Profit up 19% at Lasco Distributors

Revenues at Lasco Distributors rose just 3.5 percent for the June quarter, to $4.28 billion from $4.13 billion in 2017 but profit before taxation climbed a much stronger 17 percent in the quarter to $254 million from $217 million in 2017.
The improved profit out turn was helped by modest improvement in gross profit of $50 million and improvement in other income from $18.4 million to $42.7 million. The improvement comes off a strong period in the last fiscal year with profit rising 65 percent to $1 billion from $610 million in 2017. the 2017 profit slipped below the $717 million for 2016.
Administrative and other expenses rose faster than revenues at 5 percent, to $630 million and depreciation increased 31 percent to $30 million.

Peter Chin – Lasco Distributors’ Managing Director

Taxation was flat at $20 million, leaving net profit for the quarter rising 19 percent to $234 million. Earnings per share rose to 7 cents, from 6 cents in 2017.
Gross cash flow brought in $263 million but growth in receivables, offset by reduced inventories and reduction in amount owed to creditors, resulted in negative cash flows of $222 million and left cash and equivalent with at reduced $1.33 billion.
At the end of December, shareholders’ equity stands at $4.8 billion with borrowings at just $233 million. Net current assets ended the period $3.3 billion almost equal to Payables of $3.4 billion.
The stock traded at $4 on the Junior Market of the Jamaica Stock Exchange with a PE ratio of 11 times 2019 estimated earnings. In April the company paid out $408 million in dividends.

Stocks to Watch this week

Caribbean Cream’s Kremi product

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.

Stationery & Office Supplies new book making operation.

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.

More records ahead for JSE

The main market of the Jamaica Stock Exchange closed at a record high on first four days last week and shot to a record high during Friday’s trading but failed to hold above the 340,000 points it traded at, but the market is heading much higher.
The chart shows that 340,000 mark, as a resistance point, which may require sometime before it is fully taken out and the market moves higher. The chart is showing a pattern for 2018 that is close to that for 2017. The market having risen in January last year, went sideways with an upwards bias until July and then broke out of the channel went on to a peak in November. For 2018, the market has slowly moved upwards within a narrow channel but could break out as it did in 2018 with a bullishness seen over the past two weeks.
The market is being steered higher by a long term 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.

Several changes to IC TOP stocks

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There are several changes to the TOP stocks, following an eventful week of trading on the Jamaican Stock Exchange, with the main market posting records on all five days and closing at record highs, on four of them.
Former TOP 10 Junior Market listing, Derrimon Trading ordinary share, traded at an all-time high of $23 during the week, while former TOP 10 main market listings also hit new highs during the week, these are Jamaica Broilers trading briefly at a record high of $33, PanJam Investment at $58.99 and Pulse Investments trading up to $3.50 and current TOP 10 listing, CAC2000 hits a new record high of $10.
The TOP 10 listings at the end of the week, have a number of changes. Caribbean Producers returns with after the price slipped back to $5.30 from $5.50 and Caribbean Cream that was shunned by investors based on poor 2018 full year results, jumped 29 percent to $6.25 following the release of the first quarter results, with profit rising 59 percent. Medical Disposables renters the TOP 10 as well as Elite Diagnostic, replacing AMG Packaging and Caribbean Flavours both with earnings downgrade. Proven Investments US dollar listed stock is now in the TOP 10 with the price closing down to 18 US cents during the week and Victoria Mutual Investments return to the list, replacing Salada Foods and Grace Kennedy that rose from $52 to $54.
The PE ratio for Junior Market Top stocks averages 6.7 compared to an average PE for the overall market of 11.4, 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, this is a good indication of the level of undervaluation of these stocks.
The sharp movement in the prices of some main market stocks this past week, encouraged by minimal supplies, is a warning sign of a tsunami that is on the way for the market. Late comers to buying stocks who try to join the party will find get stocks but at a much higher prices than weeks ago.
The TOP 10 stocks now trade at an average discount of 41 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.

Profit jumps 59% at Carib Cream

Caribbean Cream outlook.

