Salada considers stock split

Published: Wednesday July 16, 2008

Salada, wants to split its stock in an attempt to bolster market activity amidst a raging stock price which jumped by 350 per cent in a year.

Next Tuesday, Salada will hold a meeting to propose a stock split.

At least, analyst suggest that the stock split could result in the total number of issued shares to 100 million.

It is currently the highest priced stock on the market, from a Jamaican-based company. But also it is a stock with a relatively sparse number of shares.

"Salada's stock trades very infrequently and if it splits it will bring more liquidity and market activity," said managing director John Rosin.

He added that most other shares trade in double digits and that it was a psychological barrier to some investors. Over 52 weeks it jumped by 350 per cent to close at $135. Since January the stock jumped 208 per cent.

"The stock split is a very good idea on behalf of Salada's Board," said Michelle Hirst, research analyst at Stocks & Securities Ltd. "Hence, even though value still exists, investors have shied away from buying the stock, especially in Jamaica, due to the common misconception that a high price means a stock is expensive."

She added that this increase in price is on the back of significant growth in earnings and new strategies. Second quarter profit to March jumped 77 per cent to $38 million. Salada has overcome its bottle shortages, which hampered production in the past. They were also able to minimise rising expenses, which grew by roughly 20 per cent, on revenue which climbed 37 per cent.

At roughly 10 million it is not liquid especially when compared with very liquid stocks such as Scotiabank at 3.2 billion shares. Additionally, Hirst's boss, Donovan Lewis, has most of Salada's shares and his hoarding has contributed to the rise in the stock price. He acquired some 60 per cent of the available stock mostly last year. The split would thereby increase liquidity by at least doubling the number of available stock.


Source:
Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20080715T230000-0500_137909_OBS_SALADA_CONSIDERS_STOCK_SPLIT.asp