Valuation and Recommendation
Valuation: We estimated a price target for JBG using an average of two approaches, the first being based on an average price-to-earnings (P/E) ratio, and the second being based on an average price-to-book (P/B) ratio.
P/E Valuation – Under this approach, we estimated a 1-year forward (FY 2024) earnings per share (EPS) of $4.26. The expected growth compared to the outturn of $3.06 per share for FY 2022 and expected EPS of $3.23 for FY 2023 is anchored by our expectation of continued strong revenue growth, particularly in the US segment. The significant factor driving this large EPS growth is the fact that the Group has ceased its operations in Haiti. Given that the Haiti operation was a lossmaking venture, the Group is expected to realize some margin expansion going forward. However, this is partially offset by the continued strong inflationary environment that is present and the likelihood of higher finance costs following the refinancing of debt coming due this year. We then applied a P/E multiple of 12.12x, which is the average P/E multiple of a select group of JBG’s peers (The table showing the group of peers can be found below). In applying this multiple to our expected forward EPS, we arrive at an estimated fair value of $51.65.
P/B Valuation – The P/B multiple applied was derived by calculating the average P/B multiple of the select group of JBG’s peers (excluding Wisynco’s P/B multiple, as we deemed it to be an outlier), arriving at an outturn of 1.40x. This multiple, when applied to the 1-year (FY 2024) estimated forward book value of $27.34 resulted in an estimate of the fair value of $38.28.
| Stock | JBG |
|---|---|
| Close Price | J$34.29 |
| Estimated Value | J$44.96 |
| Potential Upside | 31.13% |
| Dividend Yield | 1.95% |
| Total Return | 33.08% |
| YTD Return | -7.40% |
| 52 Week High | J$38.88 |
| 52 Week Low | J$25.00 |
| Trailing P/E | 7.99x |
| Forward P/E | 0.75x |
| Forward P\E | 8.04x |
| Sector P/E Average | 12.12x |
| Recommendation | OVERWEIGHT |
as at February 28, 2023
Jamaica Broilers Group Limited | Equity Analysis
