Jamaica Broilers Group Limited: JMMB’s Stock to Watch for 2016

Arlon Morrison
Investment Research & Quantitative Risk Analyst JMMB

Company Background

• Incorporated in 1958, Jamaica Broilers Group Limited (JBG) is a publicly-listed company whose principal activities include: the production and distribution of poultry products, animal feeds and agricultural items.

• The major activities within the Jamaica operations take place in the Best Dressed Chicken Division, Hi-Pro Division and JB Ethanol.

• The US operations segment consists of Wincorp International in Florida and International Poultry Breeders in Georgia and Arkansas. Haiti Broilers S.A. is the major activity within the other Caribbean operations segment.

Performance of Jamaica Broilers Group Limited (JBG) For the Six Months Ended October 31, 2015

• For the six months ended October 31, 2015, JBG reported a 9% or J$1.54B increase in revenues year-over-year to J$18.1B.

• Revenues from the Jamaican segment rose by 8% or J$1.01B to J$13.4B while revenues from the US operations increased by 16% or J$570.2M to J$4.2B.

• The US operations performed in line with expectations while in the other Caribbean operations segment, Haiti Broilers S.A. increased production and sale of table eggs to 14% of the market, compared to 12% at the end of the second quarter of 2014/15.

As such, net profits attributable to shareholders rose by 242% or J$523.53M to J$739.71M which corresponds to earnings per share of J$0.62.

• JBG’s total assets increased by J$901.96M or 4% to J$22.49B as at October 31, 2015. This was driven by a 7% increase in property, plant and equipment to J$10.09B and an 82% increase in cash and short-term investments to J$1.68B.

Recommendation

• We recommend Jamaica Broilers Group Limited as a HOLD.

• Based on our portfolio strategy, a HOLD recommendation means that exposure to the asset should be equal to 5% of an investor’s total portfolio held at JMMB. This strategy ensures risk mitigation and diversification.

• Despite the HOLD recommendation, JMMB Group views the prospects of the company favourably given the improvement in profitability seen during the year which comes as a result of investments made locally and abroad in production capacity and cost containment.

• The company views the efforts to diversify the revenue stream as a positive and believe the growing share of revenues from the US operations is a strength for the company as it combats the depreciation of the Jamaican dollar and Haitian gourde in the Jamaican and other Caribbean operations segments.