Is Barita really worth as much as JMMB?

Barita Investments headquarters

JMMB Group reported profit at $1.7 billion, for the quarter ending June this year, with comprehensive income, a better measure of assessing management performance, of $3 billion. Barita Investments reported profit and comprehensive income of $1.6 billion, almost 50 percent less than JMMB’s comprehensive income and yet Barita’s shares are selling 2.6 times that of JMMB and the market value is 32 percent greater.
Barita has 1.085 billion shares issued to investors, with total assets of $84.5 billion and shareholders’ equity of only $30 billion. JMMB Group has 1.9 billion shares issued almost twice that of Barita and assets of $545 billion and shareholders’ equity of $63 billion, more than twice that of Barita, but the market has placed a higher value on the much smaller company.
At the close of trading on the Jamaica Stock Exchange on Wednesday, the market value for Barita is $99 billion and JMMB $75 billion, nearly 25 percent less than Barita. Why is the market pricing Barita at a steep premium to JMMB? Barita has only a small percentage of its stock in the public’s hands and therefore is enjoying a scarcity premium, while JMMB is far more liquid with more shares in the public’s hands. TOP10 selection revealed over the years is that most investors appear to chase momentum and popular stocks of the day than invest in stocks that are likely to be big winners down the road.
Seeking relevant and credible information for proper investment decisions is not an area of focus for many. Radio Jamaica is a case in point. The stock has been in the upper level of the Top 10 for the better part of a year and a half, with investors being fed with lots of information to inform them of the big run that was and is still ahead of them. They would not buy into it until the company released full year results in July and even then, only a few bought into what is now unfolding and reflected in the huge rise in the first quarter results. There is a huge demand for the stock that is not easy to find at current pricing levels.

Scotia Group.

The message from the market is that out of favour, stocks are the last to get a following, but the ones that are likely to deliver huge gains. There is the case of Salada Foods, where investors are buying the stock at 40 times earnings when the market is nowhere near that level, while they ignore JMMB Group, for example with PE less than 10.
Investors were treating Barita Investments in the same manner as JMMB is now when Barita was on IC TOP 10 until sometime after the switch in majority ownership to Cornerstone, but few would buy into what was a terrible undervalued stock with much promise.
JMMB enjoyed a big bounce in its June quarter earnings that saw profit 123 percent from $769 million in 2020, but those results were down 31 percent from the $1.1 billion generated in 2019 that makes the 2021 first quarter results so outstanding, as it is up 54 percent over the 2019 results.
Profit for Barita is up 62 percent from $990 million earned in the June quarter of 2020 and up 76 percent over the June 2019 quarter earnings of $910 million.
Interestingly, Scotia Group is worth just 24 percent more than Barita. If Barita gets investors to subscribe to the 240 million shares in the upcoming IPO and the stock price holds at the current level after the issue closes, Barita market value would surpass that of Scotia.

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