ItsMoneyMark Newsletter #24

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 Shining Earnings Quarter (April – June 2021) on the Jamaica Stock Market from Public Companies While some say, “Always be thankful. Life could be Worse” or we say, “It could be Better, it could be Worse, but Give Thanks” – Based on these latest Earnings Reports, Jamaica has to be one of the most resilient economies globally.  With the harsh realities of inflation, devaluation, credit defaults, lockdowns, semi-lockdowns, and other challenges – the 2nd calendar quarterly results from Public Companies on the Jamaica Stock Exchange (“JSE”) are surprisingly shining. Even more interesting is besides a few outliers, the results are positive across several sectors showing an overall uplift in earnings.  

For the Quarter, we saw:  Shipping/ Logistics: Kingston Wharves Booming Results Financial Services: JMMB Group, Barita Investments Gigantic Numbers, and a Rebound from Sagicor  Group Jamaica  Food Distribution/Food Manufacturing: GraceKennedy leading the Charge with Big Time year over year numbers. Honey  Bun, Salada Foods, Derrimon, Jamaican Teas – all coming in strong Conglomerate/ Other: Carreras – this was the one the Market was waiting on, and did they ever deliver.  They came through with the winning basket here! Likewise, PanJam Investment  turned the year over year corner as their “investments” line item boomed again.  So, the tale of the tape, was overall upliftment in Earnings for the Quarter – Defying all the Odds of the Pandemic.  One would classify all these Companies as the mid-sized to large players in the Jamaican Economy. Per above, interestingly, all returned spectacular growth in the last 3 months reported.  The National Policy on business size to our re-collection would classify all these Companies as Large Caps or Large though.  

 The Hurt in the SMEs and MSMEs Sector If one was to use the national headlines, many media stories during the same time horizon, April – June 2021, and run an algorithm, the tale of the tape would reflect differently. Some in the SME and MSME sector must be seeing these Earnings Stories in select cases and asking themselves, “What did I do wrong for the last 3 months?”  With that said, in fairness it is very difficult to get public numbers or statistics in our SME and MSME market. Daily & weekly there are consistent comments of business closures and business issues given the Pandemic and other reasons, but the voices seem to not be carrying as loud or as wide as the more formidable, PSOJ, JMEA and JCC.  Perhaps, the respective SME and MSME sector may well need to look to figure out how to collect some degree of aggregate data or sample size/s to create their own indices in 2022 as a start.  Their voices are important and if you go by the trend in other island countries what typically happens is “consolidation” which has commenced in Jamaica a few years ago in particular sectors and is rapidly increasing.

The pandemic, in G-7 countries has arguably fast tracked some experts say digital evolution by approximately ten (10) years. Consolidation in Jamaica, in particular sectors given the current hurt that SMEs and MSMEs are feeling from the pandemic has potentially fast tracked the “titans” consolidating the “smaller companies” by three (3) to five (5) years.  Some experts feel that the next 90-120 days given the stormy weather, potential for inclement weather (we are in the season), the recent uptick in Covid again, and potential dangers flirting for the U.S. Economy – could be concerning and further add significant pressure to this part of the Economy. 

 Market Moves: Barita Investments Limited (JSE: Barita): there was a recent announcement on the Jamaica Stock Exchange newsroom, whereby Barita added three (3) senior management appointments. The appointments related to the following areas: Head – Non-Financial Risk & Enterprise Risk Management  Head – Financial Risk Head – Strategy, Planning & Analysis Barita in recent times has not only been bulking up on executives and senior management roles, but one would assume creating more and more departments within Barita.

Some of the job titles, and/or terminologies are seemingly reminiscent of U.S.A. investment banking culture or terminologies. It is interesting to note, that Barita has also differentiated between Financial and Non-Financial Risk with two (2) different Heads. As an on-looker, one is left to assume, if this is due to the recent acquisition of the material, associate equity stake in real sector company “Derrimon Trading” (Food Company), and if Barita intends to make more deals and investments like this in H2 2021 and 2022, or does Non-Financial mean, like Risks that are within Barita that are just non-financial instrument based? Either way, with more and more offices being added, roles, (“Depth in Team”) and the significant annual and quarter over quarter admin expenses increase – one just feels that some Financial M&A is coming hot and heavy for Barita. There is also the approval of the APO again, last week, and that is to come. Let’s see.  

