ItsMoneyMark Newsletter #95

ISP Finance Services, Loans hit J$ 742.8 million as of Dec 2022

Ripe for a takeover? Based on ISP’s Dec 2022 year end, the loans of the business net of credit losses, (once you take into account cash on the balance sheet) is clearly on its way to J$ 1 billion soon. This makes ISP Finance quite attractive to the leaders in micro-credit. ISP recently raised a corporate bond and this plus existing cash, allowed ISP to end the period with approximately, J$ 255 million in cash & cash equivalents on the balance sheet. 

ISP has been a slow, steady hand at the wheel, in the micro-credit business, ideal for a market player looking to add size, to their balance sheet. Essentially, grow significantly faster, versus the organic growth path. 

Besides the obvious public market players, out there, i.e., Access Financial & Dolla Financial, there are also a number of private market players, who don’t underestimate them, they are big as well. The WorldNet’s, the Kris an Charles, & more. 

Bottom line is that it is about size in this marketplace, and size counts right now in the micro-credit sector. 

Market Moves:

  • Productive Business Solutions Limited (JSE: PBS) delivers for its year ending December 31, 2022! That is, on its revenue and net profit for 2022. Strong numbers by the PBS team. 

PBS reports their financial results in US$ and for 2022, the 12 months unaudited, PBS delivered, revenue of US$ 316.1 million, versus US$ 223.9 million, year over year, + 41%. The Company’s net profit, hit US$ 8.3 million for the recent year end, versus US$ 5.59 million, year over, + 48.5%. 

Based on the 2022 numbers, PBS’s net margin was 2.63%, with their gross profit margin at 30.6%. The MD&A – management, discussion & analysis, from PBS makes for interesting and enjoyable reading. We like how it starts off, with “Fellow Shareholders” and highlights, a few key points around, their outlook and pipeline for this year, 2023, as well as, how product diversification, improved sales to leading businesses and governments in 2022 helped them in the Caribbean and Central America – the continued diversification and growing recurring revenues. 

  • Honey Bun (1982) Limited (JSE: HONBUN) puts in an “on fire” quarter, and really puts the signal out, even more about its new products, and we assume its “bread products” we are talking about here – “Shorty” really helped the revenue growth…

The quarterly numbers, 1st Quarter ended December 31, 2022, the release to the JSE – Jamaica Stock Exchange is heavily branded, marketed with HONBUN’sShorty bread products, that is, Shorty loaf breads, Shorty cinnamon raisin loafs, and Shorty burger bonds.” The continued push here by HONBUN is evident. 

As we mentioned at ItsMoneyMark, the marketing is supported by the numbers. Gross operating revenue for the quarter under review registered, J$ 817.4 million, versus J$ 664.6 million, year over year. HONBUN’s net profit rang in at J$ 69.2 million or earnings per share of J$ 15 cents, versus J$ 45.5 million, or earnings per share of J$ 10 cents, year over year. On an EPS – earnings per share basis, HONBUN, saw for its Q1, a huge jump in earnings of 50%. 

Moving to the balance sheet, just as impressive, is HONBUN’scash & cash equivalents” as of December 31, 2022, was J$ 357.9 million and investments closed at J$ 98.9 million. Important to note, HONBUN, added to it property, plant & equipment, of approximately J$ 95 million during the year. 

Pay keen attention to HONBUN’s 2nd paragraph in their MD&A – management, discussion & analysis, it reads, “We are pleased to announce the opening of the Old Harbour outlet in the first quarter of the financial year, bringing the total wholesale outlets across the island to nine (9).” 

While HONBUN does not go into detail of this model, or outlet, we have seen where these outlets, or distribution models have worked wonders, and reaped serious results for companies like KREMI, and other JSE companies, so there is a clear method behind this. 

  • Carreras Limited (JSE: CAR) threw in a flattish quarter, with its latest results reported, the 3 months or 3rd quarter, December 31, 2022. CAR made up for it with its dividend declaration of J$ 23 cents to be paid on March 22, 2023. If we annualize this, using the current share price of around J$ 8.25, we are looking at a divided yield of around 11%. Hey, as always, that’s where CAR has delivered, the income/ dividend play. 

Back to the numbers: CAR reported revenue of J$ 5.04 billion for its 3rd quarter, versus J$ 4.53 billion year over year, + 11.26%. On a positive note, CAR grew its top line by double digit for the quarter. Its earnings remained the sore point, as CAR has had its fair share of leadership changes in recent times, and CAR has shown some possibilities of breaking out its earnings to the upside but it has returned here to a flat quarter. CAR registered net profit of J$ 1.13 billion versus J$ 1.14 billion, or EPS – Earnings per Share for the quarter of J$ 23.1 cents. 

The dividend declared pretty much equates to the earnings for the quarter by CAR

  • Palace Amusement Company (1921) Limited (JSE: PAL) talk about getting it right, at the right time! Timing is everything right. 

Not just during Covid, but quite a rough time post Covid, the market and many wondered would PAL get back on track, and back to profitability to pay for and cover its debt load it took on to weather the Covid era and storm. Well, they over delivered in our opinion for this quarter, the 2nd quarter ending December 31, 2022. Additionally, great timing for PAL, considering the increase in share capital and the stock split (already approved), to take effect end of February 2023. 

PAL surprises to the upside on revenue and profit for Q2, with revenue not only rebounding but surging to, J$ 486.3 million, from J$ 151 million, year over year. Similarly, net profit increased to J$ 78.6 million, from a loss of J$ 111.6 million. Let us put this into perspective, which is a whopping, positive swing for PAL of, around J$ 190 million. 

PAL was already powering up for its stock split, a massive one 600 to 1, and many market analysts have been hyping it up prior to these numbers, as stock splits do tend to attract market attention. These results should definitely “power upPAL, heading into and post stock split now and other balance sheet items they may have planned on the cards. 

  • We briefly look at Consolidated Bakeries (Jamaica) Limited (JSE: PURITY), their 4th quarter, and full year, 12 months unaudited report to the JSE – Jamaica Stock Exchange. 

PURITY continues to grow fairly on its top line and improve its market share. The Company also has a solid foundation and balance sheet, a conservative one. Its issue has been perennially earnings for its shareholders. Just getting that revenue to flow to the bottom line at a respectable margin.

PURITY reported, J$ 323.5 million in operating revenue for the quarter, versus J$ 280.9 million, year over year, an improvement of 15%. PURITY still registered a loss for the quarter albeit a smaller one, posting a loss of J$ 2 million versus a loss of J$ 14.6 million in the previous year’s comparative quarter. For the 12 months unaudited PURITY posted, operating revenue of J$ 1.36 billion with associated net profit of J$ 13.4 million, equating to a net margin for the full year of 0.99%. We re-iterate at ItsMoneyMark, PURITY’s issue, the 0.99%. 

The Company, PURITY, still maintains the valuable property on its balance with property, plant & equipment, closing December 31, 2022 at a hefty J$ 786 million. This as a metric, weighted against PURITY’s revenue, profitability, and other financial metrics, tells the story, in terms of what PURITY’s Board & Management needs to finally address to right size its balance sheet to optimally use its capital for shareholders to responsibly improve the 0.99% as soon as practical. 

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