By Dennise Williams, Staff Reporter
Lee-Chin
MICHAEL LEE-Chin knows how to turn a dollar. In 2000 he burst on the Jamaican business scene and has made non-stop acquisitions that have proven to be spot on. He picks winners and sends his local competition back to the drawing board with each move.
His personal net worth is C$1.7 billion and he has achieved the Jamaican dream of going abroad and doing well (all right, exceptionally well). His ability to turn ten cents into a dollar was born of necessity. In 1969 he was faced with a C$2,500 tuition bill for McMaster University in Canada.
In media reports he acknowledged that he only had C$600 in his pocket earned from jobs on cruise ships and working at an aluminium plant. Calling home to Jamaica for money wasn't even an option, as his parents had seven younger children (future supermarket titans) to cope with on a grocery clerk's salary.
NEEDED HELP
He needed help and if he couldn't get it from his parents in Jamaica, why not the Jamaican government? Mr. Lee-Chin reasoned that since returning residents are Jamaica's greatest assets, why not invest in one upfront? So, he took C$400, bought a plane ticket to Jamaica and convinced then Prime Minister Hugh Shearer that he was a sure bet. He left Jamaica with a C$15,000 scholarship. In a 2002 interview with Forbes Magazine, Mr. Lee-Chin stated, "From an early age my mother told me that there were so many of us that if I was to get anything in life I would have to get it myself. So I did."
Indeed. With a degree in civil engineering, he returned to Jamaica to work on highway projects. However, Toronto lured him back and he found a job as a bar bouncer. His pay was an unimpressive C$2.50 an hour, but the job proved fortuitous. He met a young man who was a mutual fund salesman for the Investor's Group. That young man boasted of making C$200 for the day in commissions. The very next evening, he boasted of making C$400 during the day. Mr. Lee-Chin promptly applied to Investor's Group. He had found his calling. He spent the time at Investor's Group and subsequently Regal Capital Planning well. He learned the financial markets and adopted the buy and hold strategy of United States investment icon Warrant Buffet. In 1983 Mr. Lee-Chin used borrowed funds from the Continental Bank of Canada and bought into the Mackenzie Financial Group at C$1.00 per share. His investment cost him C$500,000.00. Five years later that turned into C$3.5 million.
Mr. Lee-Chin was on his way. That money came just in time to purchase the minuscule financial adviser firm, AIC for C$200,000. AIC at that time had C$800,000 funds under management. That was 1987. By 1998, the company was worth C$12 million.
Today, AIC is not only a financial advisory firm, but a mutual fund behemoth. As the tenth largest mutual fund company in Canada, it consists of C$14 billion under management and 23 separate funds. His own personal net worth is estimated to be C$1.7 billion. As the new millennium approached, it was time to head back to Jamaica. And again, his timing was on spot. The financial sector was in trouble; the Government of Jamaica (GoJ) bailed them out and needed to offload the assets taken from the financial sector as collateral.
With a fist full of dollars, Mr. Lee-Chin made the first of his aggressive acquisitions in Jamaica. And the return on investment of each has been healthy.
NATIONAL COMMERCIAL BANK
On March 19, 2002 AIC bought the GoJ's 75 per cent stake holding (approximately 117 million shares) in the bank for 10 per cent less than what the shares traded for on the Jamaica Stock Exchange (JSE). The deal valued at $6 billion (US$127 million) cost Mr. Lee-Chin $2.65 billion (US$56 million) upfront. That initial out of pocket investment is now valued at $28.7 billion (based on the JSE trading price of the stock), an impressive profit of $26 billion in less than two years. The remaining balance of $3.35 billion is to be paid in eight annual instalments. As at September 30, 2003, NCB's after tax profit stood at $2.8 billion, representing a 22.67 per cent return on equity to shareholders over the last 12 months. And Mr. Lee-Chin continues to consolidate his holding of NCB. In March 2003, AIC bought 33 million shares from Jamaica National, the selling price on the JSE was $9.17. By October of 2003, AIC snapped up 32 million more shares of NCB. Then the trading price was $13.60. NCB traded as at February 5 for $14.50. JSE And Mr. Lee-Chin's shopping spree has not stopped with NCB. Igniting the JSE, he has made several important acquisitions.
RADIO JAMAICA
In January, Mr. Lee-Chin purchased 30 million shares at $5.00 a share. By February 4, the RJR shares traded at $5.19.
DESNOES AND GEDDES (D&G)
In October of 2003 when those shares were purchased, the stock traded at $5.60, it now trades at $5.50.
CABLE AND WIRELESS
Mr. Lee-Chin purchased these shares at the same time as the D&G stock for a little over $1 billion. C&W shares trade at $0.81 up 22.22 per cent from their October 2003 ending share price of $0.99.
LIFE OF JAMAICA (LOJ)
While this stock purchase has not been completed, this is another significant investment as LoJ has now merged with First Life Insurance Company. In October of 2003 when Mr. Lee-Chin made an offer for 80 million shares they were trading around $3.36. As at February 4, those shares are trading at $6.60.
States Leo Williams, managing director of JMMB Securities, "I think Mr. Lee-Chin is shopping for value. If you look at the broad range of stocks he has purchased, at different points in time, we have classified those stocks as undervalued and so, this is where he is getting value for money. The blocks of shares that he is purchasing are large and significant. I believe that he is holding these shares for the long term. It will not be easy to find a local investor to buy these blocks of shares off of him." In terms of the rumour that Mr. Lee-Chin is creating the foundation of a mutual fund, Mr. Williams states, "I have heard the rumours in the media, but Mr. Lee Chin has not come out and publicly stated that the creation of a mutual fund is his intention. However, that would be logical."
REAL ESTATE
NCB itself has a substantial real estate portfolio. But Mr. Lee-Chin has not stopped there. In January of 2003, he purchased the 160,000 square foot Mutual Life Twin Towers on Oxford Road for $650 million. The deal between Mr. Lee-Chin and FINSAC, GoJ's financial sector rescue vehicle, called for an upfront payment of $100 million and two equal payments $225 million at 10 per cent interest on the outstanding balance.
Commenting on Mr. Lee Chin's real estate holdings, a valuator at Property Consultants, a firm dealing exclusively in commercial real estate states, "In analysing Mr. Lee-Chin's real estate purchases, you have to look at the terms. He has not fully paid for either NCB or the Mutual Towers. Basically, he received those properties as a gift. And these deals, denominated in Jamaican dollars, mean that every time we experience devaluation, he pays less for the properties. But the fact of the commercial real estate market is that the best deals are at the very top. I mean, how many other people could have bought NCB or the Mutual Towers? There are no players in that high end of the market. Plus, he has the cash in hand and the cash flow that a mutual fund allows. Simple."
And now it is reported that Mr. Lee-Chin is in the process of purchasing the Trident Hotel in his hometown of Port Antonio. It's safe to say that interesting times are ahead for Portland.
