REGENCY Petroleum Limited (RPL) is planning to raise $287.16 million through the issuance of 287,157,354 ordinary shares in an initial public offering (IPO) which opens on November 24 for $1 per share as the bulk petroleum distribution company looks to expand its operations in western Jamaica.

If Regency Petroleum is able to raise a minimum of $200 million and have its application to list on the Junior Market of the Jamaica Stock Exchange (JSE) approved, the Savanna-la-Mar-based entity would become the 47th company to list on the Junior Market, 101st company on the JSE and 149th security on the JSE. It would also benefit from a five-year tax remission where it would pay no income tax and pay 50 per cent of the applicable rate in the other five years.

GK Capital Management Limited is the lead arranger and broker for the offer with Mayberry Investments Limited being the prior broker earlier this year. GK Capital led Spur Tree Spices Jamaica Limited and JFP Limited’s listings on the JSE earlier this year.

On offer are 115,196,354 shares for the general public at $1 with the remaining shares in the reserved pool and 40.2 per cent of the offer is for the general public.

A total of 116,461,000 shares are to be converted at 96.50 per cent of the outstanding principal amount of $160.31 million in outstanding loans at the date of the IPO. GK Investments Limited’s $121-million secured term loan will be converted to 100 million ordinary shares. This is GK Investments’ second loan conversion following the Spur Tree IPO in December 2021.

The 16,461,000 ordinary shares are to be allocated in the associates loan conversion pool which includes Jerry Grant and Donald and Donique Gayle. The 55,500,000 ordinary shares are reserved for the RPL employees and key strategic partners. Key strategic partners include early-stage supporters of the company, consultants, professional advisors and non-executive directors of the company.

“In my view, the future for the petroleum industry is very promising and I have personally invested significant sums into RPL, reflecting my confidence in the industry. Additionally, RPL has appointed directors with relevant industry experience, the majority of whom are independent. We look forward to being listed on the Junior Market of the Jamaica Stock Exchange, and hope that prospective investors will join us in fuelling Jamaica,” said founder and Chief Executive Officer Andrew Williams in his letter to investors.

The company was registered in May 2018 but commenced operations on January 1, 2019. It was founded by Andrew and Jeneive Sabdul-Williams.

Regency intends to use $75 million of the proceeds to complete the construction of its company owned and operated Paradise Pen service station in Westmoreland by the end of this year and $30 million to purchase additional cylinders to satisfy the growing demand in the liquefied petroleum gas (LPG) space. The $160 million of the proceeds is related to the conversion of debt to equity and reduction of remaining debt on the company’s books. The $22 million will be allocated to IPO-related expenses and fees.

The company currently earns income from bulk LPG sold to bakeries, restaurants and hotels across the island via its own Tank Wagon (Bobtail) Trucks and automotive petroleum through a profitable service station. Its LPG storage plant in Crawford, St Elizabeth, has the capacity to fill 1,500 cylinders per day. Regency also intends to open a leased Negril service station in the first quarter of 2023 and significantly increase its market share across the island in the LPG space by price competitiveness and efficiency.

Regency’s revenue has climbed from the initial $44 million in 2019 to $607 million in its 2021 financial year which has been driven significantly by its service station which was introduced in the second quarter of 2020. After recording an initial net loss of $246,845 in 2019, it grew its net profit to $58.95 million at the end of 2021.

For the six months up to June, Regency’s revenue climbed 34 per cent to $332.04 million with its net profit up 45 per cent to $38.66 million. Its asset base has increased 108 per cent to $204.83 million with equity rising 176 per cent to $111.21 million. On a trailing 12-month earnings per share of $0.065 ($93.09 million profit before taxation), the price to earnings come up to 15.38 times.

“Under Andrew’s leadership, in its three years of full operation, RPL and its lime-green cylinders have become a mainstay in western Jamaica. The decision to establish RPL’s first service station during the peak of pandemic uncertainty, demonstrated Andrew’s understanding of the petroleum market, accumulated over a lifetime of involvement in the automotive industry in various successful private family businesses,” said Chairman Dr André Foote in his letter.

Regency intends to have a dividend policy of paying up to 30 per cent of distributable net profits once listed. The board of directors includes Andrew Williams, independent Chairman Dr Foote, independent directors Radcliff Knibbs, Edgar Bennett and Andrew Cocking. Bennet will chair the audit committee, Cocking the remuneration committee and Williams the environmental risk committee. Hugh Graham, CEO of Paramount Trading Limited, which is also listed on the Junior Market, will act as the company’s mentor and attorney-at-law Janice Grant Taffe as the company secretary.

Interested investors can apply for the offer with an application form contained in the prospectus and submitted to GK Capital’s head office at 58 Hope Road before the closing date of December 8. Applications can also be done on VM Wealth Management Limited’s wealthipo.vmbs.com or through JMMB Securities Limited who are selling agents for the offer. The minimum number of shares to be applied for in this offer is 1,000 units while increments will only be done in multiples of 100 units. The JCSD processing fee of $172.50 is payable with an application.