Recommendation
The COVID-19 pandemic has been a significant headwind for many companies, including Jamaica Producers Group. Notwithstanding, amongst listed companies, Jamaica Producers has one of the most robust balance sheets, with very little leverage coupled with several distinct operations that combined, generate significant and consistent operating cash flows. The company’s Q1 performance indicates continued operational weakness, driven largely by heightened Input costs. With that said, an uplift in the underlying economy bodes well for most of the company’s business segments which have cyclical exposure to the business cycle. Additionally, while we cannot determine the financial implication of the Geest acquisition, the company’s demonstrated ability to consolidate good businesses, like Kingston Wharves, indicates to us that this acquisition should be value occretive to shareholders. Against that backdrop, we believe the market’s current price for JP is below its intrinsic value and recommend an OVERWEIGHT.
| Stock | JP |
| Close Price | J$23.27 |
| Estimated Fair Value | J$28.27 |
| Potential Upside | 21.92% |
| Dividend Yield | 0.76% |
| Total Return | 22.68% |
| Year to Date Return | 10.81% |
| Normalized Trailing P/E | 23.34x |
| Forward P/E | 19.72x |
| Recommendation | Overweight |
As at May 18, 2021
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