JSE stocks pick 2022
By Marston Gordon
Jan 7, 2022, 06:49

2021 Review
The main and junior market indexes advanced by 0.14% and 29.69% respectively; the average price of each rose by 15.49% and 29.01%. Our selection increased by an average of 32.11%.

The outcome of our 2021 selection was:

138 Student Living (10.74)%
Grace Kennedy 59.57%
ISP Finance Services 94.87 %
QWI Investments 17.11%
Seprod ( 0.22)%

2022 Picks
Two of the top 5 best performing stocks of the combined market in 2021 being Ciboney Group and Salada Foods is a testament to how irrational investors can be and for protracted periods. It makes stock selection hazardous and partly explains why stocks with good value appreciate less than expected and is selected repeatedly.

Net book value on the audited 2021 accounts stand at $10.67 down marginally from $10.94 in 2020 caused again by the drop in fair value of the financial asset. The assets are professionally valued every three years (latest September 2021) and by directors in the intervening years. The concession agreement was renegotiated and the 90% occupancy guarantee remains, however the financial model governing the internal rate of return has been reduced from 12.5% to 9% real rate of return. The risk of collectability of accounts receivable from UWI Mona has apparently been reduced as there is significant recovery of previous provision.

iCreate could survive the going concern challenge by injection of loans from its founder until its creative energy bear fruit. The innovation the company has embarked on is promising and has tremendous upside, however they need strong administrative and financial guidance to see them through.

On a recovery path from the pandemic slump in 2020, revenues will likely close 2021 up 30% and be 80% of 2019. Net profit to sales has grown quarter over quarter to September 2021 and should at year end be 50% of the 5.88% achieved in 2019. Used car prices have climbed globally because of supply chain disruptions and chip shortage affecting production of new cars; the company will benefit from better margin (price increase) on the higher inventory it has held.
The stock price at $0.93 is in line with its net book value and the projected growth in earnings will lead to a higher price.

The “Bessa Project” property development in Oracabessa, St. Mary will inject needed capital into the company. It earns 1% fee annually and 15% of profit at the end. With negative equity, this injection should restore the balance sheet and provide liquidity to fund the core business.

The stock trades at a 36.5% discount to book $1.37 (2020- $1.14) at December 24, 2021. It has grossly under invested in US equities (25% of the total investment).

Source: Jamaica Stock Exchange

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