ItsMoneyMark Newsletter #107

Caribbean Cream, Eclipses J$ 2.5 billion in Revenue for its Latest Year-End 

KREMI continues to grow Market Share, Dominating the Market 

In this case, and for a potentially a bit longer, don’t watch the profit now, we know it is hard to say & to read, but watch & focus on KREMI’s sales… KREMI is not manufacturing these sales, they are taking it from somewhere and/or the ice cream market is growing head over heels in Jamaica. KREMI just released their year-end numbers for February 28, 2023, and in the prior year they eclipsed J$ 2 billion. Now they have eclipsed J$ 2.5 billion, growth of 20%. 

Most will be disappointed of course with their net profit line, as they should be, but it does not tell the entire story at the KREMI. Net profit for the year-end was J$ 27.1 million, with earnings per share registering J$ 7 cents. KREMI’s net margin for its recent year-end was 1.08%. 

The focus areas that should really be on it year-end latest audited statements are, (i) KREMI added a whopping J$ 440 million in property, plant & equipment in its balance sheet, might we say even more capacity, revenue growth and eventually profits to come… (ii) It did so with long-term loans and internal funding, as long-term loans increased by approximately J$ 345 million… (iii) Most importantly, KREMI has the ability to get to a 10% net margin in our opinion… 

If you can be patient, let’s assume KREMI gets to J$ 3 billion in sales or higher, and returns to a 5% net margin as a low scenario case and 10% net margin as a high (best) case scenario, this would equate to J$ 40 cents per share to J$ 80 cents per share, in earnings per share. We know, this is a very wide margin here, and it may not happen this year, but KREMI does have a history of surprising the market. If not this fiscal, we feel KREMI would remedy its net margin issue by February 2025, not a long time to wait in the Markets. 

The stock is trading around J$ 3.20 per share and traded at its 52-week low at the end of April 2023. On a forward basis, once KREMI gets it net margin act together, as there is no question it has the market and the sales, KREMI may well be at a forward P/E (price to earnings ratio) of 4x to 7x. 

Its about the future, and not the present when it comes to KREMI… 

Market Moves:

• Carreras Limited (JSE: CAR). Largely a divided/ income play at this stage of the Company’s mature life. CAR has not demonstrated whether via, its investor relations, outlook, or management, discussion & analysis commentary (MD&A), details or vision towards being growth oriented again. A few years ago, we recall CAR did speak to new products, but we didn’t really see this gain traction, nor do we see their marketing campaigns as aggressive as the old days. Perhaps CAR needs to diversify, invest in something new that can provide some outsized growth, or deploy a model like what several beverage companies have done in recent times to re-invent themselves and to keep trending. The earnings of CAR have not been disappointing, they have been steady, but it’s the growth that keeps missing, hence CAR has felt like a rollercoaster. 

By the numbers, for its recent audited year-end March 31, 2023, CAR reported 3% growth in operating revenue to J$ 16.2 billion, while net profit declined to J$ 3.6 billion from J$ 4.07 billion, year over year. The resulting earnings per share (“EPS”) for year-end 2023 was J$ 74.9 cents. 

CAR has been trading between J$ 8.40 to J$ 8.70, with an annualized divided of approximately J$ 84 cents, represents one of the healthiest divided/ income plays, if you are going for that, as the growth simply isn’t there right now. 

• Lululemon Athletica Inc. (US: LULU). The athletic apparel retailer crushed their recent quarter. Top line and bottom line, beating the street’s estimates. The numbers were so good for the fiscal quarter, that LULU raised full-year guidance. Revenue for the quarter was US$ 2 billion versus expected US$ 1.93 billion, and earnings per share was US$ 2.28/ share versus expected US$ 1.98/ share. While beating the analysts’ expectations is always impressive, the year over year performance beat, was huge by LULU. 

For the quarter ended April 30, 2023, net income was US$ 290.4 million, well improved from US$ 190 million. Revenue increased by 24% to US$ 2 billion, up from US$ 1.61 billion. 

A big takeaway in the numbers, China revenue alone grew by 79% in the quarter, year over year. 

• JFP Limited (JSE: JFP). Another resignation was reported by JFP in recent times to the JSE, Jamaica Stock Exchange, this time, it is their Human Resource Officer, Ms. Maureen Hassan, effective June 8, 2023. The previous resignation report was effective May 25, 2023, which was, Purchasing & Stores Manager, Ms. Rushell Milton. 

JFP’s share price is around J$ 1.60/ share and its 52-week low is J$ 1.32/ share. For its Q1 2023, JFP registered a net loss of J$ 14.8 million. 

• Buy Buy Baby, gets some love in the Bed Bath & Beyond bankruptcy matter (US: BBBY). There’s always a buyer for something, it may just depend on the price & the timing. Sometimes even the events surrounding it, comes back to the timing… Given its parent company bankruptcy, Bed Bath & Beyond, and as the company works on auctioning its assets, this one is drawing some interest. 

Buy Buy Baby is a baby gear retailer and details are still emerging on the interested bidders. At this stage it comes across as two (2) including Babylist that registered US$ 290 million in annual revenue in 2022. Babylist describes itself as a destination for all things baby. 

As things heat up, it will be interesting to see the bidders’ interest, that is, whether, its Buy Buy Baby’s intangibles, digital assets, stores, inventory – anyone, a mixture or all. 

• Medical Disposables and Supplies Limited (JSE: MDS). This Company, keeps gaining market share whether from new markets, its competitors, the launching of new products, etc. MDS for its year-end March 31, 2023, reported a huge top line figure of J$ 3.76 billion, up from J$ 3.41 billion, in MDS previous year-end. Net profit declined for the current year to J$ 80.1 million from J$ 105.4 million, representing a 24% decline year-on-year. Expenses and finance costs were materially higher than the previous year, and the revenue growth and margin growth was not enough to offset that. As a result, the current year-end earnings per share (“EPS”) hit J$ 27 cents. The Company’s total equity ended the year-end strong, closing at J$ 1.2 billion. 

MDS net margin for March 31, 2023, was 2.12%, lower than 3.1% for March 31, 2022. The Company is already in its current fiscal year, in its 3^rd month, June 2023, with its 1^st Quarter due on or around August 14, 2023. MDS objective should be laser like focused on growing its net margin to 5% or higher in its current financial year.