Palace shareholders not amused
By Marston Gordon
Nov 11, 2018, 02:04
Palace Amusement listed on the JSE (Jamaica Stock Exchange) in 1973 with 1,342,000 shares and has increased its issued shares by 95,000 units in 45 years to the paltry sum of 1,437,000. Without a doubt it is the least frequently traded stock on the JSE and the highest priced ordinary share.
The company’s notoriety extends to the appointment for life of its directors, literally keeping the vow “til death do us part”.
The shares of the company are highly illiquid as 87.7% are held by the top 10 shareholders. The directors in their ignorance refuse to split the stock, not understanding that the greater number of shares will increase the liquidity and reduce the nominal price (initially) as it attracts more investors to the company.
As at June 30, 2018 the stock traded at a P/E of 16.5 compared to a year ago of 21.8; the current market average is around 16 for the main market.
Looking back over the last 6 years the stock mostly traded at a significant discount, and only in 2017 did it start to attract a premium (102%) and in 2018 at 324%, aligning with main market average of 316%. In 1993 the stock price premium was 672%.
In this day and age, there is no clearly defined dividend policy. Its dividend payout ratio over the last 6 years range from 16.89% ($1.75) on 2013 profit to 2.32% ($2.00) on 2018 profit; 2014 nil. In fact, the amount paid in dividend more aligns with interest income earned by the company than to net profit.
The expansion plan (Capex) does not warrant the retention of the amount of cash held by the company and it can comfortably payout 20% of profit annually and have enough to grow the business (without borrowing) and for lean years.
The Board of Directors need refreshing to include generation Y. The company has adopted fairly well but cannot rest on its laurel and have others eat its lunch.
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