Most of the listed companies are reporting year over year increase in profits, which is in contrast to the current slide in the stock market.
Latest figures show that the market declined by 5.6 per cent in the combined market index year to date. Analysts report that the slowdown in the market is not necessarily linked to company performances.
However, the popular belief is that the slide in the stock market is due to investors liquidating stocks from their portfolios to participate in large ongoing transactions such as the recently closed TransJamaican Highway and First Rock Capital Holdings initial public offerings.
The financial sector has been the standout thus far in the earnings season, reporting an average 129.4 per cent increase in net profit. This outturn was driven by companies like Barita Investments and Proven, which reported threefold increases in their earnings at 363.9 per cent and 348.1 per cent, respectively.
Strong growth was seen from companies such as Sygnus Credit Investments (70.8 per cent), JMMBGL (32.6 per cent) and ISP Finance (32.1 per cent). The outturn in the sector was fuelled by improvements in net interest income, fee & commission income, and trading gains.
Analysts from NCB Capital Markets say, “It is highly likely that these improvements emerged from the growth inducing forces in the financial sector, such as the credit supportive environment that has resulted in more businesses and individuals seeking financing solutions.”
At the end of February, the main market financial sector had an average price to earnings (P/E) of 18.5X earnings, with JMMBGL (14.7X) and Proven (8.4X) trading below that mark. On the other hand, Sygnus (23.9X) and Barita (23.9X) currently trades above the average, while ISP Finance trades at 36.0X, which is also above its junior market financial sector average of 32.7X, based on data gathered by NCB Cap Markets.
The manufacturing and distribution sectors also performed well, with WISYNCO, Honey Bun and Salada all seeing improvements to their bottom-line. WISYNCO’s net profit grew by 13.8 per cent, while Honey Bun improved its earnings by 28.9 per cent and Salada reversed its losses in the prior period to report net profit of $5.42 million.
These results came on the back of increases in sales/revenue right across the board. Mailpac and Fontana also achieved similar results, with Mailpac beating its projected net profit of $176.8 million for the fourth quarter of 2019 by 5.9 per cent, reporting a net profit of $181.7 million.
At the same time, Fontana grew its earnings by 21.8 per cent due to an increase in revenue and other income. The average growth in earnings for the sector amounted to 12.9 per cent based on the companies reporting earnings thus far.
The average P/E for the main market manufacturing and distribution sector is 18.9X with both WISYNCO (27.3X) and Salada (20.6X) trading above that level. Meanwhile, Honey Bun (19.1X) trades in line with the Junior Market manufacturing sector average of 19.1X, and Mailpac (15.5X) and Fontana (21.5X) trade below the junior market distribution sector average of 23.3X.