About 5.3% of Regency IPO shares for the Public

Initial public share issues continue to disappoint many investors, with investors in the Regency Petroleum issue allocated the first 10,000 shares applied for plus approximately 5.3% thereafter, a release from the lead broker, GK Capital Management, stated. 
Strategic Partners, Employees and applicants converting loans got a full allocation of amounts applied for, the report also indicated.
Applications in the general pool with the same JCSD number were consolidated and treated as one.
The prospectus indicates that listing of the shares is expected to take place within 21 days of the closing of the issue, with ten days elapsing since the issue closed on November 25, the listing should take place before the end of next week.
A total of 287,157,354 Ordinary Shares were for sale at $1 each, with only 115,196,354 shares that were available to the public.

Public gets 2% of IPO share-allocation

The pull of initial public offers continues with some 15,000 applicants going after the One on One Educational Services public share issue of 380 million Ordinary Shares resulting in the general public getting, on average, just over 2.2 percent of shares applied for.
Based on the prospectus, the stock should be listed within one week of the closing date. Accordingly, the shares should be listed this coming week on the Junior Market of the Jamaica Stock Exchange and should be greeted by strong buying interest that seems set to push the price to the two dollar region. One on One will bring the companies listed on the Junior Market to 46 and will be the 50th company to list on the Junior Market since the commencement of that market in 2010, when Access Financial was listed as the first. It will be the 100 companies listed on the Jamaica Stock Exchange.
General Pool received the first 5,000 units plus a pro-rata allocation of approximately 2.23 percent of the excess.

Ricardo Allen CEO of One to One

Investors in the Convertible Loan Conversion and the Key Strategic Partners pools received a full allocation of the shares. Applicants in the Sagicor Pool received the first 450,000 units plus a pro-rata allocation of approximately 1.11 percent of the balance of the excess. Teachers and Trainers got the first 80,000 units plus a pro-rata share of around 3.47 percent of the excess applied for. Applicants in the Employees Pool receive the first 500,000 units plus a pro-rata allocation of approximately 69.83 percent of the rest.
A total of 108.75 million shares were allocated to the owners of Convertible Loans at 80 cents each, 60 million shares for the Key Strategic Partners, 30 million units each for the Sagicor reserve Pool, the Teachers and Trainers Pool and the Employees Reserve Share Pool and 121.25 million shares for the general public at $1 per share.

Dolla list Wednesday

The shares of Dolla Financial that was the subject of an Initial Public Offering will be listed on the Jamaica Stock Exchange Junior Market on Wednesday morning after increasing the number of shareholders to 14,981  as a result of the IPO.
The stock offered to the market at $1 each was heavily oversubscribed, with investors getting around four percent on average of the shares applied from the Public Pool. This publication expects moderate trading on the opening day with the price set to hit $1.30 but should see pretty spirited trading on Thursday when the price could well exceed the usual 30 percent one day limitation for price movement.
Around 40,000 applicants were received for the issue, of 500 million shares, information gleaned from persons close to the issue. The trading symbol will be Dolla, the same as the name.

JFP ipo requires careful thought

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Jamaican investors will get another shot of investing in a new initial public offer of shares when JFP Limited issue of 280 million ordinary shares opens on February 21 at a price of $1 each on the Jamaican market as the second such issue for the year to date.
The company, a custom manufacturer of furniture was formerly operated as Jamaica Fibreglass Products Limited, up to December last year. The Company manufactures furniture for offices, hotels, restaurants and laboratories, schools, point-of-sale items and boasts many large companies in Jamaica and internationally as customers. “Historically, the Company’s revenues have been derived from the hotel industry, government agencies and restaurants. Combined, these three (3) industries have been the source of an average of 72 percent of revenues for the past five (5) years with one third of the Company’s revenues being earned from the restaurant industry,” the prospectus states.
The share offer is set to close on February 28, with such a small amount is expected to close earlier. Half of the offering is being sold by one existing shareholder, with the balance of 140 million units is offered by the company, with the proceeds to boost working capital to enable it to mobilize efficiently and take advantage of more opportunities for revenue and profit growth.
The company is slated to list on the Junior Market of the Jamaica Stock Exchange shortly after the offer closes. A total of 111.6 million of the shares are Reserved Shares, not initially available to the wider public. The company currently has 980 million shares issued and after the issue closes will end at 1.12 billion units.
The prospectus states that the directors intend to pursue a liberal dividend policy that projects an annual dividend of between forty percent and eighty percent of net profits available for distribution, subject to the need for reinvestment in the Company from time to time.
Metry Seaga is the Chief Executive officer and Ian Levy is the chairman of the board that comprises seven members in total.
Historical operating performance has not been all perfect with sales declining between 2016 and 2018 from $285 million to $244 million with negligible profit and loss, but sales rose to $503 million in 2019 and slipped to $443 million in 2020, but profit before tax rose to $69 million from a small $2 million loss and climbed further in 2020 to $83 million. While profit to September 2020 amounted to $87 million from revenues of $312 million but profit dropped to a mere $4.8 million from sales of $210 million for the nine months to September last year.
Indications are that revenues could get back to the $400 million region, in 2022 and profit around $75 million for earnings per share of 7 cents. With the company producing to order there are likely to be swings in revenues and profit that could result in big swings in the price of the stock. Of course, results could be better or worse as past results show.
Gross profit for the 2020 financial year was $233 million and was flat compared to the year prior.  Gross margins increased from 46.5 percent in 2019 to 52.5 percent. The prospectus stated that improved margins were due to a reduction in staff complement and streamlining its importation process as well as sourcing material locally where possible. Over the past five years, gross margin averaged 52 percent.
The Company’s revenues from contracted work for the nine (9) months to September last year was said to be delayed as a result of multiple unforeseen contract delays caused by the Covid-19 pandemic and the various COVID– 19 containment measures reduced the number of working hours which slowed the production and completion of work. The expected revenues from these delayed projects were $81 million.
The company reports a pipeline of $255 million in contracts for the nine months to September this year and includes a $153 million contract awarded to the Company to manufacture and outfit the check in counters and baggage scales at Sangster International Airport in Montego Bay, slated to be completed in the September quarter of 2022 and $32 million in revenues remaining to be recognized from a contract to furnish the ROK Hotel to be completed in the second quarter.
Investment in the stock carries added risk, but it is well noted that the last two Junior Market listings are trading well over the market average of 17.5, based on 2021 earnings and 10 times 2022 projected earnings, with Future Energy Source trading at an incredible PE of 40 times last year earnings and 29 times 2022/23 earnings, with Spur Tree Spices at 28 times last year’s earnings and 16 times that of 2022, both having strong medium term growth prospects.
There are distinct differences between the two previous listings and the latter. The former two have a very clear path that suggests fairly consistent growth, the same is not so for JFP as such the latter should trade at a discount to the former in a rational market.

