5 hot summer IPOs

Initial public offers have been extremely popular amongst investors who have made good money from the vast majority of them. Come this summer investors will get five more opportunities to invest in IPOS.
The last issue, Wigton Windfarm made several thousands investors happy, with the price rising as high as 90 percent over the IPO price of 50 cents. Even now that it is trading lower than the peak, investors are still more than 40 percent up on the initial price. Investors in the year’s first IPO, iCreate are not that lucky as the $1.01 they paid for the stock fell as low as 70 cents since and remains well below the IPO price.
Coming this summer are, The Lab that styles itself as a fully integrated 100 percent Jamaican born and bred advertising agency with global reach and an island swagger.

Kimala Bennett, Managing Director of The Lab.

Kimala Bennett is the company’s Managing Director. NCB Capital Markets are the brokers for The Lab, that could be looking at regional expansion. Clients include National Commercial Bank, JPS. Wendy’s Dominos, Supreme Ventures, Wray and Nephew, Grace Kennedy, Caribbean Broilers, Digicel. Persons in the know say this is one of those IPOs to plan for, as it is unique and profitable. NCB Capital Markets is also taking Eppley Property Fund, a company that owns property across the Caribbean, to market this summer as well as QWI Investments, a new company that invests in listed shares.
NCB Capital Markets is also brokers to Tropical Battery Company. The company expects to come to market in July, to raise around $200 million in an IPO our sources state. The company was founded in 1950 and later purchased by John Melville and remains in the  family, since. The company’s core business is the sale of automotive batteries, complemented by the distribution of several local and world renowned automotive consumer brands. Tropical Battery’s headquarters is located in Kingston, with distribution centres in Kingston and Montego Bay.
Another that will be coming to market is Sagicor Select Funds Limited an Exchange Traded Fund that is going to market in June to raise $5 billion. The fund according to Sagicor Investment CEO, Kevin Donaldson, will track the JSE Financial Index and will be rebalanced if needed, monthly. Donaldson indicates that the fund currently has assets of $1.2 billion already. Sagicor Investments could have 2 to 3 additional listings before the year ends.
When completed, the new listings on the Jamaica Stock Exchange will raise the listed ordinary shares to more than 80 and total listings to more than 100 securities.

Record new JSE listings for 2019

This year could be a busy one for Initial public offers (IPOS) and record new listings on The Jamaica Stock Exchange (JSE), giving investors many more choices for placing their money.  
Nine IPOs came to the market in 2018 with three in December, giving investors more investment choices than in 2017. For 2019, ICreate will be the first IPO out of the block. The government owned Wigton Wind Farm’s IPO will be launched early 2019, probably by March, but it is not one for all investors, in spite of what some politicians would want to see happening. IC Insider.com gathers others to come include, a central Jamaica Manufacturing entity with strong export base, a large paint company and one in the BPO sector. In addition, IC Insider.com gathers that there are at least another three IPOs, should definitely make it to the market this year.
The JSE is projecting for 21 new listing in the current year, Marlene Street Forrest, General Managing Director, informed IC Insider.com recently.
“The main market expects 10 of the total and the Junior Market 11. The list includes both ordinary and preference shares”, Street Forrest stated.

Fontana another IPO another set of errors

Fontana operators of a series of Pharmacies in Jamaica has now released the Prospectus for their initial public offer but like Elite Diagnostic last year, there are errors in this document that needs correction and explanation.
This is an unfortunate development for yet another issue, that seems very attractively priced. The directors have all signed off on the document that has gone through the Financial Services Commission, the Jamaica Stock Exchange and the Company Office of Jamaica, so why the errors and important ommission.
The introduction in the prospectus speaks to a price of $1.88 except for reserved shares at $1.69 but later on in the body of the document it speaks to a price of $2 for each share, making it unclear exactly what the price really should be? In the interim results to September, there are two issues, one is an error and the other, information that really needs clarification. The interim cash flow has no profit, nor depreciation and it therefore is not balanced and needs correcting.
The gross profit in the interim results jumped sharply,even as revenues grew just 5.5 percent with inventories are up 19 percent at the end of the quarter over 2017 and 15.5 percent over June this year. Why the big jump in inventories with sales are just rising moderately? Importantly, this raises questions about the accuracy of the inventory levels and the gross profit margin for 2018. Management should explain the sharp changes in this area so that investors can better understand why there is such a sharp jump in the quarterly profit.
This publication finds it difficult to once more raising issues relating to a prospectus. We are concerned that enough care is not going into them. The breach of GWest Corporation relating to the non-disclosure of information relating to an extraordinary meeting that was said to approve the issue of preference shares that was never brought to investors’ attention is fresh and has not been properly dealt by the regulators or the company. The regulators seem to have turned a blind eye to it. We need to raise the standards if the capital market integrity is the be enhanced.

Sygnus Credit priced for a bounce

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Sygnus Credit Investments is offering 90,909,091 ordinary shares in two classes in the the company at J$13.72 for shares denominated in Jamaican dollar and 11 US cents for the US dollar ordinary shares. 

