First Rock deals in waiting nearly double to US$44m
First Rock Capital feted investors at one of its development sites in the upscale ‘Golden Triangle’ in Kingston on Thursday, where the start-up private equity company, which is preparing to go public and list on the stock market, also announced that its pipeline for possible projects has increased to US$44 million from US$25 million.
The institutional investors that released assessments on First Rock largely view its initial public offering, IPO, set to open January 13 as fairly priced.
First Rock plans to raise up to US$18 million in its IPO. The company wants to secure J$1.7 billion (about US$12 million) in immediate real estate transactions that are in the pipeline awaiting funding, and to finance other opportunities thereafter.
“Once we close, we will be able to execute on the transactions across Jamaica, Cayman Islands, Costa Rica and Florida USA,” said co-founder and CEO Ryan Reid at the development site in Seaview Avenue in Kingston.
The 1.6-acre site was acquired for US$2.2 million.
The company already owns eight properties. It plans to acquire an additional three properties in the coming months, including The Shoppes at Rose Hall in Montego Bay. The six-acre complex houses 29 shops, seven of which are unoccupied.
First Rock also plans to acquire a 3.4-acre property on Bamboo Avenue in St Andrew, and an office building in Virginia, United States, which contains the leased offices of SunTrust Bank.
Initially, First Rock intended to list the company on the Jamaica Stock Exchange without raising any funds – which is referred to as a listing by introduction – but reconsidered that strategy after its pipeline of opportunities increased.
“We committed to our initial shareholders that we would create a market for them … essentially a listing by introduction, but since then, the pipeline of opportunities has rapidly expanded to US$44 million,” Reid said. “So we are in really good position because we can cherry-pick from that pipeline,” he said.
The company began operating in March 2019 after raising about US$16 million in debt capital from institutional and accredited high net worth investors funds via private placement.
The company made US$218,000 profit from operations since it started in 2019. It aims to achieve US$4.6 million in annual profit by December 2021, and 12 per cent to 14 per cent return on equity over time. Consequently, institutions that released an assessment of the company expect it to grow its earning to match its pricing over time.
Brokerage firm Barita Investments Limited, for instance, utilised 2021 as its base year of assessment of the company rather than 2019 or 2020. First Rock will sell shares at US$0.12 but Barita views US$0.14 as the fair value of the stock.
“We decided to use financial year 2021 as we believed the activities of the company would be more reflective of their stated strategy,” the brokerage said, adding that the average fair value estimate under all three methods of valuation was US$0.1406, with an implied price upside of 17.15 per cent.
VM Wealth said that based on its assessment of the state of the company it “established a price target of US$0.12” – an estimate it said was in line with the offer price to the general public.
“The offer is more or less fairly valued,” said VM Wealth.
Sagicor Investments also expects First Rock to grow into its revenues over time, while noting that the current pricing to the market represents an opportunity but it comes with some amount of risk.
“The offer price of US$0.12 to the general public is fairly priced based on our estimated value of the company. As such investors could consider taking a stake in this company, however, at a fair value price the potential for upside is considered low,” Sagicor Investments said in its assessment.