belongs to Future Energy that rose 32.5 percent after trading 19.68 million shares and never got a second leg in April when it listed and remained around the closing price for all of month.  JFP rose 31 percent on the first day with 10.19 shares trading. Tropical Battery rose 29 percent on the first day with 5.76 million shares traded, with all of the others trading less than 356,000 units, with the lowest being a mere 100 shares for Limners and Bards, with a first day price gain of 30 percent.
The worst performing stock since 2019 is iCreate with a rise of 8 percent on the first day. All other stocks gained between 30 percent and 32.5 percent on the first trading day.

Filed Under: Initial Public Offers, JSE Junior Market, Stock Market Tagged With: , , , , , , , , , , ,

Mixed JSE trading on Friday

January 20, 2023 by

Trading was mixed on Friday on the Jamaica Stock Exchange, with the volume and value of stocks traded rising compared to Thursday helped by the newly listed Image Plus Consultants on the Junior market.
Trading ended, with an exchange of 30,350,965 shares compared to 24,723,664 units on Thursday, with newly listed Image Plus contributing 12.4 million of Friday’s volume, and $26.4 million to the value of trading of $178.7 million compared to $62.7 million on the previous day. Trading on the JSE USD market resulted in investors exchanging US$81,708 versus US$23,978 on Thursday.
At the close, the Combined Market Index dropped 79.20 points to end at 354,517.71, the All Jamaican Composite Index dipped 921.76 points to 386,062.55, the JSE Main Index declined 214.32 points to settle at 340,731.16, the Junior Market popped 30.02 points to settle at 3,993.91 and the JSE US dollar market lost 0.89 points to close at 218.24.
The market’s PE ratio ended at 23 based on 2021-22 earnings and 13.7 times those for 2022-23 at the close of trading.
Investors need pertinent information to successfully navigate many investment options in the local stock market. The ICInsider.com PE ratio chart and the more detailed daily report charts provide investors with regularly updated information to help decision-making.
Investors should use the chart to help make rational investment decisions by investing in stocks close to the average for the sector and not going too far from it unless there are compelling reasons to do so. This approach helps to remove emotions from investment decisions and put in on fundamentals while at the same time not being too far from the majority of investors. Investors who buy when the price of a stock is close to the average will find that they are not inclined to overpay for a stock.
The ICInsider.com PE Ratio chart covers all ordinary shares on the Jamaica Stock Exchange. It shows companies grouped on an industry basis, allowing easy comparisons between the same sector companies and the overall market.
The net asset value of each company is reported as a guide to assess the value of stocks based on this measure quickly. The chart also shows daily changes in stock prices and the percentage year to date price movement based on the last traded prices. Dividends payable and yields for each company are shown in the Main and Junior Markets’ daily report charts that show the closing volume for the bids and offers.
The EPS & PE ratios are based on 2021 and 2022 actual or projected earnings, excluding major one off items. The PE Ratio is the most popular measure used to determine the value of stocks.

Filed Under: JSE Combined, Stock Market Tagged With: , , , , , , , , , , ,

Image Plus crashed on launch

January 20, 2023 by

Image Plus Consultants share crashed on launch after listing on Friday morning on the Junior Market of the Jamaica Stock after the price reached a high of $2.25 with 104.4 million units trading in the early morning session.

Dr. Karlene McDonnough – Chairman of Image Plus Consultants Ltd.

The price fell back to just over the IPO issue price of $2 after 90 minutes and traded up to $2.20 after more than two hours of trading. Within a few minutes after midday, investors exchange slightly more than 9.8 million shares, with the last traded price of $2.09.
The listing brings the total number of companies on the Junior Market to a record 48. The shares will be amongst the few IPOs since the covid9 pandemic that failed to rocket higher on the first day of trading.
The company offered 247,889,936 new shares to the public at $2 each, to raise $495,779,872 before expenses, with the offer that opened on December 28 and closed on December 30, last year and was oversubscribed.
Applications from Key Stakeholders, Broker Reserved and Employees got full of the amount applied for, with the General Public getting the first 10,000 New Shares applied for and 35.68 percent of the balance.

