JPG's headquarters, Producers House on Oxford Road in New Kingston.
DESPITE ITS PRICE to book value of 0.75, investors have timidly approached this stock due to the events of 2005 that seemingly conspired to erode profits and consequently inflate the P/E multiple. In particular, year-to-date profits pulled down by the $213.5 million losses in the banana division in the first quarter following Hurricane Ivan, the product tampering episode in the second quarter that cost Jamaica Producers (JPG) $157 million in profits, and the passage of hurricanes Dennis and Emily in the third quarter that resulted in significant crop losses.
Therefore, on the basis of simple normalisation of business over coming periods, profits at JPG should rise astronomically in 2006. Besides, JPG is a leader in the UK fresh produce and processed foods market with the SunJuice brand increasing in popularity in the UK market.
Notwithstanding, JPG, like other agricultural-based operations, is particularly vulnerable to adverse weather conditions. The pending EU arrangements could also affect the group's banana production in Jamaica, but market intelligence suggests that this may simply require adjustments to JPG's sourcing strategy in the UK.
Hence, barring another year of natural disasters Jamaica Producers is expected to report the highest profit growth in 2006 and possibly stock price appreciation.
Vernon James and Shane Ingram are, respectively, senior manager and analyst in the stock brokerage division at DB&G.
