IPO facts investors should know

“Hello my dear client, the day we have been waiting for to increase your wealth is here. The Mayberry Jamaican Equities IPO has finally arrived, the stock is a must have at this time. Attached are the Prospectus and Application Form for your attention. The official opening date is Monday, July 9, 2018, the demand is high so please don’t delay,” Kind regards, a MIL wealth adviser.
The above was a message sent out by one of Mayberry’s wealth advisor. A group of investors stated in 2017 that investors cannot go wrong with Junior Market IPOs, all that has to be done is just buy, buy, buy and the investor cannot fail to make money. Some investors in the last two IPOs, Sygnus Credit and Everything Fresh bought into the issues heavily, hoping to catch an early bounce and pocket the profit. That the initial bounce did not last, should be a lesson to speculators.

%8 Half Way Tree Road owned by Stanley Motta.

Laden with 6 main and Junior Market stocks, Mayberry Jamaican Equities is issuing 120,114,929 ordinary shares to the public, at a price of $7.57 each. Investors really ought to know what they are buying into when IPOs are being issued, rather than thinking that the price of each IPO can only go in one direction – up. As the stock market matures and more persons come to the party of stock ownership, the valuations that new IPOs come to the market at, will continue to rise and less immediate potential gains will be priced in. In some cases, investors will need to look long term for the payoff from their investment.
Everything Fresh, Sygnus Credit, Stanley Motta and Mayberry Jamaican Equities fall into this category. GWest was another company that many investors got carried away with, in pushing the price to $4 with many buying at inflated values, now the stock trades in the low $2 range. A reminder of an adage, that successful trading starts at buying at the right price. GWest business model is based mainly on generating most income and profits coming from operating mini hospital and other patient care. Real estate income going forward was going to be secondary and would not contribute much to profit. Profit made in the year before listing was mostly from sale of real estate and that was not something that would continue for any prolonged period. Without a track record in providing healthcare, investors who bought the stock in the high $3-4 level must have been hoping that the forecast in the prospectus was going to be achieved on a timely basis. The results to March show revenues well below forecast from the new operations. The company projected medical income to March this year, at $86 million but only generated $17.4 million and that puts the issue of generating the forecasted $710 million for fiscal year 2019, in doubt. Admittedly, the company had projected a loss to March of $110 million but came up sharply lower with a loss of $88 million.
Investors should recognize that not all IPOs are equal. They should also realize that there is a clear pattern that prices then to move up for strongly demanded issues and the undergo some correction. The data shows that the best time to buy after the IPO closes is on the first day or two or a few weeks after when demand falls off and supply increases as short term investors try to offload.
Data for listings in 2016 to 2018 show and average of 31 percent correction for Junior Market stocks from the highest point to the lowest, after listings which tends to occur within 4 weeks of listing. IPOS from Mayberry seem to have a lower pull back in price, around an average of 23 percent while most others, average around 33 percent. Three main market stocks pull back from their highest point, range from just 15 percent for Victoria Mutual Investments to 31 percent for Wisynco and 29 percent for Sygnus Credit Investments.
Based on how investors have gone about pricing IPOs at their peak it seems likely that Indies Pharma will peak around $2.40 based on projected earnings in 2018, of 16 cents per share. It could even go higher if the number of investors who apply for shares exceed those Junior Market listings IPOS from those going back to 2018.

Sygnus Credit IPO rakes in $3.8B

Some 3,200 applications with more than $3.8 billion chased after the Sygnus Credit Investments offer of 90,909,091 ordinary shares preliminary data out of the company is indicating.
The company went to market to raise J$1.3 million but have the option to upsize the amount it takes in case of over subscription of the offer.
The offer is expected to close on the Wednesday May 16 received applications from Jamaicans and persons from overseas including the wider Caribbean, IC Insider.com was informed. The company is likely to take up approximately 60 percent of the excess demand in keeping with the clause in the Prospectus that gave them the right to up lift the take in case of an oversubscription.
With the level of oversubscription, the total issued shares that was projected to be just over 250 million units should end up at just over 300 million ordinary shares.
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.
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.
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.
Earnings for 2019 fiscal year could be around J$1-1.2 per share and that could see the stock trading 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.
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.

Sygnus Credit priced for a bounce

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.

New IPO set for mid-April

Add your HTML code here...

