Top 10 stocks in 2010
Published:Friday | January 7, 2011 | 12:00 AM
The Jamaican stock market closed 2.28 per cent higher in 2010 in a sign of renewed interest in stocks, notwithstanding the challenge faced by listed companies to maintain and grow sales and show robust profit.
Equities profited from the 'JDX effect', which served to tame the domestic bond market by lowering yields and charting a downward trajectory for interest rates that is yet to bottom, out as the four and 13 basis-point reductions in the December 30-day and 182-day Treasury bill yields demonstrated.
Stock market wealth grew by J$27 billion, inclusive of the near J$8b contribution in junior listings, where seven heavily subscribed IPOs served as a demonstration of investors' exceptional faith in Jamaica's small companies. The JSE Main Index was capitalised at J$565 billion, the Junior JSE at J$8.5 billion at year's close.
The companies on the more mature index that grew profit during the year tended to do so on the back of trimmed capacity, cost cuts and price hikes, and in some cases, the tweaking of business models to claw additional value from existing resources.
With clear signs that the Jamaican recession was headed into its third year - another half-point contraction in GDP is estimated at the close of the fiscal year in March - and with limited signs that consumer spending power was likely to recover, some companies also sought out new markets offshore to shore up their revenue base by expanding income streams.
Some 27 stocks on the broad market closed the year at higher prices, 19 declined and two were flat.
The stocks that topped the market in price appreciation, however, did not all have stellar performances last year: only Carreras and Kingston Wharves grew revenue; and Kingston Wharves, Gleaner and Carreras were the only three to grow profit.
The top-10 list is based solely on the movement in the price of stocks over the year to market close on December 31.
Berger Paints Jamaica Ltd
CEO: Warren
MacDonald
BRG: 67.5%Industry: Paint
manufacture
Market Price: $2.01 Price/Book Value: 1.25P/E Ratio: 7.82Market Cap: $430.8m
Berger Paints is a household name, but customer recognition and brand loyalty were not enough to maintain its market in the current downturn. The company tried staff and salary cuts as a cost-saving device, and product innovation and expansion of exports to energise sales. Exports rose more than 200 per cent in the last quarter as a result, but half-year profit at September was still down 65 per cent to J$26m. The stock hit a high of J$3.20 in May.
Carreras Ltd
CEO: Richard
Pandohie (new)
CAR: 51.5%
Industry: Cigarette distribution
Market Price: $53.07 Price/Book Value: 7.52P/E Ratio: 7.30Market Cap: $25.8b
Turnover from cigarette sales rose more than J$1.6 billion or 37 per cent to J$6 billion within a six-month span, suggesting a resilient market unfazed by price hikes. Carreras says sales volumes continue to be 'negatively impacted' by excise taxes, from which we can infer that demand fell or stayed the same; leading to the assumption that income gains were from product pricing. The company continued to complain bitterly about the impact of taxes on its business - it paid out more than J$8 to the Treasury last year - while still racking up high profit, which it continues to share generously with shareholders. The stock hit a one-year high of J$54 on December 29.
Gleaner Company Ltd
MD/Chairman: Oliver ClarkeGLNR: 46.6%
Industry: Newspaper publishing
Market Price: $1.70 Price/Book Value: 0.73P/E Ratio: 2.66Market Cap: $2.06b
The Gleaner's stock price fluctuated throughout the year but hits its peak on the last two days of trading in 2010. The publishing company's nine-month profit position of J$486m at September was enhanced by its share of the surplus from a pension plan being wound up by the company.
Hardware and Lumber Ltd
CEO: Simon RobertsHL: 32.9%Industry: RetailMarket Price: $4.65Price/Book Value: 0.42P/E Ratio: -6.63Market Cap: $375.9m
Hardware and Lumber remains the problem child in the GraceKennedy conglomerate but while the company is still reporting losses, its position is greatly improved. Nine-month losses at September were down to J$14 million, from J$183 million at the same time in 2009. Even more encouraging, the hardware retailer made an operating profit of J$32 million. The company, which operates the retail chain Rapid True Value, was placed under the guidance of GraceKennedy group CEO-in-waiting Don Wehby, who along with Simon Roberts, crafted a plan to save the lagging company. Counter-intuitively, instead of scaling back, GK thought it better to think big - or more precisely, to make the stores larger, with the help of partner True Value Inc. The market has seen enough movement to reward the stock, which rose as high as J$5.03 during the year from a low of J$3.50.
