Home' Trinidad and Tobago Guardian : July 5th 2015 Contents As the election cam-
paigns start to heat up,
we are mainly seeing
tions and other vari-
ations of gutter sport.
Hopefully, by early
August, we will see the
publications of manifestos and, perhaps, have
some edifying contributions.
Eventually, the leaders of the main parties,
who will emerge from a national poll, will be
allowed to think on their feet via at least one
national debate and attempt to articulate a
responsible way forward as we learn to face
the more stringent realities of the next few
years or so.
Are there any clear stock market winners?
Politics aside, from a business perspective,
all media companies will enjoy a strong boost
to their advertising revenues, as the vying
entities must employ both the traditional
(print) and electronic fora to both guide and
entertain the masses.
With a 12-week campaign, at least seven
or eight of those should be extremely intense.
Among the listed companies, both One
Caribbean Media and Guardian Media will
reap the benefits of the electioneering activities
when they report their third quarter results.
In addition, companies such as Carib Brew-
ery, a subsidiary of ANSA McAL Ltd and
Angostura will surely benefit; after all, no
public meeting would be complete without
a supply of beverages. Fast food purveyor,
Prestige Holdings Ltd, should also be among
the winners from this version of "feeding the
While Flavorite Foods Ltd should also reap
some rewards, that company is in the final
stages of being privatised; consequently, what-
ever gains that may accrue to it would mostly
benefit the new owners, Stone Street Capital
We are still seeing evidence of strong vehicle
sales. Are consumers factoring in changes in
motor vehicle taxes or, perhaps, significant
reductions in the petrol subsidies? Can we
anticipate an increase in vehicle repossessions
in the next 18 to 24 months, as consumers
strain to pay both vehicle loans and higher
maintenance costs? Not to mention property
taxes and other forms of "economic correc-
tions" that would impact on next year s house-
For the time being, both the Massy and
Ansa Automotive Groups would enjoy the
benefits of this mini-boom in auto sales. In
Massy s case, any slowdown in local auto sales
might be counteracted by improvements in
some overseas markets, such as Columbia.
Pending Clico-related matters
The recent exit of four directors (two based
on dubious rationale and two voluntarily)
from the board of Clico does not augur well
for the acceleration of the sale of assets and
The end of March announcement that, as
part of the settlement of its debt to the gov-
ernment, Clico s shares in three entities:
Angostura Holdings Ltd (32.5 per cent), CL
World Brands Ltd (42 per cent) and Home
Construction Ltd (43 per cent) would be trans-
ferred to the government.
Based on Clico s 2013 audited accounts, the
stated values of these companies were:
$835.139 million for AHL; $747.427 million
for CLWBL and $380.975 million for HCL.
These transfers are pending independent
valuations of those assets. Of the three com-
panies, only Angostura is publicly listed; con-
sequently, AHL s value shown above reflects
the market price of $12.47 as at December
31, 2013, which can be viewed as a "reference
or starting point" for the conduct of its val-
Interestingly, AHL held its 2013 AGM on
May 19, 2014. However, even though it still
has some flexibility, it has not yet set a date
for convening its 2014 AGM. There may be
at least two reasons for this delay.
The first is the valuation and transfer of
Clico s 66,971,877 block of shares (32.5 per
cent) in AHL. A second possible reason is the
delay in AHL receiving the outstanding sum
of $984.611 million from CL Financial Ltd.
Another complication is that Rumpro Com-
pany Ltd, a subsidiary of CL World Brands,
owns 92,551,212 shares (44.96 per cent) of
AHL. Government s acquisition of Clico s
shares in AHL and of 42 per cent of CL World
Brands could effectively make it the new own-
ers of more than 75 per cent of AHL.
When this new ownership structure is in
place, we might see the settlement of CL
Financial s debt to AHL. At a later date, will
the government consider arranging a partial
divestment of about one-third of its holdings
in AHL to help raise additional funds while
still maintaining majority control?
The sale of Clico s traditional insurance
portfolio, along with supporting assets, is also
yet to be finalised. Among the various local
contenders are Sagicor and TATIL Life Assur-
ance; otherwise, a sale to a foreign entity
could hugely expand the competitive envi-
ronment while boosting foreign exchange
We also have the pending sale of Methanol
Holdings International; in its 2013 accounts,
Clico valued its 56.53 per cent stake at $2.26
billion. Some of those proceeds are earmarked
for distribution to STIP holders.
