The initial public offer of shares in Jamaica Fibreglass Products is expected to come to the Jamaican Capital market in October, our source advises, with Spur Tree Spices to come shortly after.
The company produces fiberglass based furniture and beddings, with revenues said to be in the region of $600 million, is expected to raise approximately $250 million for expansion purposes. The prospectus of the Metry Seaga owned company is said to be at an advanced stage of preparation and should be moving through the various stages for approval soon.
Spur Tree Spices, with revenues, said to be just over $1 billion, should also be coming in October, if all goes well, with a view to pull in $250 million. GK Capital are brokers of the two issues that are slated to list on the Junior Market. The prospectus of the company that has been manufacturing seasonings and sauces since 2006 for the local and export markets is also at an advanced stage of readiness, ICInsider.com gathers.
ICInsider.com is informed that the prospectus for one issue is in a draft form currently, so it should be ready to move to the regulators shortly. IPOS are subject to approval, primarily by the Jamaica Stock Exchange and Financial Securities Commission, before the prospectus can be released to the public as such, the exact timing is subject to signing off by them.
One source advised IC Insider.com that there are several potential listing candidates in the Manufacturing sector, with a number of them expressing interest in the listing. Another source advises that there are a number of potential listings in the NCB Capital Markets pipeline. The disruption to business caused by covid-19 is creating delays in some of the issues.
What appears to be a rush to list is a marked departure from the situation that existed before the advent of the Junior Market, with many business owners now seeing the major benefits that listings bring and the usefulness of long term capital.
In the meantime, Sygnus Real Estate Finance IPO that is seeking to sell 207.6 million up sizeable by 38.86 million units to raise a maximum of US$15 million, is extended to Friday, September 10.
New IPOS expected in October
IPOs coming in your future
Jamaica Stock Exchange investors should be seeing a new IPO coming to the market sometime in July, subject to regulatory approval, with Sygnus Real Estate Finance getting ready to blast out of the box reports reaching this publication indicate.
The company, which is said to be dedicated to investing in and funding real estate developments through a combination of debt capital as well as equity capital, has projects on its books already, with developments in St Ann, St Catherine and Kingston, which the principals expect to extract extra value by way of creative acquisition and disposal. The company strategy is to fund new developments through real estate notes secured by a charge over the properties.
The company, which will be separate from Sygnus Credit Investments, could benefit from funding from them and is expected to raise $3 to $4 billion in the region. The company is coming to the market at a time of unprecedented construction of buildings in the country. Reports reaching ICInsider.com indicate strong buying interests locally and from overseas in townhouses and detached units in the country’s hills, and many see Jamaican real estate as cheap.
Also coming around July is Jamaica Fibreglass Products that produces furniture and bedding, to raise approximately $230 million for expansion purposes and Spur Tree Spices may make it towards the end of the year to pull in around $250 million. The company says it has been manufacturing all in one seasoning and sauces since 2006 for the local and export markets.
There has also been chatter in the marketplace that Jamaican Teas may consider a spin-off of its manufacturing arm into a separately listed company.
Oversubscribed
Future Energy Source Company Initial Public Offer of 500 million shares, which ICInsider.com indicated last week should be snapped up quickly by investors, with the company having long-term prospects for strong growth, did just that, with investors snapping the shares within two days of the opening.
NCB Capital Markets, the brokers for the issue, reported on Thursday that the issue, priced at 80 cents per share and opened on Wednesday, closed on Thursday the Junior Market IPO issue was oversubscribed. The successful closure of the issue will see the listings of companies rising to 42 from the current 41 on the Junior Market of the Jamaica Stock Exchange.
The company that trades as Fesco reports earnings of $92 million before taxation for the period to December last year from revenues of $4.35 billion and is projecting pretax profit of $151 million for the year to March 2021 and $264 million for the 2022 fiscal year. The plant is for two new gas stations to be added to the current 14 before the end of 2021.
Fesco IPO opens next week
Future Energy Source Company (Fesco) initial public offer of shares will open at 9 am on Wednesday, March 31 and close on April 9, at 4 PM, unless it closes earlier.
The issue comprises 300 million new shares with 200 million to be sold by existing shareholders at 80 cents each. If successful, the total issued shares will be 2.5 billion, with the shares slated to list on the Jamaica Stock Exchange Junior Market.
