Jamaican Teas board approves another stock split

Jamaican Teas board approves another stock split

Observer business writer

Wednesday, January 22, 2020

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The board of manufacturing and real estate company Jamaican Teas has approved a three-to-one stock split.

The stock split is being executed to make the shares more liquid and allow them to trade more freely. The board, at its meeting last week, approved two resolutions for the stock split and an increase in the company's share capital.

The three-to-one stock split will now go to the shareholders for approval some time in March or April, when the company convenes its annual general meeting. If approved, this will be the third split by the company.

The proposal to have another stock split was advanced to the board of Jamaican Teas, by businessman and financial analyst John Jackson who became concerned that the company's stock seems to have hit a wall of inactivity and market indifference.

Jackson expressed the view that there seems to be market resistance whenever the stock hits the $6 to $7 margin. Since April 2018, Jamaican Teas' share price has meandered between $4 and $6, going close to the $7 barrier only twice last year, on August 5 and September 9.

At the close of trading on Monday, Jamaican Teas lost $0.17 to end the day at $6.75. The two resolutions approved by the board at its meeting last week are as follows:

Resolution to increase

(1) That the existing authorised 1,000,000,000 ordinary shares in the capital of the company be increased to unlimited ordinary shares with no maximum.

Resolution for split

(2) That each of the issued ordinary shares in the capital of the company be subdivided into three ordinary shares with effect from the close of business on 1 April 2020, resulting in the total issued shares in the capital of the company being increased from 695,083,459 ordinary shares of no par value to 2,085,250,377 ordinary shares of no par value.”

In April 2017 Jamaican Teas shareholders approved a two-to-one split of the stock. This followed another split in 2016 after which the price climbed close to $8 per share. However, in recent times, trading in Jamaican Teas stocks have been weak and infrequent, prompting the board to rush into action.

At year end September 2019 Jamaican Teas doubled profit, despite spinning off its investment arm and listing a new company, QWI Investments. Jamaican Teas owns 34 per cent shareholding in that company.

In October 2019 the company also purchased 50 per cent of Bay City Foods, located in Montego Bay, making it a wholly owned subsidiary of the group. At year end September, net profit attributable to Jamaican Teas for the year increased by $201.2 million, from $198.5 million to $399.7 million.

This resulted in earnings per share from continuing operations of 57.8 cents (2017/8 – 29.0 cents). Company directors, in remarks attached to the fourth-quarter report, said investment properties produced $72.3 million in gains in 2019 compared with $24.8 million in 2017-18.

However, the main tea business suffered a temporary setback in sales in the USA market due to a main distributor there rightsizing its inventories.

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