ItsMoneyMark Newsletter #36

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“Herd Immunity and will Jamaica get there?” 

The past week has been a lot of different messages on the vaccine, from public sector and private sector leaders. It leaves you to wonder, with many different data points and statistics of first dose, overall doses administered, and percentages being circulated, will Jamaica ever get to a definition of “herd immunity.” What have we seen or heard recently, and we are now 20 months in and still under curfew on a no movement day:  

  • We need to get to around 50%… why 50%? Is there a medical, scientific or statistic immunity measure here? 
  • There have been mixed reports of vaccines administered in Jamaica at 8% – 11% circulating and other reports of when sample sizing against the adult population, as high as 30% – 40%. With many statistics socializing on social media, wouldn’t it be good, for clear data to be published. This data or observations being circulated is being observed by the entire world and not just us in Jamaica… 
  • Recently, the PSOJ, and other private sector leaders called for clear guidance on a vaccination program or policy on this, and that it remains ambiguous… this seems baffling and was baffling to listen to.  
  • The vaccine committee or national vaccine commission were discussed and their role, results as well, and the commentary and criticisms were even more perplexing…  

Clearly a “what if scenario or plan” should also be discussed in the event Jamaica does not reach herd immunity, what then happens, and how do we get back to normal as a Nation.  

Preparation is Key.  

Market Moves: 

Wow, what an amazing week for our local markets & capital markets on the Jamaica Stock Exchange (“JSE”) … It is these types of weeks where you realize that the JSE expansion of securities/ listings has been massive, as keeping up with the corporate disclosures now is giving a buzz like U.S. Markets:  

  • Stationery & Office Supplies Limited (JSE: SOS) making its business continuity move here! The majority shareholder’s son, Mr. Allan McDaniel jumps into the driver seat at SOS, effective October 15th, 2021, via Board Resolution. Mr. Allan McDaniel is now, SOS’s Managing Director (“MD”). He has been with SOS for some 20 years or longer. His father, Mr. David McDaniel, as at the said date, stepped down from the post. SOS has been a bit battered from the Pandemic, COVID-19, one of the more beat up Companies Profit or EPS wise over the past 12 – 18 months. With face-to-face school not happening, their recent expansion into exercise books, etc. got hit from that and, as many Companies cut capex and other expenses during the Pandemic, the purchase of office furniture or expanding offices was just not a priority. Additionally, even if the Pandemic forced it upon us, it demonstrated that we can still operate a business successfully in some cases, either with flexitime, with less office space, etc. Another emerging trend, and it isn’t “new”, but persons seem to be catching on more, and being more observant during the Pandemic, is that data is suggesting, potential “full time staff shortages” and overall, individuals are more and more preferring “side hustles”, and working from anywhere that is convenient, whether, coffee shops, hotels, restaurants, shared office spaces, etc. Anywhere where this is good Wi-Fi, and the occasional, food & beverage, and some periodic vibes does not hurt.  

    SOS will rebound, but it must think & plan very carefully & strategically in terms of what the Pandemic has done and other trends, which has fast tracked companies & individuals to think about efficiencies, being leaner and deliverables differently versus pre-Pandemic.  
  • AMG Packaging & Paper Company Limited (JSE: AMG) really needs to catch a break! Do they just seem to not be able to grow pre-Pandemic, during the Pandemic or hopefully at the tail? Is it time for the Board of Directors to have a real re-look at the Company for shareholders? We think so… but we have not seen any calls for that yet… AMG released their 4th Quarter and their 12 months (unaudited) for the period ended August 31, 2021. There was a profit improvement in each period, but lower revenue for the 12 months. 

    Even though, AMG has expanded, raised a successful debt placement, we recall purchased real estate, factory under construction, etc. and overall, done several balance sheet moves to improve capacity, revenue has not and is not growing… therefore all these potential strategic moves around growth, is there analysis around “market demand” for their products?  

    It seems like, AMG will have to make an M&A play to justify all these moves for shareholders. A thought is that if, the market share is not further moving into AMG to grow top line, then they will have to get more market share an alternative way as Directors.  

