TROPICAL BATERY LOOKS AT AMERICAN LIST

TROPICAL Battery Company Limited aims to list its shares on the National Association of Securities Dealers Automated Quotations (Nasdaq) in New York before the end of the decade and said its planned listing on the main market of the Jamaica Stock Exchange (JSE) later this year is the first step toward achieving that goal.

The company hinted at a Nasdaq listing just six months after acquiring San Jose, California-based Rose Electronics Distributing Company (Rose Batteries), a maker of batteries and chargers.

“We have a team and strategy and coaches based in California that we meet with quarterly to discuss our three- to five-year plans and aspirations for a Nasdaq listing,” Tropical Battery CEO Alexander Melville said on Thursday’s earnings call. “We have a structured three-year plan to get to that listing, which will then create even more liquidity,” he added.

Tropical Battery is the latest Jamaican company to express interest in a Nasdaq listing. Companies such as GraceKennedy and NCB Financial Group have previously floated plans to list on Nasdaq but failed to do so for various reasons, although GraceKennedy still hopes to list on international exchanges by 2030.

However, prior to the planned listing of Tropical Battery shares, there will be an introduction to the JSE Main Market.

Late last month, Tropical Battery said in a press release that it planned to move to the Main Market before the end of the year, and now, during the same earnings conference call in which Melville announced its intention to list on Nasdaq, it clarified that the move should occur “late September or early October.”

“We’re very excited about the transition to the main market. I think only about six or seven companies have ever transitioned from the Junior Market to the main market, and we’re doing it really early, four or five years after listing,” Meville said in the earnings call.

The desire to withdraw the shares from the Junior Market and introduce them to trading on the main market results from the company’s need to raise capital to implement its expansion plans, as well as to repay the debt incurred to purchase the aforementioned Rose Batteries.

The company said in March it paid $US19 million ($2.9 billion) for the acquisition, but that amount was revised to $US22.8 million ($3.5 billion) in financial statements released Wednesday. The funds to buy the battery maker came from loans from Sygnus Credit Investments. Part of that initial loan from Sygnus Credit Investments was refinanced with a loan from CIBC Bank.

Tropical Battery had sought low-interest financing from U.S. banks, but Melville explained that U.S. lenders were wary because of the foreign stake in the company. Given the timely nature of the Rose Batteries acquisition, with multiple bidders vying for the 62-year-old business, the company opted for financing in Jamaica to meet the deadline.

The company now wants to raise funds to pay off at least some of its debt to Sygnus Credit Investments so that more of its profits can be used to pay dividends. It is considering an additional public offering (APO) of its shares as one possible method of raising funding.

“It will either be long-term financing or an equity injection, and whether that is through an APO, a third-party investment or a rights issue, we are looking at what is the best way to proceed,” Melville explained.

Still, he said the intention was to reduce the company’s debt by half, or about $US10 million ($1.5 billion), and raising that amount through an APO would breach JSE rules for Junior Market companies that do not have a share capital of more than $US500 million, hence its push for a Main Market listing. Tropical Battery’s current share capital is $US164.3 million.

However, there were concerns that APO could lead to a drop in the share price. Melville addressed this by explaining that unlike other companies, Tropical Battery’s approach to APO will be distinct, focusing on facilitating the transition to the main market rather than solely raising capital.

“This move to the main market makes us more attractive to larger investors, pension funds and those who value transparency. We are adding a new independent board member, demonstrating our commitment to transparency, growth and dividends. This commitment will undoubtedly boost our share price,” he assured.

The company also plans to issue shares to directors of Rose Batteries. The resolution was approved by shareholders at the annual general meeting in April this year to issue 65,627,273 new ordinary shares. At Thursday’s closing price of $2.20, that’s $144.38 million in new shares to be issued.

Melville also assured that the US financial institution has committed to supporting Tropical Battery by providing low-interest financing for future acquisitions in the US. He suggested that further acquisitions are likely to occur in 2025 or 2026, and that the company will be well-positioned for strategic growth. In addition to its operations in Jamaica and the US, Tropical Battery also operates in the Dominican Republic.

In the third quarter from April 1 to June 30, 2024, Tropical Battery achieved significant sales diversification across three key regions: Jamaica, the Dominican Republic, and the United States. Remarkably, the company has moved from a heavy reliance on sales in Jamaica to a more balanced distribution. According to the third quarter report, the United States now accounts for 55 percent of sales, representing a significant shift in business and cash flow. In addition, the U.S. market contributed 65 percent to the company’s operating profit in the last quarter. This development creates further growth opportunities for Tropical Battery in the U.S. market.

The company’s total revenue rose 143.6 per cent to $1.9 billion. Interestingly, this quarterly revenue exceeds the $1.4 billion the company made in revenue for the full financial year 2019/20, just prior to its listing on the JSE.