Regency Petroleum IPO gets tenfold increase in valuation Loop Jamaica

Black Immigrant Daily News

Regency Petroleum Co. Limited (RPL) says it is going for at least two per cent of the market in the household-cooking gas sector between the Kingston metropolitan region and St Catherine within the first year of its planned expansion into the space.

The company, which signalled its intention to list on the Junior Market of the Jamaica Stock Exchange, has now released its prospectus and will be inviting applications for shares between November 24 and December 8.

Regency Petroleum started in 2018 and generated $45 million in sales in its first year and grew to over $600 million in its 2021 financial year. That equated to a compounded annual growth of 268 per cent, the prospectus noted.

The IPO capitalisation at $1.44 billion is ten times the present value of its capital at $111 million up to June 2022. Regency Petroleum, with its compound growth rate and profit margin at 19 per cent in 2022, should grow its value over time. That, however, remains to be seen in its future financials.

Regency made a $59 million net profit over 12 months to December 2021 and $39 million over six months to June 2022.

The company hired GK Capital as its broker to raise $287 million in its IPO.

A successful IPO would result in the company liquidating its debt at approximately $160 million. In addition to debt reduction, $75 million will go towards the construction of its Paradise Pen service station in support of the automotive segment. Then $30 million will go to the expansion of its cylinder business to meet growing demand.

This new service station will incorporate modern technology and equipment and feature a state-of-the-art convenience store. Construction is expected to be completed by the end of 2022 with the location set to open by the end of the first quarter of 2023.

As for the cooking gas market, Williams told Loop News: “Currently, we are only on the western side of the island – Westmoreland, St Elizabeth, parts of Handover and St James, which in proportion to the entire island, I don’t think we have reached one per cent as yet”.

The company’s current footprint is “good” and leaves a lot of room for growth,” he said.

But with the targeted areas representing about seven per cent of the entire market for household gas, according to Williams’ guesstimate, RPL has much more room to grow and expand.

“For two [to three] parishes to make up seven per cent of the market, we are hoping to capture at least two per cent in the first year,” he said.

Regency Petroleum CEO Andrew Williams

RPL has been inspired to enter the eastern side of the island due to the density of the population, the CEO said.

The population there is [more] concentrated than any other part of the island. We can be very competitive in the corporate area… when it comes unto LPG,” Williams said.

RPL is now looking for land to buy in Kingston for a fourth gas station and will set up a distribution site for its cooking gas segment, he said.”For logistics, when we set up a location there, it will be more optimal for us, considering the density of the areas,” he said.

The company currently supplies bulk Liquefied Petroleum Gas (LPG) to established bakeries, restaurants, and hotels island-wide and has seen consistent growth in this business segment amid increasing demand. Williams has his sights set on areas such as Portmore, among others, for the expansion of RPL’s cooking gas LNG segment.

Though it plans to expand its bulk business, it is targeting the expansion of the cooking gas business first, Williams said.

RPL now sells 25lbs and 100lbs cylinders but is awaiting approval for a smaller 12lbs cylinder and sees this product coming onstream “within a year.”

The company is 100 per cent owned by Williams, who intends to sell 20 per cent of the company. That would move the total shareholding from 1.148 billion units to 1.435 billion units each at $1.00 a share after a fully subscribed offer.

The new shares issued to the general public at 287 million units are apportioned that the general public can subscribe to 40.2 per cent, with reserved shares accounting for the balance or 59.8 per cent.

Within the reserved shares, GK will get one-third for themselves, RPL employees and key strategic partners at one-fifth, and the rest towards housekeeping.

“This move should assist the company in optimizing its capital structure for further growth and enhance free cash flow,” Vice President of Investor Relations at GKCM, Ryan Strachan, said.

The company will be listed on the Junior Market.

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