• The most recent round of earnings releases reflected mixed results for both Edufocal and Salada Foods. Salada Food reported a 21.5% drop in Q2 net profit; however, owing to the strong growth in Q1 (+219.9%), it reported an overall increase of 27.6% in net profit for the first half of its current financial year. Edufocal turned around its net loss into a net profit of $2.04Mn for its Q1 ended March 31, 2022, year over year. 
• Salada's H1 growth reflects a 9.7% growth in revenues as the company increased its promotional efforts to adapt to the opportunities in the fast-changing market environment brought on by the relaxation of COVID-19 restrictions.  The Company also launched a line of flavoured coffees in March, under its flagship brand, Jamaica Mountain Peak, which should help with future revenue growth. 
• Similarly, Edufocal saw an increase in earnings due to a 81.3% increase in its revenues as the company saw increased demand for its services. 
• Implementation of cost containment measures also allowed both companies to mitigate some of the effects of higher costs, which facilitated an improvement in their gross margins (+2.3 pp- Salada; +16.7pp- Edufocal).  
• Going forward, we expect future growth in net earnings for Edufocal which should benefit from the additional revenue stream from its recent acquisition of Clever School Teacher, which allowed it to expand its operations to the US, as well as from improved brand visibility after its recent IPO. For Salada, improved profitability above current levels will depend on the company’s ability to penetrate markets with existing and new products, while simultaneously sustaining efforts to contain costs. 
• Edufocal has witnessed a 354.0% appreciation in its stock price year to date; however, Salada’s price has seen a 9.5% decline.  At its present price Edufocal trades at a P/E of 141.6x which is above the Junior Market Sector average of 23.4x. Salada trades at a P/E of 35.2x, which is above the Main Market Distribution & Manufacturing Average of 22.3x.

(Source: Company Financials and NCBCM Research)

• Higher occupancy supported by recovery in operating territories bolstered KPREIT’s profitability. The company reported a 14.9% y-o-y increase in net profit for Q1 2022. 
• This was mainly supported by a 12.4% rise in rental income due to higher occupancy levels at its properties in Jamaica and the Cayman Islands, as well as increases in rents for some of its properties. The Group achieved near 100% occupancy by the end of the reporting period and continues to benefit from a solid tenant base of primarily entities that offer financial, warehousing and logistics, manufacturing, and government services. 
• In spite of higher operating expenses (+18.5%), the higher revenues had a net positive effect, which resulted in a 2.1p.p rise in the net operating margin. 
• We expect KPREIT’s financial performance to continue to improve as the company uses proceeds from its APO to reduce debt expenses and build new properties to generate more rental income. 
• KPREIT’s stock price has declined by 3.1% since the start of the calendar year to $8.72. The stock currently trades at a P/E of 11.9x, which is below the Main Market Real Estate Sector Average of 17.9x. The stock is however currently trading above its net asset value of $7.57.

(Source: Company Financials and NCBCM Research)

• A visiting International Monetary Fund (IMF) team for the Seventh Extended Fund Facility (EFF) Review, has been assured that Government, despite battling the economic fall-out from COVID-19, had achieved several macro-economic benchmarks. 
• Acknowledging that adjustments had to be made to the EFF, due to the COVID-19 pandemic, Minister of Finance and Economic Affairs, Ryan Straughn, insisted that the Government was still “very committed to seeing the reform efforts through”. 
• Based on the agreed targets on both sides, Mr. Straughn said he is confident that as the pandemic and the crisis in Ukraine rage on, the execution of the government’s capital works programme and private sector investments coming on stream will provide a much needed boost to the economy. 
• The government is also seeking to find a solution to place the debt that has accumulated specifically for COVID-19 on a different trajectory. It is of the view that in order for the country to be able to respond to climate adaptations and other issues, it will need to ensure that the appropriate fiscal space is available so as not to inhibit the normal development trajectory of the country. 
• Mr. Van Selm, the IMF’s Mission Chief for Barbados, noted that with the global increases, especially in fuel prices, during the visit there would be discussions on the macro framework and what other policies would be put in place to shield the populace.

