Nightclub group to go to town on IPO

BY JULIAN RICHARDSON Assistant business co-ordinator

Wednesday, October 03, 2012    

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KINGSTON Live Entertainment (KLE) Group expects to open a new nightclub in Portmore, St Catherine and a boutique resort in Oracabessa, St Mary.

KLE, operators of the Fiction Lounge and Usain Bolt's Tracks & Records restaurant in Kingston, said the projects will be partly financed from the proceeds of its initial public offering (IPO) for up to 27 per cent of its shares, opening next Tuesday. The company aims to raise $94.6 million through the IPO and subsequent listing on the Jamaica Stock Exchange (JSE) Junior Market.

Gary Matalon, CEO of KLE, said earlier this week that listing on the junior market will better position the company towards becoming a powerful entertainment group.

"The JSE Junior Market offers us a great opportunity to raise the capital needed to execute our development strategy. We recognised early on that financing would be key in us achieving our goals. A successful IPO puts us one step closer to our objectives," he said.

KLE has set a share price of $3.70 for the IPO. Of the 27,000,000 shares on offer, the company has reserved 13,421,377 for priority applicants, including employees and Bolt's company Sherwood Holdings Limited, that will get a discounted price of $2.77 a share.

The subscription list opens at 9 am on October 9 and closes at 4:30 pm on October 16, subject to the right of the company to shorten or extend the time for closing.

Donovan Perkins, CEO of lead broker Pan Caribbean Financial Services, is optimistic that investors will find the offer to be a great value proposition. He said the timing was right for KLE to list.

"We have a unique investment opportunity that investors will find attractive," said Perkins. "The company is growing, has opportunities to capitalise on and needs cash to take advantage of them. KLE could borrow, but an over-reliance on debt is not prudent."

KLE has enjoyed steady growth since inception four years ago as a lifestyle and entertainment company. According to a prospectus released yesterday by the company, Fiction attracts 2,000 patrons weekly and earned pre-tax profits of $16.3 million in 2011 on revenues of $124.8 million — both three per cent higher than year-earlier levels.

Usain Bolt's Tracks & Records, which opened in the first quarter of 2011, reported revenues of $14.6 million. In addition to food and beverage offerings, the restaurant earns through hosting corporate and entertainment events and the sale of 'Usain Bolt' and 'Brand Jamaica' items.

KLE expects to open its new 6500 square-foot nightclub in Portmore during the fourth quarter of 2012. The new club, branded "Famous", will feature large premium bars, multiple VIP sections, a stage for live entertainment, a Coliseum-style setting surrounding the dance floor and audio-visual technology, the prospectus said.

With the Famous nightclub, KLE plans to meet demand for premium entertainment in St Catherine. Arguably, the parish has not had a premier nightclub since the popular Cactus closed in the 1990s.

Perkins said in an industry largely dependent on discretionary income, there are solid reasons to bet on Famous replicating the success that Fiction has had in Kingston, despite the weak domestic economic climate.

"Portmore has the largest concentration of university graduates in the entire Caribbean living in that community. They are skilled, employed and entrepreneurs working professionally or running their own businesses, and many own their own homes," he said.

"Famous in Portmore is an opportunity to leverage the infrastructure and business skills that has made Fiction the number one nightclub in Kingston, and probably Jamaica," added Perkins, who noted that funding and sponsorships for the new nightclub is "largely completed".

KLE said it will partner with a leading insurance company to open a US$7.6-million boutique resort on eight acres of land in Oracabessa. To be branded "Bessa", the development will feature a river running through the property, 12 river front villas, eight private beach villas, 12 swim-up suites, 12 ocean view suites, 10 top-side river condominiums, four floating suites in the Caribbean sea and other amenities.

Equity financing will be approximately US$2.2 million, with KLE contributing 25 per cent or US$550,000 of the equity (inclusive of "sweat equity") and the partner contributing 75 per cent or US$1.65 million, the prospectus said.

KLE's partner has acquired the property on behalf of the partnership for the purposes of development, and KLE will provide marketing services and will manage the property.

Proceeds of the public offering is also intended to go towards opening another Tracks & Records restaurant on leased land in Usain Bolt's hometown of Falmouth, Trelawny. It is anticipated that the restaurant will enjoy vibrant consumer traffic from cruise ships at Falmouth Port.

"By virtue of the passengers' choice of itinerary, they are all clearly interested in Brand Jamaica, and by extension Usain Bolt, and both of these interests can be satisfied simultaneously at this outlet," the prospectus said.

KLE also has plans to open a high-end 125-seat gaming lounge in Kingston, directly in-between Usain Bolt's Tracks & Records and Fiction Lounge in the Marketplace on Constant Spring Road. To be called "The Secret Room", it is a collaboration between KLE and Supreme Ventures subsidiary Prime Sports.

KLE recently appointed Joseph M Matalon, Audrey Marks and Patrick McDonald to its board of directors. Joseph M Matalon will serve as the company's chairman and lead its corporate governance strategy as a listed entity.





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