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Sterling Investments to split stock in pursuit of liquidity

Published:Friday | February 20, 2015 | 12:00 AM
File Father-daughter duo Charles Ross, president and CEO of Sterling Asset Management, and Marion Ross, the head of business development at Sterling.

Sterling Investments Limited (SIL) is the second most expensive stock on the Jamaican market, which was listed by introduction just four months ago.

Within that time, the SIL has traded just four times and its stock price has held firm at its debut price of $134 per share.

The company's shareholders will vote at a special meeting on Saturday, February 21, on the board's proposal for a 10-to-one split of the stock, which would reduce its price to $13.40 per share without affecting the company's market value.

The meeting will also vote on a rights issue under which the company aims to raise around $450 million.

SIL currently has 4,014,547 shares in issue, which were listed by introduction on the Jamaica Stock Exchange in October 2014.

Marion Ross, the business development manager for Sterling Asset Management (SAM), the company that operates Sterling Investments Limited, said that depending on the vote on the stock split, the rights issue would offer four million or 40 million additional shares to current shareholders.

Offer renounceable

Additionally, the right's offer is renounceable. Shareholders may acquire one share for each share already held but may renounce their rights to other owners, while the units not taken up in the offer will be offered to the general public for subscription, Ross said.

SIL had initially indicated that the offer would have been non-renounceable but changed tactics in order to expand its ownership base beyond the current 100-plus shareholders and make the stock more accessible to institutional investors, including pension and endowment funds, or "any regulated institution that has restrictions on the amount of US dollars it can hold," said Ross. "SIL is a great hedge for pension funds or pension plans," she adds.

All the underlying assets are denominated in US dollars, and: "Even the one small private equity project that we do have going is outside the Jamaican economy," she said.

Sterling disclosed last year that 7.5 per cent of its equity portfolio had been invested in a condominium development being executed by Pelican Bay Limited in St Kitts-Nevis.

The company will make a pitch to pension fund trustees about the rights offer at a March 6 seminar.

Ross said the $450 million to be raised from the rights issue would position SIL for opportunities that arise in the market for USD securities. The company's portfolio heavily favours fixed-income tradeable securities, and the "new funds will be similarly allocated," according to the business development manager.

SIL is trumped only by junior-listed Eppley as the most expensive stock on the market at $380 million. Its price affects perception of affordability, Ross said. A stock split offers larger volumes for trading at a lower price.

The majority of SIL's current shareholders are pension funds, retirees and individual local equity investors, numbering no more than 110, Ross said.

At September 2014, the total value of SIL's investments was $707.55 million, comprised mainly of USD-denominated fixed-income securities with coupons ranging from 6.5 per cent 12.5 per cent. The company also reported improved net profit of J$48 million off revenues of $67 million at nine months to September 2014.

The stock has not traded since December 24.