ISP Finance revving to expand

Newly junior market listed ISP Finance is getting ready to expand, grow revenues and profit by way of a $150 million public issue of a 10 percent Secured Corporate Bonds due 2019 which are expected to be listed on the Jamaica Stock Exchange. The minimum subscription is $20,000 for each application. Interest will be payable quarterly.
The issue opens at 9 am on September 1 and will close at 4:30 pm on September 22, 2016. The Company will have the option to prepay the bonds at par before the due date. ISP reported revenues of J$52 million, a 7.2 percent increase over the J$49 million record in the second quarter of 2015, according to its unaudited financial results for the second quarter ended June, this year. Gross profit amounted to J$49 million compared to J$44 million in the comparative quarter in 2015. Net profit for the June quarter came out at J$11.7 million representing a 240 percent the $3.4 million generated in 2015, however, the company reversed $7.9 million in the June quarter, cost relating to the IPO, which it expensed in the first quarter, thus inflating the second quarter profit. For the six months to June revenues grew to $106 million from $99 million in 2015. Net profit for the six months ended at $8.6 versus $3 million in 2015.
The increase in the company’s revenue in the 2nd quarter of 2016 resulted from increased business activities, while the decrease in interest expenses in the 2nd quarter of 2016 was due to repayment of a loan to commercial bank.
At the end of December 2015, the company’s loan portfolio, before loan loss provision stood at J$304 million and grew marginally to J$305 million at the end of June. After loan loss provision of $70 million, it stood at $234 million as of June this year versus $241 million at December and is up from the $225 million at the end of March 2016. Cash on hand stood at $67 million while the amount borrowed fell to $127 million including overdraft balance of $38 million from $328 million at the end of 2015.
The funds being raised could propel loan growth significantly and with it profits particularly in 2017 as the funds would be available for a full year compared to a few months for 2016. Importantly, more funds will be available for the busy Christmas period. IC Insider forecast earnings for 2016 at of $59 million or 57 cents per share with earnings jumping sharply higher in 2017, if most of the bond funds are received and are on lent.
The company is not without risk and success will be highly dependent on management’s ability to make proper credit assessment and police tightly loan repayments by its clients.