Sterling Investments Limited, (“SIL”) a St. Lucia registered investment company, is slated to be listed on the Jamaica Stock Exchange, on October 13. No shares will be offered to the public, but may be purchased after they are listed.
In 2013, the company generated income of $70 million and comprehensive profit of $56.7 million, including $11 million from unrealised gain on investments. For the six months to June this year, income amounted to $25.7 million plus gain on sale of investments of $2.8 million and $25 million in Forex gains resulting in profit of $34 million, for the half year. SIL generates interest income from securities owned and capital gains realized from increases in the price of the securities.
The company began operation in December 2012 and enjoyed growth in in total assets, to reach $492 million at the end of 2013, and net assets of $440 million, with a loan of $31.5 million. At the end of June this year, total assets climbed to $737 million, with net assets of $554 million and loans of $171 million. “Over 92 percent of SIL’s assets are invested in US dollar fixed income assets, comprising, Non-Investment Grade Corporate bonds 37 percent, Investment Grade Corporate bonds 29 percent, Municipal Bonds 26 percent and Private Equity 8 percent” the company reported at an investment forum used to introduce the proposed listing.
“Over the last 18-months, SIL’s net book value per share has grown by 38 percent after fees and distributions. This rate of return has been influenced by favourable movement in bond prices over the review period and movement in the Jamaican dollar. The average coupon rate on the securities in SIL’s portfolio in June 2014 was 8.34 percent per annum, while the average yield to maturity was 8.36 percent per annum,” management said. The company, however, uses leveraging which can boost the net income per share above the actual interest income, if all goes well. The total number of issued ordinary shares is 4,014,547 units giving a net asset value of $138 per share at the end of June.
“For the year 2013 a total of J$7.9 million was paid in dividends or J$2.96 per share for a dividend yield of approximately 3 percent, the Company pays dividends twice yearly,” Sterling said.
The directors of the company are, Derek Jones (Chairman), lawyer and former partner of Myers Fletcher, Michael Bernard, former CEO of Carreras, Maxim Rochester, former PriceWaterhouse partner and Charles Ross, CEO of Sterling.
The number of shares are very limited, and should result in a stock that is illiquid. With the return of stability to the local currency and the level of buoyancy now seen in the daily flows, at a time when inflows tend to be inadequate to meet supply, suggest that earnings going forward will not benefit much from local exchange rate slippage, on this basis earnings per share should normalise to around $45-50 million per annum, around $13 per share, not making for an attractive buy, unless one expects major movement in the local exchange rate, going forward.