Brokers affirm Proven Investments APO as a buy

Brokers affirm Proven Investments APO as a buy

Observer business writer

Friday, January 15, 2021

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With several additional public offerings (APOs) and initial public offerings (IPOs) in the month of January, Proven Investments Limited (PIL) has garnered significant interest from the brokerage community which has recommended that investors accept, buy and participate in the APO.

The St Lucia-based investment holding company is conducting its second APO following the suspension and eventual closure from last March due to the COVID-19 pandemic's initial impact on the capital markets.

Despite the change in the environment and lower capital raise at US $30.3 million ($4.4 billion), VM Wealth Management, NCB Capital Markets Limited (NCBCM), Scotia Investments Limited (SIJL) and Barita Investments Limited have all given the thumbs up to the offer with fair values ranging from US$0.2903 to US $0.3077 ($42.06 to $43.08).

Proven's APO is priced from US $0.22 ($32.10) for key investors to US $0.23 ($33.50) which would represent upsides from as low as 30 per cent to a high of 40 per cent.

Although VM Wealth gave the PIL APO in March an underweight recommendation with a price target of US $0.23 ($31.74), the brokerage house has now given PIL an overweight recommendation with a new target of US $0.3077 ($43.08).

The analyst report pointed to the company's high dividend yield, strong management team and booming domestic real estate as highlights to support its recommendation.

PIL traded at a high of US $0.37 ($55) at the start of 2020 with a dividend yield at 5.37 per cent before COVID-19 arrived.

“We hold a positive outlook for Proven as it continues to expand its holdings in domestic, regional and international securities. We expect robust growth in Proven's subsidiaries and affiliates to be driven by sustained growth in the region.

Despite being heavily weighted in fixed income securities that are exposed to sluggish global economic growth and geopolitical uncertainties, the associated risks with this company are skewed to the upside as it stands to benefit from its robust pipeline and diversification strategies long-term. However, in the short term the company is likely to face headwinds from the economic impact of the spread of COVID-19 on its subsidiaries and associated companies,” stated the VM Wealth analyst report.

Barita's recommendation also saw PIL's net profit attributable to shareholders growing to US$11.98 million, which is based on PIL's successful deployment of capital into the proposed pipelines.

The report factored in PIL's upcoming acquisition of Massy Holdings' 50.5 per cent stake in Roberts Manufacturing Limited which is based in Barbados. The acquisition is valued at US$21.5 million while Roberts' asset base was last measured at TT$238 million ($5.04 billion). Revenue for the September 30 financial year fell by 8 per cent to TT $370 million while profit remained stable at TT $20 million. This would be PIL's third venture into the real estate sector after its exposure to Knutsford Express Limited and Dream Entertainment Limited.

SIJL report gave a fair value to the offer at US$0.27 ($38.56) with a 12-month target of $0.29 ($42.58) which is based on prevailing factors which can impact the company. However, the outlook for PIL remained positive based on the assumption of a full uptake of the APO.

“Whilst we are expecting continued headwinds in 2021 our expectation is for PROVEN to see improved performances over the medium to long term as the company continues to execute on its stated investment strategy to diversify its exposure and income streams as evidenced by the potential entrance into the manufacturing sector. We are recommending that investors participate in PIL's APO if it is aligned to their current strategy as our valuation implies that the offer is fairly valued. While we think the company's strategy may be subject to short-term volatility, based on the resurgence in confirmed cases globally, we believe the longer-term prospects are supported by a successful vaccination campaign,” the SIJL report offered.

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