The Main Market 15 for Investment2022

The 15 Jamaica Stock Exchange Main Market companies that seem poised to score big in 2022 are shown below. As is the case in the past some of these stocks may do better than projected and some may not do a swell, others may take longer to deliver the returns depending on how investors react to new to come about the companies or the industry they operate in. an example of this is the financial sector that ICInsider.com gathers had some negative results from Jamaican bonds with the rise in interest rates and reduction in trading activity as interest rate changes in Jamaica and pending rate change in the overseas markets.
Radio Jamaica – Earnings per share is projected at 65 cents for the year to March 2023 but they should end up with 45 cents for the 2022 fiscal year. The stock rose sharply with a strong increase in volume, followed by strong June quarter profits, with the stock price hitting $4.80 at the peak in 2021.
Management has done an excellent job in turning around the operations in 2020 and the group is benefitting from a leaner operation as well as a boost in revenues in 2021 and beyond. With growth expected in the local economy over the next several years, revenues and profit should continue to hit new record levels. In addition, management continues to focus on increased efficiency, implementation of new technology in various aspects of the operation that will drive growth and profit. There are plans to extract revenues out of other assets that are not readily visible to the general public currently. Not to be missed is the impact an improving economy will have on increasing revenues as businesses increase advertising spend. Futuristically, with the digitization of the network, the company will be in a position to provide internet facilities to its customers as an additional potential income stream.

Berger Paints

Berger Paints – Earnings per share is projected at $2.25 for 2022. The stock is not every bodies’ favourite, but the company is coming back into its own and benefitting from rapid expansion in the construction sector. Expect continued growth to take place as it benefits from the booming housing market locally.
Guardian Holdings – Earnings per share is projected at J$90 for 2022. This stock has been beaten down in the Jamaican market, but it is selling at a much higher price in Trinidad. It is a very good company but has never gotten the valuation that it deserves. They are expected to continue to show profit growth which may falter from time to time based on the nature of their asset base and income stream. The decision of the directors to hold foolishly to the limited number of issued shares is hurting the price badly but they will learn that it is not in the best interest of investors to continue to do so. At that time the stocks will perform better.
JMMB Group – Earnings per share is projected at $7 for the year to March 2023. It is one of the more undervalued stocks on the market, the price is about 6 times earnings. The company has a great deal of room for above average growth in the future. The group’s exposure to doing business in the Dominican Republic is a huge market of 11 million relative to Jamaica, where it can expand in a major way, either by acquisitions or just expanding the current footprints. Historically, the stock tends to move sideways until early summer, if that holds there may be time to focus elsewhere and return to this one. Investors should think long about this one. The company gets permission to buy back shares and the directors set later in the second quarter this year to start doing that and it could mop a lot of selling pressure.

JMMB

Sygnus Credit Investment – Earnings per share is projected at $2.60 for the year to June 2023. At a PE ratio of 5.5 2023 earnings the stock is undervalued and is so based likely 2022 earnings of less than a PE of 10. It operates in a sector that is not well known to the investing public, but that is where above average gains can be made. Management is on target to extract optimal gains from the operations. An example of this is when they raise funds before listing, the planned rate of return was around 8 percent now in the range of 12 percent. The company announced the acquisition of a credit investment company in Puerto Rico that should close later in the year. This will help drive revenues and profit as it broadens its reach and be in a position to attract more capital to allow for greater expansion.
Sterling Investments – Earnings per share is projected at 45 cents for the year to December 2022. The stock is seriously undervalued but investors don’t care much about this one seeing it more as a dividend provider than one with capital growth potential. Earnings should approach 40 cents for 2021 and be higher in 2022. Revenues and profits will benefit from higher interest rates locally and overseas in 2022 that will enhance profitability.
In the year just ended, revenues totaled $185 million for the first nine months, 8.6 percent higher than the $170 million earned for the same period in 2020, driven primarily by increases in interest income and gains on the sale of debt securities. Total foreign exchange gains declined year on year, from $80 million for the 9 months ended September 2020 to $55 million for the nine months to September 2021 and seem set to reverse in the final quarter of the year. Net income totaled $105 million for the first months of 2021, higher by 10.9 percent than the $94 million for the same period in 2020.

Caribbean Producers traded 52 weeks’ high during the week following a near US$2 quarterly profit.

