Valuation Summary
To arrive at our price target for JMMBGL, a Justified Price to Earnings (P/E) Model was used. Our estimate for the 2023 Financial year-end EPS, considering the challenges to operating profits in the first half of the financial year and seasonality of earnings amounted to $3.98. To arrive at a discount rate, we utilized the capital asset pricing model (CAPM), which resulted in an outturn of 13.28%. The long-term growth rate was estimated at 3.46%, taking into consideration factors including the company’s profit margin, leverage and asset utilization. Using these inputs, a justified P/E ratio of 10.18x was derived, resulting in a price target of $40.47, representing a 23.66% upside from the last closing price of $32.73. Our previous target was based on a justified P/E ratio of 10.59x and our expectations following the results of the first quarter of FY 2023, resulting in a price target of $63.03. The discrepancy in target price despite the similar justified P/E ratio is due to a downward revision in our earnings expectations following the deterioration of market conditions, which have severely impacted the result of the securities trading business. We also expect that as interest rates continue to rise near-term, securities trading income will continue to be subdued. The company currently trades at a trailing P/E multiple of 5.69x, well below the average of 14.02x for other large diversified financial groups listed on the Jamaica Stock Exchange. The company based on its current market price along with our target EPS produces a forward P/E of 8.23x. Given the factors above, we recommend investors OVERWEIGHT JMMBGL in their portfolio.
| Stock | JMMBGL |
|---|---|
| Last Closing Price | J$32.73 |
| 52 Week High | J$61.24 |
| 52 Week Low | J$32.00 |
| YTD Return | -17.01% |
| Target Price | J$40.47 |
| Potential Return | 23.66% |
| Trailing P/E | 5.69x |
| Trailing P/B | 1.33x |
| Forward P/E | 8.23x |
| Dividend Yield (TTM) | 2.60% |
| Total Return | 26.26% |
| Recommendation | OVERWEIGHT |
As at Novemeber 29, 2022
JMMB Group Limited | Equity Analysis
