At an investor briefing last Thursday, lead broker Pan Caribbean announced that its client Dolphin Cove was seeking to raise $240 million by listing 80 million ordinary shares on the Jamaica Stock Exchange’s Junior Market, increasing the share capital from 312,426,376 to 492,426,326 shares, at a price of $3 per share. Three quarters of the new shares, 60 million, will be available to the general public, whilst up to 20 million of the balance will be reserved.

Dophin Cove, established in 2001 by the husband and wife team of Stafford and Marilyn Burrowes, has two wholly owned Subsidiaries, Too Cool Limited, and Dolphin Cove (Negril) Limited, the former owning a large part of the premises occupied by the Group’s strategically positioned marine park at Ocho Rios, St Ann. Dolphin Cove (Negril) Limited owns and operates the Group’s recently opened marine park in Point, Lucea, Hanover. It is halfway between Negril and Montego Bay, and almost next door to the 1,100 room Fiesta Hotel (which has another 900 rooms planned).

At the briefing, Pan Caribbean CEO Donovan Perkins outlined nine reasons (including the already mentioned strategic location) to buy the offering.

He started with the strong board, which includes Jamaican business titans such as the Honourable Danny Williams and William McConnell, and legal and accounting experts Noel Levy and Richard Downer (the latter also acting in the capacity of mentor).

Additional strengths included Dolphin Cove’s U.S. dollar earnings (nearly 95 per cent of revenues), its excellent relationships with the cruise ships and hotel operators, the new Falmouth Port projected to reach over 1,000,000 new cruise passengers per year (allowing mega cruise liners Oasis and Allure of the Seas to dock simultaneously), which has the additional benefit of freeing up capacity in Ocho Rios.

He added that the Dolphin Cove operation was “not easily replicable”, almost “unique”, and that the improvement in the roads from Kingston to Ocho Rios would provide access to a “big internal tourism market”.

A brief look at the numbers reveals that for the twelve months to December 31st 2009, Dolphin Cove made a net profit of $109.5 million (up from $74.75 million in 2008), on revenues of $832.9 million. Critically, 72.2 per cent of revenue is earned from dolphin attractions (sale of dolphin, sting ray and shark experiences), while 28.8 per cent of revenue is earned from Ancillary Services (sale of souvenir photographs and videos, food and beverages and the use of its beach cabanas, sea kayaks and boat tours).

In his list of strengths, Perkins had also noted that the historic results did not include the Negril operation (which only started in September). In their research piece on the offer, Pan Caribbean projects revenues increasing to just over $1.6 billion by the end of 2011 (from a projected just over $1 billion in 2010), whilst net profit is expected to increase from a projected $113 million in 2010 to $179 million in 2011 (this includes the tax free incentive of listing on the Junior Stock Exchange).

According to Pan Caribbean, the company estimates that the total cost associated with Dolphin Cove Negril should be approximately US$2.5 million (excluding the purchase price for the land), with almost one half of this amount being expended between 2009 and 2010. All “brick and mortar” costs associated with the construction were capitalized and reflected on the balance sheet.

Using the latest financial numbers, the price earnings ratio is about 10, with a price to book value of around 1.4 times. In their research piece, Pan Caribbean estimates that the price to earnings ratio falls to a more attractive 6.57 on their estimate of 2011 earnings, and trades at just over book value. In the current challenging economic environment, Dolphin Cove appears to be one of handful of genuine growth stocks (assuming continued expansion in tourism) and therefore deserves to trade on future as opposed to current earnings.