by Shawn Cumberbatch
The ownership and worth of the world-famous Crane Residential Resorts is about to go up.
A $120 million financial injection is the projected target as Canadian Paul Doyle’s Millennium Investments Limited moves to trade 12 million shares of the luxury St. Philip tourism property on the verge of being listed on the Barbados and Trinidad stock exchanges.
And even before the deal hits the market, regional credit rating agency CariCRIS is telling investors the historic Initial Public Offering of eight million preference and four million ordinary shares at $10 each is a “good” buy.
Details of the IPO, the concept of which has already confirmed by Doyle, have now revealed the Crane, which has made profits for the last 14 years, including $6.2 million in profit after tax last year, will become a limited liability company.
Additionally, there are plans to have an expanded board of directors of between six to 10 members, the majority of whom will be non-executive. Doyle and his team are preparing to officially go to market with the IPO prospectus, and the intention was to use a portion of the $120 million they are hoping to raise to grow the company through a series of acquisitions.
In addition to the closed Almond Beach Village, of which it is said to be the “preferred buyer” now in the final stages of negotiations with Almond’s Trinidad owner Neal & Massy, Doyle is also interested in purchasing Sam Lord’s Castle, another historic St. Philip tourism property.
Word of these latest developments have come simultaneously with news that as a number of the island’s hotels struggle financially, with several of them closing in recent years, the 252-room Crane has continued to make profits in recessionary times.
An analysis of the company’s financial performance showed that it has generated profits in consecutive years since 1998, including up to the end of September this year when revenue and profit after tax increased by 2.8 per cent and 23.8 per cent respectively, compared to the same period last year. This was attributed to a 2.8 per cent revenue increase.
The Crane’s asset base also increased from $182.6 million to almost $200 million between September last year and this year, while its “tangible net worth” grew from $122 million to $128.6 million. The $6.2 million in net income after tax earned last year was a 13.7 per cent increase, although there was a 12.6 per cent drop in revenue.
Based on the performance, details of the planned IPO, and its opinion that the Barbados resort was well managed, CariCRIS said its creditworthiness was “good” and gave it a regional CariA- rating and bbAA- Barbados national rating.
“CariCRIS’ 2013 projections show the balance sheet strengthening as a result of the initial public offering of four million ordinary shares at US$5.† Under CariCRIS’ stressed scenario for 2013 (no new sales and an increase in defaults on payments by 10 per cent), The Crane still manages to maintain a healthy PAT margin and comfortable ROA of 14.3 per cent and 1.2 cent respectively,” the agency projected.
“Furthermore, the company is able to cover its finance charges as evidenced by an interest coverage ratio of 32.5 times while future dividend payments can be covered from a healthy cash position.
“The Crane’s low-cost business model is one of the factors that supports the rating. The business model is vertically integrated as it includes an in-house team for key functions, namely, project management, which involves the design and construction of the park residences and other projects.
“There are also in-house landscaping and security teams. This model has allowed The Crane to incur an average weekly operating cost of US 68 (cents) per square foot relative to its luxury competitors at around US$2 per square foot,” it added.
CariCRIS said Crane’s ratings would have been better were it not constrained by “a declining tourism sector and highly competitive timeshare sub-industry”, “the fact that some policies and procedures are still in its nascent stages”, and because of “a succession plan that is currently in its initial phase”.