Undervalued Caribbean Flavours

CFF fact 2014The company seems poised to hit earnings of 65 cents per share for the June 2015 financial year, making it attractive for some short-term gains with the current price of $2.09 at a PE ratio of 3 times earnings, having earned 19 cents per share for the quarter and 43 cents for the nine months, to March 2015.
Caribbean Flavours & Fragrances enjoyed a moderate increase of 16 percent in profit for the March 2015 quarter over the similar period in 2014. The increase was helped by an improvement in gross profit margin that moved from 39.6 percent to 44 percent. Profit came in at $17.3 million for the quarter versus $15 million in the similar period in 2014. For the nine months to March, profit declined slightly from $39.7 million in 2014 to $38.9 million.
Sales were up moderately in the quarter from $62.8 million in 2014 to $67 million. For the nine months to March sales grew 11.7 percent to $210.6 million from $188.6 million but cost of sales rose faster than the growth in revenues from $111.7 million to $133.5 million in the nine months or 18.75 percent. Administrative cost increased 21 percent in the quarter, and just 2 percent for the nine months, vastly better than the high double-digit increase in the prior year. The return on average equity an attractive 33.5 percent per annum. The negative is that for its small size there is limited growth from existing operations.
The balance sheet is in a healthy state with equity of $195 million or $2.17 per share. There are no borrowed funds while current assets is $210 million versus payables of only $16 million.
The principal activity of the company is the manufacture of and distribution of flavours mainly for the beverage, baking and confectionery industries. The company also sells food colouring and fragrances.The stock is listed on the Jamaica Stock Exchange junior market and is recommended as a buy by IC Insider.

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  2. my concern with CFF is very little amount of the shares outstanding is held by the public. Hence, the share are barely traded. So even though the shares may be undervalued, the probability of the price moving closer the intrinsic value is minute, there in lies the real risk of this stock.

    illiquidity add another layer of risk for the junior stock market. The stock exchange needs to look into the matter and introduce ways to improve this problem

    I suggest the stock exchange look at adding market makers to the trading process. This could add liquidity to the market

    • IC Insider says

      There is validity to some of what you say, but it was more liquid last year. I feel the sponsoring brokers hold some of the shares from IPO and should be making them more available to the public. Look at CHL same thing, low trading volumes until price moves much higher, then supply. Investors need to be more aggressive in this market if they are to get stocks. The history is that highly undervalued stocks need prices to move to eke out supply.


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