START-UP investment company and soon- to-be-publicly-listed Exponential Holdings will make a bold play in the equity market.
The firm plans to invest the majority of the $500 million it hopes to raise on the Jamaica Stock Exchange (JSE) Junior Market in equity, but Exponential's managing director, Justin Nam, believes his company's strategy "will smooth that volatility that people are afraid of".
"Guided by fundamental analysis, we are looking for value," he told the Jamaica Observer. "When you identify stocks that are cheap and buy into them, you can make significant returns."
While the main focus of the business will be investing in stocks, with a good mix of bonds to balance the portfolio, Nam is especially excited about the prospects of private equity investments in local companies.
"Since people have become aware of what we are going to do, we have had couple of guys come in front of us," he said. "There are very exciting opportunities in the pipeline now."
"Family-owned businesses with the next generation showing no interest in taking them over create a lucrative niche.
"They say to us that we love the company, we are looking to retire in 5 to 10 years," said Nam. "We (Exponential) can buy into the company, partner along with the management team and give them (the owners) an opportunity to exit (sell) and pass on those gains to our shareholders."
The investment firm is projected to be profitable in the first year based on expected earnings from stocks and bonds.
Getting a return from private equity requires a longer period of time.
"For private equity, we would need a three-year minimum before we can exit," Nam said. But they could also opt to list those companies on the JSE.
"Mayberry (Investments) bought into Access (Financial Services) before anybody knew what Access was," he added. "It was about identifying value and facilitating growth by injecting capital that made access flourish."
Exponential, which should go to market in the third quarter of this year, aims to leverage the experience of its board members and managers as well as the corporate governance requirements of the JSE, rather than historical financial performance, to attract investors.
Nam has 10 years of financial sector experience in Jamaica and Trinidad and Tobago, while the company's board includes William Craig of Billy Craig Insurance Brokers Limited; David Davies, chief financial officer of Sandals; and Adam Epstein, chief operating officer of Sizzling Slots Limited.