ItsMoneyMark Newsletter #96

GraceKennedy, several Announcements to Reflect on…

GraceKennedy Limited (JSE: GK) has really been on the move lately… They have released a flurry of announcements to the JSE, Jamaica Stock Exchange. GK makes it clear that the Company is now in its 101st year of operations, as they recently concluded the GK100 milestone. Here is some insight: 

  • GK declares dividend of J$ 50 cents per share. To be paid on April 6, 2023. 
  • GK grants stock options to senior officers: 3.83 million shares to 31 senior managers and executives on March 1, 2023.
  • GK announces share buy-back, subject to the necessary regulatory approvals. 
  • GK Annual General Meeting coming up on May 31, 2023. 
  • GK increases stake in Catherine’s Peak Bottling Company from 35% to 70%, announced February 14, 2023. 
  • And GK Earnings for 2022… J$ 7.09 versus J$ 8.27 on a consolidated earnings per share basis (“EPS”). 

GK has the team, they have the foundation, but they got to ring this EPS up to J$ 10 or above, and consistent growth thereinafter. We re-iterate, they have the balance sheet, and the resources to do it. They need something sizable to get the end results (EPS) where shareholders will see meaningful market cap movement and growth. 

Market Moves:

  • Kingston Wharves Limited (JSE: KW). The Company threw in a surprising downward year end for the market, analysts and brokerages. KW has just been on a roll, hot streak that you do expect it continue, and we were one of those at ItsMoneyMark. KW registered earnings decline of 16% for its audited year-end of December 31, 2022. Earnings per share rang in at J$ 1.89 versus J$ 2.24 year over year. The net profit line for 2022, was still a healthy absolute number of J$ 2.73 billion. 

On a positive note, KW saw moderate revenue growth, with top line hitting J$ 9.4 billion versus J$ 8.6 billion, demonstrating growth of + 9.3%. Historically, we have been accustomed to seeing KW on a tear, regarding its top line and earnings growth. 

At J$ 35/ share, these results place KW in a different light, and the 1st quarter will be important to see. The earnings growth rate prior to this, was justifying the share price, but this is the 1st downward result we can recall in sometime from KW. Roughly at a P/E of 18x… 

  • Jamaica Producers Limited (JSE: JP). JP as the sayings go, talk about in the “nick of time” and “timing is everything.” Strong upsurge in earnings driven by “share of profits in associates and joint ventures”. JP registered for this line item a healthy J$ 1.35 billion number in 2022 as compared to J$ 256 million in 2021. 

While its all about what is to come with the PanJam deal, we will focus here for now. Earnings per share was J$ 2.04 versus J$ 1.64. As we have mentioned in a number of audiocasts and newsletters, JP has all the makings of being one of the greats, without solely comparing it to a Lascelles Dem, if it, JP, can continue this recent trajectory of earnings incline. 

  • Main Event adds Director (JSE: MEEG). MEEG has been firing on all cylinders post Covid, with earnings coming back with a bang and more. Talk about a Company flying. At ItsMoneyMark, we like this move by MEEG, and it signals to the market, that they keep improving the business and powering up.

They have added Mr. Gladstone Lewars as a Director effective February 28, 2023. A few additional items to note about the appointment: (i) Mr. Gladstone Lewars is a Director of Mayberry Investments, & (ii) Supreme Ventures and Mayberry Jamaican Equities, although separate entities, own, 19.9554% of MEEG

  • Key Insurance Company Limited (JSE: KEY). KEY had a rough year for 2022, based on heightened “claims expense”. The number in KEY’s income statement, jumped to J$ 986 million in 2022 from J$ 589 million in 2021. This item really put a damper on KEY’s financial results especially given the improvement in gross premiums written year over year that KEY delivered. 

As a result, KEY’s earnings per share plummeted to J$ 10 cents versus J$ 30 cents, or by 67%. KEY delivered net profit of J$ 54.2 million. To note leading micro-credit Company that remains private in the MFI marketplace, WorldNet Investment Company Limited is on the Top 10 list of KEY shareholders at a significant 5.96% ordinary shareholding or 33.37 million shares. 

  • Derrimon Trading Company Limited (JSE: DTL). The Company continues to trade near its 52-week low, despite further financial results being released to the JSE, Jamaica Stock Exchange and the Market. DTL recently released its financial year end audited numbers for the period ending, December 31, 2022. DTL’s share price is around J$ 2.15 and its 52-week low is J$ 2.00. On a technical basis it would seem attractive, but the issue DTL is having is one of DTL share supply in the marketplace as well as its P/E ratio. DTL’s earnings still need to improve and grow into its share price even at J$ 2.15 for it to get some legs… 

By the numbers and to delve into above, the YE 2022 by DTL saw, consolidated revenue of J$ 18.4 billion (DTL is now registering > US$ 100 MM per annum in top line consistently), net profit of J$ 617 million, with earnings per share (“EPS”) of J$ 0.128. 

Although, DTL grew EPS, year over year, by 36%, its current historical P/E is 16.80x. In the event DTL registers another strong year of growth for this year, 2023, let us say 25% or better, its forward P/E is estimated at 13.4x; still relatively expensive as compared to a few peers trading at an estimated P/E of 9x – 10x. 

There is no question in our mind, DTL will get there, but DTL may well need another full year of robust growth, potentially two (2) years. 

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