ItsMoneyMark Newsletter #59

The Netflix Crater, What hasn’t moved as yet on the JSE, Getting Ready for Earnings Reports 

Well the markets, the U.S. market taught us a new financial lingo word this past week. In the past there has been major usage of fall, registered, increased, decreased, surged, tumbled, but Netflix Inc gave us a new one “crater”, LOL . Harsh language if you were on the buy side and bullish from the US$ 300s price level and gobbling up more prior to the earnings release… Notable hedge fund investor Bill Ackman closed his position and booked a loss of approximately US$ 430 MM on it. NFLX current market cap below US$ 100 B, trading at approximately US$ 95 B, with the share price around US$ 215. 

Although much has been made of his trade and loss, it’s really not that significant to Bill’s portfolio as he is after all an “absolute return investor” and this is what he does for a living. As long as his right trades outweigh his one off losers: that’s his dig… 

Well, it’s “Earnings Reports” time on the JSE any week now. We have already started to get numbers and this should continue into next week and moreso closer to the end of April 2022. This should set the state of play from here, that is do we settle within a band of where we are now, or does the Market move higher and breakout to another level. Let’s see. 

The Market is keen to see numbers from a number of players but of course, ones being watched keenly are: 

FESCO, Fontana, SVL just reported already and HUGE, GraceKennedy, Derrimon, Sagicor Group, JMMB Group, Barita, and a few more. 

A lot of the bellwethers have in time been replaced with these sound, more popular companies delivering the hot numbers.

The JSE market has been historically reactive to market info, and earnings numbers but it is noticeably moving faster now then 10 years ago, as it should. We note, with a lot of movers already higher, Mailpac Group has still been sideways and could be the fly in the ointment for 2022. 

SVL Earnings + 68!

Well, Paramount Trading (Jamaica) and Supreme Ventures (JSE: SVL) have gotten us off to a blistering start for the current Earnings Reports… 

SVL reported its 1st quarter and they made a “cash pot” of money, J$ 1 billion for the quarter or J$ 37.7 cents per share. We mean, the quarter alone is like what SVL would have made for the whole year some years ago. Hence, market analysts have now upgraded SVL’s name to “Super Supreme” and many market pundits are calling Super Supreme’s Executive Chairman, “Gary Musk”. 

Just as impressive is the growth in the top line, something that was really not as high as this before. For the quarter, year over year, total gaming income grew by 19%, and notably the lotteries line item by even more. Despite competition entering the market in 2021, SVL has not only remained dominant but has grown way more than above average. The top line growth, dominant branding and addition of “Supreme Scratchaz” has been spectacular and has gone social media viral for SVL

Share price rallied post results to J$ 32/33, new high, and expect it to go higher from here as 2022 sets into full flight for SVL.

Market Moves: 

1. Jamaica Producers Group Limited (JSE: JP) getting active on the share volumes, corporate action side. We continue to remind readers, don’t neglect this. When you see this, and especially see this, a few times, it’s a trend and it means more than just something! Let’s recap a series of JP trades over the past week or so, giving further “legs” to the share price and JP’s market cap. 

A Director purchased 2.01 million shares on April 12, 2022. On said date, April 12, 2022, a Director purchased 449k shares, totaling trading in shares of approximately 2.5 million shares in JP, not inconsiderable volume at all. 

JP has been shooting their shot in the market, keep your eyes  on them. 

2. Speaking about observing trading in shares, Mailpac Group Limited (JSE: MAILPAC) enters the fray. Sometimes if the Market ain’t buying or seeing value as yet, you will see the “company insiders” take the opportunity to acquire shares once they are not in breach of the Jamaica Stock Exchange rules, that is what is deemed as the black-out period, whereby Directors cannot trade in shares. 

Between April 11-13, 2022, a Director of MAILPAC got rumbling, and took the opportunity outside of these black-out dates and bought up 3.03 million shares… Similar to our comments on JP, don’t take these market disclosures lightly by publicly traded companies. This would equate to a Director spend on the share acquisition of approximately J$ 9 million. Always looking at the dollar value, it helps to put things into perspective. 

