Pulse top 2020 Jamaican stock with 243%

The Jamaica Stock Market has moved from the best performing in the world in 2018 to one of the worse performing in 2020. The fall from grace had to do far less with local factors but more so with global developments. Nevertheless, Main Market listed Pulse Investments came out on top in 2020 with gains of 243 percent, followed by former Junior Market listings, Epply in the second position with 227 percent and Key Insurance with 88 percent.
Even as the markets had their worse year since 2018, the past year ended with a number of stocks recording gains, up to 243 percent for top Main Market stocks and a much lower 36 percent for the best performing Junior Market stock. The Junior Market suffered badly, with ten stocks losing upwards of 39 percent out of a list of 33 stocks that declined for the year. The Junior Market was partially saved by two stocks, one that was listed in December 2019 and one listed in the last half of 2020. Mailpac was listed in December 2019 and rose 36 percent in 2020, followed by Tropical Battery by 28 percent as the two leading Junior Market winners. With tax losses as the only major asset of worth, Ciboney came in third and more than doubled with a rise of 118 percent. The Main Market had 32 stocks declining during the year, with losses going as high as 63 percent.
In 2020, both of the Jamaica Stock Exchange major markets were down, with the Junior Market just edging out the Main Market index with a lower decline of 21 percent versus 22.6 percent. Even though 2020 was not a great year, some investors made money by buying stocks at rock bottom prices when many investors were dumping earlier in the year.
The JSE Main Market fell 33 percent to a yearly low in March and the Junior Market by 37 percent. Since then, they have rebounded but not enough to take them out of the year’s negative territory.
Since bottoming in March, the Junior Market is up 30 percent and the Main Market 16.6 percent by the end of the year. There are strong signals pointing to an upward move for both markets as they transitioned from a consolidating phase when investors were assessing developments in the economy and the stock market to a more bullish state since the latter months of 2020.

Q4 profit doubles at Tropical Battery

Recently listed Tropical Battery saw profit after tax soaring 107 percent in the September quarter, to $27 million from $13 million in 2019, bettering the nine-month increase of 18.6 percent over the 2019 period for pretax profit. For the year to September, profit rose a more modest 16 percent to $73 million from $63 million in 2019.
Sale revenues
rose just 2.6 percent for the quarter, to $506 million from $493 million in 2019, but rose 7 percent for the year to date, to $1.87 billion from $1.74 billion in 2019.
The September quarter benefited from improved profit margin to 31.8 percent from 29.9 percent in 2019 and rose to 31.3 percent for the year, from 30.2 percent for 2019. Gross profit rose 9 percent in the quarter to $161 million from $147 million in the previous year and increased 11.2 percent for the year, to $585 million from $526 billion in 2019.
Administrative expenses grew 11 percent to $123 million in the quarter and 10.5 percent in the year period to $456 million. Finance cost rose in the quarter, to $13 million from $9 million in 2019 and $19 million to $38 million for the year.
Gross cash flow brought in $109 million but growth in receivables, inventories, addition to fixed assets offset by loan inflow, proceeds from the sale of shares and reduced payables, cash funds ended at $261 million. Net current assets ended the period at $827 million, including trade receivables of $314 million, amounts due from related parties at $177 million and cash and bank balances noted above. Current liabilities closed the period at $229 million. At the end of the year, shareholders’ equity stood at $776 billion, with borrowings at just $415 million.
“As a part of our Strategic 2021 Growth Plan, we will be focusing on creating shareholder’s value through acquisitions and partnerships of aligned profitable companies in Jamaica and across the Caribbean region. To this end, we have entered into discussions with several key partners to assist in identifying suitable acquisition targets”, March Melville, Chairman and Alexander Melville, Managing Director, stated in a jointly signed report accompanying the quarterly.
Earnings per share after tax came out at two cents for the quarter and six cents for the year. The company’s net asset value is 68 cents, with the stock selling at 76 percent above book value. With the company profits now being free of taxation, having listed on the Junior Market of the Jamaica Stock Exchange, earnings are adjusted to 8 cents, giving it a PE ratio of 15 times earnings, based on the stock price of $1.20 the traded at on Friday. IC Insider.com is forecasting 10 cents per share for a PE of 12 times 2021 earnings.

Intriguing week for IC TOP 10

Activity in the Jamaican stock market for the past two weeks was mostly on Barita Investments following the successful public offer of new ordinary shares, Tropical Battery, with the listing after their IPO success. the prices of both rose above the public issue prices with Barita trading at a 52 weeks’ high of $98 and Tropical at $1.35.
For a fourth consecutive week, there were no changes in the companies on the IC TOP 10 listings. The markets moved moderately higher to close at their highest levels since mid-August for the junior Market. The Main Market closed at its highest level at the close of September since the beginning of July gave up all the gains on Wednesday and Tuesday to close back at mid-September level on Friday.
The top three stocks in each market saw no change in ranking, leaving the top three Junior Market stocks, with the potential to gain between 297 to 764 percent by March 2021. Caribbean Producers heads the list, followed by Lasco Financial and Elite Diagnostic. The focus on all three is on the 2021 fiscal year profit to recover from reduced profit for the 2020 financial year. With expected gains of 204 to 228 percent, the top three Main Market stocks are Berger Paints followed by Radio Jamaica and JMMB Group.
This week’s focus: Jamaican Teas came in for increased buying during the past week after the company advised the Jamaica Stock Exchange that the board of directors will meet to determine a new record date for the sub-division of the Company’s shares, following the deferral at the Annual General meeting.  The stock traded at $4.30 on September 29 and closed at $4.83 on Wednesday, with 161,040 units changing hands, with the offer at $4.50. The volume ballooned to over one million units on Thursday, with the price hitting $5.55 during the day. The company completed the 2020 fiscal year at the end of September.
The market’s targeted average PE ratio is 20 based on the profits of companies reporting full year’s results, from now to the second quarter in 2021. Both the Junior and Main markets are currently trading well below this level, indicating the potential gains ahead. The JSE Main Market ended the week, with an overall PE of 15.1 and the Junior Market 11.2, based on IC Insider.com’s projected 2020-21 earnings. The average PE ratio of the Junior Market has been slowly rising, with better profit opportunities than the Main Market and narrowing the gap. The PE ratio for the Junior Market Top 10 stocks average a mere 6.1 at just 54 percent to the overall Junior Market average. The Main Market TOP 10 stocks trade at a PE of 8.2 or 54 percent of the PE of the overall market.
The average projected gain for the Junior Market IC TOP 10 stocks is 283 percent, and 153 percent for the JSE Main Market, based on 2020-21 earnings, indicates potentially greater gains in the Junior Market than in the Main Market.
IC TOP 10 stocks are likely to deliver the best returns up to March 2021 and ranked in order of potential gains, based on likely gain for each company, taking into account the earnings and PE ratios for the current fiscal year.  Expected values will change as stock prices fluctuate and result in movements in and out of the lists for most weeks. Revisions to earnings per share are ongoing, based on receipt of new information.

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