Most Junior Market listed companies don’t have the depth of management that most Main Market companies have. What most may lack in Management they make for by their agility and ability to grow faster than the more matured counterparts in the Main Market and this feature can deliver above average growth for stock prices. This factor alone can determine winners from losers in business.
Junior Market trades
Some elements are common to companies in both markets; as such, the investors who don’t have the time and inclination to monitor their investments regularly may want to invest for the long haul with the expectation that their investment will grow appreciably over time. There are some factors to consider in investing long term, these include continued growth of companies, inflation, possible shifts in government policies as well as social and economic policy changes that can affect investment returns in the short and long term.
Over the next ten years, many of the companies in the Junior Market could see changes in the leadership of many of the Junior Market companies and change in ownership as some of the majority owners retire. The ownership shift may be negative or positive, but it is a major factor. Continuity of ownership is a major factor to consider and this is more critical for Junior Market companies, with the largest shareholders being the lead executive management.
Access Financial Services is the first company to list on the Jamaica Stock Exchange Junior Market and enjoyed years of growing revenues and profit, but the stock price declined sharply in 2020 and 2021 as profits fell in the fiscal year 2020 and 2021 due to heightened provision for doubtful loans and slowdown in lending. Corrective measures were put in place and loans and profits are growing again, with improvement in the economy and a reduction in unemployment. The company stands a great chance of continuing to grow to provide the unbanked with alternative financing. The potential for tapping into this underserved area would position AFS as an interesting company to follow over the next ten years.
Elite Diagnostic – Health care services are a never ending need and demand will continue to grow as the local population ages and individual wealth improves. The company recently expanded from one location to three. They encountered major operating problems with machinery that increased cost and negatively affected revenues but now seems over that, with revenues growing again. They have plans for another branch to be established, which is delayed for the time being, but they added to machinery at the Hope Road branch to meet increasing demand. This company should be able to innovate and stay relevant for years to come. The company has the potential to expand into other areas of the country, bringing services closer to the consumers and generating higher income and profit.
Express Catering provides services directly to the tourism industry, with its restaurant operations housed within the Sangster International Airport. The future is tied into the growth in that industry, seemingly poised for more growth with the continued expansion of hotel rooms on the country’s north coast. The airport in Montego Bay is expanding and will provide opportunities for greater expansion for the company. Now focused solely on Montego Bay but could well move into Kingston, bringing additional growth possibilities.
Fontana stock is richly priced currently, as such, the time may not be right to buy into it as it could well fall back in price. It stood the test of time and seemed set for the next level of expansion and performance. It possesses good management has room for expansion by adding new products or acquiring others pharmacies as current owners of other existing pharmacies retire. A new branch is planned for the Portmore to come on stream in late 2022. The area with a growing population in Jamaica and therefore company’s expansion should attract good and profitable business. Spanish Town, another area, earmarked, with Montego Bay, could follow. The company is well positioned to acquire the many family owned pharmacies when the owners decide to retire.
General Accident has an excellent track record of growing the business and has adequate liquid funds to fund expansion and meet its operating commitments. The Jamaican operation is very profitable. Recently they expanded into Trinidad and Barbados, which could add to profits in 2022 but will be highly beneficial to the growth in revenues and profits in the years to come. This expansion will result in reduced reinsurance costs as the company spreads the risk over a wider geographical area. Further regional expansion is expected and will improve revenue and profit growth and swell cash funds for continued attractive dividend payments leaving sufficient amounts for investments and helping in reducing reinsurance costs. Guyana is growing strongly from oil production and will be enticing for the company to expand into that market, either directly or through one of the entities in the eastern Caribbean.
Fosrich has diversified into manufacturing pipes and has also gone into refurbishing electrical transformers, two new areas that it has a competitive advantage and is generating profits from. These ventures resulted in diversification away from being solely a retailer in the construction and energy sectors. With a growing Jamaican economy, that company will find room to increase revenues and profits as the years roll on and sales within the region.
The Beechwood Av. gas station
Future Energy is relatively a small player in the sector and has much room for growth, with only 16 service stations under its brand. The company is branching out into LNG and LPG gas sales to expand revenues in the future. The company plan to grow the number of service station under its name to 22, within three years, including one more to be owned and operated by the company. The great scope for expansion across the country makes FESCO one to watch over the next ten years as it could expand service stations in many more areas within the country. The stock is currently highly overvalued, and any investment should await a big pullback in price.
Honey Bun has made great strides since it was listed on the Junior Market in 2011. In 2009 sales were $404 million and has climbed to $1.67 billion in 2020 and rose climbed 28 percent to $2.145 billion for the 2021 fiscal year, with profit before tax moving from $191 million to $290 million. The impressive growth continued for the first quarter to December last year, with a net profit of $45.5 million that rose 31 percent above the prior year from sales that grew 44 percent to $665 million over the prior year. The company enjoys good Management that is expected to continue guiding the operations successfully, resulting in increased revenues and profit at attractive rates.
Jamaican Teas.