Caribbean Producers – Earnings per share is projected at J$2 for the year to June 2023. Cost cutting and a sharp rebound in the tourism sector with visitor arrivals just 20 percent down on November 2019 numbers augur very well for increased income and profit and the stock that was one of ICInsider.com’s 2021 picks with a 435 percent increase since the start of 2021. ICInsider.com puts the stock price at $40 for 2022 as the company reports record profits and completes the acquisition of an overseas business during the year. Investors should look to a big bounce in the December quarterly profits that should triple the US$1.6 million profit made in the September quarter as revenues for the last quarter of 2021 come in around US$35 million compared to US$25 million for the September quarter.
Caribbean Cement – Earnings per share is projected at $10 for 2022. The company was on target to earn around $8 per share last year but lower sales in the September quarter, due partly to the impact of several days when Jamaicans were not allowed to leave home and a very rainy period reduced sales volume. The stock was trading around the $115 range before the release of the third quarter results was knocked down to trade around the $100 level. The company announced a proposal for a management fee levy by Cemex at which time sellers pushed the price to the low $70 level. The selloff seems overdone, with the company having good prospects to go on to deliver good profits for investors as it benefits from the boom now taking place in the building industry.
This sector is set to continue to grow with government fiscal operations creating more space for the private sector thus taking pressure off interest rates and helping to keep them low to provide a continual stimulus for the sector and the wider economy.
VM Investments – Earnings per share is projected at 80 cents for 2022. The company had good results up to the September quarter, with revenues climbing a strong 33 percent for the September quarter and year to date and profit surging 82 percent in the third quarter and 69 percent year to date. One gather that many financial institutions had negative effects from the changes in interest rates during the December quarter as trading activities slowed thus generating less fee income than previously. The group is set to acquire a pool of mutual funds in the Eastern Caribbean with net assets around J$1.6 billion that will generate increased management fees as the company continues to look for growth going forward.

Audrey Tugwell Henry Scotia group’s CEO

Scotia Group -Earnings per share is projected at $3.65 for the year to October 2022. The group has been focusing on restructuring its operations to fit the new way of banking that relies less on physical branches than before. That has led to some branch closures and changes to services provided. This will result in reduced operating costs that will start to show in the current year.
The advent of Covid-19 in 2020 led to increased nonperforming loan provisions and a contraction in lending, with loans net of loan provisioning, falling from $221 billion in October 2020 to $209 billion in 2021 and declining from $216 billion at the end of July 2021. The fall in the loan growth should be reversed in 2022 with expansion in the local economy and continued buoyancy in the building market. Additionally, interest rates were kept to a minimum in the local economy that result in reduced interest income but with the Bank of Jamaica hike rates from half a percent to the range of 4 percent, the group will generate much increase in interest income. The increased rates could add around $9 billion to revenues in a full year and increase profit.
Investors should be focusing on the medium term prospects than on the recent past that was negatively affected by short term developments that won’t last.
PanJam Investment – Earnings per share is projected at $8 for the year. A diversified group, with focus on the property market commercial and more recently the hotel sector, liquid investments managed directly by themselves and through its 30 percent associate, Sagicor Group. Investment in the stock is likely to deliver good long term returns, but the stock seems undervalued currently with quite a bit of upside potential.
For the quarter ending September last year, profit attributable to shareholders amounted to $2.5 billion, up from $1.5 billion in 2020 and $4.8 billion for the nine months versus $2 billion in 2020, resulting in Earnings per stock unit for the quarter of $2.33 and $4.52 for the nine that should push the full year results around $7 placing the stock that traded at $66 at the end of December as undervalued at a PE of 9.6 compared to the market average of just over 16.

Christopher Williams, Proven Investments CEO.

Proven Investments – Earnings per share is projected at 0.28 US cents for the year to March 2023. Proven stock has not performed over the past year but it could do so this year as acquisitions made recently, starts to contribute to improvement in revenues and profit. Investors would recall that the company raised fresh capital in late 2020 amounting to US$29 million in addition to sums raised a year or two before that was not fully utilized to acquire new business that would deliver a rate of return on investment that was much greater than cash funds. During the last year, the company closed on some acquisitions that are set to contribute to increased profits and enhanced earnings per share. The company also plans to rationalize some of the geographically diverse holdings to generate economies of scale and thus improve profitability further.
Grace Kennedy – Earnings per share is projected at $12 for the year. Earnings of $12 may appear steep, but that is possible, with continued growth in the food division and recovery in the financial sector as well as strong economic recovery in the main markets it operates in. regardless the stock is currently undervalued and will be a good vehicle for long term growth.
QWI Investments – Earnings per share is projected at 88 cents for the year to September 2022. The numbers appear rich but ICInsider.com expects Access Financial Services to come into its own in the current year and drive its stock price well into the $50 region or more and along with other excellent holdings of QWI that are poised to deliver great returns during the year. The stock was one of the better performers on the Main Market last year with a rise of 14 percent and the NAV increasing 21.5 percent. Last year NCB Group had a block of shares on sale that pressured the price for months but those are taken out and the company may be in a position to buy back shares as such 2022 is likely to be a year of improving fortunes.

Christopher Levy – Jamaica Broilers President and Chief Executive.