Profit jumped 59 percent in the quarter to May, to $55 million from $35 million in 2017 from sales revenue that rose 29 percent to $412 million from $319 billion in 2017 for Caribbean Cream that trades as Kremi.
The improvement brings to an end falling profit for the past fiscal year when profit fell to $90 million from $176 million in 2017, from increased revenues and from profit of $164 million in 2016.
For the quarter, gross profit margin rose to 36 percent from 34 percent in the 2017, as input cost climbed 25 percent, compared over for the 2017 first quarter. The net effect, operating profit rose 37 percent to $147 million from $107 million.
Administrative expenses increased 25 percent to $76 million and marketing and sales expenses climbed 24 percent to $13 million. Finance cost was up to $3.4 million from $3.15 million.
Earnings per share came out at 15 cents for the quarter and should end the year around 70 cents, just slightly lower than the 80 cents forecasted at the end of the fiscal year.
According to Chairman Carol Clarke Webster and Managing Director, Christopher Clarke in their joint statement to shareholders, “these results are attributable to improved products supply as a result of greater production efficiencies, along with the introduction of a new range of novelties which are performing well in the market. In addition, we continued our sales and marketing thrusts to expand our market penetration and ‘Top of the mind” awareness of our product range.”
Gross cash flow brought in $65 million but growth in receivables, inventories, offset by payables reduced it to $44 million, in addition, fixed assets purchased for $101 million offset by net loan inflows of $65 million resulted in a cash increase of $8 million, pushing the cash and bank balances to $183 million. Shareholders’ equity stands at $693 million with borrowings at just $147 million. Net current assets ended the period at $221 million well over Payables of $134 million.
The stock traded at $4.90 on the Junior Market of the Jamaica Stock Exchange with a PE ratio of just 7 times 2019 earnings leaving quite some room for a good bounce from the current price. The stock is one of the TOP 10 Junior Market listings.
The company declared a dividend of 4.8 cents payable on September 21 to shareholders on record at the end of September 7. The stock will traded ex dividend on September 6.

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.

Record run for IC TOP stocks

Kingsley Cooper Chairman of Pulse that gained 67% during the past week.

Pulse Investments, in the main market TOP 10, up to the week starting June 25, jumped 67 percent this past week, to close at $3. Current listings, Caribbean Cement traded at $45 and Grace Kennedy at $56 both at 52 weeks’ highs during the week.
Former listing, Derrimon Trading ordinary share traded at an all-time high of $20.50 during the week while, the preference share traded at $2.45 for at a new high. The week closed out with 138 Student Living, falling to a 52 weeks’ low of $4.40 but C2W Music climbed to a 52 weeks’ high of $1.30 as the main market moved within just 300 points of the record high reached on June 13, while the Junior Market traded at the highest level during the week, since December last year.
There is just one change to the TOP 10 listings at the end of the week, with Stationery and Office Supplies that just slipped off the Junior Market list at the end of the previous week returning after Caribbean Producers that dethroned it in the previous week was squeezed it out, as Carib Producers rose to $5.50 from $5.10 at the end of the previous week.
With the average PE ratio for Junior Market Top stocks at 6.2 compared to an average PE for the overall market of 11, based on 2018 estimated earnings and the main market PE at 7.9 for the top stocks, compared to a market average of 13, suggest that the rest of the year should deliver better returns than the first half. A look back on the markets shows that they made noticeable rise in August last year, a pattern that goes back several years and could well do so again.
The sharp reduction in Bank of Jamaica policy rate to an unprecedented 2 percent and Treasury bill interest rates to record lows of 2.5 percent, is set to push stocks values much higher unless profits for most of the listed companies decline. The shortage of supply of many listings continues and is set to result in a big rise in prices going forward before supplies will be able to satisfy what is likely to be a rising demand.
Last week prospectuses for Stanley Motta and Mayberry Jamaican Equities were published and this week Indies Pharma is released. The first two are not priced to bounce based on the underlying nature of these companies. Stanley Motta is a real estate play that will provide income that is better than most fixed interest securities with moderate capital appreciation going forward, while Mayberry Jamaican Equities is a closed end mutual fund, growth is going to depend of appreciation in the investments held or to be acquired. Indies Pharma, with IC Insider.com preliminary earnings estimate for 2018 of 16 cents per share, could get a bounce sometime after listing and could reach $2.40. The stock sits in the mid-range of IC Insider.com’s ranking of Junior Market stocks with a PE of 10 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.
IC Insider.com’s TOP 10 stocks now trade at an average discount of 45 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 39 percent to the market.
Stocks to Watch The stocks to watch this week include, NCB Financial. 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 with the network broadcasting the popular world cup matches as adverting revenues should climb from the coverage. Others worth watching include Caribbean Cement, Berger Paints with little selling, Grace Kennedy for which there is also limited supply and Pulse Investments. In the Junior market, Demand for Derrimon Trading should continue with a resolution to be voted on at the upcoming AGM to split each share into 10 units. Supplies for Stationery and Office continue to trade around the $8 mark with limited supply, the stock could move higher in coming days or weeks. 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.

