Shares of Epply Limited, the latest initial public issue to make it to the junior market that came to market last week, started trading today. The public issue, which closed on the July 22, is the fastest IPO listing since the junior market started and probably the fastest listing on the JSE ever. For the listing to take place within a week suggests that something must have gone right with it. Nevertheless, it’s a snail pace compared to international standards.

Previously, the listing of the JSE’s own shares took 2 weeks after the issue closed on July 8th and that was one of the fastest. There clearly is much improvement needed in the timeframe between listing and IPO close. There is no reason why the JSE can’t get to international standards a list within a day or two after closure of an IPO and so ensure greater liquidity in the market. All that is required is the reconciliation of subscriptions application, money paid and the allocation of shares where there is oversubscription. In this regard, the formula for dealing with oversubscription can be determined ahead of the closure of an issue.

All the other things such as paying stock exchange fees and final approval can surely take place within a day if the application for listing is effectively done ahead of the IPO.

Well into its first trading day, there were no stocks of Epply on offer nor was there any listed to be bought. One week after listing, the JSE ordinary shares are yet to traded even as the bid is now up to $3.25 in Monday’s trade.

Related Posts |  Eppley 18th junior market listing |  IPO: Epply closes, JSE to trade |  IPO: What or who is Eppley?

Image courtesy of Simon Howden/FreeDigitalPhotos.net

Press Release 29-Jul-2013 | Eppley, the latest initial public which was closed on Monday July 22, was listed on the junior market of the Stock Exchange on Monday July 29 and brings the junior market listings to eighteen. Eppley is only the second company to be listed on the junior market for 2013 and only the third listing on the stock exchange this year. Eppley is one of Proven Wealth stockbrokers’ first introduction to the market. The stock did not trade on the opening day, had no bids or offer to buy or sell.

Marlene Street Forrest, General Manager of the Jamaica Stock Exchange speaking at the ceremonial listing, stated that “We cannot overemphasize the importance of the Junior Market in ensuring that new creative ideas, whether manufacturing or in this case, service gets the chance needed to make it from idea to development. The benefit of this market is not only in creating longevity but transparency. The benefit is also in seeing the companies that are listed produce excellent financial results for the company and by extension the shareholders. Growth in companies is almost always accompanied by growth in the economy. We understand that these companies receive a temporary shelter whether from corporate taxes, reduced listing or annual fees but this is done against the backdrop of full disclosure of their financial statements and other pertinent information to shareholders. I believe we can proudly report the following statistics which compares prelisting results to results as at the end of December 2012:

1. Percentage increases in revenue ranging from 7.75% to 1,626.32%
2. Percentage increase in profit ranging from 8.08% to 589%
3. Percentage increase in GCT from 4% to 3,770%
4. Percentage increase in Statutory Deduction from 3% to 173%

I urge you to remember the advantages of raising capital and listing on the Junior Market; which continue to be the possibility of reducing debt burden and high interest payments by substituting or adding equity capital; the daily valuation of a company’s shares; the ten year corporate tax concession for companies listed on the Junior Market; the low listing fees and the improvement of a company’s profile among other benefits”.

Nigel Clake, Chairman of Eppley, told the audience that Eppley was delighted to have access to the capital market to raise funds to finance their business and to be listed on the Stock Market was a privilege and Eppley would do all in their power to ensure that their reporting would be of the highest standard. He went on to thank the shareholders for the confidents they displayed in Eppley by purchasing the stocks.

Chorvelle Johnson, CEO of Proven Wealth took the opportunity to thank all the persons involved in the listing. She stated that the process was fairly easy with the help that Proven got from the JSE, the lawyers and the regulators. Miss Johnson went on to say that Proven will be working assiduously to bring more companies to list not only on the Junior Market, but on the Main Market, along with other products.

Sharing the historic moment | Andrea Kinach; Marlene Street Forrest; Chorvelle Johnson; Andre Tulloch; Melanie Subratie; Keith Collister; Nicholas Scott and Nigel Clarke.

Related Posts |  IPO: Epply closes, JSE to trade |  IPO: What or who is Eppley?

The English dictionary has no such word, much less the meaning for ‘Eppley’ and a Google search has it as a little-known surname. However, it’s a name that will be on investor’s minds over the next couple of weeks as the company seeks to raise $82.6 million as a prelude to listing on the junior market of the stock exchange. The shares are clearly not meant for the average investor due to the small number of shares on offer and the price of $377 per share, which is the same as the net asset value of the shares, represented primarily by liquid assets. The shares are also priced around 10 times earnings before tax.

