The Junior Market, closed on Wednesday at the highest level in more than 15 months with the June 9 close last year of 3,253.52 bettering today’s close of 3,234.44 in the market index which rose 25.41 points to be up 18.4 per cent for 2018 to date.
With moves over the past week, the market sentiment is now switched to bullish from consolidating. The two immediate targets are the 3,350 points level and then the 3,800 points, both being resistance points. The upward movement of the market would be consistent with the PE ratio of the market being revalued to at least match the 2017 year end of an average of the two markets of 14.5 times that year’s earnings.
The market closed with high level of 30 securities changing hands, compared to 24 on Tuesday, resulted in the prices of 14 securities advancing, 7 declining and 9 remaining unchanged.
The day’s trading to 4,168,953 units valued at $12,484,663, compared to 8,895,088 units valued at $105,891,017 on Tuesday.
IC bid-offer Indicator|At the end of trading, the Investor’s Choice bid-offer indicator reading had 5 stocks ending with bids higher than their last selling prices, none closed with a lower offer.
Trading closed with an average of 114,533 units for an average of $433,954 in contrast to 173,706 units for an average of $520,194 on Tuesday. The average volume and value for the month to date amounts to 242,183 units valued at $1,213,417, compared to 247,889 units valued at $1,271,186 previous trading day. Trading in July, averaged 154,060 units valued at $655,146 for each security traded.
At the close of trading, Access Financial closed with a loss of $1.70 at $45, trading 500 shares, AMG Packaging ended trading 66,295 stock units at $1.90, Blue Power concluded trading 2,694 units at $47, Caribbean Cream ended at $5.30, trading 2,000 shares, Caribbean Flavours jumped $1.50 to a 52 weeks’ high of $15.50, with 775 stock units changing hands. Caribbean Producers finished trading 10 cents higher at $7, exchanging 85,673 units, Consolidated Bakeries closed 1 cent higher at $2.50, with 10,000 shares, Derrimon Trading concluded trading of 5,877 shares at $21, Elite Diagnostic settled 10 cents higher at $3, in exchanging 34,150 units. Everything Fresh traded 80,360 shares and ended with a gain of 5 cents at $2.38, Express Catering traded 50 cents higher at $8.65, with 52,700 shares, FosRich Group finished trading 9,750 shares at $3, GWest Corporation ended at $2.17, after 91,280 units changed hands, Honey Bun concluded trading of 700 shares and rose 7 cents to $4.50. Indies Pharma traded 984,697 shares and lost 1 cent to end at $2.49 after trading at a new intraday high of $2.60, Iron Rock finished with a loss of 15 cents at $3.35, exchanging 20,000 shares, Jamaican Teas ended trading at $4.20, with 1,500 stock units passing through the exchange, Jetcon Corporation traded 1,233,200 units and rose 9 cents to end at $4.14, Key Insurance finished trading 1,000 shares with a loss of 11 cents at $3.05. KLE Group closed at $3, with 8,800 shares, Knutsford Express ended $1.14 higher at $12.50, trading 26,715 shares, Lasco Distributors concluded trading of 196,429 stock units after rising 30 cents to $3.95, Lasco Financial finished 37 cents higher at $5.90, trading 67,626 units. Lasco Manufacturing settled at $4, with 326,871 shares changing hands, Main Event ended trading with a loss of 36 cents at $6.75, with 5,673 shares, Medical Disposables traded 56,449 shares with a loss of 5 cents at $5.10, Paramount Trading finished trading 11,503 stock units and rose 80 cents to $3, Stationery and Office closed with a loss of 50 cents at $8.50, after 4,188 units changing hands and tTech concluded trading of 1,200 shares and rose 1 cent higher to $5.01. In the junior market preference segment, Eppley 9.5% finished trading 47,388 shares at $5.98.
Prices of securities trading for the day are those at which the last trade took place.
All Jamaica just below 350,000 points
The main market of the Jamaica Stock Exchange hit new record high with the all Jamaica composite Index sitting just below the 350,000 points level with 3 hours of trading elapsing.
The All Jamaican Composite Index jumped sharply by 5,035.03 points to 349,774.63 and the JSE Index surged 4,5687.48 points to end at a record 318,684.18 while the Junior Market index jumped 32.26 points to 3,194.15.
Indies Pharma traded 3,185,194 shares up to $2.25 up 75 cents from the IPO price of $1.50 while Everything Fresh climbed to $2.20 following six months results. Subsequently, Indies traded 21.19 million units with the last traded price being $2.24.