(Source: Barbados Government Information Service)

• US inflation took a breather last month for the first time since August. Prices still increased, but at a slower pace than in previous months. 
• The Consumer Price Index was up 8.3% in the 12 months ended in April, the Bureau of Labor Statistics reported Wednesday, slightly higher than economists had predicted. It was a decrease from the 8.5% recorded in March, which had been the highest level in more than 40 years. 
• Stripping out more volatile product categories like food and energy, the CPI stood at 6.2% over the same period, less than the 6.5% reported in March. 
• For April alone, prices increased by 0.3%, adjusted for seasonal swings, less than the 1.2% jump recorded in March. Without food and energy prices, core inflation rose 0.6%, more than the 0.3% advance in the prior month. 
• The increase in core inflation is making economists nervous. Businesses have been building up their inventories, which helps core inflation on the goods side, while prices in the services sector are soaring as Americans return to traveling and other leisure activities. The latter will likely make for stickier inflation that takes longer to come down again.

(Source: Reuters)

• U.S. crude oil price settled below $100 a barrel on Tuesday to its lowest level in two weeks as the demand outlook was pressured by coronavirus lockdowns in China and growing recession risks, while a strong dollar made crude more expensive for buyers using other currencies. 
• U.S. West Texas Intermediate crude settled down $3.33, or 3.2%, to $99.76 a barrel, while Brent crude was down $3.48, or 3.28%, at $102.46 a barrel. Both benchmarks were down for a second straight day and fell by more than $4 a barrel earlier on Tuesday. 
• Early in the session, comments from the Saudi and UAE energy ministers boosted Brent and WTI up by more than $1 a barrel. 
• The European Union Commission has delayed acting on the proposal. Unanimity is required to ban oil imports from Russia, and while a French minister said EU members could reach a deal this week, Hungary has dug in its heels opposing an embargo. 
• Also, some European economies could suffer distress if Russian oil imports were curtailed further. If Russia retaliated by cutting off gas supplies, economies in emerging Europe, Central Asia and North Africa might slide back to pre-pandemic levels, the European Bank for Reconstruction and Development (EBRD) warned.

(Source: Reuters)

• Sagicor outperformed financial sector stocks reporting earnings this season, as the company reported a higher net profit, while QWI reported a drop in earnings and IronRock (ROC) a net loss. Net profit grew by 31.3% for Sagicor’s Q1 2022, fell by 28.7% for QWI’s H1 2022, and dropped 291.7% to a loss of $8.55Mn for ROC’s Q1, year-over-year. 
• Sagicor’s Individual Life insurance segment performed well, while the Employee Benefits segment showed strong recovery, which supported earnings growth despite the softening in asset prices due to global market conditions. QWI’s revenues were however impacted by weaker asset prices as its portfolio took a hit in its second-quarter as the pace of its stock portfolio gains slowed. The effect of the war in Ukraine and turbulence in the USA market resulted in weaker stock portfolio gains. 
• Meanwhile, IronRock has had a difficult Q1 as the pricing of property and motor insurance continues to be an issue, especially as the increase in the rate of inflation is likely to increase the cost of claims. 
• Going forward we expect this trend of a mixture of over-performance and under-performance among financial stocks to continue. A confluence of factors affecting the financial markets, such as withdrawal of all the measures under the Disaster Risk Management Act (DRMA), elevated inflation, rising interest rates, tight liquidity, and still low FX supply, are impacting the various sub-sectors of the financial sector differently. 
• All three stocks have witnessed an appreciation in prices year to date- Sagicor (+0.1%), QWI (+3.9%), and ROC (12.9%). At their present prices, SJ and QWI are currently trading at P/Es below the Main Market Financial Sector Average of 13.4x, while ROC is trading above the Junior Market Financial Sector average of 13.3x. However, we expect positive market reaction to Sagicor’s results. As such, the stock price and multiple may rise this week.

