With NCB Financial Group Limited’s (NCBFG) extraordinary general meeting (EGM) only 11 days away, different asset managers are having mixed signals on the multi-billion-dollar additional public offering (APO) following the recent departure of several senior executives.
NCBFG’s board of directors had approved on September 8 the convening of an EGM to consider an APO for the issuance of up to 300 million new ordinary shares. The notice of the EGM, which was published on October 13, listed three resolutions for the virtual-only meeting. The first and second resolution seeks to give the board the ability to upsize the offer by an additional 150 million ordinary shares and carry out the necessary steps to execute the APO. As a result, the maximum shares to be issued is 450 million ordinary shares for the APO.
The third resolution is related to NCBFG’s directors being able to issue unused shares in the capital of the company to executives and employees across the group as compensation for services and/or valuable consideration provided to the company and its subsidiaries. Shareholders can register at https://iteneri.com/ncbfg for the EGM will be held at 2 pm. Questions can be sent to email@example.com ahead of the meeting.
“NCB Financial Group Limited has in recent times renewed its deliberate focus on ‘future proofing’ its businesses and reinforcing strategies for continued growth and development of the NCB Group of Companies. NCBFG Directors have recommended that NCBFG proceed with the Additional Public Offering of shares in the capital of NCBFG, in one or more transactions. The Extraordinary General Meeting the subject of the accompanying Notice is being arranged primarily to secure your approval for the issue of additional shares so the APO may be implemented,” stated the letter by NCBFG chairman and majority shareholder Michael Lee-Chin.
The letter highlighted the capital recalibration strategies taking place to bolster the group’s financial health which will be further enhanced from the proceeds of the APO. This ongoing development of the financial health is meant to put NCBFG on a path to once again provide consistent returns for shareholders. The APO will be offered in both Jamaica and Trinidad & Tobago where NCBFG is listed on both stock exchanges.
It had been noted in prior news releases that the APO will be used to reduce debt and interest expenses and bolster capital. NCBFG, the holding company, had interest expense of $6.22 billion in 2022 with $81.36 billion in debt/other borrowed funds. The $15.95 billion of this debt was due within the 2023 financial year (FY) and $78.14 billion due within five years. A 52 per cent of this debt is denominated in United States dollars (USD) while the remainder is in Jamaican dollars.
While the chairman has committed to the payment of a dividend by NCBFG before the end of the 2023 calendar year, some asset managers have expressed concern on the potential success of the APO and plans to deliver the dividend. Some highlighted NCBFG’s activity in the capital markets during the 2023 FY and have queried the source of the $9.772 billion injected as equity into National Commercial Bank Jamaica Limited (NCBJ). This is also complicated further by the recent developments at TFOB (2021) Limited which received $2.07 billion in its development of Lynk.
“The changes of several senior management and executives of the bank in a very short space of time is very concerning as the strategic direction is not very clear. This doesn’t augur well for confidence from new and existing investors especially with their APO on the horizon,” said an asset manager who asked to remain anonymous.
NCBFG’s stock price on the Jamaica Stock Exchange (JSE) is down 20 per cent year to date to $64.06 which left it with a market capitalisation of $158.02 billion. The stock is also down 35 per cent on the Trinidad & Tobago Stock Exchange (TTSE) to TT$2.95 (J$67.86). This comes after it hit a 52-week low of TT$2.55 on September 28, a day after the announced departure of NCBJ Chief Executive Officer Septimus “Bob” Blake. NCBFG’s book value at the end of June was $74.57.
Thus, an offer between $60-$70 would translate to a target range of $18 billion-$21 billion with potentially another $9-10.5 billion, which could be raised if the offer is upsized.
“Firstly, the [additional] public offering is not the only source of capital that we intend to bring into the organisation. So, what we’re doing is making sure that we have enough other sources to de-risk the APO. So, I don’t see these changes as impinging on the success of the APO,” Lee-Chin replied to the Jamaica Observer at a September 27 briefing.
The confidence in NCBFG has also been reaffirmed by Mayberry Jamaican Equities Limited (MJE) which has purchased more than 10 million shares or $703.50 million worth of NCBFG shares in 2023. Mayberry Investments CEO Gary Peart mentioned at the October 13 MJE investor briefing that the price of NCBFG’s stock could jump further when dividends return after not being paid since May 2021.
“I think the metrics surrounding NCB requires an entity like MJE to start taking positions. You don’t know when the final turn will come, so you have to start taking positions. I believe this is an acquisition that once the new management team and the new direction has been finalised, I wouldn’t be surprised if within the next six months NCB announces a dividend. Now is a good time to get material positions in a company like NCB,” said Peart.
Peart added, “They’ve announced the intention to do an APO. We don’t know if that might change because one of the things that we look on is the rate at which they grow their profit and it’s an entity that, if given time based on the rate of profit growth and how things change, it could be possible that you don’t even see an APO.”
Even 294 Inc and Barita Investments Limited have become top 20 shareholders with 22,761,894 shares and 16,617,822 shares, respectively, at the end of June. 294 Inc is connected to Barita’s Deputy Chairman Paul Simpson with Barita not declaring a dividend in the 2023 FY.
NCBFG’s main income source to pay dividends to shareholders is related to dividends paid by NCBJ. NCBFG receives dividend flows from Guardian Holdings Limited (GHL) through NCB Global Holding Limited while it has received no dividend from Clarien Group Limited since the 2017 acquisition. NCB Global paid no dividends in 2021 and paid about two per cent of the dividends received from GHL to NCBFG. More than half of GHL’s operating profit comes from Jamaica where it in turn pays out TTD dividends to shareholders.
“We intend to move aggressively to develop strategies to increase the repatriation of foreign exchange earned overseas by local and foreign business operating in T&T,” said Trinidadian Finance Minister Colm Imbert at his October 2 budget presentation.
NCBFG and its subsidiary GHL had their credit rating of ‘high’/CariAA reaffirmed by Caricris in the recent release. NCBJ received an upgrade on its ‘good’/CariA rating and an upgrade by S&P Global Credit Ratings to BB-.
“If, because someone really thought of it, they’d say well, on a go forward basis, we’ve already announced that we have acted on over $8 billion in cost savings. That represents about $3.30 per share that we’ll see over the next year. So, the cost saving endeavours are well underway and there’s more to come through efficiency. The costs-saving endeavours are there which will fund dividends and as I said, the APO is not the only source of capital that we will use to pay down debt to assure that dividends are paid,” Lee-Chin closed.