Stationery & Office Supplies Limited’s (SOS) board of directors will mull the decision at today’s board meeting to recommend the possibility of a stock split to its shareholders who have enjoyed double-digit returns in 2023.

The notice, which was posted on Monday on the Jamaica Stock Exchange (JSE), stated, “The market value of the company’s stock has been on a consistent growth trajectory and the liquidity of the stock is also a significant consideration.”

While this is only a consideration for a proposal to its shareholders at the annual general meeting (AGM), the announcement sent the stock up 32 per cent yesterday from $20 to $26.43 with a new all-time intra-day high of $26.45 following a one-hour halt on trading. This pushed the market capitalisation to $6.61 billion and resulted in year-to-date gains of 56 per cent relative to the $16.92 it started in 2023. This would also be a windfall for investors who participated in the company’s July 2017 initial public offering where the shares were offered at $2 per share.

SOS’s top 10 shareholders, directors and executives controlled 224,249,882 shares or 89.66 per cent at the end of March with the stock seeing fewer sellers in recent times based on market data. While June 2 saw over 1.5 million shares trading, the stock only had 45 trades for 523,811 shares valued at $13.84 million yesterday with only 632,049 shares available for sale over 16 orders.

The company’s current issued share count stands at 250,120,500 shares with the authorised share capital standing at 500 million shares. Thus, any possible stock split would involve an increase in the authorised share capital which would have to be approved by shareholders. SOS’s annual general meeting notice was sent out in its annual report from April, but there was no date attached to the notice which gives the board room to include an amendment to the notice for the fully electronic AGM.

SOS is the most recent company to consider a stock split following Palace Amusement Company (1921) Limited and FosRich Company Limited. Palace’s 600 to one stock split on February 28 resulted in the stock peaking at $7.87 and being one of the best stocks in 2023 before it retreated below its split price. FosRich’s 10 to one stock split helped fuel its monster rally in 2022 which resulted in it rising by over 332 per cent to become the best-performing stock on the JSE and largest Junior Market company by market cap. While the stock price growth was accompanied by impressive results, FosRich’s shareholder base nearly tripled to over 5,000 by the end of 2022 which would have been made easier by a stock price of $3.91 versus $39.10 and more available shares.

SOS expansion in track

SOS’ explosive stock price growth has been matched by significant growth in its earnings for 2022 and in the first quarter. SOS had its best year on record in 2022 when its revenue grew 56 per cent to $1.75 billion and net profit double to $256.51 million, which translated to an earnings per share (EPS) of $1.03.

Its first quarter (January to March) wasn’t any different as it grew its quarterly revenue by 22 per cent to $519.18 million with March setting a new record for $207 million in sales. However, its net profit declined from $104.89 million to $94.12 million on a comparative basis with EPS at $0.38. This was due to the company now being subject to 50 per cent of their normal tax rate since last August. Thus, its profit before tax was marginally higher at $108.12 million.

During the first quarter, the company grew its Seek stationery brand sales 60 per cent to $24.6 million with its Montego Bay office also growing its revenue by 50 per cent to $66 million. The growth in demand has resulted in the company spending $60 million to build another 5,000-square-foot (sq ft) warehouse on its Beechwood Avenue property which is to be completed by the end of the third quarter.

This will bring in an additional 200 pallets of inventory and allow for SOS to hold another 40-foot container on the property. Its Beechwood property is currently 24,000 sq ft with its Collins Green Avenue property at 17,000 sq ft. SOS will also acquire a 3,000 sq ft off-site warehouse for its Montego Bay office to double its current capacity which is set to be complemented by an additional three delivery vehicles.

This expansion push has been facilitated by a partnership with The Office Authority in Trinidad & Tobago who received two containers of goods in the first quarter. SOS will also export to two other islands in the Caribbean in the second quarter which is part of their plans for other projects in the region. The move comes at a time when the company began a new distribution agreement with AIS Corporation and its Seek factory operating at maximum capacity.

SOS’s asset base is up 49 per cent on a year-on-year basis to $1.52 billion with cash doubling to $296.07 million and inventories at $308.89 million. Total liabilities are up by a third to $325.04 million while shareholders equity closed the period at $1.20 billion. SOS will pay a $0.20 dividend on July 10 to shareholders on record as of June 23. This payment totals $50.02 million.