The projection shows a profit of $151 before taxes for the year ended March 2021 from revenues of $7 billion and earnings per share of 7 cents. The company forecast revenues of $106 billion and a profit of $264 million or 10.5 cents per share for 2022.
ICInsider.com had earlier done a detailed review of the offer and rated it a buy with long term growth prospects as there is much room for expansion as it currently has only 14 service stations under its banner. NCB Capital Markets is the lead broker.
Airbnb more than doubles IPO price
The very popular Airbnb listing that follows its recent IPO hit the market today and only recently started trading with nearly 30 million shares exchanged up to 2 pm, with the price more than doubling.
The stock issue price was US$68, but it started trading at US$147.61 and moved up to a high of $165, but it is now trading at $148.34 for a rise of $118. The company is a booking service for travelers in non-traditional accommodations.
Mailpac Q3 profit surges 129%
MailPac Group (MGL) continues to enjoy increasing strong profit growth despite the current pandemic, with revenue jumping 58 percent in the September quarter over the 2019 quarter and profit more than doubling.
The company recorded net profit of $149 million for the quarter, a solid 129 percent jump from the $65 million the operation recorded for the September 2019 quarter. For the year-to-date, there was an even more sizeable growth of 150 percent, moving from $203 million in 2019 to $339 at the end of September 2020.
Revenues grew 58 percent over the September 2019 quarter, from $301 million to $477 million, and grew a stunning 30 percent over the June 2020 quarter with revenues of $366 million. For the year to September, revenues rose to $1.2 billion, 42 percent more than the $851 million recorded at the end of September 2019.
Gross profit rose to 50 percent from 44 percent in the June quarter but fell to 48 percent for the nine months compared to 52 percent in 2019.
Direct expenses jumped 57 percent from $150 million for the September 2019 quarter to $236 million for the September 2020 quarter and 15 percent over the June 2020 quarter. For the year to date, the expenses climbed by 52 percent from $410 million in 2019 to $623 million in 2020. Gross profit stood at $240 million for the quarter ending September 2020, up from $150 million in 2019 and $584 million for the year to date versus $442 million in 2019.
Administrative, selling and promotion expenses increased 22 percent over the second quarter and slipped two percent from the September 2019 quarterly figure of $86 million to $84 million. The Executive Chairman attributes the increase in expenses in the third quarter over the second quarter to its expanding operations, the partnership with PriceSmart presumably one such notable factor.
For the nine months to September, selling and promotion expenses amount to $30 million, up from $29 million in 2019, while administrative and general expenses dropped to $199 million, from $218 million in 2019. Overall, these expenses were down seven percent from $246 in 2019 to $228 million at the end of September 2020. The effect, operating profit, rose a strong 140 percent over the comparative quarter to $157 million from $65 million in 2019 and an 82 percent increase for the nine-month period, moving from $195 million to $356 million.
Finance costs rose for the quarter from $352,000 in 2019 to $11 million in 2020, while the nine months to September ended at $31 million from $3 million for 2019.
Gross cash flow brought in $346 million but MGL recorded trade and other payables increase of $127 million, spent $12 million on the acquisition of fixed assets and paid $225 million in dividends to end with cash and equivalents of $309 million at the end of September. Shareholders’ equity stood at $467 million. Current assets ended the period at $369 million and Current liabilities at $185 million.
Earnings per share came out at 6 cents for the quarter and 14 cents to September. IC Insider.com is forecasting Mailpac will end the year at 20 cents per share for PE of 11 times earnings and they should go on to earn 33 cents in 2021.
At the IPO, the company projected a profit of $317 million in 2020, while IC Insider.com projected $356 and 14 cents per share. The nine months’ results are just below our full year’s forecast.
The stock is priced below the average of the Junior Market of 12 and offers strong upside potential. The strong current growth continues the trend since 2017, when revenues grew 12.2 percent, 25.7 percent in 2018 and 28.8 percent for the first half of 2019. The company offers a convenient way to shop and far less costly than traditional ways. Listing on the stock exchange provides greater credibility that augurs well for increased business. MGL provides clients with physical addresses in Miami, Florida, where they can receive all goods purchased are flown to Jamaica. The company clears all goods and delivers them to the customers at their homes or for collection.
On the negative side, the main asset owned is the brand and technology that drives the business. Other entities could break into the market and squeeze profit margin longer term.
