Durrant Pate/Contributor

NCB Capital Markets, regarded as the dominant player in Jamaica’s brokerage and equities market, is giving the thumbs down to special purpose real estate investment company, 138 Student Living’s additional public offer (APO).

Only last week, Steven Gooden stepped down as CEO of NCB Capital Markets in one of the biggest senior executive exit exercise in Jamaica’s modern corporate history.

The APO, which opened on September 8, and closes on October 6, has gotten a “do not participate” recommendation from NCB Cap Market having done an analysis of the equity offer.

In its analysis, NCB Cap Market notes that the share price as at Wednesday (September 27) was J$4.33, lower than the APO price with the return on equity being assessed at 7.5 per cent.

The trailing twelve month (TTM) dividend yield, which is a measure of the percentage of income that a security has returned to investors in dividends over the past 12 months has been assessed at 3.0 per cent. Given the foregoing, NCB Cap Market is not giving 138SL’s APO a buy recommendation.

APO details

The APO is seeking to raise J$2.15 billion by offering 513,972,784 shares with the ability to upsize by 256,986,392 shares. Of the shares being offered, 318,515,000 are reserved for existing shareholders, 138SL team members, as well as strategic partners at a price of $4.05 per share.

The remaining 195,457,784 is being offered to the general public at $4.40. Net proceeds from the APO will be used primarily to reduce 138SL’s debt by J$1.5 billion to J$2 billion, if upsized.

The proceeds will also be used to take advantage of other investment opportunities including build out additional rooms on the UWI Mona campus. 138SL was established in August 2014 to design, construct, and operate living facilities at the University of the West Indies (UWI) under a 65-year concession agreement.

It has a wholly owned subsidiary, 138SL Restoration Limited, which was incorporated in Jamaica in April 2015 to restore, reconstruct, and operate certain traditional halls, under a 30-year restoration concession, granted by UWI. Under the main concession agreement entered into with the university to solve accommodation shortage, 138SL was required to design, construct, and operate 1,584 units in 3 development phases over a four year period.

Only two of the three phases have been completed with the construction of 1008 now taking place. Under the restoration concession, 138SL Restoration agreed to renovate and expand up to 722 units, of which 456 have been completed.

However, in addition to this, under the concession the subsidiary has the capacity to increase its existing number of rooms by an additional 266, which is being done.