JAMAICA Teas — formerly Tetley Tea Jamaica — will tomorrow open its public offer to raise $83.9 million by making available 16 per cent of its shares to the general public and another 1.4 per cent to its employees and lead broker, Mayberry Investments Limited (MIL).

The firm is offering 29,435,695 Ordinary Shares at an invitation price of $3.37 per share, of which two million has been reserved for employees — including managers and non-executive directors — at a discounted price of $2.90 per share and another 435,500 for MIL at the public offer price.

The offer will close next Thursday.

The IPO price will set the market capitalisation of the firm at $566 million, which is 5.9 times the firm’s last full-year pre-tax profit and twice the firm’s total equity.

Jamaica Teas made pre-tax profits of $96 million from sales of $320 million in the financial year ended September 30, 2009 up from $42 million in profit before tax from $245 million in sales.

The company’s asset base at end-September 2009 totalled $307 million, of which $227 million was current assets, while the tea manufacturer and distributor only had $36.4 million in liabilities, placing the equity base at $271 million.

Investment firms, such as Scotia DBG Investments, placed the IPO as “fairly priced”.

“The valuation model yields a price per share of $3.45,” said Scotia DBG’s analysis of the offer. “This leads to the conclusion that the IPO is fairly priced.”

Another factor which fared into Scotia DBG’s assessment was Jamaica Teas dividend policy, which commits to paying out 15 per cent of annual profits “subject to any need for the reinvestment of profits to finance growth and development”.

Barita Investments recommends a buy and sets its target price at $4.89 a share within the next 12 months given “a projected earnings per share of $0.83 for the upcoming 12 months of June 31, 2010 and the company’stargeted price-to-earnings ratio 5.89 times”.

After the IPO, Jamaica Teas will list its shares on the Jamaica Stock Exchange Junior Market, which will entitle it to a ten-year tax break in which it won’t be liable to pay corporate income tax in the first five years after listing and in years six to 10 of listing, it will be liable to pay corporate income tax at half of the normal rate.

Jamaica Teas states that it possesses appoximately 50 per cent of the share of the tea market in Jamaica, being the largest producer of tea in the English-speaking Caribbean with a market of 100 million tea bags sold annually, exporting 40 per cent of the teas produced and selling the remaining 60 per cent in Jamaica.

Jamaica Teas has already diversified into renting commercial property and supermarket operations.

The firm had already secured a tenant for one of the three rental units it has at its commercial complex on Birdsucker Lane in Barbican, which it completed at a cost of approximately $31 million, and has taken over the Red Hills Road supermarket location formally operated as Price Rite.