Jamaica’s Future Energy Source Company Limited (FESCO) has issued its initial public offer (IPO) for subscription for 300 million newly issued ordinary shares priced at JM$0.80 each and sale of 200,000,000 existing ordinary shares by the selling shareholders priced at JM$0.80 each.
FESCO is a Jamaican-owned fuel distribution company that holds a license to operate in that country.
“Despite our growth prospects for 2020-2021 taking a hit due to the COVID-19 pandemic, we have still been able to increase our sales of fuel in litres year over year through dedication and effective work of our dealers and staff”
Up to 325,000,000 shares are initially reserved for priority application by the reserved share applicants. Meanwhile, at least 175,000,000 shares in the invitation will be available for subscription/purchase by members of the general public.
The invitation opens on March 31 and will close on April 9, 2021.
The invitation included an unusual introduction from broker NCB Capital Markets, which said that Future Energy Source Company Limited was registered with the Financial Services Commission (FSC) under Section 26(1) of the Securities Act on the 24th day of March 2021.
It added, “The FSC has neither approved nor has it passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offence.”
The prospectus was previously withdrawn for corrections and resubmitted to the FSC. However, the application to list on the Junior Market of the Jamaica Stock Exchange is largely dependent on the company’s ability to raise at least J$400 million from the IPO, and then on meeting the criteria for admission.
According to the prospectus, FESCO will use the proceeds of the IPO to support the growth of the existing business units, pursue strategic investment opportunities, and pay the expenses of the invitation.
At the same time, proceeds from the sale of shares by shareholders will accrue to their benefit and not to the company.
FESCO was incorporated and registered with the Companies Office of Jamaica on February 4, 2013, as a private limited liability company and made its first fuel sale in November that same year.
In 2014, the first FESCO-branded service station opened in Mandeville (Heaven’s FESCO) and since then the company has grown to fourteen branded service stations islandwide.
Currently, the group partners with some dealer-owned and -operated services stations, as well as company-invested, dealer-operated service stations to brand their stations as FESCO Service Stations.
The prospectus indicates that FESCO plans on opening two additional service stations in the parish of St Andrew — one at Ferry on Mandela Highway by April l, 2021, and the second at Beechwood Avenue in June of 2021. Based on their locations, the new stations should benefit from significant traffic volumes, which will augur well for the company’s revenues.
“It is generally expected that the opening of these two service stations will have a significant positive impact on the total fuel distributed by FESCO,” the document stated.
The company said it aims to provide dealer-owned dealer operated service stations with a “superior (more efficient and more responsive) fuel distributor and marketer.”
FESCO markets transportation fuels — E10 87, E10 90, (and any other blend that may become available) ultra-low sulphur diesel, diesel, LNG (estimated 2021); lubricants, coolants and chemicals; beverages including water; cooking gas (LPG) (estimated 2022/2023); and LNG for transportation.
The company’s current market share for transportation fuel is approximately 4.65 per cent (April 2020- September 2020) and should increase to 5.3 per cent by May 2021 and 7.0 per cent by December 2021.
CEO Jeremy Barnes commented in the prospectus, “Despite our growth prospects for 2020-2021 taking a hit due to the COVID-19 pandemic, we have still been able to increase our sales of fuel in litres year over-year through dedication and effective work of our dealers and staff.”
Company gross profits since 2016 have increased from JM$28.2 million to JM$178.3 million, which represents a growth rate of 58.6 per cent.
The prospectus also said FESCO has been able to increase its gross profit margins to its dealers as its brands become more recognised and demanded by customers (0.75 per cent in 2016 to 3.0 per cent in 2020).