The Jamaica Stock Exchange Junior Market sprang into action in early trading on Thursday, with the market index surging 114.24 points within 15 minutes of the opening to reach 3,616.99 points just 46 points from the all-time high of 3,662.94 at the close on August 14, 2019.
With 40 minutes of trading, the Junior Market index slipped back to 3,574.73 with newly listed Spur Tree trading at $2.57 and the JSE Main Market was marking time with the All Jamaican Composite Index at 436,547.28, up marginally from the 435,448.73 at the close on Wednesday.
The sharp move today is in conformity with ICInsider.com’s forecast that the Junior Market was in a highly bullish technical stance to break higher sooner than later on the way to more than 4,000 points.
Junior Market index jumps 114 points
Spur Tree Spices lists on Friday on the JSE
Shares of Spur Tree Spices will list on Friday on the Junior Market of the Jamaica Stock Exchange following the successful Initial Public Offering said to have attracted applications from more than 5,000 investors and raised $335.4 million before expenses for the company.
The company indicated that the issue attracted $1.3 billion and was 6 times oversubscribed. Proceeds will be used to pay listing expenses, with the remainder to be used for the repayment of debts of $170 million and to facilitate business expansion.
The listing, the second such listing on the Junior Market since the start of 2021 will bring the total stocks on the exchange to 42. A few others are expected to follow in short order as new offerings are made to the public early in 2022.
Earnings per share for Spur Tree should end the year at 11.5 cents before taxation at a PE of 8.7 times earnings, below the market average of 14.4 currently, with a high degree of oversubscription, the PE ratio will jump on Friday and into next week. IC Insider.com projects 18.5 cents earning for 2022 from a profit of $300 million at a PE of 5.4 times 2022 profit.
12% allotment for Spur Tree shares
The staff at Spur Tree Spices lost a golden opportunity to make money from the company they worked for leaving a portion of the 10 million shares on the table for others to take up at a very low price that will likely double in rice sooner than later.
GK Capital Management released to the public the basis of allotment of the successful Spur Tree Spices Initial Public Offer of 335.4 million shares on Thursday.
Applicants in the staff key partner reserve pools will receive 100 percent of their application with the balance of the shares in these pools that were not applied for will become available for the General Public Pool Applicants, who will receive up to the first 10,000 shares plus a pro-rata allocation of approximately 11.76 percent of the excess shares for which they applied.
The prospectus indicated that allocation and refunds will take place within ten days of closing and trading in the shares no more than five business days after the Jamaica Stock Exchange approves the admission of shares to the Junior Market.
“It is the intention of the Company to apply to the JSE for admission of the Ordinary Shares to the Junior Market and to make such application immediately following the closing of the Invitation,” the prospectus stated.
15% likely allocation for Spur Tree shares
The last initial public of shares in Jamaica for 2021 went off with a bang and preliminary data show that the issue attracted $1.3 billion for the Spur Tree Spices Jamaica’s offer of 335,391,848 ordinary shares at $1 each, with 180 million units offered to the general public it means that the average take will be just over 15 percent.
With 155 million reserved shares fully taken up, the 180 million units available to the public was oversubscribed by more than five and a half times, which would result in each applicant getting around 15 percent of what they applied for based on a proportional level of allocation of the shares offered to the general public. The Company reserves the right to allot shares to applicants on a basis to be determined by it in its sole discretion, including on a pro-rata basis.
Proceeds will be used to pay listing expenses, with the remainder to be used for the repayment of debts of $170 million and to facilitate business expansion.
Revenue in 2020, grew 22 percent over the prior year to $701 million and at a compounded annual growth rate of 25 percent from $290 million in 2016.
Profit before tax in 2020 rose 52 percent to $82 million, from $54 million in the prior year. Results to September 2021 show a profit of $116 million from revenues of $834 million suggesting that the full year should see a pretax profit of $155 million. Gross cash flow amounts to $115 million for 2020 up from $57 in 2019.
The company recently completed the purchase of Exotic Products Jamaica that processes and cans ackees. “Ackee is a highly demanded strategic product in our export markets and the Company plans to rationalize the operations of this newly acquired entity to double production over the next two years. This, combined with our plans to expand and grow the current Spur Tree product range, while expanding current markets both locally and overseas and accessing new markets should significantly improve our sales and profit performance in the coming years”, the company stated.
Total equity capital will rise to around $600 million from $275 million at the end so September. Current assets amounted to $357 million and current liabilities at $221 million and cash on hand of $56 million.
Earnings per share should end the year at 11.5 cents before taxation and puts the PE at an attractive 8.7 times earnings and below the market average of 14.4 currently. IC Insider.com projects 18.5 cents earning for 2022 from a profit of $300 million at a PE of 5.4 times 2022 profit, on this basis, investors who wanted more shares in the public offer could reasonably buy the stock up to the $2 level, with the expectation of a bright future for the company.
