JMMB Group seeks buyers for J$12.4b

JMMB Group is offering 266,737,797 ordinary shares to the public with the option to upsize it to 325 million units and raise up to J$12.4 billion that would lift the existing capital from 1,630,552,532 units to 1.96 billion.
The shares are priced at J$38 for existing shareholders, team members and key investors and J$38.75 for non-reserved share applicants resident in and making applications in Jamaica. Subject to receipt of regulatory approvals for the Invitation in Trinidad and Tobago, TT$1.90 per new ordinary share for existing shareholders and team members and key investors for applicants resident in and making applications in Trinidad and Tobago and TT$1.94 per new ordinary share for non-reserved share applicants.
The offer opens in Jamaica on October 22 at 9 am and in Trinidad and Tobago on October 25 at 9 am and scheduled to close on November 7. The Company reserves the right to close the offer prior to the closing date, provided that, early closure of the application list in Jamaica shall not occur prior to the end of a period of seven days following the Opening Date.
JMMB Group enjoyed moderate growth in earnings over in the past three years with earnings per stock unit for the 2019 fiscal year being $2.34 just slightly higher than the $2.18 in the previous year and $2.03 in 2017 after it jumped from $1.39 in 2016. Total comprehensive income better reflects the quality of management of the operation, by this measure with the exception of 2017 when total comprehensive income hit $4.76 billion profit have not reached that level since, with 2019 hitting $3.4 billion. Dividend payout ratio declined from 26.24 percent in 2016 to 20.65 percent in 2019 although the total amounts paid out have grown.
The group started in Jamaica in 1992 as a broker in money market instruments and expanded into other areas in the financial market since. It now has operations in the Dominican Republic and Trinidad and Tobago and plans to use some of the proceeds to acquire indirectly 22 percent of Sagicor Financial Corporation, a Caribbean based Life insurance group.
Earnings per share amounted to 68 cents for the quarter ended in June this year, up from 57 in the June 2018 first quarter. Net profit recorded year over year growth of 17 percent moving from $957 million to J$1.12 billion for the first quarter this financial year.
Net operating revenue stood at J$5.84 billion as at the end of the period representing growth of 25 percent or J$1.18 billion over the prior comparable period. This growth resulted from increases in net gains on securities trading, FX trading gains, fees and commission income and net interest income. Net interest income grew 6 percent over the prior comparable period ending the June 2019 quarter at J$2.2 billion. Operating expenses for the reporting period totaled J$3.84 billion, 15 percent higher than the prior period.
JMMB Group has a number of positives, the main one being the diversification of countries it operates in. Growth in the Jamaican economy and the substantially larger population of the Dominican Republic relative to Jamaica and Trinidad provides a strong platform for above-average growth of the group. There are political and economic risks associated with the diverse locations but the group capital base is growing and that will allow it to expand the business into areas that can deliver an above-average return.
The price the stock is offered at is fair with modest potential for growth short term with a PE around 14 times this year’s earnings versus a market average of 16, but the stock peaked at J$55 earlier this year.