John Myers Jr, Business Reporter

LEWIS

Salada Foods Jamaica Limited is considering a stock split, the board has revealed, on worries that the near doubling of its market price in the past few months could take the stock out of the reach of mainstream investors.

Salada, with less than 10.4 million shares in issue, is already one of the Jamaica Stock Exchange's most illiquid stocks, which trades in tiny volumes.

At $70 per share, Salada is the seventh most expensive stock at Tuesday's prices, but also the seventh lowest in market capitalisation of more than 40 stocks, at $727 million.

The stock lost $5 or almost seven per cent of its value on trades of 3,000 units Tuesday.

Salada chairman John Bell advised at the company's annual general meeting last Thursday - its first under new owner Donovan Lewis - that the share split was under consideration to boost the number of units, but would divulge no details, including the ratio of the split contemplated.

Two-way split

He was addressing concerns raised by shareholders.

A two way split would increase the coffee company's issued shares to 20.8 million shares but split the price proportionately to about $35 to $40 per share, assuming the stock continues to trade within its current band of $70 to $80.

A split is usually engineered to ensure that there is no dilution of the stock's value to the investor. But neither do the dividends increase, though the volume of units held is greater.

Last year, Salada, which owns the Mountain Peak brand, reported net profit of $68 million - nearly doubling the $36 million made in 2006 - on revenues of $343 million reported in September 2007.

Its net assets were valued on the balance sheet at $286 million, the majority held in cash and near cash.

Managing director John Rosen also advised the AGM that the marketing programme was 'nothing radical', divulging that it surrounded Salada's core products and was aimed at deeper penetration of the hotel market.

Growing concern

That plan was announced amid what was identified as a growing concern about the availability of locally produced beans, resulting from the displacement of crops.

That situation is expected to hurt Salada's bottom line in the year ahead if the company has to turn to imports.

Salada, on the earnings side, is hoping to build on its niche markets in Jamaican communities overseas, but Rosen said it was proving difficult to grow exports due to stiff competition from the likes of international rival Nestlé.

john.myers@gleanerjm.com