IPOs are back the Tropical issue

Just when investors thought COVID 19 had killed off IPOs for this year, suddenly pops up, Tropical Battery‘s long-promised initial public offer. The prospectus for the issue is now available to the public.
The issue for 325 million ordinary shares at $1 each of with up to 187.5 million units reserved for priority applications, opens September 22 and is scheduled for closing on September 30, subject to the right of the Company to close it earlier.
The Company intends to apply for the shares to be listed on the Junior Market of the Jamaica Stock Exchange, subject for at least $260 million being raised, by way of this invitation.
The total issued shares following the offer will be 1.3 billion units, with the parent company owning 75 percent. That will allow enough shares to be in the public hands to facilitate adequate liquidity in the stocks for some time.
The Company generated profit before tax of $87 million from revenues of $1.74 billion in 2019, a decent increase of 18.6 percent higher than in 2019 and a pretax profit of $45 million from revenues of $1.47 billion in the prior year, to September or 8.6 percent above the 2018 sales.
Gross operating revenue for the nine months to June this year increased nine percent to $1.36 billion from $1.25 billion in 2019, with profit before taxation falling from $67.6 million to $62 million.
Future growth, the Company says, “will come primarily from the addition of new product lines, i.e., Renewable Energy Batteries, Oils and Lubricants, Tyres, etc., organic growth of existing products, expansion and the renovation of our retail stores.”
The proceeds of IPO will be split equally between the selling shareholder and the Company, resulting in $162.5 million going to each, net of cost.
The Company plans to use the amount collected for expansion and working capital purposes, including but not limited to new product lines, expansion and renovation of retail stores, including an expansion of the parking area at the retail store at Grove Road in St Andrew. Completion of the buildout of and relocating to the new warehouse, head office and retail store at Ferry, Acquiring and install information technology systems for greater efficiency and improve customer experience and expansion of Mobile delivery fleet of vehicles.
Total shareholders’ equity at the end of June stands at $593 million, while our long term liabilities fell by to $315 million with the total interest-bearing debt of $415 million. The Company is owed $190 million by a related party and is interest-free, but payable on demand.
With earnings per share around 7.7 cents, the stock is priced around a PE ratio of 13 times 2020 earnings, leaving little or no room for short term gains.
NCB Capital Markets are the brokers for the offer. Unfortunately, for investors, there are no forecasted earnings included in the prospectus to help to guide them. This practice leaves a lot to be desired and it is fulltime, the authorities step up to the plate and ensure that all prospectuses include forecasted data for a least three years. That is not asking too much in the drive to build a developed capital market.

Trans Jamaican Highway IPO highly overvalued

After suffering a US$11.5 million loss in 2014, with more losses in 2015 and 2016, Trans Jamaican 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 cost associated with restructuring debt financing, pushed profit off the road.
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 share, s 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 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.

QWI Investments list on Monday

The latest initial public offering of shares QWI Investments was approved for listing on the main market the Jamaica Stock Exchange on Friday and will be listed on Monday.
The offer of shares was initially for 600 million units but was upsized to 900 million after the issue was oversubscribed. The issue saw more than 4,000 applicants applying for more than 1.6 million shares and pulled in just over $2 billion with more investors who never caught the IPO wanting shares.
As a result of the oversubscription, applicants from the General Public received the first 100,000 units plus 31.2188 percent of the excess applied for. NCB Capital Markets and Directors of QWI Investments get the full allotments. All other applicants got a portion of what they applied for with a minimum of 76,000 units for applicants in the Jamaican Teas and KIW International pool.

QWI Investments IPO oversubscribed

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NCB Capital Markets advised that the invitation for subscription of 600 million shares with an option to upsize to 900 million units by QWI Investments closed on Wednesday morning.
The share offer was by way of a prospectus dated September 9, 2019, in respect of ordinary shares at the price of $1.35 to the general public, with shares reserved at discounted prices of $1.20 and $1.25 for some investors. The issue attracted more than 4,134 applicants but more than 4,550 applications for an estimated $1.5 billion at an interim count stage with a number of persons who wanted to buy in not being able to do so. With the level of oversubscription, the company exercised the option to upsize the issue to 900 million to raise just under $1.3 billion.
QWI Investments is an investment company that will be added to the JSE Financial Index JSE sources say.
IC Insider.com is reliably informed, that there are two pending IPOS coming to the market soon. JMMB Group and the Lumber Shop both sought and got approval from shareholders to arise added capital and these could be the next two to come but Tropical Battery should not be far off. There could be two others before the year closes.

