CPJ steps up to Main Market
After listing on the Junior Market (JM) of the Jamaica Stock Exchange (JSE) on July 20, 2011; Caribbean Producers Jamaica Limited (CPJ) graduated to the Main Market (MM) on Tuesday, July 13, 2021; less than a week from its 10-year anniversary as a listed company.
The company, which specialises in the wholesale and distribution of food, beverage and other supplies, got approval from the JSE’s listing committee on Friday, July 9, 2021.
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CPJ went public through an initial public offering in 2011 where it raised US $5.11 million ($425.75 million) in fresh capital to expand its business. Although the business has grown significantly over the last decade, the novel coronavirus pandemic and a mishap with its new information technology system caused it to rack up three consecutive years of losses.
However, the company now expects significant tailwinds as the tourism sector begins to recover in Jamaica and St Lucia. This has included the expansion of its grocery stores in St Lucia from 3,000 to 8,000 square feet (sq ft) and a Montego Bay retail store from 1,200 to 6,000 sq ft. CPJ also has identified an acquisition target in Jamaica with a plan to build out a 9,000-sq ft grocery store in Castries, St Lucia. CPJ intends to grow its revenue base from US $15 million to $50 million within the next three years.
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The move from the JM to the MM opens opportunities for the company to source new equity capital through a rights issue or additional public offering (APO). JSE rules prohibit JM companies from having an issued share capital larger than $500 million unless they get permission to remain while paying listing fees as if they were a MM company or be required to graduate directly to the MM.
Companies listed on the JM are afforded a 10-year tax break, where in the first five years, the firm does not pay income tax (100 per cent remission) while they pay 50 per cent of the income tax in the second five-year period after listing.
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Derrimon Trading Company Limited became the exception when it was able to raise $4.22 billion in its January APO and remain listed on the JM after gaining JSE approval. This was done under the premise that its subsidiary Caribbean Flavours and Fragrances Limited would have been required to move to the MM based on JSE rules which would have disenfranchised minority shareholders. JSE rules prohibit a JM company from being an associate or subsidiary of a MM firm. Key Insurance Limited and Eppley Limited are the two other JM companies which have graduated to the MM. Key raised $668 million in January from a rights issue to get it above the regulatory stipulated minimum capital ratio test.
A potential equity raise by CPJ could open the door for the company to improve its capital position and reduce part of its long-term debt. CPJ has failed to maintain loan covenants for some of its debt, but has been given waivers each time by financial institutions and bond holders. CPJ refinanced US $3.6 million in debt during the first nine months of its 2021 financial year. CPJ’s net loss attributable to shareholders for the period was US $3.59 million while its cash flow from operations stand at US $592,596 compared to US $4.65 million in the prior period.
CPJ’s stock price has risen by 78 per cent year to date to $4.98 as of Monday, July 12, 2021. It hit an all-time high of $7.15 in August 2018. CPJ currently makes up six per cent of Mayberry Jamaican Equities Limited’s (MJE) $16.56-billion investment portfolio. MJE is the number two shareholder in CPJ with a 19.91 per cent stake.