Jamaican Teas is a diversified group and continues to add new products. Exporting has been a strong growth area, with North America and the Eastern Caribbean being big markets for them, with sales exceeding those on the Jamaican market. The group spun off its investment arm into a separately listed company, allowing for greater focus on an area that has been very profitable for them. The manufacturing arm is to be spun off into a separate company that will allow for greater focus on that operation and provide greater exposure for the Caribbean Dreams brand. The group is unique amongst the Junior Market companies due to its diverse business. The strong and continued growth in exports is a great asset that is expected to provide a good basis for continued growth. The group is cash flow positive and possesses the ability to expand from mergers and acquisitions. The investment arm offers good prospects to add to profit going forward.
SOS anticipates maximising profits from every business line in 2022
Lasco Manufacturing is a low cost manufacturer with room for expansion either by producing its own brands or products under license from others. The business is cash flow positive and is building up cash at a healthy pace, with loans taken on to expand the factory almost fully paid off. They are in a good position to acquire brands or other entities and do production for third parties. It could be the subject of an acquisition by others, considering the main owner cannot be very far from retirement.
Stationery and Office Supplies is more than the name implies. While stationery and office equipment are the main lines, it also has a book manufacturing business that manufactures exercise books for children’s note pads. It also operates a paper shredding business with banks being clients of theirs and other entities, which is a high profit margin part of the business. They have stood the test of time and seem set for the next level. They possess good management that will deliver strong gains in the years ahead. The company posted its best fourth quarter results in the past year and that performance is said to have carried over into 2022, with revenues for the first two months running ahead of 2021. Looking forward, expect to see expansion by acquisitions and adding new products.
Focus this coming week will be the response of the market to the latest IPO to hit the market as FJP Limited opens on Monday at $1 per share. The stock is not ICInsider.com BUY RATED, but it should deliver gains to investors, with the possibility of earnings estimated around 7 cents per share.
During the week, the Junior Market TOP10 listed Tropical Battery rose 18 percent to close at $1.79, followed by Lasco Distributors with a gain of 5 percent to $4, while Cargo Handlers fell 11 percent to $7 and General Accident moved down 7 percent to $6.26, following the release of full year’s results, with a small loss reported in the December quarter.
The potential gains for Main Market stocks moved from 122 percent last week to this weeks’ 126 percent, with the top three being Guardian Holdings followed by JMMB Group and Sygnus Credit Investments all projected to gain between 165 and 185 percent versus 161 and 186 percent last week.
All the stocks in the Junior Market can gain 13 percent to March this year, based on an average PE of 20 that would take the index to 4,700 points. About a third of Junior Market stocks with positive earnings are trading at or above this level, averaging around 23.
ICInsider.com ranks stocks based on projected earnings to highlight winners from the rest, allowing investors to focus on potential winning stocks and helping to remove emotional attachments to stocks that often result in costly mistakes.
Even with an 18 percent rise in the stock price, Tropical moved right to the top of the Junior Market TOP10 stocks with the potential to double in price. Medical Disposables price slipped with the stock now back in the TOP 10 and so did Access Financial while Cargo Handlers joins the TOP10 in fifth position.
The Junior Market index upward move slowed this past week with year to date gains moving from 16.3 percent last week to 17.1 percent to Friday, this week. The Main Market seems to be bubbling with the market index up more than 7,700 points for February and is worth watching.
The sharp price movements in the Junior Market over recent weeks reduced the potential gains markedly, with the average increase projected for the TOP 10 Junior Market stocks now at 105 percent and is now lower than the Main Market at 122 percent. The top three stocks in the Junior Market are Tropical Battery followed by Caribbean Assurance Brokers and Lasco Distributors to gain between 111 and 124 percent, compared to 114 and 126 percent, previously.
All the stocks in the Junior Market can gain 12 percent to March this year, based on an average PE of 20 that would take the index to 4,700 points. About a third of Junior Market stocks with positive earnings are trading at or above this level, averaging around 23.
ICInsider.com ranks stocks based on projected earnings to highlight winners from the rest, allowing investors to focus on potential winning stocks and helping to remove emotional attachments to stocks that often result in costly mistakes.
The Junior Market continues to offer opportunities for supper stock performance in 2022 with an average PE for the market at 9 times 2022 earnings versus close to 15 at the end of 2021, and offering a potential gain of more than 60 percent to the end of 2022. There are 26 Junior Market stocks that can double in 2022.
Those developments bode well for profits and stock prices in 2022 when the economy is expected to recover from the sharp decline in 2020. Remittances for 2021 are expected to be over US$600 million more than for the record $2.9 billion intakes in 2020 and the tourism industry is expected to be back at 2019 levels or close to it but is expected to far exceed that in 2020 all things being equal. More growth is expected from exports and the BPO sector, accordingly, the country should see significant additional foreign exchange inflows in 2022 than at any time in its history. Bear in mind that the signal of how well the country is doing in international trade, the net international reserves rose US$104 million in December over November to close the year at $$4 billion and is up fromUS$3.1 billion at the end of 2020. The early signal of tourism performance shows December 2021 behind a similar period in 2019 by just 24 percent compared to a fall of 45 percent for all of 2021 versus 2019.