Filed Under: Initial Public Offers, JSE Junior Market, Stock Market Tagged With: , , , , ,

Image Plus Consultants IPO looks attractive but…

December 17, 2022 by

Yet another company is heading to the Junior Market of the Jamaica Stock Exchange on the heels of the recent successful Regency Petroleum public issue that culminated in a listing on Thursday. The prospectus of Image Plus Consultants limited offers up to 247.89 million new ordinary shares at the price of $2 each, projected to raise $495,779,872 before expenses and to list on the Junior Market.
The issue will amount to 20 percent of the increased share capital of 1.2394 billion shares, up from 991.56 million currently issued. The offer values the company at $2.5 billion and that should rise to around $5 billion sometime after listing.
The issue opens on December 28 and is slated to close on January 11, but should close on the same date of opening or soon thereafter. Based on recent IPOS, if $5 billion goes into the Public allocation, investors can expect to get around eight percent of the offered amount.
Image Plus Consultants Services owns and operates the 25 years old Apex Radiology a Medical Imaging Company that was established in 1996.  Services provided include multiple modalities such as X-Ray, Ultrasound, CT Scan, Fluoroscopy and Nuclear Medicine at three locations in Kingston and one in Ocho Rios. The prospectus states that “With a view to growing at a faster pace, the Board took the decision to employ professional management experience and recruited a Chief Executive Officer in late January 2020. That step has resulted in very evident benefits demonstrated by the significant increases in patient cases, revenue and net profit margin over the last thirty months.”
Shareholders’ equity of $267 million in February 2022 was up 55 percent over the previous year and moved to $362 million in August. Profits before tax of $113 million increased 318 percent over the fiscal year to February 2021, representing the return of equity of 43 percent that flowed from revenues of $778 million which was up 10 percent over the prior year.
Total assets stood at $619 million at the end of August this year. Current assets ended the half year at $325 million and include receivables of $248 million that climbed from just $99 million at the end of August last year and from $139 million at the end of February this year. Current liabilities amount to $$124 million, while borrowed funds ended at $132 million.

Dr. Karlene McDonnough – Chairman of Image Plus Consultants Ltd.

Results to August show revenues and profits growing with revenues up 53 percent to $555 million from $363 million in 2021 with profit before tax of $153 million up 237 percent above the 2021 outcome of $45 million. Prior to the current year directors’ fees were paid at a higher rate than normal but are expected to reflect market rates going forward as a result the $66.5 million expensed in 2022 will drop sharply in the fiscal year 2023 and should result in a fall in administrative expenses.
“The Company intends to use funds raised to strategically and sustainably grow the business by acquiring property to be identified in Kingston which is suitable to relocate our largest operations, thereby ensuring control of our revenue and allowing for even further expansion of our offerings. Procuring suitable new bio-medical equipment to offer additional diagnostic modalities at our Ocho Rios location. Expand our offering of interventional procedures, maximizing this fast growing area of diagnostic imaging” the prospectus states.

The PE ratio will be just 7 times current year’s earnings and puts the stock in a strong position to move towards $6 during 2023. A comparison with Elite Diagnostic makes for interesting reading. While the reported profit is better for Image Plus, most other measures are in favour of Elite. The best comparison is EBITDA which shows Image with $152 million versus Elite with $190 million for the 2022 fiscal year. The interim figures annualized show Image with $359 million versus Elite with $220 million for the 2023 fiscal year. At $2 per share for the Image IPO, the stock is priced at 5.6 times EBITDA and Elite trades around 5.3 times. With three locations Elite net fixed assets amount to $885 million versus Image with $279 million and resulting in Depreciation charge being more than three times that of Image with four locations and higher finance costs as well.
If listed, the company would be the second such entity of the exchange following Elite Diagnostic. A successful IPO will raise the Junior Market listings to 48 and the total to list on that market to 52, including three that migrated to the Main Market and one that failed.
The board of directors is dominated by doctors in the medical profession and could do with some other directors with wide-ranging business experience. The directors are Karlene McDonnough, Lilieth Bridgewater, Gordon Bradshaw, Steve Lewis, Marian Vaughn and Leon Vaughn all medical-related doctors, Carolyn DaCosta, Jacqueline Leckie and Kisha Anderson.

Filed Under: Initial Public Offers Tagged With: , , , , , ,

Image Plus Consultants the next IPO

December 16, 2022 by

Yet another company is heading to list on the Jamaica Stock Exchange and is coming on the heels of Regency Petroleum that was listed on Thursday. Image Plus Consultants Limited announced its intention to go public and that seems imminent with the Junior Market seems the most likely target.
Image Plus Consultants Services owns and operates the 25 years old Apex Radiology a Medical Imaging Company that was established in 1996.  Services provided include multiple modalities such as X-Ray, Ultrasound, CT Scan, Fluoroscopy and Nuclear Medicine at three locations in Kingston and one in Ocho Rios.
According to an advertisement in the newspapers, shareholder’s equity stood at $267 million in February 2022 and was up 55 percent over the previous year, with profits before tax of $113 million that increasing by 318 percent over 2021, representing the return of equity of 43 percent that flowed from revenue of $778 million which was up 10 percent over the prior year. Total assets amounted to $447 million at the end of February this year.
Based on the profit, the company’s market value is just over $2 billion after the shares are listed.
If listed the company would be the second such entity of the exchange following Elite Diagnostic. A successful IPO will raise the Junior Market listings to 48.

Filed Under: Initial Public Offers Tagged With: , , , , , ,