Dolla Financial Services Limited’s initial public offering (IPO) opens on Friday during which prospective investors will be able to purchase ordinary shares for $1 as the microlending company looks to raise $250 million in fresh equity capital through the issuance of shares.
The IPO will see 500 million ordinary shares on offer with the balance to come from the sale of 250 million ordinary shares by existing shareholders at $1 per share. First Rock Private Equity Limited (FRPE) will be selling 187.50 million ordinary shares while Dequity Capital Management Limited will be disposing of 62.5 million ordinary shares. Dolla plans to use the proceeds to strengthen its capital base by expanding its loan portfolio regionally through acquisitions along with organic growth. The proceeds for the selling shareholders will be used to settle debt obligations assumed on behalf of Dolla. The number of ordinary shares would rise to 2.5 billion if the offer is taken up in full.
Dolla was formed in October 2009 and currently boasts a branch network of eight locations in Jamaica with the consolidated net loan portfolio standing at $870.26 million as of March 31. It began operations in Guyana in August 2021 through Dolla Financial Services (Guyana) Inc, which is located in Georgetown. It has disbursed over $2.30 billion since inception and is a 75 per cent subsidiary of FRPE.
If Dolla is successful in raising at least $250 million and is admitted to the Junior Market of the Jamaica Stock Exchange (JSE), it would 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.
“The company over the last two years has been carefully executing a pan-Caribbean strategy in the markets considered by the company to be untapped. It is on this premise that Dolla Financial Services has morphed into a billion-dollar company, with strong operations in Jamaica and the Republic of Guyana, over 4,000 loyal customers and a staff complement that is energised, committed and most of all competent,” stated chairman of Dolla Ryan Reid in the chairman’s letter.
Some 212,500,000 shares are available for the general public while the remaining 287,500,000 shares are reserved for share applicants. And 125 million shares fall under the company applicant’s pool which includes directors, employees, the company mentor Tania Waldron-Gooden and affiliates such as Dequity and the First Rock Group companies. Also, 162,500,000 shares are reserved for the Key partners pool which includes customers and suppliers determined to be integral to the company’s long-term success and lead broker Victoria Mutual Wealth Management Limited (VMWM) and its managed portfolios.
Dolla’s revenue rose by 56 per cent to $395.24 million in its 2021 financial year compared to the 18 months period (June 2019 to December 2020) where it earned $253.42 million. Its net profit grew by 757 per cent from $15.11 million to $129.55 million in 2021. On a normalised 12-month basis, the company’s revenue grew by 133 per cent while it moved from a loss before taxation of $16.47 million to a profit before taxation of $167.80 million.
Its total asset base stood at $861.09 million at the end of 2021 with $750.50 million in net loans. This growth was funded by $564.11 million in total liabilities which included a $100 million loan from First Rock Capital Holdings Limited (FRCH), $200.36 million in corporate notes raised by GK Capital Management Limited and a US$1-million promissory note from Derrimon Trading to Dolla Guyana.
Dolla made an application to the Bank of Jamaica in January for a microcredit licence ahead of the July deadline under the new Microcredit Act. Based on the expected consolidation in the industry due to the Act, Dolla is on the lookout for acquisition opportunities. Some of Dolla’s loan products include Dolla MicroFunder, SME Grow, Elite and One N’ Ready. An example of a Dolla loan was a $4-million loan disbursed to iCreate Limited in 2020 for three months at four per cent interest per month.
Dolla’s first quarter saw its consolidated interest income rise by 163 per cent to $141.44 million with net profit growing by 412 per cent to $59.85 million. The company has maintained a non-performing loan ratio below eight per cent for every year except 2020. Dolla’s trailing 12-month earnings per share is $0.079 which gives it a price to earnings ratio of 13 times. It has already been buy rated by the blog ICInsider which has set a 2023 price target of $4.
Dolla intends to have a dividend policy of paying up to 50 per cent of distributable net profits once listed. The company paid a $34-million dividend in 2020 with FRCH receiving $25.5 million (US$180,978) and Dequity receiving $8.50 million.
The board of directors includes Reid, Christopher Yeung, Dr Michael Banbury, Chief Executive Officer Kadeem Mairs, and independent directors Dane Patterson and Lisa Lewis.
Interested investors can apply for the offer through VMWM’s Wealth IPO Edge platform or selling agent Mayberry Investments Limited up to the closing date of June 10. The minimum number of shares to be applied for the 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.
This is VMWM’s third active public offer, with the broker leading the Kingston Properties Limited equity raise and MFS Acquisitions Limited takeover bid of SSL Venture Capital Limited.