The Jamaica Stock Exchange shares which were issued at $2.85 in the IPO in 2013, dropped last year to a low of $1.50 and the stock languished below $2 for months begging to be bought but with a few takers. This past week it hit $2.
At the close of last week, there was a bid in to buy 282,565 units at $2, but selling has dried up substantially. The prospects for the company is bright. Investors may be looking at 2014 performance to guide them, but it is 2015 onwards where the exciting times will be, this why IC Insider moved the stock from Market Watch to Buy Rated.
For the nine months to September last year, the JSE reported profit for the quarter of $11 million up from a small loss in the June quarter and for the first six months of the year. The big change in the September quarter resulted from a large block of shares traded that provided increased one-off income but also the recovery of $6 million in bad debts. For the year to September the JSE reported only $8 million in profit or a mere 6 cents per share, but bad debt recovered amounted to $10 million before tax. Revenues climbed to $89 million in the September quarter, an increase over the $73 million garnered in 2013. For the year to date revenues jumped $41 million to hit $242 million. Quarterly expenses climbed from $85 in 2013 to $91 million in 2014, and for the nine months, from $247 million to $273 million or just over 10 percent, a slower pace than the income growth of 20 percent.
Based on these results alone, the stock would at best be a hold and more likely a sell. Investment is about the future more than the past, and the latter is where the attraction is. The local stock market is exhibiting all the signs of a bull market in 2014. The early trading for the year to date is mostly positive. Increased market activity will mean more income from trading transactions. Increased prices will result in much more income from annual listing fees in 2015. More securities were listed in 2014 and more are expected in 2015 which will result in increased listing fees and the possibility of increased trading opportunities going forward.
Some of the factors supporting the above can be found in strong technical indicators pointing to a strong market ahead, sharp decline in interest rates and projected low inflation. Additionally, the fall in the price of oil and other commodities on the world market will provide consumer with added disposal income to spend and this is likely to improve the profits of many listed companies and should result in increased gains in stock values and trading volumes. Political winds may be blowing over the market, with elections due by 2016, but that should not stop investors from picking the stock up cheaply, if they can, and await what will be a huge pay off in two to three years’ time as the market gets back to full life, in a low inflation, low interest rate environment. The JSE had cash and investments at the end of the period of $375 million equity of $571 million with no borrowed funds.
Caribbean Producers have been restored to the Buy Rated list based on strong revenue growth in the September quarter that suggest higher profits in the current year compared with the 2014 results.