Thread by @marcgayle

Wigton Windfarm’s long awaited IPO Prospectus is finally available. Download it for yourself and review it - jamstockex.com/wp-content/upl…

Following below are my thoughts on this listing. Note this is NOT investment advice. Do your own reading and analysis.

All protocols observed.

The structure of this listing is quite an interesting one. I can’t recall if any public body has ever been listed like this in Jamaica (please correct me if I am wrong).

This is a true divestment, like the Minister or Finance @DrNigelClarkeJa promised.

#Wigton #wigtonipo

For starters, there are two classes of shares.

Ordinary Shares - 11 Billion (all of which are up for sale in this listing)
Special Share - 1 (just 1 single share assigned to the Accountant General department)

I will explain this Special Share later.

This isn’t an IPO in the “traditional” sense where only X% of the company is being sold.

All 11 Billion shares are up for sale at a price of $0.50 JMD each.

You have to buy at least 2,000 shares, so a minimum purchase of $1,000 JMD.

Of the 11 Billion Shares, the breakdown is:
- 2.2 Billion Shares for Reserved Share Applicants (20% of total)
- 8.8 Billion Shares for the General Public (80% of total)

Total proceeds PCJ aims to raise from the total sale is $5.5B.

$394.11M JMD will pay for fees associated with listing.

$5.1B goes to PCJ for whatever they decide in consultation with the MoF.

Revenue has grown 57% over the past 5 years to $2.36B in 2018.

Net Profits increased 14.6X over that time period to $826.15M in 2018.

Generally you expect profits to be depressed in the early years as growth is invested in.

In 2018, Gross Profit Margins were 70% (roughly the same year over year — which is good), while Net Profit Margins (after tax) were 35% (up from 8.6% a year earlier).

These healthy net profit margins surprised me.

Typically net profit margins are 8 - 10% globally.

That could signal that we are still paying too much for electricity, as consumers.

But that’s good for shareholders.

No overseas investors are invited to participate. This is strictly for Jamaican investors (Section 15.67)

The dividend policy is a max of 25% of net profits after tax.

However, in 2018, only $27.75M of dividends were paid out of $826.15M (ie only 3.36% of after tax net profits).

In Dec 2018, JNFM helped Wigton refinance approx $50M USD in debt into JMD.

Not only did they remove FX risk, but they were able to take advantage of a low interest rate environment on JMD.

Their USD PetroCaribe Fund debt was $49.9M USD @ 6% borrowed in 2008.

Then another facility from PetroCaribe again of $39.9M USD @ 4% borrowed in 2014.

Keep in mind these interest rates are in USD. So if the JMD depreciates, that makes those loans more expensive to service.

Contrast that with 4 Bonds in JMD:
- $710M, due in 2 years @ 6.65%.
- $1.95B, due in 5 years @ 7.4%.
- $1.68B, due in 7 years @ 7.9%
- $2B, due in 10 years @ 8.4%

They were able to borrow in JMD over 10 years all under 9%!!!

The Jamaican economy has come a far way!

All in all, the company seems to be performing well. It seems to be a robust financial machine.

I am optimistic that the operations can continue being run as efficiently as this prospectus tells us it is.

Back to The Special Share.

The sole purpose is to make sure no single shareholder can own 10% or more of the company. They can’t do it through shell companies or relatives.

GOJ really wants this company to be truly owned by the Jamaican people as a whole.

So the reason the Accountant General owns that Special Share is they are charged with the duty of checking the shareholding register every year to ensure this rule is obeyed and to act accordingly if it isn’t.

The Special Share is valued at $1 JMD.

It receives no dividends and it cannot vote.

The sole purpose is to ensure that no single shareholder accumulates 10% or more of the outstanding shares.

In fact, if any person directly or indirectly accumulates 8% of all outstanding voting shares of the company they should give written notice the company within 14 days of them becoming aware.

If they don’t, voting rights will be suspended for 1 year!

This is clever stuff.

I would love to know if this particular divestment structure was used anywhere else in the world before or if this was a completely new and innovative structure that the Ministry of Finance/PCJ came up with.

cc: @DrNigelClarkeJa

All in all, this prospectus makes for great reading and Wigton seems like a great company to add to your portfolio.

Note please do your own analysis, this does NOT constitute investment advice.

#Wigton #WigtonIPO #JSE #Mayberry

cc: @5Solae @rtrowe @Devrhoid @CVIJamaica @Gordonswaby @MoneyMax101 @SmartStephen