Durrant Pate/Contributor

NCB Capital Markets Limited, Jamaica’s leading capital market player, has given Omni Industries’ initial public offer (IPO) a ‘participate assessment’ based on its past financial performance.

In assessing the IPO, which opened last Friday (May 17), lead arranger NCB Capital Markets stated that revenues and profit saw significant growth since 2019 that peaked during the pandemic but has since moderated. 

Omni’s net profit grew over the last five years at a compound annual growth rate (CAGR) of 33.3 per cent. 

According to NCB Capital Markets, “Earnings grew throughout the COVID-19 pandemic, despite disruption to business activities that affected several key industries in Jamaica and the region. Strong cost management and strategic investments in infrastructure and sustainability supported the profit growth.” 

Metrics generally on par with or exceed industry averages 

This led to significant gross margin improvement from 24.0 per cent in 2019 to 30.0 per cent in 2023 with the company’s metrics generally on par with or exceed industry averages and improvements in liquidity and solvency underscore its financial health. Over the last five years, return-on-assets (ROA) increased from 5.3 per cent to 9.2 per cent 

Return-on-equity (ROE) decreased from 49.3 per cent to 29.0 per cent but still exceeded the peer group averages. The current ratio increased from 1.52x to 1.70x and debt-to-equity (D/E) decreased from 5.48x to 0.74x.

The capital market leader’s short to medium-term base case outlook is that OMNI Industries will see moderate earnings growth driven by increased local and export revenue, improved operational efficiency and the tax benefits associated with listing on the junior market of the Jamaica Stock Exchange (JSE).  

“We expect Omni’s local revenue growth to be led by its construction and packaging segments. We believe this will be underpinned by Jamaica’s continued economic growth, which should buoy the Construction and Manufacturing Sectors that are both historically key contributors to Omni’s performance,” NCB Capital Markets asserted.

The company reported, “Strategic investments in machinery, plans to retool using IPO proceeds, prior exporting experience in CARICOM and a new beer crate contract in Panama augur well for local and regional growth. We also believe that strategic investments in efficient machinery will aid margin expansion and amplify the impact of local and export revenue growth on earnings.”

Based on the foregoing NCB Cap Market concludes, “If our base case pans out, investors who participate in OMNI’s IPO stand to benefit from dividends, capital appreciation, and long-term growth as the company expands its market presence and improves its profitability.”

Omni’s combined IPO and Offer for Sale seek to raise 500 million shares on the JSE’s Junior Market. The company is making available 250 million new shares for subscription in the IPO, whose proceeds will accrue directly to Omni; and a separate 250 million existing shares are being offered for sale by existing shareholders.

The IPO closes on Friday May 31, 2024