Beyond the Exchange

Some seven months after insurance giant, Sagicor, first offered more than 2,000,000 shares to investors, the Board of Directors of the Trinidad and Tobago Stock Exchange (TTSE) approved its application to have the shares cross-listed on the exchange. The company started trading on August 15. Sagicor now joins the growing number of regional companies which are listed on the local stock exchange. Industry sources say more regional companies are interested in having their shares cross listed on the TTSE. Of the 33 companies listed on the TTSE, about five of the local companies are cross listed in other exchanges. These include Trinidad Cement Limited (TCL) which is cross listed in Jamaica; Neal and Massy in Barbados; RBTT which is cross listed on the Barbados and Jamaica stock exchanges and debt ridden, national carrier BWIA is cross listed on the Barbados stock exchange.

But while few local companies are cross listed on other exchanges, many regional companies are expressing an interest in trading on the TTSE.
According to Brent Salvary, research analyst, Caribbean Money Market Brokers (CMMB) more companies outside of TT are interested in trading on the TTSE because shares trade at a higher price earnings (p/e) multiple ratio in TT than in other Caribbean countries, especially Jamaica.
Some of the companies which are cross listed on the TTSE include Barbados Shipping and Trading, Grace Kennedy, Jamaican Money Market Brokers (JMMB), FirstCaribbean Bank and now Sagicor. “We are not seeing many local companies being cross listed, but the opposite. Other companies in regional markets have expressed an interest in trading on the TTSE.”

He cited Capital and Credit Merchant Bank (CCMB) and Jamaica National Commercial Bank (JNCB) both of Jamaica as examples. He said both these companies hope to list on the TTSE soon. Salvary said some of these regional companies look at the performance of their counterparts on the TTSE and when their shares perform well, they expect that their shares will also do well. He noted that the shares of the two Jamaican companies which are listed on the TTSE, JMMB and Grace Kennedy performed very well, which might be an incentive for other companies. Salvary said in some markets, some shares trade at higher p/e multiples based on factors such as interest rates and the outlook of the economy. He explained that in TT where interest rates are low and the outlook of the economy is good, there is a higher p/e ratio for the shares of those companies listed on the TTSE than those listed on the Jamaican or Barbados stock exchanges. “So when a company cross lists it may trade at a higher p/e multiples than its home base, which is a good thing because they get a higher price for the shares.”

He added that there were three basic advantages of cross listing : with cross listing comes increased liquidity in terms of the amount of shares traded; arbitrage opportunities (same commodity being sold at different prices in different markets) and brand awareness which can be used as a marketing ploy. Additionally, he said the TTSE will receive some revenues based on the amount of trading done on the exchange. He said while there are no real disadvantages to cross listing, one obstacle in terms of Sagicor cross listing, might be the restrictions on the amount of shares one can have in order to avoid a possible take-over. The TTSE had previously refused to allow Sagicor shares to be cross listed as its listing requirements prohibited companies listed on the exchange from having restrictions in shareholding. The board’s approval came after their recent amendment of clause A2 of Schedule 4 of the Listing Requirements which now permits companies to be listed on the stock exchange with a restriction in shareholding of not less than 20 percent.

Asked whether more local companies should consider cross listing, Salvary said the eventual hope is that there will be one regional stock exchange where all companies will be listed on one exchange. “We are heading in that direction but it is going to take a while. There are many legal and other issues which must be addressed before that becomes a reality.” He said because many regional companies are interested in listing on the TTSE does not mean that the TT economy is performing well. “In fact it is just a signal that the trading culture is different in TT than in Jamaica and Barbados. We have a more developed trading culture which attracts companies to list here.” Another industry source, said when a company cross lists it provides them with a wider base for stock ownership. He said if the company were to limit itself to one exchange, it means that it only has one base of investment. However, he noted that if it lists in TT, Barbados and Jamaica like Grace Kennedy, it will have the entire Caribbean as its investment public. Additionally, he said if the company wants to raise capital like a rights issue, instead of limiting itself to one country, it has the entire Caribbean.

Salvary went on to say that there is no evidence to show that a company which cross lists performs better than one which limits itself to one exchange. He said sometimes when a company cross lists, the share price might go in an upward direction like in JMMB’s case. The industry source also highlighted a few disadvantages to cross listing. He said when a company wants to cross list, it has to meet the listing requirements of the different exchanges. He said when listing in TT, the TTSE asks for semi-annual financial reports, but in Jamaica and Barbados, companies are required to report quarterly. “So companies like RBTT which used to produce semi-annual reports, now have to produce quarterly reports. For big firms like these that is a lot of accounting work to do which is an added expense.” In addition, he said they also have to pay listing fees and other different costs for each territory they wish to enter. He said the companies also have to visit the different investment publics and inform investors of the performance of their shares.