Analyst Insights
Following on the heels of Barita’s successful historic APO in the summer, the local capital markets is closing out the Christmas season and year in earnest, with at least three publicly known significant equity raises announced. Derrimon Trading Limited (DTL) and Sygnus Credit Investments Limited (SCI) are doing APOs, while Keys Insurance has announced its intention to do a renounceable rights issue. When we overlay these market activities with a slightly improving macroeconomic backdrop, we could conclude that cautious optimism is returning among local investors. This week we will give a brief overview of what ‘Christmas Treats’ the market has to offer before 2020 ends.
Sygnus Credit Investments Limited
SCI is a speciality private credit investment company dedicated to providing non-traditional financing to medium-sized firms across the wider Caribbean region. SCI’s investment objective 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 Portfolio Companies using private credit instruments. They are currently seeking to raise US$22 million (J$3.3 billion) with the potential to upsize. The funds will go towards reducing their debt and also funding a US$40 million pipeline for which they’ve received board approval to execute on. In the current macroeconomic environment, which has been impacted by COVID-19, services of Sygnus is in high demand to provide flexible financing solutions to middle-market firms for which traditional forms of financing would find too high a risk. This offer gives investors a chance to invest in a growing company that operates in a niche market with low levels of competition and high upside potential. The shares are being offered to the general public for US$.1400 and J$16.30, while existing shareholders get a discount at US$.1270 and J$14.70. Only 196,372,431 shares are up for grabs with 90% being reserved and 10% available to the general public
Derrimon Trading Limited
Since its inception in 1988, Derrimon Trading Limited (DTL) has been a distributor of consumer goods to the Jamaican market. Today, the company has grown to become a conglomerate with its primary business lines in Distribution, Retail and Wholesale and Other operation. The Derrimon Group includes the operations of Sampars, Woodcats, Caribbean Flavours and Fragrance, while distributing for international products. The company is seeking to raise J$3.5 billion which will be geared towards i) reducing debt, ii) funding vertically integrated acquisitions in the U.S., iii) expansion of local operations and iv) for working capital support. Among the many strengths Derrimon has, its ability to utilize debt to grow inorganically and to make those acquisitions accretive to the bottom-line is distinctive. Consequently, that feeds into their ability to create shareholder value inline with and ahead of some of its main market peers, by the measure of return on equity (ROE). This APO is slated to give DTL the footing it needs to essentially become a larger version of itself, while also allowing for a wider shareholder base by making additional shares available to a wider cross-section of investors (such as institutional investors), given the already low shares float. The shares are being offered at J$2.40 to the general public with J$2.20 being the discounted price for existing shareholders. Just about 1,498,698,931 additional shares are up for grabs
The aforementioned capital raises come at the end of a year that was filled with turbulences due to COVID-19. With domestic investor confidence indeed weakening in the market and market trading activity materially trailing that of last year. These opportunities will remind investors that the JSE is still filled with great potential for companies to raise capital, while providing an adequate avenue for investors to generate risk-adjusted returns in the low-interest rate environment. Other opportunities abound outside of the aforementioned capital raises and with a positive outlook for 2021 due to the ongoing distribution of vaccines, investing sooner rather than later is always better. Get talking to your Barita investment advisors about how to position yourselves heading into 2021 and potentially participating in these early Christmas gifts of an opportunity!
 |
Written by Haughton Richards, FRM, FMVA, Senior Research Analyst |
Conclusions
SCI shares are being offered to the general public for...
SCI shares are being offered to the general public for US$.1400 and J$16.30, while existing shareholders get a discount at US$.1270 and J$14.70. Only 196,372,431 shares are up for grabs with 90% being reserved and 10% available to the general public.
This offer gives investors a chance to invest in a...
This offer gives investors a chance to invest in a growing company that operates in a niche market with low levels of competition and high upside potential.
The shares are being offered at J$2.40 to the general public...
The shares are being offered at J$2.40 to the general public with J$2.20 being the discounted price for existing shareholders. Just about 1,498,698,931 additional shares are up for grabs.
The company is seeking to raise J$3.5 billion which...
• The company is seeking to raise J$3.5 billion which will be geared towards i) reducing debt, ii) funding vertically integrated acquisitions in the U.S., iii) expansion of local operations and iv) for working capital support. Among the many strengths Derrimon has, its ability to utilize debt to grow inorganically and to make those acquisitions accretive to the bottom-line is distinctive.
Full Newsletter & Report
