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JSE stock climbs as profit grows

Published:Friday | July 26, 2019 | 12:21 AMSteven Jackson - Senior Business Reporter

Jamaica Stock Exchange Limited, the JSE Group, grew its bottom line by more than a third in the second quarter, and the value of its shares are on the rise, but some brokers see the stock as pricey.

JSE traded at $38.51 on Wednesday, but the market was willing to pay up to $40 for shares in the stock market company.

The group, led by Managing Director Marlene Street Forrest, continues to benefit from increased market activity, some of which is driven by new listings on the ­exchange. It reported a 35.6 per cent improvement in net profit, which hit $121.8 million in the June second quarter.

Earnings per share in a year-on-year comparison rose to $0.17 in the quarter, from $0.13; and to $0.35 from $0.27 over six months.

Cess income and fee income also drove revenue 36 per cent higher to $429 million for the quarter.

The financial position of the group also improved, with total assets growing by $251 million to $1.58 billion, mainly due to an increase in fixed assets and receivables. Group equity stood at $1.2 billion or 17 per cent more than the comparable period.

Brokerage house JMMB indicated in its analysis, published in the final week of June, that it sees the relative price target for JSE Group at about half its current price. Its rating was derived from a combination of the relative value approach and the dividend discount model. JMMB did not ­disclose its calculations.

The value approach seeks to know whether a company’s profits are sufficient to justify the price over time. It also seeks to compute the worth of each share compared with the company’s capital. The dividend approach computes the relative attractiveness of the stock price when dividends are factored over time.

JMMB said its best- and worst-case price targets were between $13.08 and $16.97. But having said that JSE’s price-to-earnings ratio and price-to-book value were above market averages, the ­brokerage contextualised that on the positive side, the company offered unique services and had no rivals, and was growing at record levels year-on-year. JMMB rated the stock as underweight, which meant that owners of the shares should contemplate holding less than 5.0 per cent of the stock in their portfolio.

“We recommend an underweight rating on JSE at this point, given that the stock trades significantly above our ‘base case’ and best-case price target,” JMMB said then. Requests for an update on their analysis went unanswered.

Another brokerage house, VM Wealth Management, listed JSE Group in its July 15 Weekly Stock Picks as a ‘sell’, but had no explanatory note for the ­rating. VM Wealth CEO Rezworth Burchenson said, that when contacted for comment it would not be ­appropriate to do so as JSE was a strategic partner.