Atlantic Hardware and Plumbing Limited IPO
Atlantic Hardware and Plumbing Company Limited, established in 1994, is a wholesale distributor of home improvement supplies, including plumbing, tools, building materials, doors, flooring, lawn and garden supplies, paint, and adhesives. The company has a solid history having over 1,000 repeat customers (including hardware stores, contractors, developers, and retail consumers) and a workforce of 35 employees.
The IPO prospectus, dated February 20, 2025, outlines an offer of up to 499,999,800 ordinary shares at J$1.00 each. The offer is fully underwritten by JMMB Securities Limited, the lead arranger and broker and is aiming to raise gross proceeds of J$499,999,800. After accounting for J$30,000,000 in expenses, net proceeds are estimated at J$469,999,800.
IPO Summary:
Total Shares Offered: 499,999,800
Reserved Pool (~80%): 399,999,800
General Pool (~20%): 100,000,000
Offering Price: J$1.00 each
Net Proceeds: J$469,999,800
Primary Use: Debt repayment (J$470M)
Broker/Lead Arranger: JMMB Securities Limited
IPO Opening Date: February 27, 2025
IPO Closing Date: March 13, 2025 (est)
Key Financial Highlights:
For the financial year ended December 2023, Atlantic Hardware and Plumbing Company reported revenues of J$1,439,068,000 and net profits (before tax) of J$147,097,000, demonstrating that the company is historically profitable. As of September 30, 2024, cash and cash equivalents were J$426,456,006, while total borrowings stood at J$1,342,500,000 (including J$932,500,000 in long-term debt). The company has negative equity of J$68,161,494—a significant decline from J$1,729,715,773 as of December 31, 2023, likely due to a J$1,581,982,719 share buyback in March 2024 and increased borrowing.
IPO Details:
The Subscription Period for the offer opens on February 27, 2025, and is expected to close on March 13, 2025 (subject to variation). As with most relatively small offering, where most of the shares on offer are reserved and less than 250,000,000 is being offered to the general public, we feel it is prudent for potential investors to treat the opening date as the closing date and get their applications in as soon as is possible.
The minimum subscription: is 1,000 shares with a J$172.50 processing fee per application.
Atlantic Hardware and Plumbing Co intends to use the net proceeds primarily to repay debts totalling J$470,001,000, including J$300,000,000 for one facility and J$56,667,000 each for three others. This will reduce the company’s total debt from J$1,342,500,000 to J$872,500,000.
The debt reduction strategy aims to stabilize the balance sheet, potentially shifting equity to a positive J$401,838,306 post-IPO, assuming full subscription. This recapitalization is critical given the current financial challenges signalled by the negative equity.
Market Conditions and Retail Participation
The JSE Index’s performance has been largely flat over the past 3-6 Months. The JSE All Jamaican Composite Index (Main Market)has shown a modest increase of 1.87%, with a 52-week range of 346,018 to 388,945 over the past year. Assuming the stable to slightly upward trend over the last 3-6 months (approximately August 2024 to January 2025) is maintained, conditions may be favourable for the listing.
The JSE Junior Market Index currently hovers around 3,692.31, with positive momentum inferred from broader market reports. The trend aligns with a receptive market for Junior Market IPOs.
Retail Participation:
Trading volumes over the past 3-6 months, compared to monthly averages over the last five years, indicate consistent retail investor activity. The stable index performance and historical IPO uptake of similarly small offers (e.g., Spur Tree Spices’ oversubscription) suggest that active participation in the Atlantic Hardware and Plumbing Limited offer is likely.
Historical Performance of Distribution Companies on the JSE Junior Market
To contextualize Atlantic Hardware and Plumbing Co.’s potential, the post-listing performance of distribution companies on the Junior Market over the past five years were analysed. Spur Tree Spices Jamaica Limited is a food distribution company that listed on the Junior Market of the Jamaica Stock Exchange in January of 2022. Its IPO was oversubscribed, raising over J$1.3 billion against a J$335.3 million target. The stock peaked at J$3.97 by May 2022 but declined to J$1.82 by January 30, 2025—a 54% drop over three years. The stock price performance reflects initial enthusiasm tempered by market conditions. To further compound issues, interest rates have risen significantly since 2022 and the demand for stocks is not what it used to be. To illustrate this, NCB Financial Group, attempted to raise J$5 billion in May of 2024 by way of an additional public offer (APO). The company was only able to raise about half of their target (J$2.5 billion) even after extending the deadline for the offer. More appropriately, the initial public offers of R.A. Williams Distributors Limited (JSE: $RAWILL) serves as a cautionary tale for potential investors seeking capital appreciation. R.A. Williams Distributors Limited was listed on the Junior Market of the JSE in August of 2024 at J$1.00 per share but the stock ended the first day of trading down 19.0 cents at J$0.81. We recommend reading David Rose’s article in the Jamaica Observer on the post-listing performance of R.A. Williams.
