Panjam Investments Limited | Equity Analysis

In order to ascertain a target price for PJAM, we used a justified Price to Earnings approach applied to forward consolidated financial expectations based on the amalgamation of JP operations. In arriving at our target price based on the justified P/E approach, we forecasted the earnings for the 2023 financial year. Our assumptions include continued losses on investments as rates continue to rise, however, we do not believe the losses will be as severe as they were during FY 2022 given the severity of rate increases are expected to slow during the remainder of 2023. Additionally, in 2023 the ROK hotel will be fully operational for the entirety of the financial year, therefore we annualized the result of the 5 months of 2022 while applying growth in line with economic expectations; we also annualized hotel management expense while applying a slight overall discount as we expect initial expenses to launch the hotel will normalize in FY 2023. We incorporated our forecast for the earnings of SJ, which hinges on continued recovery in the local macroeconomic environment. Lastly we merged our forecast for JP’s 2023 result which incorporates organic revenue growth, and an increase in the share of profit of associates. Lastly we took into consideration the dilution effect of the additional ~562 million shares which will be issued to JP following the merger. Against this our target EPS for 2023 J$4.02 compared to the current J$4.50 for FY 2022.Note that FY 2022’s result includes a significant gain on the sale of a subsidiary; without this sale core EPS was J$3.20 for the financial year.

We used the capital asset pricing model (CAPM) to arrive at a discount rate for PanJam of 13.64% and calculated a long-term growth rate of 6.35%, using forward expectations for the potential return on equity and dividend payout ratio after the amalgamation of JP giving us a justified P/E ratio of 13.71x. We applied this multiple to our 2023 EPS target and discounted to arrive at a valuation of J$55.08. At the last closing price of J$53.84, this represents a potential upside of 2.29%. As a result Barita Investments Limited give PanJam a MARKETWEIGHT recommendation for the future Pan Jamaica Group shares.