The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian capital markets will be asked to raise between $300-$400 million in 2016, a leading investment banker predicted yesterday, although the growth rate for BISX’s share price index is likely to be slashed in half.

Michael Anderson, RoyalFidelity Merchant Bank and Trust’s president, told Tribune Business that 2016 was set to be another “pretty active year” for capital raisings in the Bahamas.

While predicting that the demand would be less than the $550 million that RoyalFidelity raised on behalf of clients in 2015, Mr Anderson said a greater proportion of this year’s capital raising would come from the private sector as opposed to the Government.

“I think 2015 was a very active year in the markets in terms of raising capital,” the RoyalFidelity chief said. “We raised just over $550 million; some $445 million for the Government, and the other piece was $105 million for the private sector.”

The majority of the private sector’s $105 million came from the $73 million Cable Bahamas preference share issue, but Mr Anderson said the Government was likely to be seeking less debt financing in 2016.

That will create more space for the private sector, and Mr Anderson said it was possible that the Bahamas might see “some initial public offerings” in 2016 along with the more frequent preference share and corporate bond (both forms of debt) issues.

The last IPO, or public equity offering, occurred when Arawak Port Development Company (APD) came to market in 2012, and Mr Anderson told Tribune Business: “There are a number of transactions we are looking at already.

“I would expect 2016 to be another good, pretty active year. I think the Government amount will be lower than what was raised in 2015 through Bahamas Government Stock (BGS) and Treasury Notes.

“I’d expect the total amount of capital raised this year to be in the $300-$400 million range, as the Government gives more space for the private sector to come to market.”

Among the offerings on the drawing board is the proposed $600 million Rate Reduction Bond (RRB) to refinance the Bahamas Electricity Corporation’s (BEC) legacy debt and liabilities. The Government has initially proposed splitting this into a $100 million component denominated in Bahamian dollars, with the remaining $500 million raised in US currency.

As for the stock market, Mr Anderson said the Bahamas International Securities Exchange’s (BISX) All-Share Index, which only measures changes in the weighted average of listed stock prices, and strips out dividend payments, had risen about 10 per cent in 2015.

He attributed this to strong performances from the likes of Commonwealth Bank, Cable Bahamas and FOCOL, and said: “If you add dividends on to that, the returns would be around 13-14 per cent overall for 2015.

“In 2015 there were a number of securities in the market that were underpriced, and we expected to see a correction in their pricing. A lot of that went on.”

Mr Anderson said Colina Holdings (Bahamas), Cable Bahamas and Fidelity Bank (Bahamas) were among the stocks to enjoy “a significant gain” in price, delivering strong capital appreciation for their shareholders.

However, with that price correction now largely over, Mr Anderson said he expected more modest growth in the BISX All-Share Index for 2016. He forecast that the rate would drop to “a more reasonable” 5-6 per cent, as opposed to last year’s 10 per cent.

“As we go into 2016, I believe most of the stocks are reasonably priced,” the RoyalFidelity chief told Tribune Business.

“There’s some upside in the banking stocks, but it’s how fast you can grow earnings with this economy. The extent of economic growth is going to limit the growth in earnings, and limit the increase in prices.

Mr Anderson said it was impossible to forecast how much employment and the economy would pick up in 2016, given that much depended on Baha Mar - which faces an uncertain fate.

“It’s hard to see people growing incomes to push the share prices much higher,” he added.

The RoyalFidelity chief told investors: “Be selective where you invest. Be sure to get diversification in your portfolio, and be ready to diversify into fixed income securities that become available, while reducing bank deposits.”