ItsMoneyMark Newsletter #78

Main Event Entertainment Group, registers Brilliant Quarter

A 3rd Quarter to Remember 

Hot to Trot – Main Event – Back in Top Form 

It needed Covid-19, the pandemic, to get to a stage of being more or less behind us, for the place to become “outside again” and Main Event Entertainment Group Limited (JSE: MEEG) would flourish again. Well just like that, here we go. Main Event is back, is an understatement. Patience rewards MEEG shareholders, with the latest quarterly financial reports, MEEG’s 3rd quarter. 

By the numbers:

  • Operating Revenue: J$ 601.5 million
  • Net Profit: J$ 123.7 million 
  • Net Margin: 21% !!!!!
  • Earnings per Share: J$ 41 cents

To put it into perspective, Revenue year over year, + 147%, Huge! Earnings year over, + 301%, Massive! 

Receivables, which is normal, grew accordingly in the quarter to close at J$ 404 million as of July 31, 2022, but MEEG has shown they have the capacity to manage this well, and ensure collections to ring the MEEG register.

Money Boss: NCB Financial Group Limited and Chicken Boss: Jamaica Broilers Group Limited

Mis-Priced to the Core 

One thing about history, it will always repeat itself. While the JSE – Jamaica Stock Exchange Junior Market is all the rage, and that may well continue, do not neglect, the good ole soldiers, in, NCB Financial Group Limited (JSE: NCB FG) and Jamaica Broilers Group Limited (JSE: JBG). 

NCB FG has recently gone further south, breaking below J$ 90/ share, and JBG remains below J$ 30/ share, despite the phenomenal 1st quarter earnings. 

When the market gives you “wonders” or mis-priced opportunities, do not complain, but if you can afford to hoard, then accumulate and just forget about it!

Market Moves:

  • First Rock Real Estate Investments Limited (JSE: FIRSTROCK) gets busy, and commences their share buy-back program! In the announcement to the JSE – Jamaica Stock Exchange, FIRSTROCK has made their first purchase on the market via their broker, Sagicor Investments. 

The advisory has updated the market as follows, 100,000 shares of FIRSTROCKUSD were purchased at US$ 4 cents per share on September 7, 2022, with the source of funding, being cash on FIRSTROCK’s balance sheet. 

It is important to note FIRSTROCK’s last statement in the advisory as follows which shows the potential intensity of the buy-back:

  • The maximum number of shares intended to be purchased during the share buy-back programme are 3,825,300 FIRSTROCKJMD shares and 24,777,232 FIRSTROCKUSD shares, being 10% of the company’s shares in issue. 
  • Any way you look at it, analyze it, that is a lot of shares or a significant % in a company 
  • Margaritaville (Turks) Limited (JSE: MTL) for its year ended May 31, 2022, cuts its net loss year over year by more than ½ but still registers a sizable loss for its year end, audited financial period. 

By the numbers, MTL registered, US$ 2.61 million in operating revenue and a net loss of US$ 609k, including finance costs. On the positive note, the business has come back, as it is largely a sole source business, defined as “it is solely geographically dependent on Turks & Caicos, further dependent on tourism there, and furthermore primarily dependent on cruise shipping there to our understanding.” So, Covid-19, the pandemic, was really ravaging to the company for these lone source reasons altogether combined. There is no diversification when it comes to MTL, and to the best of ItsMoneyMark understanding, there is no, growth/ outlook strategy for MTL to remedy this moving forward. If you are a minority shareholder, this is really a logical question, to ask of MTL’s directors at an AGM – Annual General Meeting though. 

The main positives though from the financial report, are, MTL curving that year over year net loss, and the business regaining customers, operating revenue climbing materially as outlined below:

  • 2021 YE: US$ 48,283
  • 2022 YE: US$ 2.61 million
  • Carreras Limited (JSE: CAR), announced last week Friday, September 9, 2022, in what we would deem at ItsMoneyMark, a surprising revelation. It caught us for one, off guard, as we felt CAR was settling down nicely now, and onto some next big moves in the marketplace. Stability in our opinion was key for CAR heading into 2023, and we wanted to see that especially at the helm, the leadership. We feel bringing back the glory days or stability that we once viewed of the legend, the great, Mr. Michael Bernard, would reward CAR’s share price, market capitalization accordingly. 

With that said, the release revealed the resignation of Mr. Raoul Glynn as Managing Director effective September 30, 2022, and the incoming new Managing Director, Mr. Franklin Murillo, effective October 1, 2022. 

We really liked the job Mr. Glynn had been doing for the last three (3) years and the share price of CAR reflected that, in getting CAR back to growth, which was important from our perspective. On a positive note, the resignation is in the future, which is the end of September 2022, Mr. Glynn will be taking up a position in the huge BAT Group, and will be staying on the CAR board, where he can still give valuable insight, input. 

CAR’s share price is around J$ 9, around the 52-week mid-point range for its high/ low. We felt if things stayed on course, CAR would break through the J$ 10.50, 52-week high based on how its earnings were trending. We now must see how the new incoming managing director will perform and additionally how the market will respond to him. 

  • Knutsford Express Limited (JSE: KEX) operating revenue and profits come roaring back for their year ended May 31, 2022. When looking at the public companies that were really impacted, such as KEX, Main Event, MTL, Express Catering and more, these sets of year ends, or quarters, show you that Covid-19, is more or less behind us, plus the recent WHO pronouncements… 

KEX operating revenue surged for the year end to hit J$ 1.11 billion, up from J$ 629 million, year over year, and even more importantly, on the back of the customers coming back, net profit registered for 2022 year-end was, J$ 77.8 million versus a net loss in the previous year of J$ 95.9 million. As the saying goes KEX is back baby!

An important line item in the balance sheet, KEX’s shareholders equity closed the year at J$ 751 million, getting back on the right track. 

Good to see as well, is you must know when to call it a day, and if it is not working then get out early… KEX, a good call here we re-iterate, is to take the hit and move on unlike most companies that get stuck in the dream. Pay attention to KEX’s footnotes for this one, KE Connect US LLC, ceased operations on May 31, 2022. The write-off during this financial year, from said subsidiary, KE Connect US LLC per the footnotes was J$ 30.33 million. 

  • The Dow Jones Industrial Average (US: DJIA) breaks back below 31,000 points and the rhetoric coming out of a lot of major U.S. brokerage firms, investment banks, analysts, is that the FED really needs to put the brakes on these interest rate hikes… 

The opinion is that CEO confidence in the U.S. is tumbling, frustrating and further concerns being raised of not just a pending U.S. recession but a serious U.S. recession. Let us see! 

The concern really from our perspective, at ItsMoneyMark, would be, what are the implications of this growing fear in the U.S., if it is justified for Jamaica by Q1 2023? What pre-cautionary plans are in place for us?

To re-cap, the U.S. FED has raised rates already four (4) times this year, and they meet again next week. The expectation is that they will increase rates again, but this time by 0.75%. This is further driving the fear, concern in U.S. economic markets and global markets as well. 

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