Investors should refrain from the fad of following the leader blindly. In 2013 ICInsider.com posted a report on the Unilever Caribbean, a company based in Trinidad and traded on the country’s stock exchange.
Since the report, the company stock has been on a downward slope after rising to a new record in 2013, yesterday Jamaica Stock Exchange junior market listed Knutsford Express after a long period of overvaluation relative to the market, dropped $2.75 as demand for the stock evaporated. The same thing happened to Cargo Handlers that was pushed unrealistically to $30, only for it to currently be trading at $10 and is still above normal valuation. This latter stock came as a big buy on the way up by a brokerage house.
Unilever’s profit peaked in the period to September 2014 and started a downhill ride since, but investors kept on pushing the price higher until it peaked at TT$68.30 in December 2015, on Wednesday the stock traded with a loss of $1.25, to a multi year’s low of $38.
Unilever products
The IC Insider.com report in 2013 was: When stock prices rise much faster than the growth in profits, we need to take time to note what is happening. Investors in such stocks should be fully conversant with the factors at play to ensure that their investment can be protected appropriately if and when the factors change.
Unilever Caribbean stock price is up 13 percent so far in 2013, on top of a 45 percent increase in 2012, 44 percent in 2011 and 35 percent in 2010 after a 16 percent fall in 2009. The company, a subsidiary of Unilever PLC, a United Kingdom company, is based in Trinidad and manufactures a range of homecare, personal care and food products for the Caribbean region, including Jamaica, has been having reasonable profit performances for some years. They have been able to improve sales and margins in a market that has been in recession since 2009. The growth in the stock price is well more than the rise in profits for the past four and half years.
Some of the company’s brands include Mistolin, Radiante, Breeze, Vaseline, Lux, Lipton, Becel and Blue Band. The product range also comprises dishwashing liquids as well as fabric conditioners.
Knutsford Express peaked at $16.89 and is now trading at $12.
For the three months to March 2013, revenues climbed to $137 million, up from $128 million for the same period in 2012, while profits were up to $13 million after tax compared to $11.9 million in 2012. The December quarter is the most significant period for earnings, with more than a third being generated in the period. For the 2012 full year to December, the company reported after tax profit of $59.5 million, an increase of just 2.8 percent over that earned in 2011. Profit for 2011 was up 11 percent over 2010 and 2010 profit was up 26 percent over the previous year. In Trinidad, lower interest rates have helped to push the PE ratio to 21 times earnings at a current stock price of $53.25, up from 14 times in 2011 and 11.5 for 2010.
Unilever reported areas of success reflected in good growth in some of its products and expressed concerns about rising input cost of some of the products it manufactures and competition from cheaper products. From all indications, management seems to have managed to steer the operations well, resulting in improved margins, which moved from 61.8 percent in 2012 first quarter to 63.8 percent in 2013, a continuation of the marked improvement seen for 2012 when the margins for the entire year came out at 63.7 percent versus the 59.2 percent enjoyed in 2011.
While cost increase seems to be under control in 2013 for the first quarter, that was not the case in 2012 when selling cost rose by $17 million or 17 percent and the administrative cost rose 22 percent, well above the growth in revenues. For the quarter, selling costs rose by 4.8 percent and the administrative cost rose 2.7 percent, while revenues were up 4.75 percent.
The company boast equity capital of $176 million, has no interest bearing debt and a high current asset ratio with liabilities almost covered twice over.
The article concluded that the stock seems poised to rise further as demand exceeds the supply of the stock on the Trinidad market.
At the close of the market on Wednesday, November 8, 2017, the stock seems poised to suffer a further decline, which shows up in the chart formation.
[…] offered at $1.49 below the last trade at $14.49. Unilever Caribbean is also very weak with 40,863 shares offered for sale at $38.75 but buyers are down at $35 for […]