Undervalued JMMB Group

At $9.50 per share, JMMB Group stock is one of the most undervalued main market stocks on the Jamaica Stock Exchange, with the financial group posting net profit of J$593.4 million and earnings per share of 36 cents for the quarter ending June 2016.
Total comprehensive income for period, amounted to $1.14 billion versus $894 million in 2015 and is a factor worth paying attention to as it gives a better indication of the performance of the group than the regular profit out turn.
The JMMB Group reported net operating revenue of J$3.42 billion for the first three months of the new fiscal year, reflecting a 9.9 percent increase compared to the corresponding period in 2015 and was due mainly to positive growth in net interest income, fee and commission income and foreign exchange margins from cambio trading. The Group’s net interest income grew year-over-year from J$1.44 billion to J$1.55 billion, an increase of J$109 million or 7.6 percent, due larger investment and loan portfolios coupled with reduced cost of funds across the territories. Fee and commission income increased by 56.3 percent or J$107 million to J$298 million, from growth in managed funds. Additionally, loan fees increased given the material growth in the loan portfolio. Foreign exchange margins from cambio trading grew by 72.3 percent or J$186 million to J$443 million, driven largely by increased volume and taking advantage of one-off market opportunity. Gains on securities trading, net was down 8 percent at J$1.13 billion. The prior period’s results included one-off gains of J$501 million, if these gains were excluded, core gains on securities trading would reflect growth of 56 percent, the company reported.
Operating revenue grew in all the territories with 26 percent of operating revenue generated outside of Jamaica. Nevertheless, the Jamaican entities continued to post positive performance. In Trinidad and Tobago, the Group’s operations continued to move in a positive trajectory, reporting a 32 percent or J$150.2 million growth in operating revenue at J$614.6 million. The operations in the Dominican Republic also posted growth in operating revenue; up 22 percent or J$49 million to J$275 million.
Operating expenses rose 14 percent to $2.58 billion a bit faster than a 10 percent rise in overall revenues net of interest cost, but if one off gains are adjusted for, revenues would have grown by 31 percent, much faster than operating cost.
JMMB Group’s asset base totalled J$245 billion, up J$22 billion or 10 percent relative to a year ago. The growth was due primarily to larger investment and loan portfolios. The investment portfolio increased by J$20 billion or 13 percent to J$171 billion. In addition, loans and advances, net of provision for credit losses was J$40 billion, up 21 percent or J$7 billion. Growth in the asset base was funded by customer deposits and repurchase agreements. Customer deposits increased by J$6 billion or 15 percent to J$46 billion, while repurchase agreements were 7 percent higher at J$156 billion.