Jamaica Broilers – Earnings per share is projected at $3 for the year to April 2023. The group has been expanding with a good degree of focus on the North American market.
For the year to October, last year’s group revenues for the six months amounted to $35.8 billion, 35 percent higher than the $26.5 billion achieved in the corresponding six months of the previous year. Gross profit for the six months increased less than the growth in revenues at 14 percent to $7.3 billion, Gross profit as a percentage of sales declined from 24 percent in the prior year to 20 percent. The decline is primarily attributable to increased input costs that were partially mitigated by the significant growth in the US business. For the six months ended 30 October 2021, the net profit after tax was $872 million, a 21 percent decrease versus the corresponding period in the prior year. The decrease is primarily due to foreign exchange gains of $290 million in the previous year, including in finance costs, compared to foreign exchange losses of $70 million in the current year. The prior year’s gains were mainly in the Haiti Operations where the Haitian Gourdes experienced significant revaluation against the US dollar. Operating profit of $1.7 billion was aligned with the prior year.

The case for Main Market stocks in 2022

Investors’ attention turned to the Junior Market in both 2020 and 2021 as that market provided better values for stocks and therefore greater opportunities to make higher profits. Projected earnings of the listed companies suggest that the situation is unlikely to change in 2022.
The Main Market of the Jamaica Stock Exchange eked out a modest gain of 1.1 percent in the All Jamaica Composite index at the end of 2021, the index was 21.7 percent lower than the end of 2019.
The PE for the Main market is 14 times 2022 earnings compared to 16 based on 2021 earnings, that does not suggest a big uptick for the market with just a 14 percent increase expected in 2022 over 2021 that would push the index to 499,694 points, still well below the 559,853.26 points the market closed out 2019 at.
There are several stocks in the market, data suggest could more than double in 2022 and investor would be wise to not only pay attention but pick up some of these undervalued stocks in preparation for long term growth as the Jamaican economy rebounds and move into a new stage of long term positive growth that a number of these companies will benefit from.
Banks could be amongst the big performer as they shed the need for continued heavy provisioning of loans as well as grow their book of loans to deliver more income to profits. Added the increase in interest rates will help improve their net interest income.
ICInsider.com data indicates that there are 8 stocks that can double in the Main Market in 2022 into early 2023. 2021 finished with several stocks trading at or above 20 times earnings in the Main Market if that level of valuation continues into 2022 and is more widespread, then the gain in the market could exceed the above potential gains. In the final analysis, the market index is just a simple measure as to how the overall market is doing. It comes down to individual stocks that can do well and that is the case for ICInsider.com TOP15 stocks.

Profit drop at Elite but watch this stock

Revenue of $118 million for the first quarter in 2020 fell 7 percent to $110 million in the first quarter to September 2021, resulting in a loss of $10.3 million compared to a profit of $16.7 million the previous year for Elite Diagnostic.
Reduced revenues impacted profit margin with a decline to 61.4 percent from 66.25 percent in 2020 and from 63.3 percent for the fiscal year to June. Input cost climbed 6 percent to $42 million from $40 million and gross profit fell 14 percent to $67 million from $78 million.
On the surface, the last reported results for the company may drive fear into the minds of investors but that would lead to a miss of potentially profitable investment for the future. “Net profit was impacted by increased administrative expenses, depreciation and foreign exchange losses”, management advised shareholders in their commentary on the results.

Elite Diagnostics

The report to shareholders continued, “revenue was affected by Covid-19 with reduction of operating hours and reduced procedures. Currently, the company’s operational hours are back to normal. An unusually lengthy breakdown of the CT also impacted our revenues during the quarter. Along with our regular preventative maintenance of the machines, the company has invested in equipment and parts to reduce some of the downtimes of the machine breakdowns”.
“The St Ann location revenue is increasing month over month since all modalities became operational in the first quarter of 2020. The company is cautiously optimistic as the effects of Covid-19 more negatively impact the rural areas of the country. The company continues to see steady demand for imaging services at all locations.”
Administrative expenses rose 13.5 percent to $46 million in the quarter from $40 million and depreciation jumped 44 percent to $25 million from $17.4 million in 2020. Finance cost was steady at $10 million, while foreign exchange movement resulted in a $3 million swing from a surplus of $1 million in 2020 to a loss of $2 million in 2021.
In spite of the loss incurred in the quarter, gross cash flow was positive with inflows of $15 million, down from $28 million in 2020. Additions to fixed assets offset by loan inflows utilized just over $15 million as net cash outflow for the period ended at $503,581. At the end of September, shareholders’ equity stood at $449 million, long term loans at $209 million and short term loans at $10 million. Current assets ended at $679 million, including trade and other receivables of $44 million, cash and bank balances of $39 million. Current liabilities ended the period at just $20 million, with net current assets ending at $659 million.
The results ended with earnings per share being a loss of 3 cents for the quarter, down from 4 cents for the quarter in the prior year. Based on the latest results, most investors would be looking elsewhere for investment opportunities. In doing so, they could miss one of the biggest winners in 2022. IC Insider.com forecasts 30 cents per share for the fiscal year ending June 2022, with a PE of 10 times the current year’s earnings based on the price of $3.05 the stock traded at the Jamaica Stock Exchange Junior Market. The company has more room for revenue growth from the addition of new equipment, continued growth in the relatively new St Ann location and additional branches in the future.

