There is a great deal of interest in the Sagicor Select Funds that is offering 2.5 billion shares for subscription by the general public at $1 per share and a slight discount for some selected applicants.
The company has the right to upsize the offer by an additional 1.5 billion shares. The offer opened July 3 with a closing date of July 17.
Financial Select Fund aims to give results before expenses, corresponding generally to the price and yield performance of the JSE Financial Index that seeks to mirror the financial sector companies on the Jamaica Stock Exchange. The list includes some that are not wholly financial, with NCB Financial dominating with 38 percent of the index at the beginning of March.
In order to track the performance of the Index, the Select Fund uses a replication strategy, with the Fund investing substantially all of the securities represented in the Index in approximately the same proportions as the Index. The Financial Select Fund will rebalance monthly, if necessary, to maintain the appropriate balance to track the index. On average, the Financial Select Fund will invest at least 95 percent of its total assets in the securities comprising the Index. The Index is developed and maintained by the Jamaica Stock Exchange and calculated based on market capitalization of the various companies making up the index.
The company estimates that “financial stocks will increase in price by an annual rate of 8 percent over the five-year period, with the net asset value of the total assets expected to rise to $7.2 billion in 2024. The performance of the securities held is expected to be favourably impacted by the growth in the financial sector and the consequent higher earnings for the companies whose stocks form part of the JSE Financial Index, on average,” the company stated in the prospectus.
Frankly, if that were the returns, investors would be better off investing in a number of the preference shares listed on the market that provide a rate of return that is equal or better without the same risk. Since the Financial Index started at the beginning of March this year, it has gained 22 percent as NCB Financial in the main, the largest portion of the Index and the fund, moved from $145 to last trade at $188, to be up 30 percent since the end of February.
Fortunately, with interest rates being low and continuing to fall, profits of companies will most likely rise, including financial sector ones and therefore drive the value of stock in the fund at a much higher rate than the unrealistic forecasted levels.
The positive with the fund is that if one is of the view that the sector will continue to grow at an attractive pace then it could be a good vehicle to hold without having to buy a basket of the stocks and having to manage them appropriately. The down side is that because it is not a managed fund, the value will rise and fall with the stocks in the portfolio. Additionally, the fund violates one of the carinal principle tenets of investing, that of having a balanced portfolio, so that no one investment is so large as to drag down the portfolio significantly. Investors do not need to go beyond the 1990s to see how devastating concentration of investment can be.
IC Indier.com considers the environment to be very conducive, to the fund do well going forward with a likely growth rate closer to 20 percent per annum for a few years than 8 percent, but investors should not factor in a premium to the net asset value of the fund anytime soon if at all.
Some investors just don’t want to be bothered with managing a portfolio but want direct exposure to the market and that is where a select fund is seen as useful. Each investor has to determine what it is that they want from an investment. Investors are unlikely to see the level of gains generated from the Wigton public offer from this issue in a matter of weeks, for example.
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.