Scotia DBG Investments LtdCEO: Anya Schnoor
SDBG: 32.4%
Industry: Financial services
Market Price: $22.00
Earnings per share: $3.51
Price/Book Value: 0.93P/E Ratio: 5.55Market Cap: $9.31b
Scotia DBG made more than J$1.5 billion in the yearly period ending October 31, but that was a 30 per cent drop in performance relative to the J$2.19 billion made in 2009.
The investment company income took a hit because of the JDX effect and subsequent fall in rates, resulting in J$2.75 billion less business for the company last year - revenue amounted to J$8b versus J$10.8b of revenue in the previous year. But Scotia DBG contained the fallout through J$2.5 billion of savings on interest expense, which captures interest payments to its clientele. The stock hit its peak of J$23.99 early in the year. The market has given Schnoor high marks for driving efficiency at the firm.
Pan-Jam Investment Trust Ltd
CEO: Stephen Facey
PJAM: 30.6%
Industry: Property services
Market Price: $47.01 Price/Book Value: 0.79P/E Ratio: 6.30Market Cap: $8.31b
Pan-Jamaican dabbles in a number of businesses but its core activity is in property services and investment management, both of which underperformed in the nine-month period to September, the latter due to reduced trading gains and lower returns on JDX-affected investments. Pan-Jam noted its satisfaction in its newest investment, a 25 per cent stake in spice company Walkerswood, which is performing to expectations after its takeover by a syndicate of investors led by Associated Manufacturers Limited and the conglomerate. Pan-Jam's tone on its Hardware and Lumber investment has undergone a sea change. At the top of the year, the Facey-controlled company signaled that it was preparing to make tough decisions on the investment - it owns 20 per cent of H&L - after writing off its share of losses, but now it has endorsed the reformation plan and declared support for the current manage-ment. Pan-Jam's share of income from Sagicor, in which it has a 24.7 per cent ownership, was down 17 per cent at September; but while the conglomerate forecasts continuing challenges for the insurance company in the periods ahead because of the depressed economy, it is not displeased with the investment. During the year, both companies struck a deal that gave Sagicor a larger holding of the tightly held PJAM shares that Guardian Life was shedding.
First Jamaica Investment Ltd
CEO: Stephen Facey
FJI: 30.5%
Industry: Investment management
Market Price: $36.50 Price/Book Value: 0.84P/E Ratio: 6.49Market Cap: $11.1b
First Jamaica, a Pan-Jam subsidiary managed by the same team, is preparing for its latest project, a new hotel development in New Kingston that will operate under the Crowne marquee. The target is the meeting market.
Kingston Wharves Ltd
CEO: Grantley Stephenson
KWL: 29.9%
Industry: Port services
Market Price: $4.00 Price/Book Value: 0.55P/E Ratio: 7.65Market Cap: $4.29b
Kingston Wharves is mainly involved in container handling, and is the primary conduit for motor vehicle imports. A new partnership with Hoegh Autoliners as its Caribbean shipping hub has boosted business at the port, driving volumes to 1.097 million of tonnage in the nine-month period to September, relative to 963,700 tons the previous year. The new business, complemented by reduced debt-servicing costs, gave the company a 910 per cent turnaround from a loss of J$46 million to net profit of J$370 million in the nine-month period. During the year, Kingston Wharves also split apart the positions of CEO and chairman, with the latter title now held by lawyer Derek Jones.
GraceKennedy Ltd
CEO/Chairman: Douglas Orane
GK: 25.9%
Industry: Food, financial services
Market Price: $51.00 Price/Book Value: 0.68P/E Ratio: 7.62Market Cap: $16.9b
Revenue and profit have fallen at GraceKennedy, but the market still loves this blue-chip stock. Progress inside the group has come on the banking and financial services side under the First Global group. The GK stock traded as high as J$68.01 during 2010.
Mayberry Investments Ltd
CEO: Gary PeartMIL: 24.1%Industry: InvestmentsMarket Price: $2.47Price/Book Value: 0.83P/E Ratio: 11.71Market Cap: $2.97b
Gary Peart and his team handled the first IPO on the junior market, that of its associated company Access Financial Services in 2009, the success of which made Mayberry the go-to firm for another six listings in 2010. A ninth IPO was brokered by PanCaribbean.
The company is now more focused on fee-based transactions for revenue. Its third-quarter performance was strong, resulting from bigger gains in sales of investments that produced a five-fold growth in net profit, from J$17 million to J$90 million. Nine-month profit, however, was 19 per cent lower than the prior year.