Purity IPO: A healthy investment
SSL in the MoneyWednesday, November 07, 2012
CONSOLIDATED Bakeries (Jamaica) Limited popularly known as "Purity" is seeking to raise $97 million in an Initial Public Offering (IPO). For investors who are seeking a home for their funds, this eagerly awaited investment would be ideally suited to their portfolio.
For those of you who may not be familiar with Purity, it is a wholesale bakery that manufactures baked products primarily under its "Purity", "Miss Birdie" and "Hearty Goodness" brands. They have a distribution network to Kingston's metropolitan and urban areas, Spanish Town and Clarendon population centres throughout Jamaica which is serviced by 50 sales employees and contracted persons. They are growing exports to the Jamaican diaspora and ethnic markets of North America. With their eye on exports, last year, their products were sold in to Loblaws, one of Canada's largest food retail stores and they expect this arrangement to continue.
The company began in 1957 where families owning three bakeries came together: Valentine Bakery, owned by the Chang Family; Powell's Bakery, owned by the Powell Family; and Huntington Bakery, owned by the Seivright Family to form a company now called Consolidated Bakeries (Jamaica) Limited (CBL).
CBL has been baking up goodness for its consumers for over 50 years. Located on 30,000 square feet of production facility on Valentine Drive, off Red Hills Road, CBL is owned by the Chang Family whose founder, Gladstone Chang, has been in the business for over 80 years. Incidentally, Gladstone Chang is the father of the iconic Thalia Lyn who is no stranger to the business community and is the CEO of Island Grill. The Chang Family is committed to providing Jamaica, its consumers and its staff with wholesome, nutritious products at good value. Health is very important to the Chang Family "it's who they are" and they extend this healthy living mindset to their 120 members of staff.
The company intends to use the proceeds of the IPO to further strengthen its operations, retool and improve its operational processes so as to fulfil its strategic plans and business goals, improve the company's financial and non-financial performance. The use of proceeds includes, but is not limited to, strengthening the company's working capital and reducing debt levels; improving their distribution by installing computerised route management systems and improved production.
I am sure you are asking the question: "Why should I buy Purity shares?" To give a short list of strong positives; the company has annualised sales of $500 million and has strong potential to become the definitive number 2 bakery/seller of baked products in Jamaica behind National bakery. Purity also has a dominant position in certain categories and it wants to grow and strengthen those segments.
Its balance sheet is comparative to a main market company (asset rich with low debt). Not to mention, CBL has a long-standing company history and brand recognition in the marketplace. Their property holdings which adjoin PriceSmart will enable them to further expand if they so desire. Of note, profit before taxes as at December 2011 stood at over $22.3 million, shareholder equity grew 3.94 per cent in a year and turnover in the same period increased by 11.58 per cent.
Last, but not least, their management team has since been enhanced with the addition of Anthony Chang as managing director (formerly of the LASCO Group of Companies). Anthony Chang has over two decades of experience in leading and managing businesses. He is also a past president of the Jamaica Chamber of Commerce and is a director on several prominent companies. Another name you may recognise is Vincent Chang who is the chairman of the Board of Directors. Chang has over 25 years in the baking industry and holds degrees from Loyola University in Canada. He has also completed several professional courses at the American Institute of Baking. Each company on the Junior Market has to have a mentor and Keith Collister holds this position. Collister has a wealth of experience as an analyst and is the director of Special Projects (Finance and Planning Division) of Sandals Group and Chairman of Appliance Traders Pension Fund.
The company is also guided by a diverse and experienced Board of Directors; Vincent Chang (chairman), Anthony Chang (executive director), Nicola Chang Murphy (executive director who also serves as the company's director of Sales and Marketing), Thomas Chin (executive director), Noel daCosta, CD (independent non-executive director) and Philmore Ogle, CD, OD, FCA (independent non-executive director).
This company believes in creating its own niche market rather than competing. Their plans are to excite the consumer with different products (sorry I can't elaborate on this as it will spoil the surprise when the new products hit the market). They believe in and stand by giving their consumers "wholesome goodness in every bite".
Stocks and Securities Limited is the the principal stockbroker and financial advisor for this initial public offering. Deborah Vieira is a Wealth Advisor at Stocks and Securities Limited and can be contacted via firstname.lastname@example.org.