Business

VMIL is being listed at a discount – JN Fund Managers

Wednesday, December 13, 2017

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The Victoria Mutual Group is listing its subsidiary, Victoria Mutual Investments Limited (VMIL), on the Jamaica Stock Exchange (JSE).

The initial public offer (IPO) of VMIL opened on Monday, December 11 and closes on Monday, December 18th.

On the strength of the goodwill of the Victoria Mutual Building Society brand, it is expected that the offer will be oversubscribed.

VMIL will be run by Devon Barrett, CEO of VM Wealth.

President and CEO of the group, Courtney Campbell explained the rationale behind the decision to put a part of the group on the JSE.

“In terms of [a] strong, integrated financial group, VMIL is the vehicle through which VM will significantly increase our funding support to the private sector to facilitate growth of high-potential entities, especially our medium enterprises, and diversify VM's revenue base. With respect to our modern mutual goal, this IPO is historic in that this is the first time that a mutual financial institution in Jamaica will list a subsidiary on the Jamaica Stock Exchange. In addition, as part of our commitment to remain at the forefront of advancing financial inclusion, we have designed the offer to create value for our members and clients.”

According to the VM Group's Chief Investment Officer Devon Barrett, this invitation has come at an opportune time.

“We have identified the need for more innovative and creative financing solutions for small and medium-sized entities (SMEs). The demand is approximately $20 billion per year and we plan to use the proceeds of this IPO to provide financing solutions, in either debt or equity. So, we are committing at least $1 billion of financing to SMEs in 2018.”

In a release to clients, JN Fund Managers notes, “We believe that VMIL is being listed at a discount. Our estimated fair value is $2.97, based on the company's projected performance in fiscal year 2018. This represents a 21.31 implied upside from the listing price. Additionally, based on the company's stated intended dividend policy of a 75 per cent payout ratio, the estimated dividend for fiscal year 2018 is $0.20. This translates to a potential dividend yield of 8.32 per cent on the issue price.

“Consequently, the estimated 1-year total return is 29.63%. We therefore rate VM Investments Ltd as a BUY.“

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