IPO facts investors should know

“Hello my dear client, the day we have been waiting for to increase your wealth is here. The Mayberry Jamaican Equities IPO has finally arrived, the stock is a must have at this time. Attached are the Prospectus and Application Form for your attention. The official opening date is Monday, July 9, 2018, the demand is high so please don’t delay,” Kind regards, a MIL wealth adviser.
The above was a message sent out by one of Mayberry’s wealth advisor. A group of investors stated in 2017 that investors cannot go wrong with Junior Market IPOs, all that has to be done is just buy, buy, buy and the investor cannot fail to make money. Some investors in the last two IPOs, Sygnus Credit and Everything Fresh bought into the issues heavily, hoping to catch an early bounce and pocket the profit. That the initial bounce did not last, should be a lesson to speculators.

%8 Half Way Tree Road owned by Stanley Motta.

Laden with 6 main and Junior Market stocks, Mayberry Jamaican Equities is issuing 120,114,929 ordinary shares to the public, at a price of $7.57 each. Investors really ought to know what they are buying into when IPOs are being issued, rather than thinking that the price of each IPO can only go in one direction – up. As the stock market matures and more persons come to the party of stock ownership, the valuations that new IPOs come to the market at, will continue to rise and less immediate potential gains will be priced in. In some cases, investors will need to look long term for the payoff from their investment.
Everything Fresh, Sygnus Credit, Stanley Motta and Mayberry Jamaican Equities fall into this category. GWest was another company that many investors got carried away with, in pushing the price to $4 with many buying at inflated values, now the stock trades in the low $2 range. A reminder of an adage, that successful trading starts at buying at the right price. GWest business model is based mainly on generating most income and profits coming from operating mini hospital and other patient care. Real estate income going forward was going to be secondary and would not contribute much to profit. Profit made in the year before listing was mostly from sale of real estate and that was not something that would continue for any prolonged period. Without a track record in providing healthcare, investors who bought the stock in the high $3-4 level must have been hoping that the forecast in the prospectus was going to be achieved on a timely basis. The results to March show revenues well below forecast from the new operations. The company projected medical income to March this year, at $86 million but only generated $17.4 million and that puts the issue of generating the forecasted $710 million for fiscal year 2019, in doubt. Admittedly, the company had projected a loss to March of $110 million but came up sharply lower with a loss of $88 million.
Investors should recognize that not all IPOs are equal. They should also realize that there is a clear pattern that prices then to move up for strongly demanded issues and the undergo some correction. The data shows that the best time to buy after the IPO closes is on the first day or two or a few weeks after when demand falls off and supply increases as short term investors try to offload.
Data for listings in 2016 to 2018 show and average of 31 percent correction for Junior Market stocks from the highest point to the lowest, after listings which tends to occur within 4 weeks of listing. IPOS from Mayberry seem to have a lower pull back in price, around an average of 23 percent while most others, average around 33 percent. Three main market stocks pull back from their highest point, range from just 15 percent for Victoria Mutual Investments to 31 percent for Wisynco and 29 percent for Sygnus Credit Investments.
Based on how investors have gone about pricing IPOs at their peak it seems likely that Indies Pharma will peak around $2.40 based on projected earnings in 2018, of 16 cents per share. It could even go higher if the number of investors who apply for shares exceed those Junior Market listings IPOS from those going back to 2018.

