Hey Guys – Happy Easter Monday!
Surprise! It’s an Easter Bonus Newsletter!
Some of us may be having a late wake up call or getting some extra sleep but financial results keep getting posted and a few company updates even if we are off… some persons are using the Easter weekend, semi lockdown, and overall down time for varying reasons, whether it be for, “catching up on that additional work, getting some extra R&R, reading a few strategic books or planning the rest of 2021.”
Admittedly, it’s tough to plan for 2021 in terms of budget v. actual. Not an easy time to be a CFO for a private company or a public company right now. You will have to re-cast that budget not once or twice but practically a few times this year, given the continuing Pandemic.
What seems like it is hurting, as COVID continues and in some cases, payables, debt, other liabilities may be mounting at Companies:
(1) We know since 2020, that Tourism is battered and that theme continues into Q1 and Q2 calendar 2021,
(2) Quick Service Restaurant (“QSR”) has been hurting quietly, most are private so difficult to get a read what is happening as a result of the Pandemic. The continued shortened hours of operating are an issue, and the fixed costs are not necessarily,
– Interestingly we saw a note whereby gas stations will be permitted to operate until 12am outside of curfew hours… Well, this is what ItsMoney lives for! Recently we said, “no mans land” makes no sense. Either go full hundred or crash, but choose.
– Therefore, since we are on the topic of QSR, and while we commend the thought process of ENDS (we assume it also means it has a linkage to “pon di endz”) as linkages like pivot is an important use of words these days, we think as common sense prevailed with the gas association it must prevail with the QSR association id there is one.
– Simply put, and without bias, every “ABC” radius of miles across the island there must be ABC QSR allowable to be open as well.
– It not only helps the 2nd shift worker, the QSR sales, and other indirect linkages as well, but just as opening a necessity for transport past the curfew hours, food is in the same boat.
– The easiest and simplest form and accessible are the existing infrastructure of QSRs.
– As landlords and other fixed costs do not give “blys” we are surprised that the QSR association has not been more forceful.
(3) Retail space similar to QSR is hurting as well, but mostly positioned private,
Besides the sectors that we mentioned recently and companies that seem to be COVID resistant and actually up year over year Re: 2020 v. 2019, the above are what have been admittedly hurt badly, primarily cash reserves burnt/ spent.
To date, pushing 12/13 months later or JAMAICA COVID anniversary, the banks seemed to have held strain in some of the above sectors (we are unsure), while the economic picture seems to be, “we are pushing through.”
Or is it a case that it has just not happened as yet? As perhaps the banks do not want to take the realized write down or hit to the vaunted EPS? Let’s see how it plays out.
These are some of the questions that are top of mind and brewing heading into the JAMAICA COVID anniversary thoughts.
Whilst it is not a review of the full year and impact of COVID on local companies, it is strange to some local market analysts and investors that we speak to, that U.S. Markets had such a wretched few months in 2020 with so many companies filing for bankruptcy (chapter 11) or let us say re-structuring. In particular, the entertainment & cinema sector, QSR sector, and retail space to re-hash.
So, we can assume the similarities are in the sectors from observations & trends, but only from observations mostly and the clinker of tourism.
Where else are the “in between” the lines:
(1) Similar to AMC and the large U.S. and global cinemas, Palace Amusement 1921 has re-shut its doors, and its audited financials or financials when looking at the net current assets speak to what could be ahead,
(2) In tourism, we saw Hard Rock entertainment in Montego Bay, stay closed and not re-open permanently,
(2) (A) The many articles/ press releases on Mystic Mountain and whatever is happening there add to the continued distress in the sector and the trend,
(3) Many retail plays or stores have closed during the 12 months but these are not necessarily Big Plays or are not connected to conglomerates or other; these could be brewing but given the privacy and the de-listing of a few of the larger ones from the public markets in the early 2000s it is difficult to tell. We will also assume they have large cash reserves to withstand this Pandemic.
The Message –
The Government, Agencies, BOJ, MoF, have made it clear that the policy to date will not be like U.S. of 2008, whereby if there is a significant mid-size or large company that may have an issue then, it will bail it out or let us say assist and take equity or prefs or some stakeholder mechanism.
It seems that even if the bank closes its door, if it is not fit for a Securities Dealer to consider, then, where would a company of this nature go to, if it ticks the Boxes, E.G. of large employer, essential services, contributor to GDP, etc.
These once in a 100 year episodes or events must be significant times to seriously look as did the U.S. at the time but very quickly, as the U.S. does, how as a nation, Jamaica can quickly, if necessary use and integrate:
– DBJ
– NIF
– PC Bank
Food for thought.
The takeaway though is that if this is to happen, the conglomerates should win in 2021 / 2022 as they are positioned best, as the message is that government to date will not enter or create a Fund that is timely, fast and dynamic like the U.S. did in 2008.
Therefore, while the conglomerates are historically slower moving, they have something the Junior companies mostly do not have. They have large whacks and boards of “cash”.
A few that have been slowly acquisitive but have not necessarily been as aggressive as Derrimon or NCB FG over the years in terms of number or size deals but have a lot of cash on the sideline are:
(1) Jamaica Producers,
(2) Wisynco Group,
(3) Barita Investments,
(4) GraceKennedy,
Especially the 1st 2 names.
Market Moments –
A few more results have come out and the JSE is so busy now, that even on a Saturday, numbers are being uploaded and financials. That’s great and a thumbs up to the JSE!
(1) Seprod, as expected smashed the street and expectations.
– Revenues grew overall less than we expected but still above average to J$ 37.7 Billion versus J$ 32.6 Billion
– The earnings per share (“EPS”) was the hit. Pandohie and team hit, J$ 3.89/ share versus a timid J$ 2.33/ share the previous year ( using continuing operations )
– Bottom line, approx. J$ 2.8 Billion Net Profit
Now there is a lot of noise in the Earnings. If you back that out, you are looking at borderline flat numbers on the EPS side.
What’s the noise? FX Gains, a lot. Gain on Disposal of Property, a tidy sum and some other figures.
The query now is this the new normal for Seprod moving forward? Where they wouldn’t only be a bigger and better food biz after all the M&A they did over the last few years but will they keep doing transactions like this year in and year out? Let’s see.
(2) Mailpac Group auditednumbers came out. Nothing really changed as they did release their Q4. One of the few that does both and it really helps investor – a good habit.
– Watch for some further explosive growth on the top line based on continuing change in local buying habits and long lines at Price Smart to help Mailpac
– As they hinted in their last earnings report and MD&A, if they are able to manage their costs, freight and other expenses, the Q1 EPS should continue to be favorable to the market
– It seems a bit reminiscent of our only local comparative to the good old days of Apple and Google that actually continue; don’t bet against the Quarter until they threw in a Clinker
Happy Easter Monday.
Enjoy today to the Max.
Be Awesome.
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Happy investing and Happy markets.
Enjoy the It’s Money Experience until next week!
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ITSMONEYMARK 