Jamaica is capital central
NCB Capital Markets' Steve Gooden says to expect more cross-listings, capital raisesWednesday, June 02, 2021
BY DAVID ROSE
With the Jamaican equities market becoming more attractive due to the increased participation of investors, it is expected that more Caribbean companies will choose Jamaica as their destination to raise equity capital and potentially tap the debt markets.
Following the cross-listing of Guardian Holding Limited (GHL) on May 5, Massy Holdings Limited expressed similar interest to cross-list its ordinary shares on the Jamaica Stock Exchange (JSE). Although both companies were already listed on the Trinidad and Tobago Stock Exchange (TTSE), their market multiples were extremely low when compared to some of their Jamaican counterparts in similar industries who trade on the JSE.
This new window of cross-listings opens the door for more Caribbean investors to extract value from the various companies which operate across the region. Neither GHL nor Massy have stated any intentions to raise additional equity capital on the JSE at the moment, but that might change in the coming months as both firms expand aggressively.
“ . When you measure the value of stocks traded on the JSE vs the Trinidad and Tobago Stock Exchange (TTSE), as a percentage of total market capitalisation, the JSE was four times as active during 2020. This higher level of liquidity augurs well for better price discovery and more robust valuations. It also allows these companies to broaden their investor base beyond their home markets,” stated Steven Gooden, CEO of NCB Capital Markets Limited (NCBCM). NCBCM led GHL's cross-listing and sale of shares by its affiliate NCB Global Holdings Limited.
Trinidad and Tobago (T&T) has experienced a downward progression in performance as its net international reserves are now on par with Jamaica, which has been exasperated by its perennial foreign exchange (FX) problem.
Up to recently, multinational firm PriceSmart had to reduce imports which severely impacted sales along with the fact that freight forwarders have requested payments in USD only to settle transactions as the FX situation worsens.
Barbados like other areas in the Caribbean have also experienced difficulties in sourcing FX due to the decline in their main income-earning sectors. T&T recently declared a state of emergency as COVID-19 cases began to skyrocket along with the fatality rate from the virus. Despite all of these disparaging events, Gooden sees T&T as an opportunity which cannot be passed up.
“We actually entered Trinidad seven years ago via an acquisition. Our subsidiary NCB Merchant Bank (T&T) Limited, formerly NCB Global Finance Limited, has grown its assets base seven-fold to approximately US$120m over that period. We are currently on a drive to deepen and broaden our wealth management and capital markets footprint across the region. T&T is an important part of that thrust.
In Trinidad, the macro environment, including the recent launch of its junior market, and a high level of money market liquidity, should result in greater market interest. This is in addition to cross-listings, which I expect to be a trend for the larger companies, especially those with a regional presence,” Gooden shared.
NCBCM is currently awaiting a licence to start its operation in the twin island republic. Though the state of emergency has delayed business activity for people looking to open investment accounts from Jamaica, Gooden noted that their application is far advanced and should be approved before the financial year ends in September. This would be done through NCB Merchant Bank rather than a different outfit.
“There wasn't a delay; our roll-out is as planned. We are advanced in the application process and anticipate having a licence soon. The licence would allow clients across the jurisdictions to tap into both markets once the requisite accounts are opened. Having an account at one entity makes it easier to open an account in the other. We are excited about this particular opportunity, which also includes our Barbados clients, as we also have a stockbrokerage there. The TTSE has a lot of potential. In building out our pan-Caribbean brokerage infrastructure, we see ourselves contributing significantly to its market development. The Jamaican market allows these companies to tap into a fresh pool of financing. So, if they do have a capital need, I expect them to look at the local market, especially if use of funds involves Jamaican operations,” indicated Gooden on the future of NCBCM. NCBCM has divisions in Cayman and Barbados, with an inactive operation in the Dominican Republic.
NCBCM recently upgraded its GOIPO platform to allow the entire account-opening process to be digital. This will allow for the full verification of documents like ID's and other know-your-customer documents. Gooden noted that this will open greater doors for their clients as they will be able to navigate the account opening process in multiple jurisdictions without the need to visit Jamaica.
The last company to cross-list between Jamaica and T&T was MPC Caribbean Clean Energy Limited , which raised $1.46 billion between both markets. Equityline Mortgage Investment Corporation is the only non-Caricom business to have listed their preference shares on the JSE.
JMMB Group Limited, GraceKennedy Limited, NCB Financial Group Limited and Eppley Caribbean Property Fund – Value (CPFV) are currently cross-listed on both markets. CPFV did a secondary offer on the JSE in July 2017 and raised $3.07 billion in fresh capital. Supreme Ventures Limited and Trinidad Cement Limited (TCL) were once cross-listed in the other jurisdiction's stock market, but delisted due to illiquidity and the takeover off TCL by Cemex in January 2017.
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