ItsMoneyMark Newsletter #106

Don’t Sleep on Fontana Limited

The Pharmacy that keeps Growing, Fontana 

Not many companies on the JSE for the 1st Quarter demonstrated robust growth in Earnings. Practically a handful or less than 10 companies overall comes to mind. The environment, inflation, higher interest rates and other potential economic factors caught up with company earnings as revealed in Q1 results (calendar), not only for the financial services sector (expected), but impacted the real sector too. 

It therefore makes Fontana’s run and results even more to talk about it, especially given that it does not include their future earnings from highly touted, and the hotly expected Portmore location. 

For Fontana’s 3 months ended March 31, 2023, that is their 3rd quarter, Fontana’s net profit kept rolling and surged by 42%, hitting J$ 148.4 million on revenue of J$ 1.71 billion. The respective earnings per share (“EPS”) registered was J$ 12 cents versus J$ 8 cents, year over year for Q3. Year to date EPS now stands at J$ 45 cents for the 9 months. 



Fontana’s share price is back to around J$ 9/ share, up from J$ 8/ share earlier in 2023. For the 9 months Fontana’s earnings have almost surpassed all its previous full year (J$ 45 cents v. J$ 49 cents). Assuming Fontana can get to J$ 57-60 cents for its 12 months, a 15x P/E (price-to-earnings) ratio with its current earnings growth rate, and not counting in major expected growth from its Portmore location to come, makes Fontana intriguing to say the least. 

Market Moves:

• Derrimon Trading Company Limited (JSE: DTL). The Company saw some surprising “sell side trading” in DTL by a Senior Manager, despite the financial results moving materially lower for the last quarter. In a report to the JSE, Jamaica Stock Exchange, DTL advised that a Senior Manager sold 154,889 shares on March 13, 2023. 

By the share price numbers, DTL broke through its long-time support at J$ 2/ share price level and closed on the JSE on or around J$ 1.82/ share. The resulted in a material lowering of its market cap to J$ 8.25 billion. With DTL breaking the support level at J$ 2/ share, the stock is trending towards its 52-week low or a potentially new low. 

As mentioned, what drove this yesterday in market activity was the quarterly results from DTL. This was for the 3 months ended March 31, 2023, or Q1 2023. On the positive side, revenue grew by approximately 16% year over year and hit J$ 4.92 billion. The issue though is revenue and market share aren’t net profit. DTL’s net profit tumbled on higher “operating expenses”, and registered J$ 52.5 million versus J$ 172.9 million, year over year. 

DTL’s net margin for the quarter, as a result was 1.07%. 

• Lasco Financial Services Limited (JSE: LASF). Announces an interesting move and it begs the question if more of this is to come. It features clearly the highly respected and business savvy, Mr. James Rawle playing a bigger role in the Lasco group of companies. LASF announced on May 24, 2023, that, Mr. Rawle was appointed the Company’s Deputy Executive Chairman on May 18, 2023. 

We had written in 2022 or sometime ago at ItsMoneyMark that the only item in our minds holding back what we call the “Lasco Group” is the lack of clarity, transparency around the Lasco Companies “business continuity plan”. 

We have recently seen how well “Island Grill” handled and executed it, and how important corporate communications and investor relations is to a business with major decisions. 

• ISP Finance Services Limited (JSE: ISP). The more and more you look at the Company, analyse their financial statements and add to this their recent moves, they really are a great potential buyout option for a market player. 

ISP reported their year-end audited numbers for December 31, 2022, and they weren’t bad given all that has been happening in the micro-credit sector and interest rate movements within the past 12 months. They are not break-out numbers, but ISP has never been known for that. They have been a slow and steady micro-credit player. 

Their loan book, net of provisions for credit losses closed the YE 2022 at J$ 760 million, an increase from J$ 713 million, year over year. ISP closed the year-end with cash and investments of over J$ 255 million, so the Company should be on its way to surpass J$ 1 billion loan book this year depending on their deployment. ISP’s total interest income was J$ 432 million with net profit of J$ 57.6 million or earnings per share of J$ 55 cents. 

Besides how ISP has been adding debt financing to foster growth as it recently issued a Corporate Bond to grow its loan book further, the far more interesting move was the appointment of two (2) Independent Directors: David Lee and Damian Duncan, effective May 17, 2023. Both gentlemen are private equity players and have backgrounds in finance/ banking. It therefore makes the move even more intriguing given the market’s hunger for deals. 

ISP one to watch and how it plays out in 2023/ 2024. 

• FosRich Company Limited (JSE: FosRich). There is no question about it, FosRich is “one of the darlings of the JSE.” There are a few equities on the JSE that have this level of connectivity and strong investor relations (“IR”) with their shareholders, market analysts, and stakeholders overall. There was a time roughly in the period up to 2010 or prior (before the Junior Market kicked into gear) that the “bellwether stocks” dominated the market and communicated well with stakeholders. FosRich and a few other Juniors took that baton and never looked back, and it demonstrates how important the messaging, IR of a company can be especially in our market. 

We raise this, as FosRich post their quarterly numbers, that we spoke about in a recent ItsMoneyMark Newsletter has now further announced another major move. Their release does not speak to any contracts yet or potential revenue but “less is more”, and they have achieved a win, with this corporate announcement. On May 18, 2023, FosRich released on the JSE: 

“FosRich Company Limited announces the incorporation of FosRich USA, Inc., which is being established with a view to pursuing various business opportunities in the United States of America.”

• JFP Limited (JSE: JFP). The 1st quarter (March 31, 2023) from JFP was harsh, defined as much lower than expected, and declined year over year on all counts. Revenue was J$ 75.7 million, declining from J$ 110.2 million. More materially, JFP registered a net loss of J$ 14.8 million versus a net profit of J$ 34.9 million. 

A few other things happened at JFP per announcements on the JSE. Total Office (2006) Limited became the single largest shareholder in JFP, with the March 31, 2023, report reflecting Total Office (2006) a Trinidadian firm holding 261,380,105 shares or 23.25%. That’s an associate stake by Total Office (2006) in JFP. The Company announced post results the resignation of senior manager for the post of “purchasing and stores manager” effective May 25, 2023. 

The quarter although reflecting a net loss and lower revenue should not be a large concern as JFP has not demonstrated robust growth historically but this T&T firm entering the fray should present further opportunities for both companies. JFP’s 1st quarter to our re-collection is usually lower and the way in which the company realizes revenue tends to lead to stronger latter quarters in the year or year-end numbers, given the nature of JFP’s contracts/ business.