Coming off a robust third quarter, MGL is entering what is normally the busiest time of the year for the company that should continue the solid growth experienced in 2020 so far.
The stock currently trades at $2.13 on the Junior Market of the Jamaica Stock Exchange. The company paid an interim dividend of 5 cents per share in July 2020 and 5 cents per share in October and more is expected, with the company promising at the time of the IPO that the Directors intend to pursue a dividend policy that projects an annual dividend of up to 75 percent of net profits available for distribution.
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.
Motta for income & long term gain
The Musson Group is disposing of all their interest in Stanley Motta Limited in a scheduled sale of all the 757,818,862 ordinary shares currently owned.
Our source states that the business which is a solely a real estate venture is not part of Musson’s core business. If the shares are listed it would be the fifth company connected to the group to do so.
The offer has 227,348,547 shares reserved mostly for family members of the majority shareholders of the Musson group and 529,970,315 units for the General Public for purchase at $5.31 per share. All the net proceeds will be payable to selling Shareholders. Sources indicates that General Accident Insurance will make be taking up a large block of the shares that offered to the public.
The Company intends to apply to the Jamaica Stock Exchange for the listing on the Main Market of all the Shares and to make such application as soon as is conveniently possible following the close of the offer. The offer opens on July 6, with July 20 set as the closing date.
A business process outsourcing and technology park consisting of five buildings totalling over 200,000 square feet of rentable commercial office space at.
The company owns 58 Half Way Tree Road in Kingston, next door to the new Kingston, comprising 200,000 square feet of rentable space that is fully leased with the lease quoted in US dollar. Tenants are responsible for all expenses arising by reason of occupation, including insurance, property tax and maintenance expenses. The weighted average tenor and annual rent per square foot are 4.7 years and US$12.09, respectively.
The anchor tenant is Jamaica Agent Services Limited, the local subsidiary of Alorica Inc. Alorica is a US based global business process outsourcing firm and the third largest provider of customer experience solutions in the world. The company has over 100,000 employees and operates from 140 locations in 16 countries around the world in North America and the Caribbean, Latin America, Europe, China, the Philippines, and Japan. Alorica serves over 600 clients many of which are on the annual list of the 500 largest companies in the United States as compiled by Fortune magazine. Under the terms of Stanley Motta’s two leases with Alorica, who took possession of Units 2, 3 and 4 each as a “cold hard shell” and paid to complete the buildings at its own expense including all interior walls, ceilings and finishes.
The complex will be managed by Felton Property Management Services Limited, a subsidiary of Musson. Felton will be responsible for all day-to-day on-site property management, administration and accounting services.
The property is a designated Free Zone, accordingly, Stanley Motta is exempt from corporate income tax on the rental income of Free Zone property.
The Board expects to distribute approximately 90% as dividends subject change from time-to-time if circumstances dictate.
The Projected Valuation obtained from an independent appraiser, using the income capitalization approach, for Unit 4 at completion is US$21.3 million or approximately $2.63 billion using rates of exchange as at December 31, 2017 and $2.79 billion using the weighted average selling rate according to the Bank of Jamaica as of June 19.
The Company’s sole source of direct income is from the rental of units in the technology park. Its only other source of income is from dividends from Unity Capital, whose sole income is derived from the rental of office space in its building at 58 Half Way Tree Road. The lack of diversification means that the Company is particularly exposed to risks affecting the property market.
The Invitation is underwritten by the Underwriter up to a maximum of the equivalent of US$21 million.
The stock is not for all investors in the short term. Investors looking for relatively high return in US dollars with modest capital appreciation over time may find this an attractive offer. While most investors may view the income in US dollars as a big positive, they ought to be aware that continued devaluation of the local currency going forward is not guaranteed. Of note is that the rental income for a full year is likely to be in the order of US$2.5 million with most expenses picked up by tenants, it should net out around the same amount tax free. The yield on investment will translate to just under 7 percent. The property has room for some amount of expansion which is done could increase the revenues and profit. The new leases while priced at $12 per square foot is set to rise to $14 dollar at renewal in 5 years and should go higher on renewal thereafter.
With Jamaica, on target to lower the fiscal deficit to 60 percent of GDP and with government maintaining balanced fiscal operations inflation going forward is likely to remain low and should result in low interest rates, against this back drop ground, the income from this operation could see investors ultimately acquiring the stock as a good income play and then drive up the price over time.