ItsMoneyMark Newsletter #4

It’s Money is BACK!

Welcome back for another week. 

The Chop

A few interesting things happened this week, but not shocking. We already know that this economic pause is going to be longer than expected and the GDP contraction is way worse than expected. In a few months from now, there will probably some new phrases floating around for “cash is king” or “dry powder” – it may be “be liquid or sell”. 

Statistically the numbers have been trending higher in terms of figures coming out of the Central Bank and most recently the PIOJ. We have heard the following: 

– Revised contraction in GDP to 8-10% for a particular period which made the headlines, and we believe this will decline further before it rebounds. This number and range seems in fact conservative. 

– PIOJ has now released an 18% decline in economy for the historical period of April – June 2020. A fantastic graphic and piece by the PIOJ. Year over Year comparison. 

While tourism has re-opened post this into July 2020, the numbers aren’t impressive as yet and are not rapidly increasing or increasing month over month as expected. This is the predicament. 

The Bell weather stock of all stocks on the JSE – the Big Kahuna – Scotia Group Jamaica reported yesterday and it wasn’t pretty. The results hit the “tape” and let’s just say the tape yellow. 

The insight of the results plus BOJ, and PIOJ continues to paint the bigger picture. Scotia Group Jamaica Earnings were Down for the Quarter ( Q3 ) 63% and for the 9 Months Down 43%.

The headline is the ECL – Expected Credit Losses of J$ 2.58 Billion for the Quarter.

Add to this that the publicly traded micro finance firms results have been break even or losses at best – It all starts to add up to the Trend of the Credits and Leverage taking a hit on the balance sheets. 

We will keep watching the tape but be more careful and selective in the Financials is the Message. There is more Chop ahead. 

Smart Money

This has happened a few times historically in JAM, and it seems evident that supports above; we are close to watch this wave again. 

Smart money is piling into real estate but of course not the ‘000 available of residential TH/ Apt in Kingston. 

Commercial Buildings/ Warehouses/ Industrial – the Money is Flowing into. If you can afford to, jump in as well.

With P/E ratios still at 15-20x and the inherent risks, valuations don’t make sense in the Market in quite a few cases, so money is finding another home. The low interest rate of 0.5% an all time low continue to keep the market steady, but that doesn’t mean value in those cases is there for now. 

The particular real estate assets are allowing investors now positioning to sell better regarding the FX even if it re-valued this week as well as if in the event interest rates rise. 

The Funk

Expected expected expected as limited revenues of about US$ 5.8 Million (about 20% of Norm) in the final quarter resulting in Caribbean Producers Jamaica (JSE: CPJ) taming it to the chin. 

We await other Tourism or Tourism linked public companies to report. 

US$ 5.5 Million loss before Taxes, but on a positive note, US$ 4.3 Million is depreciation and amortization. 

It will be interesting to see if there are any aggressive pivots to more local trade by CPJ or any other moves as the tourism numbers to revert to even mid-number seem to be a ways, away. 

The Frolic

Keep watching Penn National (NASDAQ: PENN). It’s gearing up to be an interesting one. Besides taking the 36% stake in Barstool Sports ( the conqueror of ESPN and SportsCenter ), and pulling out all the synergies so far, the 2 companies are launching a betting app for mid September branded Barstool. The Covid pivot here with Tech and Barstool marketing and cheaper channels and penetration is one to continue watching. 
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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