Everything Fresh leaves a slightly bad taste
Everything Fresh will open it's IPO on Thursday, May 17th and my analysis shows some weaknesses that must be considered when buying into this share. Here is a brief analysis:
- Everything Fresh was formed in 2003 and commenced operations in 2008. It was started by Courtney Pullen and Melene Pullen, husband and wife team.
- The Company imports and distributes dairy products and delicatessen meats, dry and canned goods, fruits, vegetables, seafood and meats. They have a wide chain of distribution from supermarkets to hotels.
- They are seeking to raise $390M from an issue of 156M shares at a $2.50 per ordinary share. This listing will be on the Junior Market.
- They recorded revenue of $1.8B, with expenses of $1.7B in 2017. Their financial statement however show a worrying trend re expenses, specifically director emoluments. In 2016 they had $3.5M in director's emoluments and a staggering $15M in 2017 due to what they claim is the adding of two directors. That is a 5 times increase in director's emoluments. This is in the back drop of having around $60M in staff costs.
- They have failed to provide their first quarter performance for 2018. This could have provided data into their currently income/expenses ratio.
- Company paid only $1.3M in taxes in 2017, which may be seen as good, but could trigger audit from the Tax Department.
- The company has been profitable for a number of years, but has seen a decline in profit from 2016 to 2017 due to higher expenses.
- The funds raised through their IPO will be to expand their operations to increase customer size, building warehouse facilities and purchasing equipment for storage and delivery of goods. it is hoped that with these improvements there will be an increase in their revenue. Solar systems will be implemented to reduce its energy costs, however, the capital required for this was not disclosed. Their long term goal is to expand to other Caribbean countries, but the details regarding this was not provided in their prospectus.
- Their board has a mix of successful professionals including Donovan Perkins, Mark Arscott. It should be noted that three family members are on the board of 12 members.
It is my humble view that this is a BUY. However, the strategy should be to get in and get out at listing. One does not see a proper explanation of their dividend policy, which should be a concern for long term investors.
Sygnus a buy?
After careful analysis of the prospectus offered by Sygnus Credit Investments Ltd. I have these brief comments:
- Sygnus profits from July 2017 have been impressive at US$500K. Their expected year profit is US$1M.
- Sygnus was founded in June 2016
- Sygnus has a solid Board of Directors with diverse skill sets.
- The Company is seeking to raise only US$10M.
- The Company will issue up to 90,909,091 ordinary shares in two classes US$ and J$ at a fixed price of J$13.72 per J$ share and US$0.11 per US$ share.. However, one should be careful with the currency conversion factor with the Jamaican economy on the improve.
- Sygnus does not seem to have a large client base, however, the clients they have are large entities.
- Sygnus is not just about investment banking, investment management but also in Tax advisory services.
- Some $11M left the Company to unknown sources. It's a pity not much information has been provided on that.
- Sygnus operations are based out of St. Lucia.
- Dividend policy is very impressive. They intend to distribute up to 85% of the SCI's net income to stockholders in the form of quarterly cash dividends.
- They have a solid buy back policy allowing shareholders to offer for sale such number of shares with teh aggregate value of which shall not exceed more than 15% of the net asset value.
- Their earning per share is favorable.
- The expenses of the Company seems small at this point with no salaries paid out.
Based on my analysis a BUY would be the best bet here. If you are a day trader a quick out by listing could earn you up to a 40% ROE. If you are a long term trader then a hold for 2 years could see great dividends and a gradual increase in value while the sharks exit their position.
Tomorrow I will look at the prospectus of Everything Fresh which opens on Thursday in the Junior Stock Exchange.
Safe trading everyone and remember only risk what you can afford to lose. Trading stock is a high risk investment which can give high returns if done properly.