The issues are to be partially underwritten up to the equivalent of US$5 million by Sagicor Investments. If all shares are taken up in the IPO there will be 250,178,614 ordinary shares issued. The prospectus list the current yield on the portfolio of invested funds at 10.3 percent. In the event that of oversubscriptions, the issuer has the right to upsize the amount to be accepted.
Subscription list opens 9 am on May 2 and is scheduled to close on May 16 if not closed earlier.
The capital structure of the company and the choice of investing funds will tend to result in a return closer to fixed interest levels, but likely higher than some bank lending rates, in the short to medium term as such investors should be looking for steady growth but relatively high dividend payments in the medium term. The falling interest rates on Jamaican dollar money market instrument will make the dividend payment very attractive source of income.
Sygnus Credit Investments is a specialty private credit investment company, dedicated to providing non-traditional financing to medium-sized firms across the wider Caribbean region. These companies typically have revenues between US$5 million and US$25 million.
The investment objective of the Company is to generate attractive risk adjusted returns with an emphasis on principal protection, by generating current income, and to a lesser extent capital appreciation, through investments primarily in Portfolio Companies using private credit instruments.
In 2017, the Company raised US$16 million in equity from 44 investors, with more than half the capital raised from institutional investors. The top 5 largest institutional holders invested $8.5 million and owns 52.9 percent of the Issued Shares. The fund raised was used to capitalize the company and invest in Portfolio Companies. The targeted investment types include bilateral notes and bonds, preference shares, asset backed debt, mezzanine debt, convertible debt and other forms of structured private credit instruments. These types of financing are typically more aligned with the growth and expansion plans of Portfolio Companies.
The company intends to pay out up to 85 percent of its net income as dividends to shareholders, payable on a quarterly basis. The target dividend yield is over 7 percent on the IPO price.
At December 2017, SCI had US$16.7 million in assets and generated net profits of US$660,855. The value of investment in Portfolio Companies was US$11.6 million, generating a yield of 10.3 percent.
Sygnus Capital Management, the Investment Manager, seeded SCI with US$540,000 and owns 3.4 percent of the issued shares. In total, Sygnus Capital Management and Sygnus related parties invested US$1.04 million and owns 6.5 percent of the Issued Shares.
Earnings for 2019 fiscal year could be around J$1-1.2 per share and that could send the stock to between $15 and $20 within twelve months. Returns could be greater if they use borrowed funds to meet some of the demand they have for funding. According to Jason Morris they intend to use borrowed funds once they have used up the equity now being raised. Book Value per Share was 10.5 US cents at the end of 2017.
Thirty-eight-point-nine percent of the fair value of the Company’s investment in Portfolio Companies was denominated in Jamaican dollars. For the period ending December 31, 2017, appreciation of the Jamaican dollar versus the US dollar resulted in Net Foreign Exchange Gains of US$247,705, this gain which flows through the income statement, may be reversed in future periods, and may affect Net Profit.
The Company currently has a robust pipeline of US$31.4 million in deals to finance, of which US$3.2 million has been approved, US$12.3 million has been mandated and US$15.9 million are at various stages of prospecting.

VM Investments 2 times over

Yet another Initial Public Offering crossed the line with demand exceeding supply as the latest issue by VM Investments to raise just under $700 million, has been oversubscribed and closed at the end on Tuesday.
“We were heartened by the overwhelming confidence demonstrated by Members of the Victoria Mutual family and the wider public. We closed today with subscriptions in excess of $2 Billion for the $689,261,487 offer” Devon Barrett, Victoria Mutual Group’s Chief Investment Officer said.
Barrett went on to say “we believe this augurs well for Jamaica’s economic growth and look forward to contributing to this growth by providing financing solutions for small and medium-sized entities in Jamaica. Details on the basis for allocation will be communicated to the Jamaica Stock Exchange in a subsequent advisory.”

Devon Barrett CEO of VMIL addressing invitees at the formal announcement of the IPO

A total of 225,003,750 Ordinary Shares in the Offer are initially reserved for staff and customers of the VMBS Group at discounts from $2.08 to $2.33 each and 75 million for the general public at $2.45 each. The offer which opens on December 11, was scheduled to close on December 18.
The company reported profit after taxes of $326 million, surpassing the $310 million made in 2015 and up to September profit of $273 million was achieved putting in on track for $360 for the year or 30 cents per share with PE ratio of 8, which is well below the average of the market 14.
Last week, FosRich and GWest closed with the issue oversubscribed and Wisynco closed with over $17 billion chasing a little more than $6 billion that was sought. Reports are that the Wisynco offer was heavily subscribed to by institutional investors.

Elite Diagnostics IPO Decemder 7

Information reaching IC Insider.com, is that the initial public offer for ELITE DIAGNOSTICS could come to market on 7th December 2017.
The 5 year old company provides imaging and Diagnostic Medical Facility offers services such as MRI, CT Scan, X-Ray, Ultrasound and Fluoroscopy. The Issue is expected to raise $160 million at approximately $2 per share with the shares to be listed on the Junior Market of the Jamaica Stock Exchange.
The proceeds from the offer will be used for expansion of the business. The company operates from Holburn Road in Kingston and now has a new office on Hope Road.
If the issue comes in as stipulated, it will make for 5 new issues officially on the market at the same time. If the issue is successful, it would raise the listings on the Junior Market to 38 assuming the FosRich offer is successful, with 34 of them being ordinary shares.
Other issues expected are, Wisynco and VM Investments that are heading to the main market of the Jamaica Stock Exchange and GWest for the Junior Market.