tTech IPO JCSD fee breaches prospectus terms
The imposition of JCSD processing fee is not only untidy, it is in breach of the terms of the prospectus and must be returned to those investors who paid it. There are no references to JCSD processing fee in the prospectus and under the heading of Statutory and General Information items 6 of the prospectus states, “All Applicants (including Reserved Share Applicants) will be required to pay in full the Subscription Price of $2.50 per Share, subject to discounts, where applicable. No further sum will be payable on allotment”. Most junior market IPOs, are highly anticipated, with several issues closing shortly after opening, leading most investors to apply for shares ahead of the opening day and so ensure that their application are on a timely basis. On Tuesday ahead of the opening of the tTech issue, a statement appeared on the website of the Jamaica Stock Exchange, to indicate that the “application form found in Appendix 1 of IPO Prospectus did not include any mention of the JCSD processing fee of J$134.00 (inclusive of GCT) that each application would be subject to. As such, the application form has been updated to include such commentary”.
Most persons would not have been aware of the charge and so put in their applications without it while some included it, having seen the change. This places some applicants at a disadvantage small though it may be. Some investors are shocked that, the company and the broker did not absorb the charge for the cess and that the Financial Services Commission and the Jamaica Stock Exchange have permitted the late imposition of it. The charging of the JCSD processing fee inclusive of GCT is an irritant for investors and there are few solid reasons why companies are not treating the cess as a part of the cost of listing rather than asking investors to pay for it directly.
tTech is BUY RATED for strong growth
tTech is going to the capital market this month to raise approximately $50 million by the issuing for subscription 25,652,000 shares to the general public and special interest group with the general public being asked to pay $2.50 each for 16.4 million being made available to them.
IC Insider assessed the company’s record and forecast increased earnings for 2016 and 2016 and accorded it the BUY RATED honour.
Edward Alexander, Chief Executive Officer, in an interview with IC Insider stated that the staff of the company indicates that they will all be taking up their full allotment, if so there will be few of these shares available for the public to acquire at the IPO stage.
The Company was incorporated in Jamaica on December 1st, 2006, and is a managed information technology (“IT”) service provider, or what industry insiders refer to as a “Managed Services Provider”. That is, for the most part, the Company’s main service offering is the management of other businesses’ IT infrastructure remotely and on a pre-paid basis.
The company is growing at an attractive rate with revenues that are up 28 percent for the half year to June to $81.4 million versus expenses increasing 18 percent and only 14 percent when technical fees, services and products that are part of direct expenses are excluded.
IC Insiders’ forecast, based on continuation of good revenue growth, is for profit before tax for 2015 to end at $36 million or 45 cents per share and $27 million or 35 cents per share after tax and $64 million or 60 cents per share for 2016. This gives it a PE based on 2015 earnings before tax of 5.5 and for 2016 of 4 and compares with junior market stocks with PE of 8, with half of the market selling above the average, suggesting that the stock should enjoy a nice bounce over the next twelve months or less. The company has $51 million in cash and no borrowed funds with current liability of just $27 million, so why do they need to raise the funds? “Expansion into security services will require added equipment, software working capital for continued expansion” Alexander stated, in addition listing allows the staff to be part owners and benefit from future growth.
There are a number of positives for the company it is in a good growth industry with potential for regional expansion, the Grace Kennedy contract and relationship could provide them the experience to take on other large regional conglomerates. They are a service-based business with high gross profit margin which is a big positive and if growth continues at current levels would contribute to a big increase in profit. A lot of the business is recurring, providing stability to the operation. The founders’ vested interest will remain strong as they will still hold relatively large percentage of the company after the IPO.
Only about 15% shares being offered to the general public the stock almost guaranteeing that it will be in relatively short supply which could drive price up quickly after listing, this is especially so being the first tech company on the JSE.
Subscription opens at 9 am on December 16th, 2015 and closes at 4:30 p.m. on the December 18th, 2015, subject to the right of the Company to shorten or extend the time for closing. All completed Application Forms must be delivered to NCB Capital Markets.
NCB insiders buy up shares
National Commercial Bank (NCB) advised the Jamaica Stock Exchange that a party connected to three directors purchased 552,790 of the group’s shares on May 7, another amount of 77,886 shares on May 8 and 843,924 on May 11.
NCB posted improved results in its latest quarterly report which shows a 7 percent increase in profits to $3.27 million over the similar quarter in 2014 and profits of $5.4 million for the six months to March. The stock which closed at a 4 1/2 year high of $31.10 on Wednesday, has gained 82 percent since bottoming out last year summer, at $17.
The purchases come amidst reports that NCB is slated to pick up a large block of Guardian Holdings shares. Insiders may not have stopped buying as NCB Capital Markets still a bid for an undisclosed amount at $30.
JSE off to tamer start than Friday
Trading on the Jamaica Stock Exchange stared off the week on a calmer note, than it did last Friday but there have been a few sizable trades so far.
The larger trades in the first hour of trading are, Caribbean Cement with 300,000 changing hands at $4.08, Grace Kennedy 215,470 shares at $64, National Commercial Bank 3,512,412 shares at $30 and Scotia Group first traded 690,287 shares at $25 and then added more at $24.50 and a 1,390 units traded at $25, to bring the total to 714,543 units. The bulk of the National Commercial Bank shares were crosses done by NCB Capital Markets and that of Scotia Group were crosses done by Scotia Investments as well as purchased from other brokers. Thirteen stocks have traded so far amounting to 4.99 million units with four coming from the junior market.
Main Market| The JSE Market Index gained 712.88 points to 95,376.21, the JSE All Jamaican Composite index jumped 797.02 points to close at 105,353.33, just below the level reached on November 11, 2011 and the JSE combined index leaped 679.81 points to close at 97,253.14.
$450m rights issue for Sterling
Sterling Investments Limited is setting to raise around J$450 million by way of a renounceable rights issue by April this year. The opening date of the issue will be March 18, with closure set for April 8.
Before the issue, the directors are planning to get approval for a stock split which IC Insider understands is likely to be 10 new shares for each one now existing. This means that the right issue price should be under $13.40, the price that the stock has traded at recently, assuming the split takes effect at the above ratio.
The company has called an extraordinary general meeting of shareholders for February 21, 2015 in St. Lucia to consider increasing the share capital, approving the stock split, authorizing the Directors to implement a Rights Issue and to carry out all steps and documents needed to give effect to the stock split and to implement the Right Issue.
Sterling is primarily involved in investing funds in mostly debt capital denominated in foreign currencies. At September last year, profit from operations totalled $48.36 million or 16 cents per share and total comprehensive income ended at $62.8 million. For the September quarter, profit amounted of $9.9 million down from $12.57 million in 2013 with negative total comprehensive income of $2.3 million. At end the end of the period equity capital amounted $544 million. NCB Capital Markets are the brokers to the rights issue.
The Directors intend to consider the payment of a final dividend at the Directors meeting that is scheduled on February 21, 2015. The company paid a dividend of J$1.35 in June last year.
C&W trades 1m units at 54c
Cable & Wireless traded 1 million units at 54 cents as Scotia Investments sold the stock which was bought by NCB Capital Markets.
The trade leaves 275,995 units on the bid at 54 cents, just below are bids for 600,000 sahres at 50 cents, 1,064,000, 27,360, 300,000 and 2,975,000 units at 47 cents. the closest offer is 500,000 units at 60 cents.
The stock has gained 93 percent since it last traded on Wednesday last week at 28 cents, after Cable & Wireless Plc announced the acquisition of Columbus Communications and that the local company added 125,000 cell customers between April and September.