Wed | Oct 28, 2020

Barita enters elite $100b club, then retreats

Published:Friday | October 16, 2020 | 12:12 AMSteven Jackson - Senior Business Reporter


File 
Paul Simpson, deputy chairman of Barita Investments Limited.
File Paul Simpson, deputy chairman of Barita Investments Limited.

The market value of Barita Investments Limited, BIL, has hit $100 billion for the first time, a status held by only three other stocks, all of which are financial firms.

However the stock pared gains the following day.

BIL closed at $92.20 on Wednesday, valuing the company at $100.09 billion; on Thursday, it closed down at $92.05, erasing its market value to $99.93 billion.

BIL has grown 25 times in market value in two years since its acquisition by private equity firm Cornerstone Holdings. Its value then was around $4 billion.

The Jamaica Stock Exchange estimates the market value, or market capitalisation, of companies by multiplying the closing price of a stock by the number of listed shares.

Barita now ranks as the fourth-largest listed financial institution in Jamaica, based on market valuation. It comes after a series of fundraisings via the market, the most recent being an additional public offering, APO, of shares that was oversubscribed last month.

“We continue to build strong teams, and these teams are navigating opportunities to the benefit of shareholders,” Cornerstone founder and deputy chairman of Barita Paul Simpson said in an interview with the Financial Gleaner.

The other three companies on the market in the $100b club are: NCB Financial Group, with a market value of $335 billion; Sagicor Group Jamaica, $172 billion; and Scotia Group Jamaica, $145 billion.

At least two others, PanJam Investments Limited and Kingston Wharves Limited, were members last year, but lost value during the pandemic. They and at least three other large-cap stocks, GraceKennedy, JMMB Group and Wisynco, currently fall within the $50 billion to $75 billion band.

On the JSE Financial Index, which tracks 23 companies, Barita has climbed from No. 14 to No. 4. The stock has gained 27.22 per cent year to date in a market that is down 27 per cent.

“We generally do not comment on the price of the stock,” said Simpson, when asked about the implications going forward.

Cornerstone acquired 77 per cent of Barita in August 2018, or 345 million of the 445.8 million shares in issue at the time. Its listed shares now top 1.08 billion units after two rights issues and one additional public offer. The APO raised $13.5 billion and the new shares hit the market on September 30.

The stock price had risen in anticipation of the share offer, then fell initially when the new shares hit the market but quickly rebounded in October. The result was that Barita overtook property and investment conglomerate PanJam Investments’ now $74 billion in market value, and also increased its distance from financial conglomerate JMMB Group at $55 billion.

Since 2018, the BIL share price has increased tenfold from the $9.20 offered by Cornerstone at is takeover of the company, while the number of listed shares has more than doubled.

The stock price increased despite the theoretical dilution effect in which earning per share would fall with increased shares. Instead, BIL’s earnings grew by double digits and triple digits as the market responded to the growth in both revenue and profit over the quarters.

Barita earned $2 billion in net profit in the nine-month period ending June 2020, up from $1.4 billion a year earlier. Revenues totalled $3.7 billion, up from $2.8 billion.

The company now holds $52 billion in assets, and its capital base has expanded to $15.2 billion from $9.3 billion a year earlier.

steven.jackson@gleanerjm.com