ItsMoneyMark Newsletter #45

It’s the end of 2021 and you guys are STILL here with us, THANK YOU!

What will 2022 bring? We’ll find out!

Happy New Year from the ItsMoneyMark team!

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Let’s get into the final newsletter of 2021!

The Phenomenal Financial Numbers of Buying House Cement  

You got to dig deep sometimes, but once you look at the financial numbers of Cargo Handlers Limited (“CHL”) and jump into footnote 14, there is some “fun time” data & numbers on how well and material the newly minted cement player, Buying House Cement Company is doing. Talk about not just Mr. Market with this one, but talk about, Market Share…  

That is one of things with audited financial statements, the standards, IFRS, is once you jump into an associate stake, a subsidiary, and the many other company/ financial jargons, there is that phrase that comes with it, “more disclosure.” 

The background is that Cargo Handlers has been diversifying in recent times and has been making patient & wise moves. They bought a 30% equity stake in this entity, Buying House Cement within the last financial year. Based on the results, it has turned out to be a “steal of a deal,” and has further propensity to be a “runaway freight train” for CHL.  

Some perspective on Market Share, as we speak more about the CHL numbers further on…  

  • Caribbean Cement Company Limited 
  1. Historical Revenue 2020 J$ 20.108 billion  
  2. Projected Revenue 2021 J$ 22-23 billion  
  • Buying House Cement   
  1. Historical Revenue 2021  J$ 2.22 billion  

We admit we are not comparing “apples to apples” here precisely, as the CHL note makes mention of 9 months, and there may be other anomalies but if we draw a line through this, with Buying House Cement revenue as a % of Caribbean Cement Company Limited revenue at this stage, it really jumps out to you, as a Wow!  

Assuming Projected 2021 for Caribbean Cement holds, that is an approximate 10% number already.  

If we do Buying House Cement 2021 September number from the CHL audit versus Caribbean Cement actual 9 months to September 2021 revenue number, we get to a startling 12.35% (2.22 billion/ 17.8 billion).  

Big picture here is, Buying House Cement is bigger than the market thinks, and its growing… 

Market Moves: 

  • Salada Foods Jamaica (JSE: SALF) continues to “rock” with its year-end audited financial results for the period, September 30, 2021. Salada Foods, delivered net profit of J$ 156.82 million for 2021 versus J$ 110.4 million for 2020, improving 42% year over year. Salada is known for stringent, strong, efficient cost controls and overall adherence to budgets over the years. 2021 was another case of that when you look at their P&L results, in particular the cost side of the income statement.  

    Revenue grew fairly, despite the pandemic, reaching J$ 1.18 billion for 2021 versus J$ 1.06 billion for 2020 comparatively, growth of approximately 11%. In the Chairman’s remarks, Mr. Patrick Williams, of Salada speaks to the successes that Salada had during the 2021 fiscal year, highlighting the company’s continued export sales growth and the successful introduction of non-coffee products, namely, the Jamaica Mountain Peak Ginger Tumeric Tea. It is important to note, Salada would have lost its leader and star in Mrs. Dianna Blake-Bennett, effective October 31, 2021, albeit to a perceived competitor in Jamaican Teas Manufacturing AKA Caribbean Dreams Foods. Therefore, this was after the year-end numbers. Without question, we anticipate that the resignation should hurt Salada, but at the same time, Salada is built like a well-oiled machine when you really examine the company over the past decade, its growth, its successes, how it operates, and its cost structure. Additionally, when you really “deep dive” into what happens in the mid-cap space of the market regarding manufacturers/ distributors, they seem to all live good together, do cross-over trade with each other, or assist with strengths/ weaknesses, or co-packing, etc.  

