Glimpse into the garment world
British economist Niall Ferguson once pointed out that the Industrial Revolution in the 19th century was in fact a Textile Revolution for Europe. During the 17th century, India’s share of the world economy was 22% and it exported cotton and silk products to Europe. By 1952, India’s share went down to just 3%1.
In 2000, Jordan signed a free trade agreement with the USA. Since then, it underwent its own “mini” Textile Revolution. Garment factories popped up everywhere in Jordan, mainly the free zones and employing mainly foreign workers.
Clothing has become the country’s top export:
Let’s look at one of companies that is currently trading at NASDAQ, Jerash Holding (Ticker : $JRSH)
Established in Jordan in 2000, $JRSH has grown substantially since then to IPO on May of 2018.
It currently employs 5000 workers, 25% of which are local Jordanian and 75% of which are foreign (mainly from Bangladesh, Myanmar, India, Nepal and Sri Lanka).
In fiscal year of 2021 (ending March 2021), $JRSH witnessed a slight dip in revenue, mainly due to the lockdowns imposed by government in March of 2020. However work quickly recovered as the foreign workers were not subject to movement restrictions imposed by the lockdowns (dormitories were not located far from the factories).
A large chunk of the sales goes customs free to the USA:
Its main customers are listed below, Northface controlling the largest share of sales
Since its debut on the stock market, $JRSH hasn’t traded like most of its peers. In fact the price has been stagnant.
Its current prices to sales ratio is 1:1 (market cap at $90 million)2. The company is expecting sales for FY2022 of around $110 million which could be an upside to the stock price. It also has a high equity ratio compared to other peers.
However there are still looming risks: the coronavirus pandemic has not officially ended with the world entering another wave of lockdowns. The backlog of shipping containers has created a bottleneck and could affect exports. ESG investors could look at the company and judge its treatment of workers, both local and international (the recent unfortunate passing of a Jordanian worker3). They could also look at how Fast Fashion is playing a negative role on the environment. The Jordanian government could also decide to impose new restrictions and fees on foreign workers. There is also the recent rise in tension between the USA and China (the company being mostly owned by Chinese investors).
Take that into account when doing your equity valuation.
In another garment related newsletter, the Jordanian companies listed on the Amman stock exchange such as El Zay, Worsted Mills and CJC (which closed its doors a few years back) will be tackled and investigated as possible investment opportunities.
(N.B: I did $JRSH first as it is always easier to work with SEC disclosed 10-Ks than it is to work with ASE disclosures. I know there has been a recent improvement with XBLR4 disclosures, but a lot of the statements, mainly in PDFs, are not easily accessible, especially when it comes to machine readable software. How does the ASE expect to have news outlets or robo advisors notice what is going in our markets?)