 Kingston Wharves (JSE: KW) firing on all cylinders and is really a barometer of the Jamaican Economy. Give it some more time, perhaps a few more years, and some may call KW a Bellwether as well given the pace at which KW is growing at… By the numbers, this is how Team Kingston Wharves showed up, and showed up in a big way and surprised the market with their earnings for the June 30th Quarter: Net Profit topped J$ 700 million. Registering J$ 739 million. This far surpassed J$ 500.5 million registered in the comparative Quarter in June 2020,  So, Earnings per Share hit, J$ 50.9 cents for the Quarter. We just feel on the face of it, it feels like a record Quarter for KW! Booyah!  We mean, if you annualize that and KW keeps at that pace, you are talking about J$ 2/share??? Wow…  Even Revenue for the Quarter grew by a staggering 40% year over year, hitting J$ 2.06 billion. 

 JMMB Group (JSE: JMMB): their recent earnings further justified all the rage about JMMB, and even with that, JMMB is still one of the most fair-priced stocks on the Jamaica Stock Exchange with a Price-to-Earnings (P/E) of only 10-11x earnings projected, possibly lower depending on the growth rate for the next three (3) quarters.  Bottom line is JMMB Group is Flying! By the Headline Numbers: J$ 1.93 billion in net profit for the 3 months June 30th, 2021, versus comparative 2020 Quarter,  Earnings per Share of J$ 88 cents versus J$ 39 cents for 2021 versus 2020,  Just as Huge Operating Revenue, shoots to J$ 6.86 billion versus J$ 4.99 billion,  Super interesting is the updated style of the Report and the Segment Contributions: (i) 63% or most of the Operating Revenue – which is the norm – is from Financial & Related Services, (ii) The continued levelling up or super interesting note – 36% – is from Bank & Related Services,  Now, that tells the Story!  Total Assets, grew to J$ 544.5 billion, for June 30th, 2021, compared to J$ 431.7 billion, year over year, a whopping jump of 26%. This being one of the main performance benchmarks for a financial company/ group and shows the super confidence in JMMB from its existing and additional client base. Let’s take a trip to foreign!

U.S. disruptive stocks continue to illustrate a recent trend, and even more so over the past 6-12 months, with their respective and selective CEOs coming out with brash announcements especially around their Earnings Reports.  Tesla Inc had gotten the party going with using some its widely touted cash pile to buy alternative assets versus just holding cash in the traditional pies – i.e. – chequing account, money market instruments, U.S. Treasuries… Tesla made the bold move of buying up large chunks of Bitcoin and it paid off! Now, here comes Palantir with Big Data all the rage in recent times and their Direct Listing popping as expected previously – The Company has built a large cash pile. In addition to that, popular U.S. companies have been registering stock issuances to take advantage of stock price increases which in turn and in some cases grows their cash pile even more…

This is not something we have seen in Jamaica or the Caribbean. While we are not sure, we are not certain if it is allowed in our markets or perhaps majority shareholders do not perceive the dilution to the greater good of them and their Companies. That is, can they own a smaller part of the pie, get more cash, and grow even faster to off-set that dilution? Clearly in a bigger market with significantly more scale like the U.S. this is what is happening a lot now.  Boom even though analysts will look at Palantir’s splurge as being less risky than Tesla’s big spend at the time, Palantir makes a move here.  Palantir jumps into the commodities market with some of its “cash” and buys US$ 50 million of Gold Bars in August 2021! US$ 50.7 million of 100-ounce gold bars that will be stored in a secure 3rd party facility until they decide to take physical possession.  The Company, Palantir is now debt-free.  
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Happy investing and Happy markets.

Enjoy the It’s Money Experience until next week, bright and early at 7am!

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

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