ItsMoneyMark Newsletter #3

Hey Everyone, 

It’s Money is here and rumbling on Friday!

Over the past few months and weeks, we have been dealing with 3 significant hurdles of uncertainty that have been making the financial markets, the economy and Jamaica feel like Everest.

Hurdle 1, has been a fluctuating one, that is the FX/ Dollar that after a while really grows on you each time and settles down and buyers/sellers, businesses and sundry tend to just work with it and life moves on. We will mention it, because it is a real factor, but the FX factor has always been an issue and it is here to stay. We have re-valued some, J$ 147 and change versus J$ 150, post-election. Let us put this obstacle behind us for now and for today. 

Hurdle 2, the uncertainty around the General Elections. This is now done and dusted and the resulting “Green Wash” will only serve to create continuity and enhance macroeconomic stability. That is the incumbent has won another term and continues. Multilateral support should continue and perhaps be increased or enhanced as a result. The Opposition accountability is a concern given the massive loss and who will step up given the sound bites of the current Opposition Leader but all of this should be sorted out in time as we focus on the Markets & Economy. 

Hurdle 3, the Pink Elephant of COVID-19. The positive is we have cleared 2 Hurdles in Jamaica, but this is the Kilimanjaro! 

Are we on for another pause in the Economy? If so, what type of pause? A short one, mid-tempo or long?  

In any case, small or mid-sized businesses who closed operations earlier this year in the March – June period, and then sourced funding whether, debt, equity, quasi debt to re-open cannot take another closure. 

In the case of companies who now owe a lot of liabilities in arrears, whether payables, redundancies, other liabilities, how will they manage one of these types of pauses if it were to occur. 

Something will have to break the cycle, whether it be a return to normalcy soon, which is hopeful, one of the announced private / public partnership Equity Fund/s by the Minister depending on the clauses which is a very good idea (Jamaica could use a Sovereign Fund for this or quasi Sovereign Fund), or a longer pause would mean the worst case scenario. 

Leveraged companies as is the norm are presently in the worst-case scenario for this pandemic. 

In the U.S.A. many small to large companies have received assistance from the stimulus plans that continue, available restructuring plans and other payroll plans, none of which are offered in Jamaica as yet, except for similarities in the payroll plan. This has been quoted as due to the needs for fiscal restraint and planning in Jamaica. That is, we cannot do more economic assistance programmes.

The next 90-120 days will be critical for the Financial Sector and their Clients and the overall Economy for how this continued potential pause is managed and pivoted. 

Fun Stuff

Fontana Pharmacy (JSE: FTNA) recently came out with their audited financials for year-end 2020. 

While the earnings per share (“EPS”) are down, coming in at a hard J$ 22 cents versus J$ 26 cents, they are much better than this!

The revenues grew which were expected with the opening of Waterloo Square. I mean a place with Starbucks and Wendy’s. What is not to like? And this will only help to attract more foot traffic and more buying into the leading Pharmacy of Fontana. Now revenues jumped to J$ 4.5 Billion which shows some COVID-19 proof behaviour here… As we had said before, look for the COVID proof stocks or players right now. 

Although there are some changes to the Top 10 list that could break confidence, here is what should be focused on: 

(1) Normalized EPS could be as high as J$ 35 cents / share
(2) Finance Expense is “chunky” and contains a lot of “noise” in it, not just interest expense but a lot of different entries that we are sure Fontana Directors will get moved out of there for the next quarter to truly show the performance of the business. It is better than the current EPS as we opined. 

Carefully read the footnote. 

IPO – U.S. Market

There has been a lot of buzz in the U.S. recently around SPAC and SPV with huge amounts of success especially for Bill Ackman and it is catching on more. 

Not in Jamaica directly but we have also seen Jamaica companies associated with it, E.G. JMMB, Sagicor with the Canadian transaction. 

Onto this, data analytics have been all the rage. Watch this one carefully. It’s not one that you can always get into the sector or into one of the companies publicly:

Palantir – Big Data and another Thiel Play potentially 

Given the current losses it will not be instant, but Hey, we heard the naysayers about Apple from as far back as 2007, 2010, likewise Google, likewise Twitter, likewise Amazon, likewise Facebook, and of course who can now forget the ever present Tesla. 

Be Good and until Next Week, 
It’s Money Mark.

These opinions and thoughts are solely of ItsMoneyMark and does not constitute investment advice.
Ensure to always speak to a Licensed Financial Advisor.

Thank you for reading!

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