NCB jumps out Indies in IC TOP 10
The main market of Jamaica Stock Market ended at a record close on Friday with NCB Financial jumping $3.01 to $100.01 as Jamaica’s largest financial group dropped out of the IC Insider.com’ Top 10 main market stock list.
NCB price jumped on Friday, as investors responded positively to the group’s June results and was replaced by Carreras at 9th position. NCB remains an excellent stock to hold for long term growth and increased dividends. In the Junior market Caribbean Producers rose to $5.80 and Medical Disposables to $5.51 to ease out of the top listing and were replaced by recent Initial Public Offer, Indies Pharma at number 9 and Jetcon at 10.
The PE ratio for Junior Market Top stocks averages 7.4 compared to an average PE for the overall market of 12, based on 2018 estimated earnings and the main market PE stands at 7.8 for the top stocks, compared to a market average of 13, a good indicator of the level of undervaluation of these stocks.
The TOP 10 stocks now trade at an average discount of 37 percent to the average for the Junior Market Top stocks but it’s a third of what the average PE for the year is likely to be of 20 times earnings and main market stocks traded at a discount of 40 percent to the market.
TOP 10 stocks are likely to deliver the best returns within a 12 months period. Stocks are selected based on projected earnings for each company’s current fiscal year. Based on an assumed PE for each, the likely gains are determined and then ranked, with the stocks with the highest potential gains ranked first followed by the rest, in descending order. Potential values will change as stock prices fluctuate and will result in movements of the selection in and out of the lists for most weeks. Earnings per share are revised on an ongoing basis based on new information received that can result in changes in and out of the list as well.
Stocks to Watch this week
There are clear signs that the usual summer rally has started on the Jamaica Stock Exchange, with the main market hitting new highs on all five trading days during the past week, and ending at record closing highs on all, except on Friday.
The main market entered record territory, minutes after opening on Friday with the All Jamaican Composite Index climbing 1,082.40 points to an intraday record of 340,315.50 and the JSE Index rising 986.19 points to a record 310,065.85. The market is being steered higher by an upward sloping support line as well the 45 and 125 day moving averages, lending support just below the index for the main market and the Junior Market is being steered by an upward rising long term support line.
The market saw many developments that confirm that a bull market is in place. Mayberry Jamaican Equities initial public offer, opened and closed on Monday, having been oversubscribed and Indies Pharma public offer opened on Thursday and closed on Friday but Stanley Motta remains opened after more than a week since the offer opened.
Elsewhere in the secondary market, Jamaica Broilers traded briefly at a record high of $33, others trading at 52 weeks’ high in the main market are Kingston Wharves trading at $52.03, PanJam Investment at $58.99 and Pulse Investments trading up to $3.50, but 138 Student Living, having fallen to a 52 weeks’ low of $4.40 the previous week fell even lower in this past week to $3.85,
Former TOP 10 Junior Market listing, Derrimon Trading ordinary share, hit at an all-time high of $23 during the week. Current TOP 10 listing, CAC2000 hit a new record high of $10 as well as C2W Music climbed to $1.60, while recently listed Everything Fresh traded at an all-time low of $1.95 since listing in June. US dollar market listings, Margaritaville and Proven Investments both traded at a 52 weeks’ lows during the week as investors seem to lose interest in the US dollar listed shares.
The main market is exhibiting strong bullish signals while the Junior Market seems more subdued apparently waiting on the release of results.
Against this back drop there could be some interesting developments in in the market in the coming days. Based on demand and supply of stocks and trading activities last week the stocks worth watching this week include, Caribbean Cream that jumped sharply on Friday after the company reported improve first quarter results, NCB Financial pulled back in the past week but may be constrained by the $100 mark until the group reports third quarter results by month end. PanJam Investment could move higher again, as there continues to be buying but there is very limited supply of the stock on offer. Radio Jamaica that came for increased buying recently seems to be seeing supplies coming to market at $1.20 or higher and could get more attention as the weeks roll on. Others worth watching include Caribbean Cement, Berger Paints with little selling, Grace Kennedy for which there is also limited supply. In the Junior market, some demand exists for Derrimon Trading, with a resolution to be voted on at the upcoming AGM to split each share into 10 units, but the price may be stuck around the $20-23 range with the PE more than 20 times 2018 earnings compared to the market average of 11.4. Stationery and Office Supplies continues to trade around the $8 mark, with limited supply on offer, the stock is worth watching but may require second quarter results to kick the price to another level. With the directors stating that they have discussed the possibility of a stock split in the past, the stock can be expected to be one to see a split probably by the next AGM, investors should be stock piling this one with the price being undervalued. Jamaican Teas pulled back in the past week from $5.50 to $5 this week, but with limited stocks being offered for sale, is worth watching. Wisynco seems to have found support just above $9 and is one to watch over the next few weeks as the release of full year result nears, the Jamaican Stock Exchange is another to be watched along with JMMB Group and Seprod.
