Three of IC Insider.com TOP 10 stocks gained between 25 and 33 percent during the past week and dropped out of the TOP 10 as the Jamaica Stock Exchange recorded all-round gains after falling by record levels in March.
Stocks leaving the TOP are Lasco Manufacturing with a gain of 33 percent after the stock rose from $2.75 the previous week to close at $3.65. General Accident moved from $4.50 to $5.71 to record a 27 percent rise and Sygnus US dollar-based stock gained 25 percent to close at 15 US cents and left the main market TOP 10. Eppley rose 31 percent for the week in closing at $16 and Elite Diagnostic is up a stunning 50 percent but remains in the TOP 10. Access Financial closed the prior week at $18.35 and is now up 33 percent to $24.50.> Some of the gains in the market arose from oversold conditions as well as funds returning to investors last week from the refund of the Trans Jamaica Highway IPO.
Current IC Insider.com TOP 10 listings are based on profits of companies reporting full year’s results for the financial year ending after this year’s second quarter and up to the second quarter in 2021.
While local stocks make a strong recovery this past week, thanks no doubt to some of the IPO refund coming back into the market. Investors must not lose sight that significant uncertainties abound about the local and global economy and how each company may be affected. It is not possible to determine the exact fallout and benefits from the crisis and the impact on company earnings. Actual earnings could vary materially from IC Insider.com’s forecast.
Investors should be looking beyond just the immediate situation and identify companies that are financially strong to withstand the current cut in revenues but will make a strong recovery by 2021. There are, however, cases where companies will benefit from the crisis, with signs that some companies’ sales increased sharply.
The three top Junior Market selections are Caribbean Producers, KLE Group and Caribbean Assurance Brokers with the potential to gain between 268 to 600 percent by 2021. Caribbean Producers’ price was struck, with the stock falling to a low of $2 in March, but is now trading at $2.50, as the company was poised to have their best yearly results. Closure of hotels and restaurants derailed the trend. The company had the best performance to December last year, with sales rising 10.7 percent to US$59 million, with a profit of US$525,000 versus a loss of $1.2 million in 2018. The expectations are for the company to return to normality for the 2021 fiscal year that ends in June 2021 that will give buyers of the stock around current prices a big payday.
In the Main Market, Radio Jamaica leads the pact followed by Berger Paints then Carreras with projected gains of 205 to 253 percent. RJR had its best Nine months period last year since 2014, while Berger suffered from poor sales in the second half of the year, which management attribute to weather-related disruptions. The company stands to benefit from lower raw material prices with a fall in the price of oil on the world market as well as lower energy prices.
The Jamaica stock market suffered sustained pressure during March, leading to one of the most rapid falls in stock prices in the history of the market and leaving many stocks severely undervalued.
Some companies with early 2020 year-ends will not have experienced the same impact from the fall out of sales on reported results and stock prices, as will others.
With the tourism industry virtually closed, companies heavily dependent on the industry will have little or no sales for a while from March. The Group consists of Caribbean Producers, Dolphin Cove, Everything Fresh and Express Catering. Entertainment company Main Event and restaurant operator KLE Group will be hurt from patrons staying home as well as fewer tourists visiting Montego Bay and patronizing the restaurant in that town. Once this period of disruption has passed, KLE should benefit from economies of scale with the full ownership of the additional restaurant.
The results of some companies will be hit by falling stock and bond prices. The results for the 2020 first quarter will show the impact of the recent market decline locally and overseas. The latter includes JMMB Group, Proven, NCB Financial Group, Barita Investments, VMBS Investments, Jamaican Teas, QWI Investments and Sagicor Group. Banks may have to increase loan loss provisions as businesses encounter cash flow problems and defaulting on loan payments.
The targeted average PE ratio is 20, with both the Junior and Main markets currently trading well below this level. The JSE Main Market ended the week, with an overall PE of 12 and the Junior Market a mere 9.2, based on current 2020 earnings. The PE ratio for Junior Market Top 10 stocks averages 5.5 with the Main Market at 8.5.
The TOP 10 stocks now trade at a discount of 40 percent of the average for Junior Market and Main Market stocks trade at a discount of 29 percent to the overall market. The average projected gain for the IC TOP 10 stocks is 312 percent down from 377 percent last week for the Junior Market and 139 percent from 153 percent for the JSE Main Market, based mostly on 2020 earnings.
IC TOP 10 stocks are likely to deliver the best returns to March 2021. Forecasted earnings and PE ratio for the current fiscal year are in determining potential gains. The ranking of stocks is in order of likely increases, with the highest-ranked, being the most attractive. Expected 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 as new information is received that can result in changes in and out of the list.

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