PATRICK HYLTON
NCB CAPITAL Markets Limited has offered a return of 11.75 per cent on the $300 million in preference shares it will bring to the market next month, but says that it could tack another 1.5 percentage points to the dividend if the company's return on equity reaches 20 per cent or higher during the life of the preferences.
The shares will be redeemable in 42 months.
NCB Capital Markets is the money management and stockbroking subsidiary of Michael Lee Chin's National Commercial Bank Group, which earlier this month, told the Jamaica Stock Exchange of its plans to offer the preference shares and to seek their listing on the exchange.
Yesterday, NCB Capital Markets published a prospectus, announcing the offer of 100 million one-cent preference units, with an offer price at $3 a unit, with the aim of raising $300 million. The offer is to open on July 25 and close three days later.
Applications will be for a minimum of 30,000 units.
While the agreed return will be 11.75 per cent, calculated on the offer price on the stock units, prospectus pointed out that that directors, may, in the event that the return on equity with respect to any financial year of the company shall be equal to or exceed 20 per cent, declare a bonus dividend, the result of which would have the agreed rate being equivalent to 11.9 per cent per annum.
NCB Capital Markets has in recent times easily exceeded the benchmark ROE that would trigger the higher returns, a fact about which Patrick Hylton, NCB Group CEO and the chairman of NCB Capital Markets, boasted in his introduction to the prospectus.
"In fiscal year 2005, we recorded revenues of J$8.1 billion and after tax profits of J$1.9 billion, a 66 per cent year over year growth," Hylton said. "This translated into a return on equity of 43 per cent, bringing our average ROE to 42 per cent for the past three years."
In fact, for the first six months of the current financial year, to the end of March, NCB Capital Markets had revenue of $3.71 billion, for a half year profit of $839.95 million. Shareholders equity at the time was $6.92 billion, up from $5.53 billion at the end of 2005 financial year.
The company's total assets at March stood at $57.5 billion, approximately $2.7 billion higher than the end of the previous fiscal year.
However, the prospectus highlighted the fact that NCBCapital Markets holds a little over 94 million shares of the lottery company, Supreme Ventures Ltd. (SVL), whose market value has plummeted since going public early this year. NCB Capital Markets underwrote the offer and had to take up the shares and pay out $380 million as the offer was undersubscribed. At the time of the prospectus, it has already suffered a market loss of $167 million.
The financial statements at 31 March 2006, do not take into account the possibility that the investment in SVL might be impaired, as NCBCML does not have sufficient information on the company's trading history and current financial performance to make such an assessment at this time, the prospectus said. A final review will be done as soon as sufficient information is available.