Indies Pharma could make you money
Indies Pharma goes to market on Thursday to raise $248.4 million from 174 million shares for its own use while the current shareholders are offering 92.5 million units to raise nearly $139 million.
Only 60 million shares are set aside for the general public. The shares are mostly priced at $1.50 each with lower prices for shares reserved for selected groups. The proceed is expected to be used to pay off loans to its parent company and bank loans, working capital and funds the cost of the issue. The total issued shares currently amount to 1,158,553,500 units and the issue of 173,983,149 shares, if successful will raise the total issued shares to 1,332,536,649 units.
Indies Pharma is a pharmaceutical distribution company out of Montego Bay, which sold its first pharmaceutical 2005, and today distributes over 150 prescription and over the counter pharmaceutical formulations for Bioprist Holdings under the ‘Bioprist’ brand and operates the Trident Pharmacy located nearby in Sam Sharpe Square, Montego Bay. The Company currently services customers across all 14 parishes of the island, including over 400 pharmacies, private and public hospitals and government agencies including the National Health Fund as well as medical practitioners, and directly to individual end users.
Based on how investors have gone about pricing IPOs at their peak, it seems likely that Indies Pharma will peak around $2.45 based on IC Insider.com’ projected earnings in 2018, of 17 cents per share. It could even go higher if the number of applicants for shares exceed those Junior Market IPOs from those going back to 2017.
The stock sits in the mid-range of IC Insider.com’s ranking of Junior Market stocks with a PE of 9, just a bit less than the average of 11 for the market but most IPOs have traded around 15 times the current year’s earnings at the peak reached within 2 weeks or so.
Indies is not the cleanest entity to come public in recent years. The prospectus shows that there are clear areas of management weakness that need sorting out, but they are not alone, Elite Diagnostics exhibited some similar traits in spite of having men with business experience as board members. The promoters and directors should never have allowed the prospectus to be put out with scanned copy of the audited accounts from the book issued by the auditors. It does not telegraph a good message about management.
The financials are strong but here again it reflects concerns. The statement of Financial position show amount dues from directors standing at $166 million per the half year report. Under the tax laws of Jamaica such amounts may be taxable if not repaid within a certain time frame as the amount would be treated as a distribution. Its is unclear if this issue is addressed in the prospectus.
The company has some strong positives. At the end of October 2017 borrowed funds exceeded shareholders’ equity this has changed by April this year with equity of $374 million well ahead of debt of $194 million. For one Gross profit which has been running between 75 percent to 62 percent between over the past five years with the half year to March coming out at very strong 62 percent, revenues grew an average of 15 percent for the past 4 years but only 6 percent in 2017 but is up by 10 percent for the half year to April. The company has been able to keep cost well under control and this has enable a richness in profitability with pretax profit rising 56 percent in 2017 89 percent in 2016 and 154 percent in 2015 after a 25 percent increase in 2014. The profit for 2016 would have been even better if there was not a loss on sale of fixed asset in the 2017 period amounting to $32 million but the rise in 2017 would likewise be less.
For the half to April this year revenues rose 10 percent to $301 million over the similar period in 2017 but profit is only up 6 percent to $73 million from $69 million before tax. IC Insider.com forecast is for a 16 percent increase in pretax profit to $200 million for the current year. The company could pick up additional sales as a result of the publicity that emanates from the listing.
going forward the slow seen in revenues in 2017 to date has to be watched as that could suggest maturing of the company but they have a long pipe line of applications in to add products to the existing lines.
Indies Pharma IPO coming this week
Last year summer was hot, very hot for the Jamaica stock market as for the first time there were multiple Initial Public Offers (IPO) on the local market at the same time.
This summer is turning out to be another hot one as well. Already, there are two new issues out with Stanley Motta and Mayberry Jamaican Equity to open this week.
Information reaching IC Insider.com is that another Montego Bay based company, Indies Pharma will issue its prospectus by the end of this week, to raise around $400 million. The issue is likely to be priced at just under 10 times 2017 earnings but slightly less, based on earnings for 2018, IC Insider gathers. According to the company’s website, they have approximately more than hundred drug presentations in the market and have filed to have more than 350 drugs licensed at the Jamaica Ministry of Health and hope to capture 10 percent of the local market after they obtain the licenses. The broker handling the offer is GK Capital.
IC Insider also gathers that there is a venture capital firm offering shares in a private placement currently.