12% allotment for Spur Tree shares

The staff at Spur Tree Spices lost a golden opportunity to make money from the company they worked for leaving a portion of the 10 million shares on the table for others to take up at a very low price that will likely double in rice sooner than later.
GK Capital Management released to the public the basis of allotment of the successful Spur Tree Spices Initial Public Offer of 335.4 million shares on Thursday.
Applicants in the staff key partner reserve pools will receive 100 percent of their application with the balance of the shares in these pools that were not applied for will become available for the General Public Pool Applicants, who will receive up to the first 10,000 shares plus a pro-rata allocation of approximately 11.76 percent of the excess shares for which they applied.
The prospectus indicated that allocation and refunds will take place within ten days of closing and trading in the shares no more than five business days after the Jamaica Stock Exchange approves the admission of shares to the Junior Market.
“It is the intention of the Company to apply to the JSE for admission of the Ordinary Shares to the Junior Market and to make such application immediately following the closing of the Invitation,” the prospectus stated.

Sygnus Real Estate Finance comes up short

Property in Mamee Bay, St Ann that Sygnus has an interest in.

The Initial Public Offering Sygnus Real Estate Finance that closed on September 10 came up short of the initial target, with just 1,153 applicants applying for the 207,608,341 shares offered by the company to raise $3.9 billion at $19.30 per share.
While the uptake was well below the minimum target it nevertheless, the offer still raised a respectable sum amounting to approximately $2.3 billion. The new capital adds to the $3.6 billion in shareholders’ equity at the end of February this year moving it to just under $6 billion and total assets of $8 billion.
The company is a real estate investment company with the primary objective of bringing flexible financing to monetise and unlock value in real estate assets across the Caribbean region. The type of instruments used to invest in real estate assets include preference shares, bridge financing, profit sharing debt, secured debt, mezzanine debt, and various forms of equity investments.

Alliance IPO is now

Shareholders of Alliance Financial Services will offer later this month just over 1.25 billion shares to the public for purchase at $1.59 each, for a total consideration of $1.99 billion.
The Invitation opens at 9 am on December 28 and will close at 4 pm January 11, subject to the Selling Shareholders’ right to close the issue at any time after it on the Opening Date once the shares are fully subscribed.
During its sixteen (16) years of operation, the company has grown to become a notable Cambio and remittance service provider in Jamaica.
The company reported a $709 million profit for the year to September 2020, from revenues of $1.5 billion. The 2020 profit equates to earnings per share of 11.3 cents for a PE of 14 but using the 2019 earnings the PE would have been 12.7, with both below the Jamaica Stock Exchange Main Market average of 17.
JMMB Securities are brokers for the offer.

