The TTNGL’s Additional Public Offering: June 5th – June 28th, 2017 (4:00 p.m.)

5 June 2017


Following the Government of Trinidad and Tobago’s announcement by the Honourable Minister of Finance, Colm Imbert, on October 17th 2016, in his budget statement that it intends to further divest some of its ownership in TTNGL, the company has officially launched an Additional Public Offering (APO) this Monday, June 5th, 2017.

Following the Government of Trinidad and Tobago’s announcement by the Honourable Minister of Finance, Colm Imbert, on October 17th 2016, in his budget statement that it intends to further divest some of its ownership in TTNGL, the company has officially launched an Additional Public Offering (APO) this Monday, June 5th, 2017.

 

See below for the details:

  • Offer Size: 40,248,000 Class B shares at TT$21.00 per share for a total consideration of TT$845,208,000.00
  • Opening: June 5th, 2017
  • Closing: June 28th, 2017 at 4:00 p.m.

The announcement, prospectus, as well as the purchase application forms can be found here.

While this APO should not be a surprise to anyone who has been following the government’s fiscal woes on the back of a rather difficult local economic environment and depressed government revenues due to the diminished results of the energy industry, it comes only three months after the closing of the previous government-led APO of First Citizens which was undersubscribed by about 32% with about 16.5 million of the shares offered not being sold. In his budget statement, the Minister of Finance had spoken of raising $1.5 billion each from APOs for First Citizens and TTNGL, but having only secured $1 billion from First Citizens, he has scaled back the TTNGL to raising $800 million.

Some have argued that the TT$32.00 price tag per share of the FCB’s APO is the main culprit for the undersubscription to the offer, with it being too high, despite being the market price of the shares as of the day of the opening of the offer. Nevertheless, this resulted in all subscribers to the offer receiving their full allocation, which, in a way, was to the benefit of the subscribers.

Therefore, the main question remains: will this be the case for the APO of TTNGL and should investors consider this new offer by the government?

We at Firstline believe that it is very likely that this APO will not be different from the last. The TT$21.00 price-tag per share is, similarly to the FCB’s APO, the current market price as of this morning (June 5th, 2017). Given the tough economic situation, especially in the energy sector, the interest in “risky” assets by large and smaller investors has been muted (remember, the price of shares is market-driven and as a result, the possibility of loss is real where the price may go lower than the initial buying price in the short term or the long term). Additionally, the TT$21.00 per share price is also very close to the 2015 IPO price of TT$20.00. Hence, potential subscribers to the current offer may feel that the shares have not performed adequately given expectations about huge capital appreciation as happened with the First Citizens IPO and notwithstanding the best dividend pay-out on the market.

However, as we like to remind ourselves and our clients, past performance is no guarantee of future returns and TTNGL has some very strong positives to offer investors:

  • TTNGL’s shares carry the highest dividend yield of any locally listed shares at 7.14%. Furthermore 99% of the company after-tax profit is to be distributed as dividends. Hence, as long as Phoenix Park Gas Processor Limited (PPGPL), the company from which TTNGL derives its revenues remains profitable, TTNGL’s dividend yield should remain above average.
  • TTNGL earns its revenue in USD and holds significant cash, suggesting a capability to pay dividends at current levels prospectively for another five years. There are suggestions that it moves to pay dividends in USD and awaits the administrative capability of the TTCD to so do.
  • PPGPL, the company of which, TTNGL is one of the main shareholders, has weathered the recent slump in the energy sector better than most and remains a highly profitable venture, thanks in no small part to its good management, low-cost structure and advantageous geographical location in the Caribbean that enables it to remain competitive despite the advent of fracking in the U.S.A. To be sure, its marketing arrangements with Trafigura have worked very well for it, but equally certain is its competitive changes to the Caribbean market, with competition from historic as well as new players happening as we speak.
  • TTNGL’s stock’s all time high price was TT$25.00 (25% more than the TT$20.00 at issue) while its all-time low was TT$18.75 (6.25% lower that the issue price). The stock has also managed to remain above the issue price for most of its short life in the public eye.

 

So where does that leave us? Well, with a stock that we at Firstline believe is adequately priced, with modest upward potential but also limited downside risk, while offering an exciting dividend yield that should be expected to remain better than the local average for the foreseeable future.

As such, we see the APO as an attractive investment opportunity for investors who are willing to take some additional, but limited, amount of risk (it is a stock after all), and are looking for an additional higher than average income-generating opportunity. The very real potential for undersubscription to the offer as a whole comes as an added bonus as subscribers may see their subscriptions fully allocated.

Feel free to contact any of Firstline’s team members (see below) who will be happy to assist you in the subscription process:

 

-Jody Hernandez | jody.hernandez@nullfirstlinesecurities.com;

(1 868) 628 – 1175; 374 – 2838

-Thomas Verguet | thomas.verguet@nullfirstlinesecurites.com;

(1 868) 628 – 1175; 485 – 2786

-Maxine King | maxine.king@nullfirstlinesecurites.com;

(1 868) 628 – 1175; 684 – 6918

-Alicia Hernandez | alicia.hernandez@nullfirstlinesecurities.com;

(1 868) 628 – 1175; 620 – 2540

-Cole Patrick | cole.patrick@nullfirstlinesecurities.com;

(1 868) 628 – 1175; 280-8637

-Winston Gordon | winston.gordon@nullfirstlinesecurities.com;

(1 868) 628 – 1175; 678-9393

-Serena Katwaroo | serena.katwaroo@nullfirstlinesecurities.com;

(1 868) 628 – 1175

-Maria Lewis | maria.lewis@nullfirstlinesecurities.com;

(1 868) 628 – 1175

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