    Overall, Salada has never been “loved” by the Market, but they will be fine given the changes, their recent earnings show continued growth, and they do what they do best, (1) Grow retained earnings quietly, (2) Grow the cash holdings/ hoard on the balance sheet steadily…  
  • Cargo Handlers Limited (JSE: CHL), 30% investment during the fiscal year into “Buying House Cement” for  J$ 133.7 million, is paying dividends already based on the year-end financials results from CHL. The company reported its year-end for September 30, 2021, with revenue of J$ 337.3 million, improving from J$ 283.4 million in 2020. Earnings were bullish for CHL in 2021, with net profit surging to J$ 159.6 million from J$ 107.6 million in the comparative 2020 period. Earnings per share (“EPS”) jumped to J$ 43 cents per share from J$ 29 cents per share, improving by 48% year over year.  

    CHL, as a stock, remains very tightly held and difficult to get on the JSE if you are looking for a decent size/ “chunk” or to come in as a new investor… with that said, historically and even more so now, CHL has offered a nice double play as compared to other stocks on the JSE. That is, the company pays fair to above average dividends and given the continued growth in earnings, capital growth as well.  

    On the capital growth standpoint, which of course in the long game, has continuously increased earnings for CHL and in turn improved dividends for shareholders over the years, CHL’s latest investment into “Buying House Cement” is another example of CHL showing it is willing to continue growing the business. For the year-end 2021 P&L, the company’s share of profit of associate generated J$ 28.59 million; as the deal happened in the current year, this line item would have been zero in 2020. Drawing a line via this number, it translates to “Buying House Cement” having a nice year, making approximately J$ 95 million altogether… Expect an even better 2022 from Cargo Handlers Limited and a stronger contribution from its associate Buying House Cement… 
  • Main Event Entertainment Group Limit (JSE: MEEG) admirably shows profit for its year-end October 31, 2021, despite a lack of product or a lack of entertainment sector in Jamaica. MEEG rebounds to a profit line of J$ 16.1 million in 2021 versus a net loss of J$ 18.22 million in 2020. On the revenue side, given the continued Covid protocols, curfew restrictions and lack of entertainment sector or no permits for this sector, as expected, MEEG’s revenue did head south year over year: moving lower to J$ 758 million for 2021 versus J$ 1.046 billion in 2020. Overall, the Earnings per Share (“EPS”) closed out at J$ 5 cents per share in 2021 versus a loss of J$ 6 cents in 2020.  

    What MEEG did a brilliant job with, is in managing their balance sheet during 2021 and focused on maintaining and improving their liquidity ratios, collecting receivables, and growing their cash balances where they could during these leaner times for the company. Essentially, positioning themselves for their sector specific rebound – entertainment. Current assets closed the fiscal year at J$ 322 million vis-à-vis current liabilities at J$ 122.9 million. Cash & bank balances improved nicely to J$ 195 million from J$ 132.2 million. Cash is King! 

    One of the biggest areas of confidence viewed in Main Event Entertainment Group Limited during the year, and whether you are an existing shareholder, on the sideline, or an analyst, you must pay attention to this one… It is in the Top 10 shareholder list… Mayberry Jamaican Equities Limited at Number 2 (11.24%) and Supreme Ventures Limited at Number 3 (10%), you are speaking about 21.24% confidence level in Main Event from these parties. It is a big statement in their outlook and forward-looking thoughts for Main Event once the pandemic subsides. 
  • GoDaddy (NYSE: GDDY) the web services group gets an activist investor, in Starboard Value LP, with Starboard Value snapping up US$ 800 million of shares or approximately 6.5% of GoDaddy. As any active investor thrives on, Starboard felt that GoDaddy was significantly undervalued based on its 20 million subscribers, latest payment platform/ upgrades in June 2021 and so on. Starboard is a New-York based hedge fund and is known for activist investing and typically attempting to gain board control, to improve company’s performance. We will see what happens here… So far, so good. 

    Since the announcement and over the past 5 days, GoDaddy’s share price is up approximately 12% as a result, trading currently around US$ 84/85 per share. 

We here at ItsMoneyMark want to express our sincere gratitude and appreciation for still being with us at the end of  2021! Thank you for riding this journey with us. There’s lots more instore for 2022n – so make sure you are subscribe so you do not miss anything!

Have an amazing 2022, stay safe and invest!

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Happy investing and Happy markets.

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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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