    Back to the Numbers: For the 12 months, revenue ended lower at J$ 705.9 million for August 2021 versus J$ 720 million for August 2020. Net profit did improve, and that is a positive takeaway, and ended at J$ 62.6 million versus J$ 56.2 million in 2020 for the 12 months, climbing by 11%. Q4 2021 reflected similar growth, a 9% increase, hitting J$ 20.04 million versus J$ 18.4 million. Cash & cash equivalents remain strong at J$ 130.5 million.  
  • Wigton Windfarm Limited (JSE: WIG) has made an interesting announcement. It is headlined or titled “Redundancy;” however, their advisory goes on further to state that due to a company restructuring exercise, the Operations Manager role will be made redundant effective October 31, 2021… An interesting point about the release are that it mentions company restructuring exercise. With Wigton back at its IPO price of J$ 50 cents per share and hitting a 52-week LO of J$ 46 cents per share, shareholders and the market are looking for more information & disclosures. Because the release states, “company restructuring exercise” and the release only had one position, it leaves speculation and one to ponder, is there more? If so, to what extent, over what period, and what will be the expected savings to shareholders? In recent times, we saw whereby Radio Jamaica made a restructuring exercise announcement, and eventually how the share price reacted. Of course, these are two different sectors, and we are not saying Wigton is doing anything of that nature or sort, but their release clearly leaves speculation for shareholders who are feeling some pain right now & uncertainty anyway with all the recent negative research or analytical blog reports on the Company.  
  • Jamaica Producers Group Limited (JSE: JP) has been taking the “deal game” to a whole new level as a Jamaica company, and “chopping” up that private equity game as a Conglomerate. We have long felt, even if we never want to compare Lascelles deMercado to another company, that if there was just maybe going to be another like it, and in its own way, it would be JP. Well, after seeing the moves over the past few years, and the company just seems increasingly active, brand oriented, and focused, “we like what JP is doing.” JP just feels alive, and in turn, we know they have a heck of a balance sheet and “cash holdings,” but we finally feel the EPS will come. For the old-time lovers of Lascelles deMercado, who waited, waited, and waited years, for that EPS growth to finally kick in and then after it did it was just like a “G Rate” consistently annually with the retained earnings kicking, and growing and growing the business. One of the criticisms of JP in the past and on & off, has been that there is a lack of consistent EPS growth, and yes, the market rewards it when it has a “big year,” but it can also be perceived as an outlier year, case in point, gains booked from the Mavis bank Coffee Factory deal in a past fiscal year. JP has had other years like this, and from time to time, they have described the business as changed, which is true, and therefore, big gains, should and can be expected as this is now a part of the JP Way or course of doing business. To add to the point, and speaking about taking it up to another level, JP has upped their way of doing business, by no longer doing let us say one deal per annum, or every 2 years, but within the past 12 months, JP has completed something of the nature of three or more deals. Very impressive despite the Pandemic for JP.  

    Announced this week, JP has hit the “deal street” again, and with a JV partner in well-known private equity Group, Norbrook Equity Partners. The two companies have started a Company, named Grupo Frontera, GFL, owned 50/50 by them, and acquired Grupo Alaska in the Dominican Republic (“DR”). Grupo Alaska is a leading ice & water company in the DR. JP’s messaging goes further to say, that GFL has a further strategy to acquire and grow well-positioned companies in the Spanish speaking Caribbean and Central America.  

    We await to see, especially with JP as a conglomerate, and not in the beverage or water business yet in Jamaica, will “Brand Alaska” make its way to Jamaica soon, in some form or method…  
  • U.S. weekly jobless claims came out at much better than expected, 290,000 versus expected number of 300,000. Well, received by the markets and globally: continuing jobless claims were lower and back at pre-pandemic levels. Overall, positive data to continue moving the Dow higher. WeWork is back! After going to a valuation of US$ 0.00, WeWork is now trading on the Market as “WE” and is back in a big way… Not back at the valuation about 2 years ago of US$ 47 billion or so, but US$ 9 billion is better than ZERO, right? LOL. All parties, of course are excited again, and the share price post “blank cheque,” “SPAC” deal, up +10%, around 13%. Chipotle, crushes earnings on the street, and revenue jumps 22%… everyone is loving healthier options & variety, & menus that get an edit…Tesla, posts record Q3, sending share price higher, even though many market analysts are now toasting to SpaceX versus Tesla… We are sure, it will just be a matter of time before they doubt SpaceX or some negative reports emerge, it just does not seem possible to have so much positive news consistently around a “Musk” company, after seeing the difficulties of Tesla and previous market sentiments…  
Make the best of October and see you next week!
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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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