3. FosRich Company Limited (JSE: FOSRICH) has had a run of runs… 12 month return and YTD – year to date return phenomenal upon review. 

12 month return: more than 4x the current price being above J$ 23/ share 

Year to Date: + 157% 

It is normal when stocks have this type of run, and significant positive movement in a relatively short space of time that the Majority Shareholder/ Board of Directors take advantage of the opportunity, of course, once they have further plans for growth, and so forth. FosRich had signaled returning to the market for sometime via the Media, and other mediums, given the uptick in financial performance and uptick in share price. 

Well here we go! Finally, the well awaited announcement from FosRich hit the market this week. The Board of Directors of FosRich is expected to meet on April 28, 2022 to have a serious meeting and seek to recommend to shareholders the following matters: (a) stock split & (b) raise equity investment via a rights issue and/or an APO by way of new ordinary shares. 

Either way, typically our market responds well to announcements like this, and FosRich has been doing well quarter over quarter, and this announcement can result in FosRich going higher.

Additionally, one thing for sure, once FosRich has capital to allocate, they have not been short of growth ideas and opportunities. 

4. Margaritaville (Turks) Limited (JSE: MTL) needed this type of quarter. It’s the rebound quarter. Where the analysts at large say, MTL is back… pretty much all of MTL’s revenue except for a 1‘000 US$ was in the quarter that flowed into the YTD – year to date numbers. 

In reviewing the results, and the MD&A (more companies really need to upgrade their MD&A and be clear on their disclosures on what is happening with the business and the quarterly results as MTL has. Some JSE listed companies still are not including a MD&A with their quarterly numbers in 2022!MTL registered operating revenue of US$ 974k for the 3rd quarter and for the 9 months, YTD operating revenue of US$ 975k. The net loss for the quarter was US$ 166k, which shrank from US$ 261k in the previous year’s comparative quarter. All things improving, MTL’s net loss for the 9 months, YTD was US$ 776k. 

MTL dealt with considerable inventory management issues in the YTD numbers, and it’s never easy getting going again after such a long hiatus as a going concern: the re-start costs and associated one-off admin expenses are considerable. The revenue coming back is the critical takeaway. 

The going forward issue that MTL has, given that the cruise liners are back, is MTL has historically had a scaling, growth issue story, that is a ceiling to its potential. Will MTL change this post Pandemic or just keep the business as is? 

5. Paramount Trading (Jamaica) Limited (JSE: PTL) just recorded its highest operating revenue for a quarter on record, for its 3rd quarter. 

PTL is largely known in the Market as a chemical company, but when you dig deeper it does a lot more than that and carries a wide array of products. Paramount Trading, offers industrial chemicals, Allegheny petroleum products, SIKA products, bleach contract manufacturing for 3rd parties, and more. It really puts some context around what PTL does, versus just thinking about them only as a chemical distributor, as clearly over the years they have pivoted into being a manufacturer as well. 

Let’s get to the numbers. In our ItsMoneyMark Newsletters, a few editions, late last year and earlier this year, we spoke about PTL in the low J$ 1 range being a “good deal” and it was just a matter of time before it would get that profit pop again. 

Well here go, the record quarter we spoke about. 3rd quarter revenue of J$ 463 million versus J$ 347 million year over year. Even more impressive, net profit for the quarter of J$ 47 million. PTL’s net margin is where the action is and it came out for the quarter at approximately 10.1%! PTL’s 52 week range has been J$ 0.95/ J$ 2.85 per share. Friday’s close saw PTL just below J$ 2/ share. This could be a delay in the upcoming gains, or that the Market wants to see PTL deliver consistent earnings, back to back.

Either way, PTL could well be heading back to its 52 week high this year, and surpassing J$ 3/ share with another strong & consistent quarter (4th quarter coming up) with a 10% net margin or better to be maintained. 

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