Deon McLennon, Contributor
MONTEGO BAY Ice Company Ltd (MBICE) has its business down cold. Tracing its origins to a small start-up which began in 1948, the company today can produce hundreds of blocks of ice per day from its Montego Bay manufacturing plant. With over 50 years of experience MBICE has become the predominant ice manufacturer in western Jamaica. The principal activities of the Montego Bay Ice Company Limited (MBICE) are the manufacture and sale of ice and spring water, and the rental of cold storage facilities and apartments. Its subsidiaries are as follows:
| Subsidiaries | Principal Activities |
| Montego Cold Storage Ltd | Cold Storage and apartment rental |
| Deans Valley Ice Company Ltd. | Dormant | |
The manufacture and sale of ice is the group's core competency. Ice sales dominate the group's revenue and account for 89% of group sales, it is also the most profitable revenue stream enjoying a profit margin of 60%. This high profit margin (the highest in the manufacturing industry group) along with the Montego Bay's ice operating environment, which is discussed next, has facilitated the groups revenue stream static composition over the last five years.
PROFITABILITY
Following up from the discussion above we already know that MBIce has the best gross profit margin among its peers. Yet its operating profit margin is below the industry standard and its net profit margin is half the industry average. At the tip of the iceberg it appears as if the company needs tighter cost controls as cost and expenses consume approximately 59% of every revenue dollar. However, in examining the firm's cost structure, salaries and wages account for over 30% of all expenses and point to a setting where the stakeholders who benefit from the company's wage bill will continue to do so as their interests are concomitant with the majority of the shareholders. The fact that this arrangement has existed for the last five years would appear to substantiate the circumstances. Poor return on assets and equity is likely to continue.
LIQUIDITY
MBIce's liquidity is remarkable and is substantially better off than the industry standard. The company could pay all its short-term debt by liquidating 15% of its current assets. It is also noteworthy to recognise that over 50% of the company's current assets are invested in interest earning instruments and the cash could cover liabilities with a ratio of 2 times.
VALUATION
All valuation ratios show that the company is undervalued. However, it is unlikely that any correction will occur as this stock is "off the radar" for most investors, as will be discussed further. MBIce risk profile reveals that its business risk is below that of it peers. Its price movement is less volatile than the market and most of its peers, thus offering investors more price protection.
This result is attributable to its extremely low trading turnover, which is significantly below its peer grouping, thus increasing the liquidity risk. Of special note is that for 2004 MBIce had the lowest number of trades for an ordinary stock, registering only 21 trades.
It was followed by Palace Amusement Co with almost twice the number of trades at 41 trades.
