The junior market propelled us — Lasco's Lascelles ChinSunday, February 28, 2021
BY DAVID ROSE
After a decade of growth and consistent expansion, founder and executive chairman of the Lasco Group of Companies Lascelles Chin is praising the Jamaica Stock Exchange's (JSE) Junior Market as a strategic tool which has elevated Lasco Manufacturing, Distributors and Financial Services to new heights.
Although Chin had considered other ways to expand the companies before their October 2010 listing, he was limited by the environment where government debt was king, and equity was less than attractive for smaller companies. This was when Jamaica's debt to GDP ratio was higher than 100 per cent with more than $1 trillion gross loans to deposits stood below 60 per cent and there were 45 companies listed on the main market of the JSE. In addition, there weren't many incentives for businesses to expand based on the crowding out of capital in the country.
“We were waiting on the junior market. It took us some time, but it took us a year or two to prepare ourselves. It was the junior market that really propelled us.
“Before, we were growing at about 10-30 per cent per year and it would be hard with the high interest rates and scarcity of loans to grow the business,” Chin told the Jamaica Observer's Sunday Finance.
However, with junior market's launch in April 2009 and Jamaica Debt Exchange in January 2010, the cards finally aligned in Chin favour who took the monumental step and began the process to list the companies.
A strong benefit of the junior market was the 10-year tax break which would fast-track the growth of the business which had a fresh injection of equity capital.
“At that time, I sold 20 per cent of my companies to put everything into the business to build our cashflow. It increased the distribution business by over 90 per cent and the manufacturing business by 500 per cent. It made a big difference and allowed us to finance our growth to propel the success of the two companies,” Chin said with strong passion in his voice.
The Lasco companies were the fourth to sixth companies to list on the young market which now stands at 42 listed companies with 45 listing in total to date.
The cumulative capital raise among the three companies was $433 million at $2.50 for each share. Despite the heavy oversubscription and frequent trading on the market, the Lasco companies had a stock split in June 2013 to facilitate greater liquidity and expand their shareholder base. Chin said “when the share price increased to over $20, we split each company 10 to one so that other investors could afford to become shareholders of the companies.”
Even with the expiration of the tax break for all of the companies, each one has managed to surpass the prior financial year's earnings with Lasco Manufacturing's (LASM) nine months net profit standing at $1.01 billion. LASM was recently selected as a private sector partner in the United States Agency for International Development (USAID) and The University of the West Indies (UWI) in the USAID's Jamaica Renewable Energy Alliance which will reduce the company's energy costs and allow for UWI Mona to benefit from the data for analysis. A 500-kilowatt (KW) photovoltaic (PV) battery storage system will be added to the White Marl Complex before the end of the calendar year. This is in addition to the 12,000 square feet of additional space from the recent expansion to facilitate greater manufacturing output and improve logistics flows.
Chin pointed out that both LASM and Lasco Distributors (LASD) will be launching new food products from the research and development pipeline with Lasco Financial Services (LASF) moving to provide merchant payment facilitation through Lasco Biz. This is in spite of shipping costs rising more than 300 per cent due to COVID-19 compounded by the irregularity in arrivals which has affected the productivity of operations. Despite the economic fallout which has led to more hardship in the economy, no member of staff has been laid off since the start of pandemic with the companies absorbing costs where applicable.
“We are working on new products and in the next month or two, we are going to concentrate more on exports which we see opportunities present. Because of COVID-19, we couldn't concentrate on this initiative, but now we have the management structure to look after exports.”
Chin did confirm to Sunday Finance that the new managing director for LASD is in Jamaica and will be taking up his role shortly with the possibility of joining the LASM and LASF boards alongside James Rawle and Jacinth Hall-Tracey who are the managing directors for the respective companies.
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