NCB CAP recommends participation in Tropical Battery APO




Brokerage house NCB Capital Markets Limited has green lit the Tropical Battery APO, encouraging investor participation,

The broker stated, "By averaging our DCF valuation of $2.83 and P/E valuation of $2.67, we obtained a price of $2.75, with an implied forward P/E of 21.28x. This represents an upside of 47.0% on the $1.87 APO price, which is above the 12.7% cost of equity and suggests that investors would be adequately compensated for buying Tropical’s shares at the APO price. Therefore, we recommend that investors PARTICIPATE in Tropical’s APO. We believe our recommendation is justified by the expected savings on finance costs, once the APO proceeds are used to pay down $1.40Bn in CIBC debt + $0.3Bn in other outstanding debt.

" Additionally, the significant increase in operating profits from its recent Rose and KAYA acquisitions should also support a substantial recovery in Tropical's earnings. Moreover, global and regional macrotrends support a shift toward increased demand for renewable energy and energy storage solutions in the U.S., Jamaica, and Dom. Rep., which should fuel medium-term demand growth. This growth should translate into higher profits, the resumption of dividends, and ultimately greater value creation for Tropical’s existing and new shareholders participating in the APO. Still, market conditions could delay the convergence of the company’s stock price to our target price."

Tropical Battery Company Limited (Tropical) is seeking to raise capital through an Additional Public Offer (APO) on the Junior Market of the Jamaica Stock Exchange (JSE). The company is offering 954,545,455 new ordinary shares, with the possibility of increasing the offering by an additional 168,449,197 shares, for a maximum total offer size of 1,122,994,652 new ordinary shares. The APO price is J$1.87 per share. If the APO is successful, Tropical intends to apply to the JSE to graduate from the Junior Market to the Main Market. The APO proceeds, totalling approximately $1,785,000,000. 

Source: NCB Capital Markets Limited

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