NCB Capital Markets, however, says the offer is overvalued.
At $2.50 per share, the brokerage said it was not recommending Barita's ordinary shares as a buy, noting in its analysis that the company's trailing price to earnings ratio of 10.42 times was higher than the average price earnings (PE) of 9.36 that the two companies listed on the stock market deemed to be most similar in size, income streams, and competitive position to Barita Investments.
On a price/book ratio assessment, NCB Cap said the shares are even more expensive when compared to larger listed companies on the Jamaica Stock Exchange.
If the industry P/B of 0.67 times were to be applied, said the investment house's analysis, then the share offer should have been priced closer to $1.88 per share.
Sound fundamentals
But, Michelle Hirst of Stocks and Securities Limited (SSL), while noting the higher price multiple still rated the IPO as a buy.
"As a result of its proven track record, strong management and sound fundamentals, SSL recommends Barita Investments Ltd as an equity investment at J$2.50 per share," said Hirst, manager of equities and research at SSL.
"Though its trailing price multiple is higher than the industry average, the premium seems justified, given that Barita's size will allow it to grow earnings faster than its larger, more mature competitors."
Barita Investment Limited hopes to raise $1.1 billion from a placement of 200 million ordinary shares at $2.50 per unit; 100 million convertible variable rate preference shares; and another 100 million redeemable variable rate prefs.
The preference shares are priced at $3 each with a coupon of 16.5 per cent on the redeemable prefs and 12 per cent for the convertible prefs for the first year.
NCB Cap also gave them the thumbs down, saying the initial dividend yield was 43 basis points and 50 basis points lower than the most recent six-month treasury bill yield in November of 16.94 per cent and the BOJ 180-day open market tenor priced at 17 per cent, respectively.
"In addition, the reset margin of 1.75 per cent does not offer investors a sufficient risk premium above Government of Jamaica instruments of similar maturity," said the analysis.
Friday will make it the fifth day since the offer is open to the market with brokers reporting a fair to moderate take-up of the shares.
The IPO opened for subscription December 7 and closes December 15.
Barita hopes to strengthen its capital base from the proceeds, and launch into the private pensions and foreign currency markets.
Pan Caribbean Financial Services, whose recommendation is 'buy and hold', said in its analysis that the anticipated new injection of capital, strong management, and diversified revenue streams will allow for a reasonable increase in shareholder value overtime.
sabrina.gordon@gleanerjm.com