As reported in another newspaper, there is
the pending matter of the classification of
Investment Note Certificates (INC), which
was issued by Clico Investment Bank. Under
what circumstances are they considered secu-
rities or deposits? A clear-cut answer would
hugely impact, positively or negatively, the
National Insurance Board to the extent of
about $700 million and the National Gas
Company to an amount in excess of $1 bil-
Aside from Clico related matters, the local
business community continues to be adversely
impacted by inconsistent access to foreign
exchange and the risk that some of its gov-
ernment receivables would be shifted to the
next fiscal year.
Are there any lessons to learn from the IPO
An initial public offering (IPO) can take
two forms. One version is the sale by an exist-
ing shareholder of part of its stake in the
company; this is being done in the case of
Phoenix Park Gas Processors Ltd, via a new
company, Trinidad and Tobago NGL Ltd.
In the other version, we have an entity
seeking to raise additional funds, either to
make an acquisition or to settle debts. An
example of this can be found in the Stallion
One of the fundamental skills for achieving
a successful IPO is that the issuer must be
able to accurately gauge the condition of the
market and price the security "correctly."
If the price of the security is too high, then
the chances for success are low and the issuer
is faced with several options:
1. Reduce the price.
2. Withdraw the offering or
3. arrange with a "backstop investor" (usu-
ally, an institution) to take up a large portion
of the shares.
On the other hand, if the price is too low,
then the issuer misses out on an opportunity
to either make an additional profit (from the
sale of existing shares) or raise extra funds
for his new or proposed ventures.
In our local, very conservative market, suc-
cess is usually defined in two ways; first, it
must leave room for investors to enjoy some
price appreciation in the secondary market
and second, it should offer a reasonable div-
As the ultimate owner, the government
has apparently made a strategic and practical
decision to price the Phoenix Park shares
(which price will be revealed soon) below its
This decision was based on two factors: 1)
the market for the company s main products
has changed drastically and 2) the govern-
ment s "immediate need" for funds to help
balance its current budget; consequently,
postponing the offer date introduces an even
greater price (and, possibly, political) risk.
Let us now look briefly at the Stallion Prop-
erty Trust IPO, which subscription deadline
was extended to last Friday. The two fixed
income portions of the offering were rea-
sonably priced and they should not have had
a problem to sell those units.
On the other hand, the equity portion was
not particularly attractive.
First, its projected dividend yield was a
meagre 1.5 per cent (dividend of $0.30 divided
by price of $20). Also, the dividend was not
projected to increase until 2020 (after five
years), assuming all other variables were met.
(Note: The dividend of $0.30 was derived by
dividing the payment of $10.146 million by
the number of shares that would be out-
standing after the issue, that is, 33.82 million
Taken together, these projections ltd new
investors expectation of enjoying any short-
term price appreciation.
The prospectus, at page 40, did caution
that prospective investors in the common
units are designed for investors with "a strong
risk appetite who can withstand capital depre-
An investor who still wants to participate
in the property market can reap a good return
from the existing mutual fund, Praetorian
Property Fund. How is this possible?
We do know that the life of the Praetorian
Fund was extended by one year to November
2015. Over the past several months, the fund
has been selling its properties and, in other
cases, upgrading others to make them more
saleable. There is a reasonable expectation
that the fund will eventually sell everything
and return the net proceeds to shareholders;
if not in 2015, then sometime in 2016.
What does this mean for a potential prop-
erty stock market investor?
Subject to supply, an investor can probably
buy a PPMF share for less than $3.40. (The
most recent price was $3.10.) Reasonably,
one can expect to receive anywhere from say
$4.50 to $4.75 when all its assets are sold
and the fund terminates. (The March 2015
net asset value was given as $4.82, which
was an improvement from last September s
This return could be as soon as November
2015 or as late as November 2016. This cal-
culated risk almost "guarantees" that the
investor will receive a reasonable return on
his money in a relatively short time.
With those funds in hand, the investor can
then decide to buy Stallion shares on the
secondary market, probably very close to the
recent offering price.
JULY 5 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
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Elections, Clico issues and IPOs
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