Who are they? | Although the public knows nothing about Eppley, it was established in 1973 and has been operating for some time under the name, Orrett and Musson Investment Company Limited. The Company is also an affiliate of General Accident which provides the Company with the necessary infrastructure to monitor and manage its investments plus ancillary administrative services. In consideration for these services, General Accident receives an incentive based fee, which is calculated as 20% of the Company’s average return on equity that is greater than 12% per annum.

The Directors, who are associated with the Musson group as directors or executives, are Nigel A. L. Clarke, Melanie Subratie, Nicholas Scott, Sharon Donaldson, Jennifer Scott, Maxim Rochester, Keith Collister, Alexander Melville and Byron Thompson.

The offer opens on Monday, 22 July 2013 and is scheduled to close on Monday, 29 July 2013 with 218,999 shares offered to the public of which 145,999 are Reserved Shares. Applications from the general public is at a minimum of 20 shares and multiples of 10 thereafter.  If any of the Reserved Shares in any category are not subscribed by the persons entitled to them, they will be available for subscription by the other Reserved Share Applicants, and thereafter, by the general public.

The proceeds are expected to be used to expand the capacity of the Company to provide credit facilities and to pay the expenses of the Invitation, which the Directors believe will not exceed $7.5 million. There will be no liquidity for these shares as the float is far too small.

Business profile | The Company manages a portfolio of loans, leases and other forms of commercial credit. In so doing, it provides a variety of credit products to corporate and professional customers, including insurance premium financing — the company’s main line of business, lease financing arrangements for equipment (mostly motor vehicles for commercial and professional clients), commercial loans, and other forms of credit.

Insurance premium financing involves the financing of insurance premiums for personal and commercial insurance contracts, generally for periods of less than a year. Leasing involves the provision finance leases and commercial lending involves a variety of loans products that in most instances differ in structure or collateral from loans the Directors consider to widely available in the marketplace.

The Directors anticipate that commercial lending and leases will comprise an increasing share of the Company’s business following the Invitation.

Eppley aims to provide more attractively priced credit to its clients with better service than what is currently available in the marketplace. It aims to do this by maintaining a lean and efficient organizational structure, making fast investment decisions based on common-sense credit standards, and exercising strict confidentially and privacy in its dealings.

The Company’s business strategy is to deliver high and consistent risk-adjusted returns to its shareholders. It believes that commercial credit offers more attractive risk adjusted returns than other available fixed income investment alternatives, including Government of Jamaica debt. The Company stated that the vast majority of its aftertax earnings will be distributed to shareholders as cash dividends subject its Dividend Policy. The policy may be revised by the Board from time-to-time with the distribution being not less than 50% of its after-tax earnings.

Eppley’s numbers | The Company’s average return on operating assets, which provides an indicator of the rates at which it is able to lend, has fallen from 28% in 2008 to 15% in 2012. This reduction occurred at a slower pace that the reduction of interest rates in Jamaica. At the same time, the Directors note that the average cost of the Company’s operating liabilities, an indicator of the rates at which it is able to borrow, had not declined as rapidly. As a consequence, the average net income spread has tightened from 15% in 2008 to 8% in 2012.

The Company has restructured its balance sheet moving way from greater reliance on debt financing to a greater use of equity funding. The restructuring involved repaying related party assets and borrowings subsequent to the last audited report at the end of 2012, as well as actual or planned conversion of some loans from related parties into equity.

The Company’s cash and deposits were $115.5 million higher on 30 April 2013 compared to 30 April 2012. In keeping with its business strategy, Eppley began its lease operations late in the first quarter of 2013 and recorded lease receivables of $18.7 million as at 30 April 2013.

Eppley’s net investment income declined to $14.9 million in the 4 months ended 30 April 2013 compared to $16.1 million in the 4 months ended 30 April 2012. This was a result of increased holdings of lower yielding cash and marketable securities in the period. The Company’s other operating income increased significantly, mainly as a result of foreign exchange gains on its holdings of hard currency. As a result, its profit after tax increased from $7.0 million in the 4 months ended 30 April 2012 to $12.1 million in the 4 months ended 30 April 2013.

Listing of the shares on the stock exchange will provide visibility for the Company and opens it up to borrow cheaper funds than if they were a non-listed company. Listing will also improve the return on equity as there will be no taxes for 5 years on profits.

IPO outlook  | This one looks like a medium term investment but due to the listed number of shares, investors may want to acquire some in the IPO to ensure that they have them well ahead of when profits start to grow.