QWI IPO opens next week Monday

QWI Investments, a recent start-up investment company’s initial public offer of shares opens on Monday, September 16, with the sale of 600 million units.
The company has the option subject to the Financial Services Commission, to upsize the amount to 900 million shares if demands warrant it. Shares are being offered to the general public, at $1.35 each.
The amount expected to be raised is $787 million from the 600 million shares but could rise to just under $1.2 billion if the company upsize the issue to the maximum permissible.
The investment objectives of the Company is to invest primarily in securities of companies listed on the Jamaica Stock Exchange and on other recognised overseas stock exchanges with a medium to long term investment horizon to provide attractive risk-adjusted returns, with diversification across industries and regions. The portfolio will be actively managed on an ongoing basis guided by the investments team.
The company, currently a subsidiary of Jamaican Teas, really started operations towards the end of March when it acquired the quoted shares, from KIW international and Jamaican Teas amounting to $465 million. Since then it has grown the net assets by 52 percent to $705 million after accounting for operating expenses, well ahead of growth in the JSE composite Index over the same period. The performance equates to earnings per share in the period of 51 cents. At the end of July unaudited placed the net asset value at $1.52 per share.
Of the 600 million shares on offer, 270 million units are set aside for the general public. 115 million shares each are earmarked for NCB Insurance Company and NCB Capital Markets. Shareholders of Jamaican Teas and KIW International on record on 16 September 2019 can buy up 45 million shares at $1.25 each per share. Directors of the group and customers have 55 million units set aside at varying prices.
QWI had quoted shares amounting to $899 million at the end of July and current liabilities of $188 million. The closing date for the issue is set for 30 September but could be extended if market conditions demand it.
The QWI board is chaired John Jackson, John Mahfood, Cameron Burnet, all Chartered Accountants, Carl Carby, Management Accountant, David Stephens, Investor and business owner and Malcolm McDonald, Attorney at Law.
The shares are to be listed on the main market of the Jamaica Stock Exchange. NCB Capital Markets are the brokers to the issue and will be using their electronic portal to process all applications, which should allow for speedy processing of applications.
Persons involved in preparing this story, are connected to QWI investments.

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.

The Lab, coming to a broker near you

NCB Capital Markets is readying a number of new public share issues to come to market by the summer this year.
Numbered amongst them 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. “We are a strategic, creative, passionate solutions oriented and no nonsense group with a heavy emphasis on getting stuff done.” Kimala Bennett is the company’s Managing Director. Clients include National Commercial Bank, JPS, Wendy’s, Dominos, Supreme Ventures, Wray and Nephew, Grace Kennedy, Caribbean Broiler and Digicel. Persons in the know say this is one of those IPOs to plan for, it unique and profitable. QWI Investments is another that NCB Capital Markets is readying to take to the Jamaica Stock Exchange main market by early summer.

Kimala Bennett, Managing Director of The Lab.

Another that will be coming to market is Sagicor Select Funds Limited an Exchange Traded Fund. According to a note in the Sagicor Group audited financial statements, “It is the intention of the company to apply to the Board of the Jamaica Stock Exchange for admission of the shares to trading on the main market if subscriptions of at least $5 billion are raised.”
The above will come on top of the current public offer of Wigton Windfarm that opens next week to raise $5.5 billion, earmarked to be paid over to the government after expenses associated with the offer.

Up to $50m loan to buy Wigton shares

NCB Capital Markets will be providing investors up $50m in margin funding to assit with buying of Wigton’s shares in the IPO.

Investors in Wigton Windfarm initial public offer of shares will be able to access up $50 million in loan financing from NCB Capital Markets (NCBCM) to fund up to 50 percent of the purchase, NCBCM’s CEO Steven Gooden informed IC Insider.com.
The Wigton IPO, is generating lots of interest, amongst Jamaicans, residing locally and overseas and should pull in around $6 billion before expenses for the sellers, PetroJam. It will be one of the larger issues, to hit the Jamaican capital market.
In addition to providing margin funding to assist in purchasing the new IPO issue, NCBCM online portal, dubbed ‘GoIPO’ and created in conjunction with the Jamaica Central Securities Depository , will be available for their investors to use in making application for the shares. The application will allow investors with accounts at NCBCM, to easily fill out application forms as the system will automatically populate the form with the other information for persons with login access codes.
The GoIPO was born out of the major challenges that NCB encountered when they brokered the Wisynco IPO.
Investors with login codes can use them to access NCB system and access accounts that will fund the application. The system will be show the Wigton IPO application from which the appropriate application form is to be fill out. The required information will be the sum being invested. The system will compute the number of shares being applied for and the applicant will identify the account that the funds will come from.

