ItsMoneyMark Newsletter #65

Finding the Lower P/E Ratios, or Potentially undervalued JSE plays that Remain

Jamie Dimon, the famous head of CEO JPMorgan Chase, recently came out with the statement, that we should all brace for an “economic hurricane.” It is not shocking as several financial analysts and economists in the U.S. have signalled this as an expectation from earlier in 2022. We tend to agree with Dimon, and while none of us have a crystal ball, or can time it, you need to take even greater care in your investment oversight for the 2nd half of 2022 and into 2023. 

We have mentioned at ItsMoneyMark in a few newsletters, to pay down your debt where you can, and if you can, to be careful with leverage overall in the coming months, particularly over the next 12 months. Additionally, be selective and even more thoughtful with purchasing local equities, at 20x – 30x earnings. Of course, and arguably, if the Company you are looking at, at current P/Es has an outstripped “growth rate,” e.g., well above 30% earnings growth, then disregard our comment here. 

During the 1st half of 2022, that is ending in another 27 days or so, several JSE – Jamaica Stock Exchange have moved much higher, in some cases, 50% – 100%, such as SVL, MIL, MJE, and a few others. 

We identify a few movers, that we feel are undervalued, steady in the event of some degree of economic fall-out and have not moved yet on the JSE charts. 

  • JMMB Group – The share of profit of associate leading the charge for JMMB Group. The year-end without this was flattish, but therefore they did that purchase and got into Sagicor and it is reaping dividends! JMMB Group at an unbelievable P/E ratio of under 8x.
  • Sagicor Group Jamaica – Simply put, if overall, carrying PanJam Investments earnings and JMMB Group earnings, well that is enough for us at ItsMoneyMark.
  • Carreras Limited – Annualize their latest dividend of J$ 23 cents, and a 9% dividend yield is solid! Earnings growth not big, but 9% in the latest report is not bad right now. Could get further legs.
  • Mailpac Group – You got to have an outlier, sleeper in 2022… That’s Mailpac for us. Below  J$ 3, near 52-week low. If they can resolve their growth issues and get some legs in one of the next 1-3 quarters, watch out for an uptick.

Market Moves:

  • Ciboney Group Limited (JSE: CBNY) with the market advisory. Well as the saying goes, “better late then never” for minority shareholders on the JSE – Jamaica Stock Exchange with this one. The company’s share price and market capitalization has been on a roller coaster, and currently is approximately, J$ 381 million, almost at the mid-point between CBNY’s 52-week low/ 52-week high for its share price. 

    CBNY announced to the JSE, on June 1, 2022, a material corporate disclosure regarding the Company, and the matter of the majority shareholding of 72% of ordinary shares. They stated in the release, that, further to the communication of February 28, 2022, CBNY understands that the majority shareholder is in the process of pursuing the finalization of a decision in respect of its said, 72% shareholding in CBNY. The Directors will provide a further update a soon as one becomes available. 

    SSL VC – SSL Venture Capital Jamaica just closed successfully by MFS Group, and that has set some precedent for what an entity like Ciboney could be worth, versus a judgement call. In the U.S., this type of transaction, a takeover or a SPAC formation is extremely popular, and if Ciboney happens, depending on what a new investor plans, we could see two (2) deals like this in a noticeably brief period for the JSE. Happy capital markets!
  • JMMB Group Limited (JSE: JMMBGL) simply flying! We have been writing & speaking about JMMBGL continuously at ItsMoneyMark, and these financial results for their year-end just further confirm our opinion. Huge Year-End for the year ended March 31, 2022, for JMMBGL shareholders! 

    The earnings per share reported for the year-end, on a 12-month trailing basis, now place JMMBGL’s price-to-earnings ratio below 8x. Let that sink in a bit, and to re-iterate this is “trailing”, not considering the next 12 months and further potential growth for JMMBGL given their current growth rate.  

    JMMB Group reported earnings per share for the year-end, March 31, 2022, of J$ 5.85, versus J$ 3.84 year over year, representing growth of 52%. JMMB’s net profit was J$ 12 billion, on revenues of J$ 26.8 billion. JMMB’s revenue grew by 18.5% for March 31, 2022, versus the prior year. 

    Share of profit of associate was the beast of the growth for JMMB Group for 2022, coming in at J$ 5.07 billion versus J$ 1.88 billion, for this line item, year over year. 
  • Medical Disposables & Supplies Limited (JSE: MDS) did something unique for their year-end, and in a positive way. MDS grew both revenues and net profit by 42% respectively, for the year ended March 31, 2022. 

    The Kurt Boothe led company, showed in its recent financial results, why it did those massive M&A deals, or acquisitions, as the revenues, earnings come to fruition. MDS reported J$ 3.41 billion of revenue, and J$ 105.4 million of net profit, or earnings per share of J$ 37 cents for the year ended March 31, 2022. 

    MDS’s share price has been cruising above J$ 7/ share lately, and the Company closed the year-end with total equity of J$ 1.1 billion. 
  • There were some interesting Management Changes disclosed to the JSE – Jamaica Stock Exchange over the past week or so, by Seprod (JSE: SEP) & Carreras (JSE: CAR). Do not forget, management changes can be a lead indicator especially, if in significant leadership roles, about the expectation of the Company, and its outlook in a fiscal year or longer. Its not only the quantitative items that you need to focus on. 

    Seprod just did a big deal in Trinidad by purchasing A.S. Bryden & sons, with the expected combined revenues of the entities to be more than US$ 500 million. Now, SEP has reported that Country Manager, Ms. Tricia Hill who joined SEP since 2016, has resigned effective May 4, 2022. One may assume, this is potentially due to the deal of A.S. Bryden & sons, and SEP is maximizing the potential synergies as much as possible even though, they had stated the companies will operate separately. 

    At Carreras, they reported a change in senior management position to the JSE. CAR has seen several changes over the past few years, but from an earnings standpoint and market cap standpoint, CAR has been doing impressive as of late. Ms. Cammeca Cookhorn resigned effective May 31, 2022, from the position of Legal and External Affairs Manager. 
  • Amazon Inc (NASDAQ: AMZN) has been performing extremely well over the past five (5) trading days and has been higher in six (6) consecutive sessions now. In the past 5 days, AMZN share price is up 16.25%. 

    Year-to-date, AMZN is still down 26%, and is trading currently 33% below its 52-week high.

    The stock split, 20-1 for AMZN was first made public in March 2022, and takes effect on June 6, 2022, on a split-adjusted basis. The record date for the stock split was May 24, 2022. The stock split has been assisting AMZN recover some of year-to-date dip in the share price. 

Have an amazing 2022, stay safe and don’t forget to invest!

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