Price is Right

The National Gas Company of Trinidad and Tobago Limited (NGC) has to wait until 4 pm on June 28 to know if all 40,248,000 of its Class B shares in TTNGL; with an offer price of TT $21 per share, are fully taken up.

However, NGC heads have expressed confidence that this APO is priced right and will very likely be fully subscribed.

This was the response of NGC Group chairman, Gerry Brooks and NGC’s vice-president of Finance and Management, Narinejit Pariah, to questions posed about the expected performance of the TTNGL APO, three months after an APO from First Citizens bank was undersubscribed by about 32 percent.

Several people cited the TT$32 offer price as a main factor, arguing that it was too high even though $32 was the market price of First Citizens shares as of the opening day of that offer.

Taking note of this and the continued difficulties in the economy, some people have predicted that the TTNGL APO will experience a similar fate.

NGC expects to raise TT$845,208,000 from the sale of its Class B shares. The proceeds of which are intended to help fund Government’s fiscal programme.

Business Day therefore asked if management had found itself in a quandary when pricing the APO and if some investors had since expressed the view that the offer price should be been less than $21.

Pariah said, “If you look at the price performance of TTNGL over the past three months; from March 27 to now, that share traded around $21.75 on average and in fact, was closer to $22 from inception to now. So we think it’s a fair price.” Pariah responded to this and other questions during a briefing session on the TTNGL APO, held at the Hyatt Recency, Port-of-Spain on June 13.

Questioned whether potential investors may be hesitant to put their money into TTNGL at this economically challenging time, Pariah’s immediate response was “No.” “The feedback that we have received to date, there’s a lot of excitement in terms of this investment. There’s no other investment in the (local) market right now that will give you a dividend yield of 7.4 percent. So there’s a lot of excitement with respect to this investment,” Pariah said.

Brooks then give his opinion on both questions. Regarding the TTNGL APO offer price, he said, “The average price has been $21.99 as (Pariah) said, which means that you’re getting a 4.5 discount relative to the average price at $21. So there’s room for capital appreciation.” Turning to the recession question, the NGC Group chairman said, “If we were in a recession and people are holding back money and they’re staying in cash, they then need to determine where is the best place to invest that cash.” According to Brooks, the TTNGL APO provides an “excellent” option for that cash “because the return is 7.14 percent, with potential upside in terms of capital appreciation...

So the current environment favours this share because it’s an excellent return in terms of dividend yield, with good potential capital appreciation.” Business Day then asked Brooks about the response, as of June 13, to the APO. “The response has been excellent,” he said.

Asked to expand on this, Brooks replied, “In the first week, some people are going to be organising their forms, money, cheques and so forth but certainly, the feedback that we’ve gotten from the brokerage community has been (positive).” “In terms of individual investors and institutional investors, their response has also been very strong... Credit unions have been very, very enthused - they were in this room (at Hyatt Recency) less than a week ago and many of their investment committees are also looking at this APO because it fits very nicely into their investment allocation formulae..So we are very enthused, the feedback has been excellent,” Brooks stated.