IPO facts investors should know

“Hello my dear client, the day we have been waiting for to increase your wealth is here. The Mayberry Jamaican Equities IPO has finally arrived, the stock is a must have at this time. Attached are the Prospectus and Application Form for your attention. The official opening date is Monday, July 9, 2018, the demand is high so please don’t delay,” Kind regards, a MIL wealth adviser.
The above was a message sent out by one of Mayberry’s wealth advisor. A group of investors stated in 2017 that investors cannot go wrong with Junior Market IPOs, all that has to be done is just buy, buy, buy and the investor cannot fail to make money. Some investors in the last two IPOs, Sygnus Credit and Everything Fresh bought into the issues heavily, hoping to catch an early bounce and pocket the profit. That the initial bounce did not last, should be a lesson to speculators.

%8 Half Way Tree Road owned by Stanley Motta.

Laden with 6 main and Junior Market stocks, Mayberry Jamaican Equities is issuing 120,114,929 ordinary shares to the public, at a price of $7.57 each. Investors really ought to know what they are buying into when IPOs are being issued, rather than thinking that the price of each IPO can only go in one direction – up. As the stock market matures and more persons come to the party of stock ownership, the valuations that new IPOs come to the market at, will continue to rise and less immediate potential gains will be priced in. In some cases, investors will need to look long term for the payoff from their investment.
Everything Fresh, Sygnus Credit, Stanley Motta and Mayberry Jamaican Equities fall into this category. GWest was another company that many investors got carried away with, in pushing the price to $4 with many buying at inflated values, now the stock trades in the low $2 range. A reminder of an adage, that successful trading starts at buying at the right price. GWest business model is based mainly on generating most income and profits coming from operating mini hospital and other patient care. Real estate income going forward was going to be secondary and would not contribute much to profit. Profit made in the year before listing was mostly from sale of real estate and that was not something that would continue for any prolonged period. Without a track record in providing healthcare, investors who bought the stock in the high $3-4 level must have been hoping that the forecast in the prospectus was going to be achieved on a timely basis. The results to March show revenues well below forecast from the new operations. The company projected medical income to March this year, at $86 million but only generated $17.4 million and that puts the issue of generating the forecasted $710 million for fiscal year 2019, in doubt. Admittedly, the company had projected a loss to March of $110 million but came up sharply lower with a loss of $88 million.
Investors should recognize that not all IPOs are equal. They should also realize that there is a clear pattern that prices then to move up for strongly demanded issues and the undergo some correction. The data shows that the best time to buy after the IPO closes is on the first day or two or a few weeks after when demand falls off and supply increases as short term investors try to offload.
Data for listings in 2016 to 2018 show and average of 31 percent correction for Junior Market stocks from the highest point to the lowest, after listings which tends to occur within 4 weeks of listing. IPOS from Mayberry seem to have a lower pull back in price, around an average of 23 percent while most others, average around 33 percent. Three main market stocks pull back from their highest point, range from just 15 percent for Victoria Mutual Investments to 31 percent for Wisynco and 29 percent for Sygnus Credit Investments.
Based on how investors have gone about pricing IPOs at their peak it seems likely that Indies Pharma will peak around $2.40 based on projected earnings in 2018, of 16 cents per share. It could even go higher if the number of investors who apply for shares exceed those Junior Market listings IPOS from those going back to 2018.

Derrimon hikes profit 45%

Staff at Derrimon Trading.

