Investment broker, Stocks & Securities Limited (SSL) has cautioned investors about the current Mailpac Group Limited (MGL) initial public offer (IPO).
MGL was formed to assist Jamaicans with seamlessly purchasing and receiving items from online stores. The company has expanded to provide cross border online shopping in Jamaican dollar as well as online local shopping. The company has further expanded to offer clients a Mailpac branded MasterCard for shopping, freight shipping and brokerage services.
“The MGL shares are being offered at J$1.00 per share, while our analysis is within a range of J$0.65 to J$0.88 per share. Therefore, we believe that the company is overvalued and that investors are at risk of losing their initial investment once secondary trading commences. Hence, SSL’s opinion is that MGL is a very risky buy.”
“Though the group is backed by seasoned companies, SSL believes that even though Mailpac is one of the longest and largest within Jamaica, there are multiple other companies that provide cheaper courier services as well as tracking…”– Stocks and Securities
SSL notes that, “MGL is comprised of several businesses that can aid the company to grow. However, limited historical data was provided, as such, projections within the Prospectus could not be confirmed by SSL.”
SSL explains that in Jamaica there has been an increase in online shopping which has inherently fed into the increase in external courier service providers. “Other than Mailpac, other courier services include, Tara Courier Services, Knutsford Express Ltd, ShipMe, Quickship and DailyPak, just to name a few. Though the group is backed by seasoned companies, SSL believes that even though Mailpac is one of the longest and largest within Jamaica, there are multiple other companies that provide cheaper courier services as well as tracking, which is of most importance to Jamaicans, other than service.”
The valuation for the “very risky buy” label by SSL is explained. “Using Enterprise Value, which is a measurement used to determine the market value of the business, the Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) multiple was calculated. This ratio compares the company’s value to its earnings including its debt and equity, and is used as a comparable, relative to the value other companies operating similar businesses. Additionally, equity value, being the value of a company available to shareholders, was calculated using P/E. P/B and EBITDA ratios and compared to the 2,250,000,000 shares outstanding, as at December 2018 and 2019. Here equity value per share was determined and an average was taken to ascertain that MGL is valued between J$0.65 and J$0.88 per share. With the invitation for investors to purchase these shares at J$1.00 for general and J$0.90 for employees. SSL believes that MGL is over valued by approximately 31% for the general public and 18% for employees.”
The Mailpac IPO closed at 5:00PM yesterday, November 22.