(Source: Company Financials and NCBCM)

•  Dolphin Cove and Spur tree have reported favourable Q1 performances, evidenced by year over year growth in their respective bottom-lines. 
• Dolphin Cove saw its earnings recover from the net loss of US$154.83k in Q1 2021 to a net profit of US$759.55K. Growth was supported by an increase in visitor arrivals, though arrivals were 58% of the pre-pandemic levels. The company's revenues grew by 246.7% in Q1. 
• Spur Tree’s net profit grew by 193.7% despite the significant cost pressures being faced due to the ongoing supply chain challenges. The company’s revenues grew by 40.7% as it continues to push to expand its reach in export markets and strengthen its brand among its loyal customers. Owing to the higher revenues and some cost efficiencies, the company was able to increase its gross margin by 7.5p.p to 37.5%. 
• Going forward, we expect that both companies will experience continued growth in earnings. Dolphin Cove’s top-line will continue to benefit from increased visitor arrivals in 2022. Additionally, Spur tree through its new product offerings and further expansion in both domestic and overseas markets is expected to see earnings growth in the coming months. Further growth in efficiencies through capitalization on economies of scale will also be important to support profitability as Spur Tree contends with commodity price shocks and elevated supply chain costs. 
• Dolphin Cove and Spur Tree’s prices have increased by 45.7% and 405.0% since the start of the calendar year, and since listing, respectively. While Spur Tree currently trades above the Junior Market Distribution sector (20.1x) and Junior market (23.5x) P/E averages at 65.8x, DCOVE is just below Junior market average, at 23.0x.

(Source: Company Financials and NCBCM)

• Mexican headline inflation and the closely-watched core index rose in April to their highest levels since January 2001. This data is likely to prompt the central bank to hike its key interest rate again this week. 
• Consumer prices rose 7.68% in the year through April, and in the month alone increased by 0.54%, according to non-seasonally adjusted figures. The annual figure was still far above the Bank of Mexico's (Banxico) target of 3%, plus or minus one percentage point, and higher than the forecasts of 7.72%, according to a Reuters poll. 
• Banxico has increased its benchmark interest rate by 250 basis points over its last seven monetary policy meetings to 6.50% as it has struggled to contain rising inflation. Notably, Nikhil Sanghani, emerging markets economist at Capital Economics explained that “growing inflation risks, alongside the more hawkish U.S. Fed policy actions, will put pressure on Banxico to continue its tightening cycle.” Consequently, he expects Banxico to hike the key rate by 50 basis points to 7.0% this week.

(Source: Reuters)

• As inflation rates climb throughout the Caribbean, Governor of the Central Bank of Barbados, Cleviston Haynes is cautious about wage adjustments to match it. He noted that a wage adjustment to match inflation is really not the first best option for the country considering that once wages increase, there will be increased prices across the board. 
• Haynes emphasized that the supply shock that the region is facing currently is impacting largely food and energy, and this is what is driving the inflation rate. He further outlined that in some countries, the focus is not on the headline inflation rate but really on what they call the core inflation rate, that is you take out food and energy because those are the things that you really have very little control over, and then you try to focus on the underlying inflation rate. 
• Considering this, if there are wage adjustments the region runs the danger of trying to have wage increases that are adapting to inflation, which is a temporary cycle. Instead, the Governor believes that the Caribbean should address the impact of these prices on the average citizen by framing targeted measures that are perhaps time-bound since food and energy price increases are really likely to be transitory.

(Source: Trinidad Express Newspapers)

• Consumers grew a little more optimistic about inflation in April, though they still expect to be spending considerably more in the year ahead, a Federal Reserve survey released Monday shows. 
• Inflation expectations over the next year fell to a median of 6.3%, a 0.3 percentage-point decrease from the record high in March, according to data going back to June 2013. On a three-year basis, expectations rose 0.2 percentage point to 3.9%, which itself is 0.3 percentage point off the record. The data comes with 12-month inflation in March running at 8.5%, the highest level since December 1981. April consumer prices are due to be reported on Wednesday. 
• Responding to the surge in prices, the Fed last week raised benchmark interest rates by a half percentage point, the biggest hike in 22 years and the second increase of the year. 
• Americans are still leery about the high cost of living. Household spending is projected to rise 8% over the next year, according to the New York Fed survey. That’s a 0.3 percentage point increase from a month ago and another series high. 
• However, there also was some optimism, as consumer expectations for gas price increases fell to 5.2%, a 4.4 percentage point drop that came as oil prices edged lower in April. Respondents also grew more secure in their jobs, with just 10.8% expecting to lose their employment over the next 12 months, which tied for an all-time low. 
• Expectations for home prices were unchanged, but the 6% anticipated increase is still higher than the long-term average.

(Source: CNBC News)