John Jackson, financial analyst (left) and Vernon James, stockbroker with Dehring Bunting and Golding.
Camilo Thame, Business Reporter
Analysts who watched the main Jamaica Stock Exchange index decline by nearly 20 per cent for the year to August, are cautiously optimistic about a moderate upswing in the market for the last quarter of 2006, but remain selective about stocks.
All except five of the 41 stocks listed on the local exchange had price drops ranging from four-71 per cent for the calendar year to date.
But August ended with prices for 18, or 45 per cent, of company stocks rising, while another six maintained their prices as at the end of July.
Debra Lopez of NCB Capital Markets anticipates "a low to moderate uptick in the market for the last months of the year," but she is more optimistic about the prospects going into 2007.
"Despite the situation faced by financial services, those stocks will over time, lead the market," said Lopez.
"There has also been some developments in the real sector - Jamaica Broilers (JB), with their ethanol plant and Seprod with good acquisitions."
Broilers announced last month the construction of a US$17 million, 60-million gallon ethanol plant, which it believes will help drive its profit by 50 per cent over the next two years. Seprod has been on an acquisition drive, having purchased Serge island Dairies last year and 2,300 acres of farm land in St. Thomas this year to secure its expansion.
The price of JB's stock declined by 16.5 per cent during the month of August to push overall decline for the year to 23.5 per cent, but Seprod saw a 24.8 per cent increase in the price of its stock during August, although the price on Thursday, August 31, was still down by 6.3 per cent.
Financial analyst John Jackson shares the view that "as we trend towards the end of year, (there) should be some recovery in some of the better-performing companies."
Jackson made some forward-looking projections for several stocks, which he thinks will lead the way in price appreciation.
"I would be surprised if Lascelles does not go to $300 by the end of the year, because it should net $30 per share," Jackson told Sunday Business.
Lascelles made $22.64 per share for the 12 months to June 30 this year and closed at $225 last Thursday.
Added Jackson: "Providing an announcement on the court case is not made this year, Carreras stock should reach $50 and be sustained there."
Carreras, whose shares traded at $40.25 on the last day of August - and which continues to fight a ruling made by the Tax Administration Department that the cigarette manufacturer owed $5.7 billion in taxes - should see a 25 per cent increase in net profits should it maintain its first quarter results of $647 million to June 30.
Its comparative results for the three months to June 2005 was $504 million.
At $40.25, Carreras stock price was nearly 12 per cent higher than last year.
Jackson also projected that Scotiabank's stock price would move from the $20 it traded at August 31 to the mid-20s, while National Commercial Bank, which closed at $16.89 - nine per cent higher than the end of July this year - should move to $20.
Both banks have seen significant profit growth so far this year: BNS' by 17 per cent for the nine months to July, and NCB's by 62 per cent for the nine months to June 30.
Market downturn
Jackson believes the downturn in the market, which began last year April, has reached bottom, and that based on upward price movements in August, what he terms as the traditional start of the stock market year, points to a general recovery of stock prices.
The recovery, he said, remains dependent on institutional investors.
"A recovery tends substantially to rest on what institutional investors do," Jackson said. "They are looking forward to next year."
Estimates place institutional investors at over 700 and their holdings about 40 per cent of stock shares.
Dehring, Bunting and Golding (DB&G) stock brokerage manager, Vernon James, says institutions are already liming up to realign and build portfolios with bargain stocks.
"There are a number of institutional investors in the order queues. A few pension funds are trying to build their portfolios right now," said James.
"There are a substantial number of buy orders in the system. The order queues for some stock are getting a lot of undisclosed bids, which indicate large purchases. This is one of the reasons why we were progressing over the last few days, and the reason why it is not moving faster is that they (investors) are shopping around for inexpensive stocks to build their portfolios."
camilo.thame@gleanerjm.com
