NCB pushes All Jamaica within touch of 380K
The main market of the Jamaica Stock Exchange traded at a new record territory on Wednesday morning a mere 3 minutes of opening passing and went on to yet a higher level at 5 minutes later while passing other records along the way to the recent high.
The All Jamaica Composite Index rose 3,015.46 points to 379,946.02 and the JSE Index gained 2,747.43 points to a record 346,173.52.
The Junior Market that slipped 33.18 points in earlier trading is now down just 4.45 to 3,364.67.
Sagicor Real Estate Fund traded the most share of just under 8.7 million units at $11.75. NCB Financial now trades at $122 with the bid at the last sale price.
All Jamaica trades at new intraday record
The main market of the Jamaica Stock Exchange traded at a new record territory on Wednesday morning within 3 minutes of opening and went on to yet a higher level at 5 minutes later.
The Main market which has slipped back slightly since to be at 377,639.34 for the All Jamaica Composite Index for a gain over Tuesday’s close of 376,930.26. The All Jamaica Composite Index traded with a gain of 1,728.19 points to 378,658.45 and then went on to 378,793.40. The JSE Index rose 1,574.58 points to a record 345,000.67 and then went further to 345,123.62 for a total gain of 1,697.53.
The Junior Market Index slipped 33.18 points to 3,335.94 Derrimon Trading pulled back to $2.75 from $3 and Paramount Trading fell to $2.60 from $2.75 from the close on Tuesday.
NCB pushes All Jamaica to intraday record
At this stage of trading it is unclear exactly where the indices are as NCB opened at $199.01, just seconds after the market opened, but that trade was cancelled as it was outside the 30 percent range permitted by the Exchange in a day. At the time of writing, the records have the All Jamaica Composite Index up 5,408.08 points to 378,261.05. The JSE Index surged 4,927.37 points to a record 344,638.58. The price for NCB Financial used to compute the index is $120.65 but that is just over $1.65 too high, as such the main market indices is about 1,500 points overstated but that would still mean that the indices would be trading at new record territory beating the previous high of 375,307.08 reached last week.
The Junior Market that hit a new closing high on Monday has retreated by 21.92 points to 3,370.66.
Big bounce in Fosrich profit
Fosrich Group reported profit of $30 million for the June quarter, an increase of 630 percent over the $4 million reported for the prior year’s reporting period.
Profit before tax climbed to $60.6 million for the half year to June, for an increase of 144 percent over the $25 million for the similar period in 2017 and by an increase of 234% over the post-tax profit of $18 million, reported for the prior reporting period.
Having listed on the Jamaica Stock exchange Junior market in 2017, profits are now free form taxes for a period of 5 years. Earnings per stock unit ended at 12 cents for the half year and 6 cents for the quarter and should end up just around 27 to 30 cents, if the trend continues.
During the second quarter, the company enjoyed an 18.7 percent hike in income to $320 million, from $270 million for the prior year. For the half year, sales revenues were just up by 5 percent to $592 million from $565 million in 2017.
Gross profit for the quarter, rose 23 percent to $141 million from $115 million, in the prior reporting period and for the six months to June gross profit increased just 6 percent to $269 million. Gross profit margin slipped from the first quarter to 44 percent with the margin for the six months ending at 45 percent. Other income for the year-to-date benefited from foreign exchange gains of $15 million.
Administrative expenses fell $14 million for the half year, to $198 million and slipped just slightly for the quarter to $102 million from $103 million. According to the Managing Director, Cecil Foster, “the decrease was driven primarily by efficiencies gained from the management of staff and related costs, reductions in selling and marketing expenses, reduced insurance costs and reductions in damaged goods write-off and warranty expenses. The cost savings were partially offset by increases in staff training, legal and professional fees, rent and bank charges,” management indicated.
Finance cost for the year-to-date was $28.5 million compared to $19.6 million for the prior reporting period, but rose 68 percent in the June quarter to $17.5 million. “This increase is being driven by a new working capital line of credit obtained to assist with the financing of operations. This new facility was obtained at more favourable rates than the previous bank facilities,” Foster advised, in his commentary on the interim results.
Inventories rose sharply from $625 million in December to $808 million in June, receivables declined to $148 million from $156 million. Amounts due to creditors fell sharply from $297 million as of December to just $35 million. The company paid off amounts due on overseas line of credit thus reducing foreign exchange risk. The switch contributed to a sharp rise in loans from $384 million to $795 million.
“The company continues to closely manage inventory balances and the supply-chain, with a view to ensuring that inventory balances being carried are optimised, relative to the pace of sales, the time between the orders being made and when goods become available for sale, to avoid both overstocking and stock-outs. Monitoring is both at the individual product level and by product categories,” foster advised shareholders.
Part of the loans was on lent to an affiliated company that is completing an apartment complex on Shortwood Road, the managing director confirmed to IC Insider.com. The financials show $243 million due form them. The amount due incurs interest at 12.5 percent rate, Foster stated. The line allowed the company to stock up on some commodities at low prices relative to what normally obtains in the trade.
Shareholders’ equity now stands at $670 million, up from the $609 million at December 2017. Fosrich trades on the Junior Market at $2.80 on Tuesday, just around 10 times earnings.