Virtues & pitfalls of OPAs & stock splits

A reader of IC Insider.com asks the following question. In general, based on what l have read, listed companies can raise capital faster than getting a loan. I think there is a risk for the company that the Additional Public Offer (APO) can be undersubscribed. What are other ways APOs may hurt the company?
An APO is just like an IPO but it is usually better as the former is already listed and has followers and a wide number of shareholders who are familiar with the company’s history of management and financial wellbeing.
Shares issued to the public can be undersubscribed if the pricing is out of line with investors’ expectations or if market conditions change adversely after the issue opens. Bear in mind that the management and their Broker would get a sense from the market whether the issue will be taken up or not.  Brokers will usually do roadshows to pitch an issue or get feedback from their clients before pricing and going to market with the issue. At least with an APO, the market has already determined the value investors place on the company so pricing is easier than for an IPO that has to be priced off the indicative market valuation.
One more question? if there’s a stock split after an APO ( thinking of PanJam), might it be better to buy shares after the APO as they could buy more shares for less money, is my understanding correct?
Stock splits tend to cause the stock price to rise because the news of the split and the lower share price stimulate short-term interest and if investors wait until after the split they are likely to pay more for the stock in real terms. In the case of PanJam buying in the APO could be the best bet. It, however, depends on the timing of the split as well as that of the APO. The odds are that the split would take place before the APO and if history is anything to go by the stock price will rise and result in a higher APO price than the price before the split. Buying the stock now before the announced stock split may be the better move.

TransJamaican IPO pulled in $25.5B

Ministry of Finance, Dr. Nigel Clarke in his budget presentation in the Jamaica Parliament stated that the TransJamaican Highway IPO pulled in $25.5 billion from 36,428 applicants.
National Road Operating and Constructing Company (NROCC) that owned all the 12.5 billion ordinary shares that are issued, 8 billion ordinary shares at $1.41 each and they upsize the offer by an additional 2 billion shares.initial
the issue attracted more applications than the 31,000 brought in by Wigton Windfarm. The shares went to the market at a PE ratio of 24 times earnings and will hit the market at a time when the market values have declined sharply since the debut of the IPO in February.

Transjamaican Highway IPO highly overvalued

After suffering US$11.5 million in losses in 2014, with more losses in 2015 and 2016, Transjamaican Highway (TJH) turned a profit in 2017 of US$1.75 million, with an increase to US$6.5 million in 2018. The company seemed on track for another profitable year in 2019, before costs associated with restructuring debt financing pushed profit off the highway.
IC.Insider.com projects 2020 earnings to be around US$5 million or 6 Jamaican cents per share, from total revenues of US$57 million with a gross profit of $21 million. Finance cost is projected at $15 million, inclusive of preference share dividend with a high, 8 percent coupon rate.  The PE ratio is a rich 25 times 2020 earnings, but that should fall to 19 in 2021. The IPO price works out at 1.3 times book value. Shareholders’ equity amounts to $95 million, with borrowings at $245 million inclusive of nearly US$20 million in preference shares, putting the debt to equity ratio at a high 2.6.
National Road Operating and Constructing Company (NROCC), the selling party, currently owns all the existing 12.5 billion ordinary shares, is inviting investors to purchase up to 8 billion ordinary shares of TJH, at $1.41 each. The company reserves the right to upsize the offer by an additional 2 billion shares in the event of oversubscription on the terms and conditions set out in this Prospectus.  NROCC estimates that after the issue, new shareholders will own between 64 percent and 80 percent of the issued ordinary shares offer is upsized or not.
Just under 80 percent of 8 billion shares offered for sale is underwritten by NCB Capital Markets, Underwriting of a portion of the offer will ensure the listing of the shares will on the Main Market of the Jamaica Stock Exchange.
A total of 5.36 billion shares are reserved for a select group of applicants and just under 2.64 billion are available for the general public.
Highway 2000 East-West was the first toll road built and operated in Jamaica and connects May Pen and Portmore to Kingston and is operated under a concession agreement.
The concession is for a period of 35 years, with 17 years remaining, with an option to renew for a further 35 years, subject to payment of a renewal concession fee to be determined. The company has the right of first refusal to secure a similar concession to maintain, operate or own, when complete, the leg of Highway 2000 that will extend from May Pen to Williamsfield that will extend the length of the Toll Road by approximately 50 percent.
The Portmore leg of the highway accounts for 56 percent of traffic and 51 percent of revenue in 2019 and Vineyards accounts for 19 percent of traffic and 36 percent of revenue, with Vineyards having higher tolls than any other toll plaza due to more class 2 and 3 vehicles using it.
Traffic on the highway is exceeding the forecasts since 2015 onwards, the prospectus states and is expected to grow at a steady pace, with 4.5 percent in 2020. In 2021, the growth rate rises to 5.6 percent and 6.3 percent in 2022. For the nine months to September last year, the Company had revenue from ordinary operations of US$39.26 million, reflecting an increase of US$240,000, on the US$39 million generated for the same period in 2018. This miniscule rise was primarily due to an increase in the annual toll rates starting in July 2019 following the toll rate increases allowed under the Concession Agreement. Revenue was also affected by decreased traffic since March 2019, primarily at the Portmore leg, due to the near completion of construction works of the Nelson Mandela Highway. The reduced traffic at Portmore has, however, been offset by increased traffic at the Spanish Town toll plaza as more users divert to the Nelson Mandela Highway.
There are other opportunities for the company to take advantage of, with expansion locally and overseas. As such, the growth prospects could be very positive going forward.
The stock seems suited for investors with a long-term time horizon. The stock at the offering price is well ahead of the average of 16 for the market based on 2020 earnings. Investors in the IPO are taking on a considerable risk of a pullback in the value of the stock when things settle sometime after listing.