Wigton IPO with propectus expected in a day or two.

Persons having no login code will have go online and fill in name, JSCD account number and TRN and enter the sum they are investing and method of payment as well as upload a photo ID to go with the application.
The new system will eliminate the need to visit a locations to deliver applications and significantly reduce errors associated with manual processing.
Of the GoIPO solution, platform is encrypted, providing security and confidentiality to users, who can access the digital portal once they have a JCSD number. Gooden said, too, that as selling agents of the IPO, NCBCM possesses the largest distribution channel within the broker space and clients who do not wish to apply digitally are encouraged to complete and return their forms to NCBCM locations islandwide.
NCBCM say that investors can apply through the NCB system to apply for shares to go into other brokerage accounts.

The stock exchange needs radical overhauling

The Jamaica Stock Exchange is thriving with many investors making good money from their investments in the stocks on the market and companies raising fresh capital as a result of the attractiveness of the capital market. But the growth in the market belies some deep concerns and failures in the system.
The reality is that the capital market is in a state that is far from healthy and those in authority are no moving to fix it. It is difficult to understand why.
An example is that some directors think they can override the Company’s Act and do things that they are not empowered to do. An example is that the directors of GWest Corporation in their wisdom decided that a resolution passed at a general meeting prior to going to the public was only to be partially disclosed to potential shareholders. The stock exchange sees nothing wrong with the lack of disclosure which amounts a variation in the terms of the contract. “So public” was the information, that not even the company’s auditors who reported on the financial statements, months after the public issue, included the information of the resolution that was to give rise to the issue of preference shares, in the audited accounts.
In October, just under 92 million Seprod shares were offered to the public for purchase. Some of the shares were reserved for then existing shareholders of Seprod. Subsequent to the closure of the issue, NCB Capital Markets, the brokers that handled the issue announced that all applications for Reserve Shares in the offer were fully allocated. Several shareholders of Seprod found that they did not get their full allocation and contacted NCB, it was then that they seem to have discovered errors made at the stock exchange.
On November 8, NCB Capital Markets “advises and due to the large number of subscribers for the Offer, the process is taking longer than anticipated.” NCB Capital Markets advised that it is in the process of reconciling the applications and verifying payments received and has requested approval to provide the Basis of Allotment on Monday, November 12, 2018. The broker advised the Stock Exchange on the date promised, that in addition to the full allocation of reserve shares, subscribers from the general public will receive up to the first 5,000 units for which they applied, with the balance greater than 5,000 units allocated approximately 16.56 percent. Subsequent to the allocation