Investors in Jamaica will get another opportunity to vote come mid April, on the merits of a new public share offer.
IC Insider.com has confirmed that Everything Fresh is set to issue their prospectus around the middle of April. Brokers for the issue is stocks and Securities. The company imports and distributes products including diary, seafood and meats with the hotel sector a major customers. The business operates from 78 Marcus Garvey Drive, but he hopes to acquire additional premises, to be financed from the initial public offering (IPO) of shares, the chairman Gregory Pullen was quoted as saying in 2017.
“You have to expand the warehouse after a while, and I see us getting a bigger place for storage, but I don’t believe in these super-huge warehouses where you store goods forever,” he said,” Pullen was reported as saying last year.
The company has a large nine-member board chaired by Gregory Pullen, Courtney Pullen, Melene Pullen, Garret Gardener, Nesha Carby, financier Mark Croskery, ex-banker Donovan Perkins, attorney-at-law Vivette Miller and Chartered Accountant Jennifer Lewis.
Everything Fresh seems set to be the second initial Public offer to hit the market in 2018, and is one of about nine that is expected to go public this year. Sygnus Credit is expected to come to market within weeks having sent the prospectus to the authorities for vetting in February.

$1.22 billion chased 71M Elite shares

Elite Diagnostics could be in the Junior Market TOP 10 by the end of 2018.

Elite Diagnostic initial public offer of 70,680,000 ordinary shares were aggressively taken up by the General Public and place the issue as the one to have attracted the largest number of subscribers.
Applications for 614,190,600 units were received from 3,346 investors value of J$1,228,381,200.
The public offer was oversubscribed by more than 10.5 times and only one category of reserved shares was fully subscribed to, with 6,160,000 shares reserved for Medical Practitioners, receiving 54 applications. Applications from this group covered 19.046 million shares valued at $38,092,600, the first 70,000 units were allotted in full with balance getting 10.062 percent.
A total of 3,257 applications for shares were received from the general public who will receive the first 15,000 units with the balance in excess, receiving 3.383 percent.
A total of 12 applications for shares valued at approximately 1.555 million shares were received from Directors and Employees of the Company for the 4,060,000 shares reserved.
Five Affiliated Doctors applied for 142,000 out of the 700,000 shares reserved for them, two Affiliated Entities applied for just 56,000 of 420,000 shares reserved for them. Eight Referring Doctors Tier 1 applied for 2,240,000 of the 6,160,000 shares reserved. Applications from Referring Doctors Tier 2 applied for 1.011 million shares from the 1,900,000 shares reserved for them.
Sagicor Investments and NCB Capital Markets were the brokers to the issue.

Elite IPO put off for now

The initial public offer of 71 million shares in Elite Diagnostic that was to have opened to the public on Monday January 22 but put back to Wednesday January 24 has been put off once again.
The prospectus that was originally planned for release in early December included results for the first quarter of the current fiscal year to September with errors that lead to an understating of expenses and over stating of profit as well as errors in the amounts relating to fixed assets in the cash flow and balance sheet.
According to a recent release from the company, “Elite, after consulting with its Financial Advisors, has decided to update certain statements made in its prospectus dated December 11, 2017 and Addendum dated January 17, 2018. The revised statements and the new Opening and Closing Dates will be published on the JSE’s website as soon as possible.”
IC Insider.com who first brought the errors in the report to the public had written after the addendum was released that the company needed to withdraw the prospectus and have the figures properly checked and audited before releasing it again to the public.

Elite interim figures lack credibility

Elite Diagnostics interim figures are wrong and need auditing.

Elite Diagnostic issued an addendum to the prospectus for the public issue of shares. They should withdraw the issue, until they have the interim figures audited and fixed. For even after they amended them to correct for errors, $15 million is still unaccounted for.
The interim results, initially included in the prospectus and in the addendum to them, send a shocking picture of the amateurish approach to the company’s financial stewardship.
The company reported first quarter numbers without the significant cost of depreciation, which when included, reduced the profit by approximately 40 percent. To compound the matter, the figures are presented in cents which is shown is no other place in the prospectus, no experienced accountant would provide public results with cents included. The presentation tells a sorry story as to the errors that are in the report and are still there.
In a report of a missing $11 million, IC Insider.com pointed out the error re depreciation and fixed assets. In the addendum, fixed assets are up by $3 million but the figure is still short of what the data in the report suggests it to  be.
At the end of June last year, fixed assets amounted to $187 million, with the cash flow to September showing $74 million being added and would bring the total amount to $262 million, before depreciation of $9 million for the first quarter and would result in net fixed assets of $253 million. The interim results have the figure at $238 million, a huge difference of $15 million.
Deferred tax liability of $9.5 million reported in the June year end audited report disappears in the interim figures and may actually be a part of the error in the report. Without a proper checking of the data along with documentations of large transaction is difficult to say where the error may be and that is why the figures should audited at this stage to ensure integrity of the numbers.

