Jul 2011 Financial News

Active trading in Proven shares expected - Williams

Jul 06, 2011

Proven Investments Limited (PIL) will list on the Jamaica Stock Exchange (JSE) at a share price equivalent to 12 per cent higher than the price it used for its private placement over a year ago. And even though the company is not issuing any new shares, investors who don't already have shares in the investment company should be able to get a stake in early trading as the company expects trading of its shares to be active when its stock hits the market just over a week from now.
"Some (shareholders) I know have already indicated to me that they wish to sell some of their shares, so I know that there will be some shares available on the market," said PIL CEO Christopher Williams at a broker briefing hosted by the company on Monday at the NCB Wellness Center in Kingston.

PIL is seeking to list by way of introduction some 300 million shares on the JSE on July 14 with NCB Capital Markets as lead brokers. The firm will list at book value, at a price of US$0.112.

The company -- a partnership among veteran bankers Peter Bunting, Mark Golding, Garfield Sinclair and Williams, along with businessman Chris Bicknell -- managed to raise US$20 million through a private placement in January 2010. The offer of 200 million shares priced at 10 US cents per share was snapped up by 150 private and institutional investors.

Mayberry Investment Limited executive financial advisor said there's no question that some investors who bought into the company will want to realise an early profit.

"If a man has 10 cents and a man offers him 15 cents and he needs some money, that's profit," said Jones.

"Yes, once its on the exchange I do believe there are persons who will be willing to offload some of it; maybe not the big principals, but I think persons who got in on the private placement would want to trade it," Jones said.

Introductory listings do not involve an initial public offer, which means Proven will not be raising new capital. NCB Capital Markets which has participated in several other Proven initiatives, including the firm's acquisition of Guardian Asset Management last year -- will manage the application process and streamline applications for the shares once they are listed.

Explainining why the company opted to list by introduction as opposed to raising capital, Williams said: "Our commitment is to not go for capital unless we have a deal to execute and we didn't have a deal... the deals that we are working on are not ready as yet, but we wanted to list... we wanted to be as efficient as possible on the return on equity for our capital."

Proven last month reported net profits of US$6.6 million for the 13-month ending March 31, 2011, its first year of operations. Consolidated net revenue for the period under review was US$11.9 million - net interest income was US$3.4 million or 29 per cent of total revenues while net fair value and realised gains registered US$3.07 million for the period, contributing 26 per cent to the total. At the end of the period, the company posted earnings per share of US$.005.

Against this background, Jones believes that PIL's stock offers a great value proposition for investors.

"I'm expecting it to do well," said Jones, "In terms of the published financials so far, they make good money and if you're making good money persons are going to take an interest."

But John Jackson, an active investor and publisher of Investors' Choice Magazine is not as bullish as Jones. He suggested that the stock may be over-priced.

"The only stock that is trading at 10 times earnings in recent time is Dolphin Cove, so there's hardly any likelihood that Proven ought to be selling at more than 10 times earnings -that would place the value at about US$16 million, which is about half the value of the company on the books," argued Jackson. "So anybody buying in excess of five cents per share would be paying an enormous price for it... I don't see it selling at much more than that."

Jackson added: "They may have pushed it up depending on what has been happening post their March results but certainly the figures for the last two quarters of the year, which includes their asset management company, doesn't suggest that earnings have actually accellerated... In the final analysis, if the bidders and the sellers have a wide standoff and they can hold out long enough, then they can hold out for their US$0.10 or US$0.11 per share... But I believe, in the final analysis, that earnings have to grow to justify that."

Meanwhile, at the broker briefing, Williams expressed confidence in PIL's performance going forward, with the company exploring opportunities in Cayman, Trinidad and Tobago, Barbados, St Lucia and Jamaica, among other countries in the region.

"Having spent 20 years in this industry, I really feel this investment company model gives us a lot of flexibility and within the context of the Caribbean, there aren't any investment companies of this sort, unlike in the states where they are a dime a dozen - Berkshire, KKRs etc," said the PIL CEO.

Additionally, Williams said there is a "strong possibility" that the company makes a rights issue before the end of 2011.

"We definitely have to hit a deal a year," said Williams in response to an investor who posed the question.

"It's going to be renounceable... so it will go to the shareholders first and they will renounce and then it goes to the other shareholders and then the general market," he explained.

Williams also stated that the company may explore listing in the Cayman Islands in the future.

"We think that there is huge demand for the shares in Cayman...Especially given that both Mr (John) Collins and Mr (Hugh) Hart have very strong ties there," he said.


Source:
By Julian Richardson Assistant business co-ordinator
richardsonj@jamaicaobserver.com
Jamaica Observer
Wednesday July 6, 2011

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