Mar 2010 Financial News

JSE bullish

Mar 10, 2010

Market cap still only 60% of 2008 highs

Trading on the Jamaica Stock Exchange (JSE) has been bullish in recent weeks with stock gains nearing 50 per cent since late January, but market capitalisation still lags $363 billion below 2008 highs.

Currently 21 of the 38 listed stocks are trading near 52 week highs with the top 10 advancing stocks gaining between 23 to 47.8 per cent in price between January 26 to March 8.

The rally meant that investors in GraceKennedy, for instance, earned an additional $475,000 for every $1 million held in the stock. Besides the top 10, other stocks nearing 52 week highs include Capital & Credit Financial Group, Caribbean Cement Company, Desnoes & Geddes, Jamaica Producers, Mayberry Investments, Montego Bay Ice, Barita Investments, National Commercial Bank of Jamaica, Palace Amusement, Sagicor Life Jamaica and Seprod.

Market capitalisation stood at $518.6 billion on February 26, 2010 which is $100 billion less than it was a year ago and $363 billion less than two years ago, based on JSE statistics analysed by the Business Observer.

The two-year decline -- from $881.8 billion in February 2008 to $518.6 billion -- is equivalent to more than three times the US$1.27 billion ($113.6 billion) Government received as a Stand-by Arrangement from the IMF last month.

The market improvement followed strong financials and the approved International Monetary Fund (IMF) Stand-by Agreement seen by some analysts as a pre-requisite to macroeconomic improvement.

The Stand-by Arrangement with Jamaica, will allow the Government to run $1-billion-a-month deficits for public sector entities over the next year. However, the key objectives of the IMF arrangement are to "support the Jamaican authorities' ample reform programme to address deep-seated structural weaknesses in the country's economy, increase its growth potential, and make it less vulnerable to external shocks", according to an IMF release last month accompanying the agreement.

The top advancing 10 stocks have outperformed the JSE Index which increased 9.9 per cent from 75,166 points on January 26 to 82,631 points on Monday March 8, 2010. The JSE Index is recovering from its worst decline in 14 years and on Monday the Index was some 29,470 points below its 2008 high of 112,100 points in May. JSE general manager, Marlene Street-Forrest previously blamed the 2008 market decline on the global meltdown, high interest rates and its crippling spill-over effect on company earnings in 2008.

In 2009, however, stocks were cheap relative to their improved earnings.

For instance, GraceKennedy's stock price jumped following the release of favourable financials last month. Its net profit for its financial year ending December 2009 jumped by 54 per cent over the previous year to $2.57 billion. All business segments improved during the year under review including the group's retail and trading segment, which reported an $83-million pre-tax loss but which was an improvement over a $440 million pre-tax loss the year before.

The conglomerate's banking and investments segment continued to trail behind the other growth segments, largely reflecting the impact of $1.77 billion in losses suffered from irregular bond trading over the course of 2008 and 2009:

The segment did however, post a pre-tax profit of $105 million compared to $26 million the year before. For 2010, the GraceKennedy said it would focus on strengthening the control systems of the group and complete its new distribution centre in Spanish Town by April 2010.

Scotia Group also released favourable financials last month with $2.7 billion in net profit over the first quarter ending January 31, 2010, an 11 per cent increase over the comparative period last year. During the review period, Scotia's Earnings per Share (EPS) was $0.85, compared to $0.77 last year, while the Return on Average Equity (ROE) was 22.9 per cent.

Scotia's revenues increased by 11 per cent to $7.9 billion. Net interest income for the quarter was $6.5 billion, up $970 million or 17 per cent when compared to last year. However, the firm said that lower fee income on deposit and payment services, as well as reduced revenue from securities and foreign exchange trading income, which has been impacted by the conditions in the financial markets, resulted in Other Revenue declining by 12 per cent compared to the comparative period last year.

Scotia DBG Investments (SDBG) -- the wealth management subsidiary -- reported net profit of $546 million over the period under review, a 42 per cent increase over the corresponding period the year prior.

Stock price movement over past six weeks

*GraceKennedy up 47.5 per cent from $40.29 to $59.45

*Scotia Group Jamaica up 38.8 per cent from $16.21 to $22.50

*Scotia DBG Investments up 36 per cent from $16.55 to $22.57

*Berger Paints Jamaica up 34.7 per cent from $1.70 to $2.29

*Carreras up 28.2 per cent from $35.14 to $45.07

*RJR up 27.3 per cent from $2.20 to $2.80

*Kingston Wharves up 27.3 per cent from $2.75 to $3.50

*Pan Jam up 25.6 per cent from $35.50 to $44.62

*First Jamaica Investments up 23.8 per cent from $25.05 to $31.00

*Jamaica Broilers Group up 22.9 per cent from $4.88 to $6.00


Source:
STEVEN JACKSON
jacksons@jamaicaobserver.com
Business writer
Jamaica Observer
Wednesday, March 10, 2010

http://www.jamaicaobserver.com/business/JSE-bullish--market-cap-still-low_7472464