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GraceKennedy shares rise in run-up to stock split

Published:Wednesday | June 8, 2016 | 6:00 AMSteven Jackson
Don Wehby, CEO of GraceKennedy Limited.

The shares of food and financial conglomerate GraceKennedy Limited rose towards record highs in the lead up the announcement of a planned stock split.

GK shares have finally returned to levels hit more than a decade earlier, in 2004.

GraceKennedy first signalled that the split was under consideration at its annual general meeting on May 25. The market rewarded the announcement by buying up the stock and pushing the price to $118.09 on Tuesday. The stock closed at $91.30 on May 25.

On Monday, the GK board approved the three-to-one split. Assuming shareholders vote their approval at a meeting set for July 11, the split will increase the company's authorised capital from 400 million shares to 1.2 billion. It will also triple the shares in issue to around 993 million units, but shareholders will not see an increase in the value of their holdings as the price of each share will similarly subdivide to a third of its trading value pre-split.

The rationale for the split is to increase liquidity of the tightly held conglomerate stock by making more available for trading at a cheaper price.

"The stock split would result in the number of stock units currently owned by a stockholder being increased threefold," said GK group CEO, Don Wehby, in a press release.

"The stock split would allow our stock to be made available to more investors. It is also expected to further enhance the market for the shares," he said.

BULL RUN

GraceKennedy is the latest stock market company to announce a subdivision of its shares - two others being bakery operator and junior market company Honey Bun 1982 Limited, and property conglomerate Pan-Jamaican Investment Trust.

The Jamaica Stock Exchange witnessed a bull run in 2015, but GK did not double in price like many other listed companies. The stock has increased in value since the start of this calendar year, but really took off at the end of May following the AGM.

Year to date, the price has risen 45 per cent, with market capitalisation at $39 billion.

Tuesday's closing price of $118.09 essentially equalled the December 2004 closing price of $118 based on historical GK annual reports.

Currently, the stock's trading range puts its 52-week high of $120.50, which resembles levels traded during periods during the 2004 bull run. The stock never maintained that value and dipped to $87 by 2005, then $63 in 2006. Over the last five years, GK traded as low as $50.01, a point hit in 2012.

GK recently released its first quarter results, which showed revenues up by 14.3 per cent to $22 billion, while net profit more than doubled from $702 million to $1.6 billion at March 2016.

steven.jackson@gleanerjm.com