Sector Trends:
The JSE Manufacturing and Distribution Index recently rose by 1.27%, indicating resilience. However, limited data on other direct comparables suggests varied outcomes, with success tied to balance sheet strength and earnings growth post-listing.
Atlantic Hardware’s strong FY 2023 earnings contrast with its current negative equity, a red flag not dissimilar to challenges faced by peers if not addressed post-IPO.
Macroeconomic Factors
Inflation was reported 4.7% in January 2025, down from 5.0% in December of 2024, signalling a moderating trend that supports consumer spending and corporate margins. This is likely to have a positive impact on distributors like Atlantic Hardware. The benchmark rate, the BOJ policy interest rate, stands at 6%, with deposit rates at 5.80% in 2023 and lending rates historically higher (around 16.489%), though likely aligned closer to 6% currently. This stable monetary environment facilitates manageable debt servicing post-IPO. These conditions provide a supportive backdrop for financial recovery, assuming effective use of IPO proceeds. Atlantic Hardware is also being prudent, choosing to list at this time allowing them to effectively convert high cost debt into equity which will relieve them of the associated interest charges.
Projection for Post-Listing Stock Performance
Based on the foregoing, Atlantic Hardware’s stock performance is deemed cautiously optimistic with the potential for moderate initial gains, tempered by long-term uncertainty. The following points support our short-term outlook:
The stable JSE indices and consistent retail participation suggest a positive IPO reception. Historical profitability (J$147 million net profit in 2023) and debt reduction, coupled with the limited amount offered to the general public (100,000,000) could drive the stock above its J$1.00 offer price, potentially to J$1.20-J$1.30, if investor confidence holds. However, negative equity raises risks of a muted debut if scepticism prevails.
Long-Term Outlook (6 Months-3 Years): Sustained performance depends on post-IPO financial management. Reducing debt to J$872.5 million could restore positive equity, but profitability must improve to offset leverage risks. Spur Tree’s 54% decline over the last three years despite its performance, as well as the relatively muted responses to subsequent offerings, warn of potential volatility if earnings falter or market sentiment shifts.
Key Risks:
Negative equity (J$68 million) signals distress, requiring flawless execution of the debt repayment plan.
High pre-IPO debt (J$1.34 billion) could pressure valuations if revenue growth stalls.
Mixed peer performance underscores dependency on operational success post-listing, mainly revenue growth, debt reduction and effective debt and capital management.
Conclusion and Opinion
The stock is likely to see moderate gains if debt reduction succeeds and market conditions remain stable, but investors should monitor quarterly financials closely. The surprising negative equity despite strong revenues highlights the IPO’s critical role in recapitalization—a make-or-break factor. Based on the relatively small amount of shares being offered to the general public, as well as the performance of the Junior Market Index as a whole, it is possible for the stock to see modest price increases post-listing (projecting J$1.20 – J$1.30). However, the current market environment of high interest rates coupled with the performance of more recent junior market listing could temper upside expectations. We do not enttirely rule out the possibility of the stock falling below its IPO price given the prevailing risks and historical data.
IPO Summary:
Shares Offered :499,999,800 at J$1.00 each
Net Proceeds: J$469,999,800
Primary Use: Debt repayment (J$470M)
Closing Date: March 13, 2025 (est.)
Authors Note: This article was written largely with AI with minor additions from the Author. Please see details of the Large Language Model and the prompt given below.
LLM: xAi’s Grok 3 (with Deep Think)
Prompt:
“You are a Financial Analyst with 30 years of experience. You also have the Chartered Financial Analyst professional designation. You’ve analyzed the prospectuses of companies that have gone public on the main and junior markets of the Jamaica Stock Exchange and have analysed the movements in their stock prices upon listing against the prevailing macroeconomic conditions at the time. You’ve also seen the financials and metrics of distribution companies that have listed on the junior market of the Jamaica Stock Exchange and have related the post listing performance to the strengths of their earnings and balance sheets. Use your extensive experience as a CFA to analyse the prospectus of Atlantic Hardware located at https://cdn.jamstockex.com/pd/2025/02/JSE-Junior-Market-IPO-Prospectus-Atlantic-Hardware-and-Plumbing-Company-Limited.pdf and provide an overview of the offer and provide a projection for how the stock will perform after listing taking into account the current demand for stocks as evidenced by the movement in the JSE main market and junior market indices over the past 3-6 months, cross-referencing that with the current level of retail participation as per volumes traded over the same period compared to the monthly averages over the last five years. You may also use the performance of other distribution companies that have listed on the Junior market of the JSE over the last five years to guide projections for Atlantic’s post listing stock performance. Your analysis should Also consider the current macroeconomic factors namely the trend in inflation and current interest rates.
I may ask you follow up questions. Also, provide feedback on the quality of this prompt according to the best practices for AI promoting and give the prompt a grade out of 10.”