$11M missing from elite figures

$11 million are missing from the first quarter figures included in Elite Diagnostic prospectus to raise $141 million in an IPO.
While the 2017 audited accounts show depreciation and amortization of $28 million and administrative expenses of $81 million,the interim figures show no amount for depreciation, with administrative cost of $24 million which is just over 25 percent of the full years cost to June. Direct cost is $87 million for the fiscal year or just under $22 million per quarter, in line with $21.7 million in the September quarter. The conclusion is that the cost of depreciation is not included and would result in profits falling from $23 million reported to $14 million and would reduce the expected full year earnings below the annualized figure of $92 million down to a much lower amount, assuming that the new location at Old Hope Road just break even.

Elite Diagnostics is the first 2018 IPO out of 9, that is expected this year.

The intrigue does not end there. The movements in fixed assets show a missing $11 million, with fixed assets at June being $187 million and the cash flow statement showing additions of $71 million, that should result in a total of $257 million which would be reduced by approximately $9 million for depreciation for the quarter, bringing the net figure to $249 million but the interim figures have fixed assets at $238 million. For short, a material amount of $11 million is missing and it is unclear what items are under or over stated.
On the face of it, the reported profit for both years appear overstated, on that basis, IC Insider.com reduced earnings per share for the full year to 20 cents, with the stock being priced at 10 times earnings, but that still leaves the stock a buy.

Wisynco should list by year-end

NCB Capital Markets Manager, Origination and Structuring Stanley Thompson (left) exchanges laughs with Wisynco Group Limited Chairman William Mahfood during a signing ceremony commemorating a partnership with the local manufacturing and distribution giants. Sharing in the moment, too, are Wisynco Chief Executive Officer Andrew Mahfood and PriceWaterhouseCoopers Director Fiona Hyman

Investors who subscribed for share Wisynco Group’s Initial Public Offering in the General Public pool have been allocated up to the 25,000 units with any amount in excess is allocated 18.70 percent thereof.
Shares reserved for Employees, Strategic Investors and the Broker were fully taken up. The listing committee of the Jamaica Stock Exchange meets today to consider the listing of the shares and it is expected that trading in the stock should commence sometimes next week.
The Company offered 149,414,576 shares to raise approximately $1 billion to use in its operations but existing shareholders offered 635,085,424 shares for sale at the same time as a part of the overall offering. Up to 314,700,000 Shares in the Invitation were reserved for priority application from, of which 150,000,000 units for subscription by the Strategic Investors and 52,200,000 Shares for the Broker at the Subscription Price of $7.87 per Share to 112,500,000 Shares for employees and directors at $7.08 per Share.
NCB Capital Markets were the brokers to the offer that was heavily oversubscribed with issue being opened on Wednesday December 6.
Financially, the company is strong, with shareholders’ equity of $7.6 billion and cash of $4.75 billion as of September. Profits for the 3 months to September came out at $656 million versus $591 in 2016 and for the June 2017 fiscal year, $2.24 billion versus $2.3 billion in 2016, from revenues of $19.4 billion while in 2017 revenues were $21.25 billion. For the current fiscal year to June 2018, IC Insider.com is forecasting profit of $2.6 billion, around 70 cents per share, from revenues of $24.8 billion and $3.9 billion or $1.05 per share in 2019, from sales of $29 billion.

General public oversubscribed GWest 100%

GWest complex in Montego Bay,

Montego By based GWest Corporation’s Initial Public Offer of 169,689,500 shares, closed on the opening day, December 7, was oversubscribed by 41.3 percent, but the oversubscription by the general public exceeded 100 percent.
The level of oversubscription by the general public is amazing for company that is its infancy and generating a loss in its current fiscal year, with limited data on which to judge future earnings. Details of the level of subscription for the IPO was released by the broker for the issue, JMMB Securities.
Applications totaling 1334, were received for shares valued at $599,310,000. All the shares that were reserved were fully taken up, while General Public for which 69.7 million shares at $2.50 each, were available to purchase, received the first 10,000 shares applied for and 45.941 percent of the balance.

Dr. Konrad Kirlew, chairman of GWest.

GWest made a loss of $29 million in the six months to September this year and for the full year to March 2018, a loss of $111 million is projected, and is estimated to swing sharply to a profit of $166 million in 2019 and $388 million in 2020 as revenues rise from an estimated $158 million in 2018 to $803 million in 2019 to $1.2 billion in 2020. The shares are slated to be listed on the Junior Market of the Jamaica Stock Exchange.
Elsewhere, IC Insider.com gathers that VM Investments received applications in the range of more than 3,000, but less than 5,000, with the basis of allocation to be considered by the board on Thursday.