NCB Financial remains on high alert
The Jamaican stock market, scaled new heights last week, helped by NCB Financial hitting a record high of $115, as supply of the stock being sold remains limited.
More buying came in for the stock on Friday and investors should be on the watch again as the price could go higher during the current week.
Grace Kennedy is another of the main market stocks to keep an eye on, as it slowly tries to move higher. Caribbean Cement moved back to $50, on Friday and could go further in this week as increased demand came in for the stock. It clearly one to watch but investors will need to determine if Friday’s move is a part of the usual month end window dressing. Kingston Wharves closed at $61.80 but traded as high as $65, supply remains low, thus favouring further price gains, even as the stock is carries by far the highest PE in the market. Watch for Scotia Group that should be releasing third quarter results, this week Thursday and Sygnus Credit Investments that posted full year results in line with expectations of US$1.4 million.
In the Junior market, Indies continue with strong demand existing for the stock, with news of potential acquisition and new products, the stock is worth watching for more gains. General Accident could move higher as more demand comes in for it with limited selling.
Caribbean Flavours seems to be following its parent, Derrimon Trading, continuing to rise with limited volume on sale currently. Medical Disposables, declined during the previous week, recovered last week and .should be moving higher going forward, continue to watch this one, as well as Derrimon Trading that has contracted to distribute products of a Trinidad producer.
Stocks with scarce supplies that could spring surprises include Barita Investments, Grace Kennedy, NCB Financial, Berger Paints, Caribbean Cement, Kingston Wharves, PanJam Investment, Sagicor Group, Salada Foods, Seprod and Scotia Group. The main market is not the only segment with limited supplies. The Junior Market supplies continue to be limited for many of the listings. The list includes, Caribbean Flavours, Cargo Handlers, Derrimon Trading, Express Catering, General Accident, Caribbean Cream, Medical Disposables, Stationery and Office Supplies and tTech.
An overall view of stocks indicates that the main market continues to be steered higher by an upward sloping support line as well the 45 and 125 day moving averages, lending support just below. The Junior Market now at a 15 months’ high, is being steered by an upward rising long-term support line and a golden cross. The golden cross is a very strong bullish long-term signal.
Rising stock prices dragging PEs higher
The bulls have taken control of the Jamaica Stock Exchange, driving the main market to several new record highs during the past week with All Jamaica Index hitting more than 352,000 points last week Friday and jumping more than 6,000 points on Tuesday morning this week to more than 356,400 points and hitting a high of 363,496.
At the same time, the Junior Market now trades at a 15 months’ high. The bullishness has also raised the PE ratio of the market higher since the start of July. The average PE for the overall Junior Market is now 13, based on 2018 estimated earnings. The main market PE, is now an average of 13.7. At the start of July, the PE ratios, were at 11 for the Junior Market and 13 for the main market. At the end of 2017, the average PEs were at 13.5 and 15 respectively, based on 2017 earnings.
The PE is the most used tool in valuing stocks. in order to compare the value of one stock versus another, as such paying attention to this most important measure is critical to success in the stock market. PE ratios are not static and will change as profit and interest rates change. Profit will drive a stock to an expected or accepted PE but interest rates will change PE depending on whether rates and rising or falling. For several years Jamaican became used to a PE of 10 being the norm. That was when interest rates were in the teens now that rates are down sharply from that level PE will rise but its taken quite some time for that to happen. Investors are slowly recognizing that to participate in a growing economy and rising profits that they have to pay more to buy the shares of the listed companies.
The attached chart suggests that the average PE ratio is likely to end 2018 around 16 TO 17 times earnings, as investors continue to gradually upgrade the multiple they are prepared to pay for stocks, which would lift prices sharply over the coming months, from current levels.
Treasury bill rates now under 2 percent and government 4 years bods clearing at 3.95 percent and with a chronic shortage of many of the stocks, continuing to put upward pressure on prices, the PE ratios will move higher, investors should be taking their cue from this development.
The movement of the markets PE to the range mentioned above would translate to and increase around 25 percent rise in the market for the rest of the year and would result in full year gains of 40 to 50 percent in main and Junior markets for the year.
All Jamaica leaps to record 363,496
The Jamaica Stock Exchange continues to scale new heights on the last trading day of August as the bulls take control of the market. At midday the All Jamaican Composite Index has surged more than 8,829 points to pass 363,000 points.
The All Jamaican Composite Index has jumped 8,829.47 points to an intraday high 363,496.38 and the JSE Index surged 8,044.65 points to a record 331,186.28. The Junior Market index rose 36.05 points to 3,253.63.
NCB Financial had jumped earlier to a record $115 from a close of $113 on Thursday, to make the first big move on the index, but Caribbean Cement climbed to $50 from $46.50 on Thursday, Sagicor Group rose from $38.05 to $39.75 while Kingston Wharves jumped from $63 to a record $65 and helped push sharply higher beyond the 363,000 mark.
In the Junior Market, Derrimon Trading having just over 1 million shares trading at $24 and Caribbean Producers traded 1.26 million shares at $6.50.