On June 9, 2014, a reader wrote in with the question, “I respect your learned opinion and analysis in financial matters. In this regard, kindly advise if possible as to your views on Lasco Financial, Distributors and Manufacture. Do you believe that these stocks are likely to perform well in the short, medium and/or long-term.
The prices have declined compared to when I bought them and I am concerned about the potential for further decline as the dollar continues to devalue. Should I just cut my losses and sell and convert to FX.”
The prices on June 6 last year were as follows – it took J$111.37 to buy US$1 and now its roughly $120, an increase of just 7.7 percent. Lasco Distributors traded at $1.32 then and is now at $4 for a gain of 203 percent, Lasco Financial Services traded on June 6th last year at $1.15 and gained 156 percent to trade at $2.95 on Friday last week and Lasco Manufacturing was at $1 in June 2014 and has gained 180 percent up to Friday last. It is clear from the above which investment was the better one to have made. Those stock while doing very well have not been the best performing on the local market since then. Cable & Wireless traded at 29 cents in the 2014 period and last traded at $1.05 a 262 percent gain, Desnoes & Geddes was priced at $4.25 and is now at $30, the Jamaica Stock Exchange was then priced at $1.95 and has increase by 464 percent and Caribbean Cream moved from 75 cents to $4.35 for a gain of 480 percent.
IC Insider’s response, thanks for your enquiry. As you will see our BUY RATED list contains these three stocks. Here are our views. First off the local stock market tends to go down around May until last June or July. This is not cast in stone, just a tendency. One reason for it is that investors get the full information as to what companies did last fiscal year and a glimpse for the new-year. In the case of the three Lasco companies they have just reported their full year results. The distributorship earning is the most encouraging of the three and looks like it will probably do better than the other three in the short to medium term. It will also benefit from the Salada Foods distribution which started this year, as well as from increased production to come from the expanded Lasco Manufacturing company’s operation. The information suggest that the next set of results should possibly show growth over that of 2013.
Lasco Financial seems poised for good things, but big marketing spend last fiscal year kept profits down as they went for more market share. It does look as if they will be spending on the world cup promotions which could build business, but may also keep profits pressured somewhat for a while.
Lasco Manufacturing seems cheap at $1 bearing in mind the impact that the factory expansion is likely to have on both sales and profits ultimately. Short term they will have to pick up interest cost and depreciation on the completed factory but will enjoy cost savings and ultimately increased profits.
One need to be careful of converting to foreign exchange at this stage, as the big move in the FX trade could be over. You may have to hold the stocks for a while but the investment could pay off in the medium term, more so in the case of financial and distributorship, during 2014. We would want to see he Q1 results for Manufacturing before jumping.
It is our view that the market overall, is undervalued but investors will need to be patient and the payoff is likely to huge for those who wait, the gains to be reaped elsewhere is not likely to be all that great, to cause one to jump and possibly miss the gains in the local market that is ahead.