Revenues for the Derrimon Trading first quarter March this year, climbed 27 percent to $1.94 billion above the $1.53 billion reported for the 2017 quarter and led to a big hike in profit.
The company reported a strong 45 percent jump in its first quarter results, from $35 million to $52 million or 21 cents per share to March this year, but profit could have been even higher had they not incurred finance cost which jumped 56 percent to $38 million from $25 million in 2017, in refinancing the preference shares they held previously at higher rates than the new ones. IC Insider.com is forecasting earnings per share of just over 80 cents for the current year.
This year is the last for profit to enjoy full tax free status, in 2019 profit will be taxed at half the usual 25 percent rate less payroll tax credits.
“The full quarter’s performance of the retail stores as well as the impact of the joint venture positively influenced the growth of the revenue during this reporting quarter,” Derrick Cotterell, the chairman reported to shareholders.
Gross profit for the period was $353 million representing 18 percent of revenues and was up from gross profit of $279 million in the 2017 period with a similar percentage of revenues. According to Cotterell there was improved margin in the core business resulting from “a combination of improvement in margins arising from strategies employed within both the distribution & retail segments of the business, the positive impact from the culled distribution portfolio and improved margins from growth of the supermarket portfolio.” Margins for the non-manufacturing arm rose to 17.2 percent from 16.94 percent in 2017.
The company’s equity position is $1.04 billion but borrowed funds stand at $1.22 billion, cash and investments amounts to $432 million thus negating some of the negative of the high leveraging of the group. With much of the cash and investments held by Caribbean Flavours, the larger portion is not readily available to Derrimon. Current assets amount to $2 billion and current liabilities at $413 million.
The company is proposing to do a major increase in the authorized share capital, with some being set aside to facilitate the 10 for 1 stock split. With the stock price having climbed to the $20 region, the company should take the opportunity to raise equity capital and retire some of the debt now being carried by the parent company.

Grace, CPJ, Palace & Salada in TOP 10

Jamaican stocks have not had a spectacular year with six months having elapsed so far. The main market grew 6 percent and the Junior Market is up just over 11 percent for the year to date.
Palace Amusement with an increase of 164 percent was the only stock to double in price, C2W Music and Express Catering came close with more than 90 percent gain, while former TOP 10, Stationery and Office Supplies came in with an attractive 63 percent.
With the average PE ratio for Junior Market Top stocks at 6.2 compared to an average PE for the overall main market, of 11, based on 2018 estimated earnings and the main market PE is 7.9 for the top stocks, compared to a market average of 13, suggest that the rest of the year should deliver better returns than the first half. The sharp reduction in Bank of Jamaica policy rate to an unprecedented 2 percent and Treasury bill interest rates to record lows of 2.5 percent, is set to push stocks values much higher unless profits for most of the listed companies were to fall. A factor that is at play that is not known to the vast majority of investors, is the lack of supply for many stocks. The shortage of supply is set to result in a big rise in prices going forward before supplies will be able to satisfy what is likely to be a rising demand.
Out of the top lists are JMMB Group that rose by week end while Jamaica Broilers earnings was downgraded to $2 per share based on lower 2018 results from ongoing business operation and Pulse inched up in price to be squeezed out of the main market list. Stationery and Office Supplies slipped off the Junior Market list after Caribbean Producers just got squeezed in, with the price slipping to $5.10. Grace Kennedy, Palace Amusement and Salada Foods return to the top list with the latter price falling from $14.25 at the close of the previous week to $11.70 now. Importantly, Palace implemented price increases mainly between 4.8 and just over 8 percent for the movies, effective at the start of July, this resulted in projected earnings for 2019 now put at $150 per share, up from $140 at our last revision.
On Friday, prospectuses for Stanley Motta and Mayberry Jamaican Equity were published. These issues are not priced to bounce based on the underlying nature of these companies. Stanley Motta is a real estate play that will provide income that is better than most fixed interest securities with growth moderate going forward, while Mayberry is a close end mutual fund that growth is going to depend of appreciation in the investments held or to be acquired.
IC Insider.com’s TOP 10 stocks now trade at an average discount of 45 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 39 percent to the market.
Stocks to Watch The stock closed without an offer at the close of the week. NCB Financial, PanJam Investment could move higher again this week as there continues to be buying but there is very limited supply of the stock on offer. Radio Jamaica that came for increased buying in the past week could get more attention with the network broadcasting the popular world cup matches as adverting revenues should climb as a result from the coverage. Others worth watching include Caribbean Cement, Berger Paints with little selling, Grace Kennedy for which there is also limited supply and Pulse Investments that traded a large volume on Wednesday and Thursday with the price shooting to $2.28 before pulling back on Friday. In the Junior market, demand for Derrimon Trading closed the week at a new high, during the past week and seems poised to move higher. Stationery and Office Supplies settled down during the week is set to rebound soon as selling around the $8 level starts to ease. Jamaican Teas pulled back in the past week to $5.50 but with limited stocks being offered for sale, it is worth watching.