Watch this one – RJR Group

Investors should be watching keenly developments at Radio Jamaica as the company seems poised for a turnaround in its fortunes.
The company today reported to the Jamaica Stock Exchange that a connected party purchased 26.5 million of the company’s shares on July 5, 2019. The trade took place at $1.03 and is very significant, sending a strong message of the group fortunes ahead, but few are watching this one. The RJR purchase may not mean much to most, but IC assessment of recent results suggests otherwise.
In November last year, IC posted an article, captioned “NCB Insiders sending a powerful message.” The article highlighted the fact that some directors and executives at NCB Financial Group see big things ahead, to have put down $650 million in buying a block of 4,793,610 shares close to the highest price it traded at in recent times. Since then the stock rose from $136 to more than $200 for a gain of 47 percent, with more to come.
RJR Group, reported profits that more than doubled in the December quarter from $79 million to $168 million on revenues that climbed from $1.39 billion to $1.5 billion but for the year to March this year, the group reported a small loss of $22 million thus reversing the profit of $34 million at the end of December 2018. Operating revenues rose an attractive 9.7 percent in the March quarter to reach $1.29 billion, segment results show that revenues grew 5.3 percent for television, 7.4 percent for radio and 8.2 percent for print in the March quarter over the prior year’s March quarter. Some cost incurred in the 2019 fiscal year will not repeat in 2020, while income as a result of the World Cup football, will not recur. The group lost around $40 million in doing world cup coverage and that loss will disappear in 2020. RJR ended the year with shareholders’ equity of $2.35 billion, borrowings of $387 million. Current assets amounted to $1.5 million with cash funds at $448 million and current liabilities at $662 million. In spite of the loss for the fiscal year, gross cash inflows amounted to $485 million.
The gains in revenues are an important message about future income and a very good indication that the 2020 fiscal year should be a profitable one. The purchase of the block of shares when coupled with growth in revenues seems a positive indicator of what to expect for 2020.
There are a few other indicators as well. Some entities placing advertisements in the Gleaner faced cancellation as a section of the paper attracted increased business that they had to turn away advertising and that seemed to have gone on for weeks in the June quarter. Faced with a growing economy with sales rising as well as increased competition companies will spend more on advertising to move more products and services, a trend that should continue going forward. Of significance, is that GDP growth in the first quarter of 2019 is 21 percent faster than in the same period in 2018 if this trend continues for the rest of the year growth would be in the 2.5 percent level or more. That would mean more advertising dollar spend and the RJR Group is in a good position to benefit from that going forward.
IC projects 15 cents per share in earnings for 2020 with the stock that traded at $1.10 on the Jamaica Stock exchange on Friday, is now at a PE of just 7, well under the market average of 15.6.

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