In our 2021, ICInsider.com stated the period ahead, “seems set to be the year of surprises as many stocks that suffered badly in 2020 could be making a major turnaround in revenues and profit, while some that may not fully recover could start showing good signs of returning to normalcy.” That is exactly what happened during the year with strong gains from the likes of Caribbean Producers, Express Catering, Main Event, Medical Disposables, Radio Jamaica, Stationery and Office Supplies and
Medical Disposables rose 7 percent for the week to $6.49 and dropped out of the TOP10 and was replaced by General Accident that comes in at $6. In the Main Market TOP10, Sagicor Group rose 9 percent for the week to close at $58 and was replaced by Scotia Group at $36.
The top three Main Market stocks, this week are Guardian Holdings followed by JMMB Group and Radio Jamaica all projected to gain between 199 and 258 percent up from 183 and 261 percent last week.
The TOP 10 stocks trade at a PE of a mere 8.2, with a 45 percent discount to that market’s average.
ICInsider.com ranks stocks based on projected earnings to highlight winners from the rest, allowing investors to focus on potential winning stocks and helping to remove emotional attachments to stocks that often result in costly mistakes.
The public offer for Spur Tree Spices shares opens on Wednesday this week and should be heavily oversubscribed, with closure likely by the end of the week.
The average gains projected for the TOP 10 Junior Market stocks moved from 149 percent last week to 151 percent and Main Market stocks moved from 155 percent to this weeks’ 154 percent.
Eleven stocks representing 26 percent of all Junior Market stocks with positive earnings are trading at or above this level, similar to last week, indicating that many others will rise towards the 17 mark in the months ahead.
ICInsider.com ranks stocks based on projected earnings to highlight winners from the rest, allowing investors to focus on potential winning stocks and helping to remove emotional attachments to stocks that often result in costly mistakes.
In the Main Market, other than Caribbean Producers, Sygnus and Pan Jam Investment fell 4 percent.
The Junior Market closed the week, with an average PE of 14.3 based on ICInsider.com’s 2021-22 earnings and is currently well below the target of 20 and the average of 17 at the end of March this year based on 2020 earnings. The TOP 10 stocks trade at a PE of a mere 8.1, with a 42 percent discount to that market’s average.
ICTOP10 focuses on likely yearly winners, accordingly, the list may or may not include the best companies in the market. ICInsider.com ranks stocks based on projected earnings to highlight winners from the rest, allowing investors to focus on potential winning stocks and helping to remove emotional attachments to stocks that often result in costly mistakes.
Notable TOP10 movers this week are; AMG Packaging rose 9 percent in closing at $2.07 from $1.90 at the previous week’s close and Lumber Depot rose 18 percent to $3.25. Medical Disposables lost 5 percent of its value to close the week at $6 and Caribbean Assurance Brokers dived 13 percent to $2.60.
The average gains projected for the TOP 10 Junior Market stocks moved from 142 percent last week to 150 percent and Main Market stocks moved from 157 percent to this weeks’ 159 percent.
The average PE for the JSE Main Market is 15.8, which is 20 percent less than the PE of 19 at the end of March and 27 percent below the target of 20 to March 2022. The Main Market TOP 10 average PE is 8, representing a 51 percent discount to the market and well below the potential of 20. A total of 17 stocks or 36 percent of the market trade at or above a PE of 19, with most over 20, for an average roundabout 25, suggesting that the accepted multiple is between 20 and 25 times the current year’s earnings.
ICInsider.com ranks stocks based on projected earnings to highlight winners from the rest, allowing investors to focus on potential winning stocks and helping to remove emotional attachments to stocks that often result in costly mistakes.
Big TOP10 movers for the week are AMG Packaging lost 6 percent in closing at $2.25 from $2.40 last week, Caribbean Cream fell 4 percent to $5.60, Elite Diagnostic dropped 8 percent to $3.20, Caribbean Assurance Brokers rose 6 percent to $2.47 and Dolphin Cove rose 3 percent to land at $12.90 after it a 52 weeks’ high of $14 on Thursday, new coronavirus making the news seemed to have induced selling on Friday. In the Main Market, Caribbean Producers jumped 15 percent to close at $10, up from $8.61 and Radio Jamaica gained 8 percent to $3.30.
The top three stocks in the Junior Market are AMG Packaging, followed by Caribbean Assurance Brokers and Access Financial Services. All three can gain between 150 and 211 percent, down from 154 percent and 207 percent previously.
The Junior Market can gain 38 percent to March next year, based on an average PE of 20 and 17 percent based on an average PE of 17. Ten stocks representing 25 percent of all Junior Market stocks with positive earnings are trading at or above this level, down from seven last week, indicating that many others will rise towards the 17 mark in the weeks ahead.
ICTOP10 focuses on likely yearly winners; accordingly, the list may or may not include the best companies in the market. ICInsider.com ranks stocks based on projected earnings to highlight winners from the rest, allowing investors to focus on potential winning stocks and helping to remove emotional attachments to stocks that often result in costly mistakes.