ItsMoneyMark Newsletter #23

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 Earnings results are starting to pour in again and turn it on, on the Jamaica Stock Exchange – the JSE, and the theme over the past 12 months continues and even more so, since the Pandemic started – a blistering 18 months ago in Jamaica.  
 The theme is the one of the food companies, especially “niche” food companies moving from strength to strength.  

 Salada Foods Jamaica Limited & Honey Bun (1982) Limited,report and they came out with double digit earnings % increase respectively – big ones, year over year. The interesting point is that both companies viewed as “manufacturing sector”, however with the focus on food manufacturing, have accelerated within the past 3-9 months in looking at their numbers – This June 30th, 2021, Quarter.  

 The results have caused many an analyst to wonder, what has caused this “pop” in the latest earnings release quarter – in both cases, the year over year growth in Net Profit after tax or Earnings per share (EPS) was Huge. Not your 10% or 20% or “double digit” story, but in one (1) case, 250% year over year. Many market pundits in analysing the results, have wondered what would have occurred between April – June 2021, suddenly to have created this jump in operating revenue and net profit, in these two (2) earnings reports.  Was it the re-opening of the economy and will this continue? Was it built up demand from the Pandemic and a one-off quarter as the economy re-opened? Or is it that persons and families are home more and eating more, therefore companies like this are benefitting more? Or is there potentially a significant underlying stress from the Pandemic that is causing Jamaicans to eat/ consume more during this extenuating period of economic shutdown/ semi-lockdowns and prolonged starting and stopping of the Economy?  Or were the price increases taken, if any, substantial enough for this type of earnings increase, assuming costs were maintained?  Whatever your answer: if you have some surpluses and you want a hedge, especially with “inflation” from a practical basket to beat the bumping up of prices in Jamaica right now, look at the food basket of stocks for your basket of investment hedges against losing money purchase power.   Before we get to these BIG 2 earnings results for this week, let’s see the Food Basket Year-to-Date (YTD) share price performance: 
YTD performance of the BIG 2 reporting this week, and over the next few days, potentially expect to see their prices increase even more…  

Salada Foods Jamaica: +154% YTD when applying the stock split Honey Bun (1982) Ltd: +27% YTD When you look at this sample size, and there are a few others that we haven’t included, but this gives the principle of a “basket”, the range is +27% to +154%, with Derrimon as an outlier. Clearly, on a side note, the Derrimon stock has some work to do in 2022 to catch up with its APO, M&A and all the deals done!  +27% or higher YTD would have covered you for devaluation of the JMD$ versus the USD$ and/or inflation – And that’s the bottom line. Although many market pundits are concerned about raw material rising costs, shipping costs, etc. in 2021, “food” investing with the big ones, and in particular niche food investing seems to be a safe and sound bet for anyone looking to hedge or beat this inflation mosquito that is not only coming back and back but is getting fatter.  

 Market Moves on Honey Bun & Salada Foods: 
 Honey Bun (1982) Ltd, Q3 Earnings Jump by 250% 
 Honey Bun is clearly baking more and it’s showing in the 3rd Quarter. This was for the Q3 ended June 30th, 2021 – J$ 566 million versus J$ 367 million in operating revenue for the Quarter and year over year. Net Profit of J$ 64.8 million and EPS hit J$ 14 cents per share for Q3 and J$ 37 cents per share for the YTD.  Salada Foods Jamaica, Booming 3rd Quarter 2021 

Salada Foods, revving up even more with their exports as well. Revenue J$ 310 million versus J$ 256 million. Profit after tax or J$ 50.9 million versus J$ 23.8 million. 
 EPS of J$ 4.9 cents for Q3 2021. J$ 115 million Profit after tax for YTD 9 months. Approximately J$ 317 million of cash & investments held on their balance sheet. Shareholders’ Equity approaches J$ 1 billion.  
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These opinions and thoughts are solely of ItsMoneyMark and does not constitute investment advice.
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