Sygnus Credit profit exceeding projections

Sygnus Credit Investments (SCI) raised approximately US$16 million in capital from institutional and accredited high net worth investors following a private placement in May 2017 and began operating on July 1, 2017.
By the end of December last year, Investment Income amounting to US$500,568 was earned, with total Expenses amounting to US$106,858, resulting in Net Investment Income of US$393,710, which represents the Company’s core operating earnings, data from the company’s interim results show. Unrealized gain of US$290,650 due to the appreciation of the Jamaican dollar against the US dollar, on an investments in Portfolio Companies that are denominated in Jamaican currency. This unrealized gain may fluctuate depending on movement in the Jamaican currency versus the US currency. Net Income after Income taxes of US$3,893 amounted to US$680,467 representing 0.01 cent per share, based on a weighted average number of ordinary stock units of 64,503,985.
The Company recorded Other Comprehensive Income of US$310,475 reflecting fair value gains on its investment in Portfolio Companies resulting in Total Comprehensive Income of US$990,942 for the period.
The net results for the period does not include Management Fees to be charged from January 2018 along with Performance Fees. Management Fees are computed at 1.9% of assets under management. Performance fees are computed at 15% of the return on equity above a hurdle rate of 6%.
The company has US$11.6 million invested in four Portfolio Companies in Energy Distribution, Beverage Manufacturing, Commodity Distribution and Food Distribution. At the current pace of investment, SCI is sourcing and investing an average of US$1.9 million in transactions per month, which is a faster velocity than anticipated a report by the company states.
The investment in Portfolio Companies is earning income at a yield of 10.3 percent. US$6.5 million or 56.6 percent of the initial investment in Portfolio Companies is structured with profit participation and other upside structures. At the end of 2017, the overall investment pipeline stood at US$30 million, including US$7.9 million with signed mandates. The demand is likely to be funded by new shares to be sold to the public this year.
Shareholder’s equity grew to US$16,705,798 at the end of 2017. The Company issued 159,269,523 ordinary shares initially at a price of US$0.10 and J$12.86 per share and has a book value of US$0.1049 or J$13.04 per share.
Sygnus Credit Investments is a specialty private credit investment company, focused on providing non-traditional financing to medium-sized firms across the wider Caribbean region. The investment objective of the Company is to generate attractive risk adjusted returns with an emphasis on principal protection, by generating current income, and to a lesser extent capital appreciation, through investments primarily in medium-sized firms using private credit instruments.
The Company targets Companies operating across a broad range of sectors, including manufacturing, distribution, financial services, energy, real estate, transportation, infrastructure and business services. Target companies typically have revenues between US$5 million and US$25 million.
Chairman of the board is Clement Wainright Iton, B.Sc., MBA, Non-executive Directors are Nakita Edwards CFA, FCCA,CPA, Hope Fisher, B.Sc, Ian Williams B.Sc, MBA,Peter Thompson, CFA, MSc, Damian Chin, BA, MSc and Ike Johnson, PhD, CFA. Executive directors are Jason Morris CFA and Beresford Grey.

100th listing coming for JSE

The Jamaica Stock Exchange is set to continue to grow with an increase in listings continuing with more than 100 listings being achieved in 2018 for the very first time.
More trading activity is expected in the future as a result of new listings, and the impact of the fall in interest rates will have, on trading activities. The exchange now has 92 listings, with a few duplicated ones, in the main market and US dollar market will see and there could be four on the exchange suggest before the year ends with three of them regarded as definite. Brokers say they are working on 8 new ones for 2018 currently, Marlene Street Forrest, Managing Director of the Jamaica Stock Exchange advised IC Insider.com.
The three are expected to be GWest, a medical complex out of Montego Bay, that is expected to raise over $400 million, the company’s income will come from a combination of rent, from the major part of the complex and fees from operating a small short term medical facility. The complex currently has a number of blue chip clients as tenants. Wisynco Group is looking to raise for itself $1 billion but some of its current shareholders wanting to cash out. Information suggests that shares are to be offered to a wide array of persons including the 700 staff members as well as a large number of customers hence the shares from the IPO could be pretty scarce. FosRich Group of Companies. Caribbean Insurance Brokers that is being handled by Mayberry Investments, is the fourth possible 2017 listings. Mayberry Investments has been working on Neveast Supplies but this seems to be a 2018 listing.

GWest complex in Montego Bay, its IPO is expected soon.

Others that should see their ordinary shares listed on the Jamaica Stock Exchange include, Jamaica Plumbing and Supplies, the government’s owned Wighton Wind Farms, Jamaica Public Service Company, with the government wanting to dispose of its share in the power company, KIW International that has taken the decision to have the shares relisted, in preparation for this the company approved at its recently held annual general meeting, a 15 for 1 stock bonus to bring the issued ordinary share capital to just over $50 million. UCC Online, a segment of University College of the Caribbean was expected to have gone to the market this year but have been ironing out issues to facilitate the initial public offering, they could be ready in 2018 and Sygnus Capital Investments should list in the first quarter of 2018, probably by February, on the main market of the stock exchange. Sygnus is a relatively new company, established to undertake loans or make medium term investments in medium size businesses. The company which is registered in St Lucia will be managed by Sygnus Capital Management, a Cayman Island based corporation. The company raised US$15 million in capital and is aiming for another $5 million when they come to market, which could be as early as January next year. According to our source they have so far lent out US$11 million and generated a higher rate of return that originally expected. The company has a good stream of potential users of its funds.