The Jamaica Stock Exchnage subsidiary

announcement, IC Insider.com gathers that investors from the general public who attempted to sell their shares after being allocated, had the Seprod shares in their accounts blocked, so they could not be traded. No one thought it prudent to advise them that the shares were blocked. This publication is seeing an increasing practice where persons in control take unilateral action to alter contractual arrangements. Someone or entity made a big mistake in not computing the allocation correctly in the first place. Information IC Insider.com has, clearly points to the error being made by the Stock Exchange subsidiary. Having done the allocation and credited investors, accounts and refunded excess funds, the Stock Exchange in the view of this publication has no authority to vary a concluded contract. Investors on November 26, were informed that the public got the first 5,000 shares and 16.25 percent of the excess. The letter from the Jamaica Central Securities Depository stated that “ we advise that initially, allocations had been calculated and posted to accounts, however, we detected a glitch in processing that resulted in shares of some clients being incorrectly allocated. Steps were taken to make the necessary adjustments that also included a change in the pro-rated percentage initially published from 15.56 percent to 16.25 percent. When an organization with the prestige of the Jamaica Stock Exchange fowls up matters, one expects that they would handle the matter in a professional manner and absorb the cost, and not opening themselves up to potential law suits.
The Stock Exchange has done the same illegal thing by blocking investors account from trading, as usual the Stock Exchange did not a have the decency to communicate with the investors about that matter. The sad thing is that they wanted the TRN numbers, but the reason they want it is spurious at best. It was just needed to try and clarify that more than one account that seem to belong to one person actually is so. But there is nothing in law that requires them to make such demands and worse the investors have no agreement with the JSE to provide such information as a condition of opening an account. Sadly, the JSE don’t need TRN to sort out limited liability companies, as the Company Office of Jamaica gives each company a unique number that can be used for that purpose. That the Stock Exchange is acting in questionable manner should not be surprising as one or maybe more of their dealer members, have wantonly breached agreements that they have with clients, refusing to comply with the contractual terms.
The Jamaica Stock Exchange release relating to an article IC Insider.com published in connection with the Seprod share allocation states:  “The JSE wishes to advise the public that the article published on ICInsider.com on Friday, November 23, 2018 entitled”, “Seprod stock allocation fowl up to cost JSE” incorrectly stated that the JSE was expected to absorb a loss in respect of the recent allocation of Seprod shares.
“The JSE advises that the JSE Group (The Jamaica Stock Exchange and its subsidiary, the Jamaica Central Securities Depository (JCSD) did not suffer any loss in relation to the foregoing.
“There was a delay in the final allotment of the Shares, but this was not due to any malfunction of our systems. We further advise that the allotment of the Shares was successfully completed, as communicated by the JCSD to the relevant investors.
“We wish to underscore that we continue to work tirelessly to maintain the confidence of participants in the market as we deliver our services to our valued customers,” states JSE.
The Stock Exchange may be “trying to work tirelessly to maintain the confidence of participants in the market,” but there are a plenty that they need to speedily do to convince the public that they are seriously tackling the many issues that require sorting out to enhance its reputation. The problems and inadequacies of the present trading platform is just one of them that has lasted far to long. Then there are errors in the trading report. Currently, delisted securities are still showing up in the reports and Eppley 7.5% preference shares for example that has been recently listed is being reported in the ordinary share section rather than in the preference share section where it belongs.
On November 1, the trading report shows the All Jamaica Composite Index of the main market closing at 396,907.46 but the report for the 2nd of November the Index was said to have closed at 387,739.58 with a rise of 832.12 but that was not possible. On the 5th of November the index was said to fall by 5,472.20 to close at 392,267.38. To date the erroneous information is still on the Stock Exchange website.

The Stock Exchange in its wisdom continues with the circuit breaker that serves no useful purpose. Not only does it have no useful purpose it is making a mockery of the exchange but they seem to have their heads in the sad oblivious as to what is going on around them. Take an example Barita Investments traded at $60 recently but the trade was cancelled as it breached the circuit breaker rules daily limitation, yet it is still being carried as the 52 weeks’ high price. That of course makes no sense, but this is just one of similar errors showing up all over. The stupidity of the circuit breaker is that stocks are frozen for an hour and if a stock breaches the level at a minute after 12 in a day it cannot trade again for the balance of the day. If there is need for it why not have the breaks for 15 or 20 minutes so that trading can take place fairly freely. After all the Stock Exchange still has the power to halt trading in a stock or the market if they consider it prudent to do so. The reality is that the Stock Exchange is not handling what they now have to mange and they want to go into new trading areas that is not really in demand.

Seprod shares attract nearly 4,000 applicants

Seprod shares sold at $24 each.

Many investors who applied for Seprod’s shares that were sold publicly in October will end up getting a relatively small allocation with nearly 4,000 applications chasing the 91.9 million Seprod shares that were offered for sale in October.
According to the release “Facey Group Offer of Seprod Ordinary Shares based on the broker’s preliminary numbers, the indication is that they received 3,799 applications.
NCB Capital Markets advises and due to the large number of subscribers for the Offer, the process is taking longer than anticipated.” NCB Capital Markets advised that it is in the process of reconciling the applications and verifying payments received and has requested approval to provide the Basis of Allotment on Monday, November 12, 2018.
Based on the number of applications, the average allocation would be around 24,000 shares each but with NCBCM allocated 10 million units the average falls to 21,000 units however 45 million units were set aside for exiting Seprod’s shareholders, staff, current and past directors.
The shares that were offered for sale at $24 traded on the Jamaica Stock Exchange today at $39 each.