Equity Trader at JMMB, Clive Charlton, says brokerage firms’ negative recommendations on JFP’s initial public offer (IPO) were unfair as enough consideration was not given to the impact of the COVID-19 pandemic on the business.

Equities Trader at JMMB, Clive Charlton

Speaking on Taking Stock with Kalilah Reynolds, Charlton said he believes analysts overlooked JFP’s steady performance in previous years as well as the complex nature of the company’s business.

The company released its prospectus for an IPO and offer for sale in February, offering some 280 million shares to the market. Just over 168 million shares were available to the public with all shares priced at $1.00 per share. 

Several brokerage firms, including VM Wealth Management and Barita, advised investors not to participate in the offer because of the volatility in the company’s revenues. 

JFP’s offer, which opened on February 21 was oversubscribed and closed a day later. The company’s shares were listed on the Junior Market of the Jamaica Stock Exchange on Monday, March 14. The stock ended its first week of trading at $1.53 on Friday after reaching a high of $1.86 during the week.

Charlton said that analysts did not “sufficiently” explore JFP’s performance over the last five years leading up to the pandemic before giving the company a negative recommendation. 

He said the company’s performance between 2016 and 2020 was “fairly good” and showed consistent growth in revenue and profit. However, the nine-months results for the company in 2021 showed a steep decline.

“You must ask yourself, what could have caused this? Why would the company grow for so many years and then suddenly fall off?” he asked. The analyst noted that in 2020, contracts would have been withdrawn as uncertainties grew about the pandemic and how restrictions would impact business.

However, Charlton noted that JFP has projects in the pipeline valued in excess of $200 million for 2022. 

“That is an indication that post-COVID recovery process, nationally, is happening,” he concluded.

Additionally, he pointed out that companies have adapted to the new way of doing business and this represents a resurgence in JFP’s contracts. 

“It seems to me that many analysts did not look at that,” he lamented.

Charlton also noted that JFP’s products match up to international standards as the local franchisees for several international companies have contracted the company to manufacture its furniture. 

“In terms of portfolio management, their business line is uniquely different from many other manufacturing/processing companies that are listed on the JSE. So, it provides a nice diversification of risk to your portfolio,” he said.

NOTE: The opinions expressed in this article are for educational purposes only, and are not to be construed as financial advice.  Please consult a licensed financial advisor before making any investment decisions.

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