ItsMoneyMark Newsletter #101

Caribbean Cement Numbers, not showing any slowdown in the Real Estate Industry!

2022 Earnings up 24% at Caribbean Cement 

Caribbean Cement Company (JSE: CCC) year-end numbers for 2022 grew across the board nicely, from top line to their bottom line. 

The company, CCC, reported healthy growth in operating revenue of 8.4%, year over year to J$ 25.8 billion, with net profit of J$ 5.3 billion and earnings per share of J$ 6.33. 

Every other day when someone says, “do you think the real estate market will soften, or can it continue? Will the real market crash?” 

Well, simply put, Caribbean Cement, is the fly in the ointment, the tale of the tape, cement is selling, and the industry is moving!

Market Moves:

• Express Catering Limited (JSE: ECL). They had a phenomenal Q3, versus their previous year, for the period, February 28, 2023, versus February 28, 2022. ECL reported an almost 10x improvement in net profit year over year for its respective Q3. Net profit surged to US$ 1.14 million from a mere US$ 120k in its previous year’s Q3. ECL’s revenue increased materially to US$ 6 million, increasing from US$ 3.48 million. 

ECL was expected to rebound strongly with its P&L, and in turn its earnings accordingly. The quarter is in line with expectations, post Covid era, and it is to be noted that with ECL’s large debt load, during the quarter under review, the company paid, US$ 613k in finance expenses – “not a small number”. 

The positive trend is expected to continue into ECL’s 4^th quarter and next fiscal year. The potential item area that ECL needs to be mindful of and communicate via investor relations with the market is their balance sheet, and the following items, (i) current debt load and plans, (ii) debt (long-term loans) to equity ratio, and (iii) owing by related companies line item. 

The company has had a very stable top 10 shareholder list with a few institutional names, and/or accredited investors. To note, National Insurance Fund holds a material > 10% in ECL, closing the quarter, Q3, February 28, 2023, at 11.102%. 

• EduFocal Limited (JSE: LEARN). To note, LEARN has reported a further delay to the JSE, Jamaica Stock Exchange regarding their annual audited financial statements. LEARN advises that the new timeline for their audited financial statements, is on or before April 28, 2023. 

In fairness to LEARN, there have been several companies on both the Junior and Main markets who have advised of delays in their audited financials. LEARN though is being more keenly observed as analysts, brokers, investors, are hotly awaiting to see their numbers, given that they are still a relatively young company i.e., from a publicly traded standpoint. 

LEARN’s market cap is approximately J$ 1.3 billion. 

• Supreme Ventures Limited (JSE: SVL). Well, worldwide? SVL gone Global… In an announcement last week to the market, SVL told us and the market about Ghana. Now, while we cannot see the numbers, or any forward revenue, earnings from this, it feels big, and Mr. Market may take it as that too. Let us see. 

Bottom line, SVL states, that via its subsidiary, Supreme Ventures Ghana Limited, it will be shortly signing an agreement for the exclusive provision of management and technical services to Game Park Limited, which will be the promoter of Pick 1 (Cash Pot) and Pick 4 lottery games in Ghana. 

SVL at 22.6x trailing 12 (TTM) P/E, price-to-earnings ratio, may seem high to some, but SVL keeps cooking, delivering and some. As long as SVL keeps doing things, and growing, it should continue to outshine a P/E of 20x. 

• The Ford Motor Company (US: F). They have been making that push into the EV market, electric vehicle and as such, F has made another material announcement in support of this. 

Ford Motor Co will be investing US$ 1.3 billion in Canada, to build an EV manufacturing hub. It will be in Ontario, Canada, at its Oakville assembly plant. At the location, Ford will make changes such as, amalgamating its three (3) body shops into one (1) and adding a battery pack assembly. The objective is to build the next generation of EVs and to hit the market approximately around the middle of this decade. 

It will be renamed, the “Oakville Electric Vehicle Complex.” 

• Caribbean Producers (Jamaica) Limited (JSE: CPJ). Now, this was the big “popping” news of the week. CPJ for a few years was carrying a matter in their footnotes of their audited financial statements regarding a tax matter/ issue. These matters are in fact viewed negatively by existing shareholders and potential shareholders, and despite what the number maybe or settlement, in general, shareholders and the market, want to see this type of matters (a) settled and (b) behind a company, especially once it is a public company. 

Therefore, this is extremely positive news for CPJ. In an announcement to the JSE, Jamaica Stock Exchange, CPJ has announced a material disclosure of information, headlined “GCT Audit Final Assessment.” Here are the details:

“In 2016, Tax Administration Jamaica (TAJ) conducted a GCT audit for the period January 2012 to December 2015 and proposed an adjustment to the returns for the period. Over the years proceeding, the management under the oversight of the Board of Directors of Caribbean Producers (Jamaica) Ltd (CPJ) dialogued with TAJ and other relevant authorities to review and resolve the proposed adjustments. On March 29, 2023, the Management of CPJ agreed to a final assessment of J$328M, of which J$88M was already agreed upon and paid over, in 2017, to the TAJ.

The company had set aside reserves to mitigate against the sum payable upon final assessment which has now been settled with the TAJ.”

The latter part is positive and important to note, as CPJ states, “had set aside reserves to mitigate against the sum payable.” Reason being a shareholder next query will be, is there any impact on current year’s numbers. So, we assume by this, CPJ had set aside enough to cover all of this. 

How positive are developments of this nature to re-iterate? Listen, when analysts, the market, investors see these announcements, a natural query they ask, is “why now?” Whether for a particular reason, or it just took this amount of time to be settled, it leads to buzz, and potential positive corporate messaging for CPJ moving forward, considering their other recent developments. 

CPJ is trading at approximately 10x or less P/E, price-to-earnings historical 12-month trailing (TTM). The Company seems well on its way to surpass annual revenue of US$ 200 million, and its net margin is expected to be maintained.