Drax Hall branch of Elite.

The company paid a dividend of 9 cents in October this year 2021. Net asset value is $1.29, with the stock selling at just over 2.4 times book value.
Reporting to shareholders in the annual report for the year to June, the chairman, Steven Gooden, stated, “we have been fortunate to see an increased demand for imaging services and were prudent to have sought to capitalize on this demand – through the acquisition of new equipment. We will continue to pursue this growth strategy by installing a new MRI system at the Liguanea branch, which we anticipate will be operational beginning early 2022. This new machine, we expect, will serve to reduce the company’s operating hours and thereby its related expenses. Additionally, with the St Ann branch issues finally resolved, the location is now operating at the desired capacity. Looking ahead, the near to medium term holds the classic combination of challenge and opportunity.On the one hand, we see continued challenges in terms of rising prices, compounded by the depreciation of the local currency; the company pays all its rent and purchases equipment and supplies from overseas in US dollar, so any depreciation in the dollar will affect the bottom line. On the other hand, we also see our cash flows remaining stable, if not strong, amid the continued high demand for our services. The demand is so strong that, were it not for dealing with the issues associated with the Drax Hall branch, the company might well have advanced plans for another branch. We intend to approach growing the company’s footprint with alacrity and all seriousness in the coming year”.

Caribbean Cream stock for the main course in 2022

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Sale revenues rose 16 percent for the half year, to August 2021 $1.03 billion from $891 million but rose a mere 5.4 percent for the August quarter, to $486 million from $461 million in 2020 at ice cream maker Caribbean Cream. Management attributed the poorer second quarter performance to the several no movement days imposed by the government during the quarter.
Profit melted in the quarter by 85 percent to just $7 million from $47 million in 2020 and fell 17 percent for the six months to August, to $61 million from $74 million in 2020.
The company has not had a consistent and predictable profit outcome for some years, still, the trajectory has generally been up. In 2019 the company posted $89 million after tax that fell to $55 million in 2020 and $101 in 2021. The 2022 fiscal year profit is poised to beat that of 2021, notwithstanding the setback in the second quarter.

Caribbean Cream posted significant gains in profit in Q1.

Improvement in profit margin in the first half of the year was consistent at 41 percent, with the prior year’s six months but has increased over the 37 percent achieved for the fiscal year to February 2021. But it fell from 50 percent in the 2020 august quarter to 44 percent in 2021. The effect, operating profit fell 6 percent in the quarter to $215 million from $230 million but increased 15 percent for the year to date, to $423 million from $369 million in 2020.
Administrative expenses excluding depreciation rose 25.4 percent to $134 million in the quarter and increased 32 percent in the six months to $249 million, from $188 million in 2020. Sales and distribution expenses increased 8 percent to $30.5 million from $28 million in 2020 for the half year and were virtually flat at $15.5 million for the second quarter. Depreciation charge rose from $59 million in 2020 to $62 million in 2021 for the six months. Finance cost rose in the quarter to $6.7 million from $6 million in 2020 and $9 million to $12 million for the six months.
Gross cash flow brought in $151 million versus $160 million in 2020. Working capital growth used up all but $13 million in 2021 versus $81 million used up in 2020. Additions to fixed assets consumed $83 million for the 2021 half year versus $62 million in 2020. Loan repayment and paying $26 million dividends resulted in outflows of $114 million. At the end of December, shareholders’ equity stood at $869 million, with long term borrowings at $303 million and short term loans at $13 million. Current assets ended the period at $408 million, including trade and other receivables of $65 million, cash and bank balances of $103 million. Current liabilities ended the period at $173 million. Net current assets ended the period at $235 million.
The results in the past few years being inconsistent does not mean that the future will continue in that vein. One focus is on taking a more significant share of the market for ice cream and related products while finding avenues to cut costs. The company announced earlier this year that in collaboration with Power Factor Technologies, a power engineering services company, they embarked on a major project to install a 630 kilowatt capacity Combined Heat & Power plant fueled by LNG at the company’s premises. This project is scheduled to come on stream at the start of 2022 and is expected to generate considerable cost savings and should have a positive impact on results for 2022 onwards.
The stock closed 2021 at $5.70 with a PE ratio of 9 much lower than the average for the market around 15 and below many Junior Market stocks trading around 20 times earnings.