Editor of Caribbean Value investor, Devrhoid Davis, interviews Steven Jasmin from Smart City Clearing Company Ltd. live from the Jamaican Stock Exchange Annual Conference in January of 2020 to discuss Guyana’s capital markets needs and how he plans to work with the Jamaican Stock Exchange to create a way for the world wide public equity markets including institutional and family office asset managers as well as the Jamaican, Guyanese, and Caribbean diaspora to gain access extremely early in Guyana’s growth cycle. By helping to transform Jamaica into the Singapore of the Caribbean. This push is directly in line with the strategy and mandate of Jamaica’s Economic Growth Counsel led by two of Jamaica’s leading financial service sector leaders Michael Lee Chin and Senator Aubyn Hill. You can find a full transcript of the the interview below.
Transcript of Video Interview:
Devrhoid Davis: Good evening investors. My name is Devrhoid Davis the CEO of Caribbean Value Investor. With me this afternoon is Mr. Steven Jasmin the CEO and Managing Director of Smart City Clearing Company Ltd.
I’m going to be speaking with Mr. Jasmin just to kind of get an understanding of what their company does, their positioning, their investment mandate, and actually their interest in the Caribbean region; particularly Jamaica Stock Exchange. Mr. Jasmin. It’s a pleasure and welcome to Jamaica.
Steven Jasmin: Thank you for having me.
Davis: Why don’t you start with a little about your background and then a little bit about the inception of Smart City Clearing?
Jasmin: So, I’m an investment banker from the United States. I have an office there with a background focus on offshore oil & gas. So, about 30 months ago I moved down to George Town Guyana and opened up my merchant bank focusing on helping Guyana get to first Oil. As they have gotten to yesterday which is a milestone and now I’m focused on helping the economy grow and Guyana grow as it is the largest per capita offshore oil reserves in the world.
Davis: Wow, and those are pretty remarkable achievements Steven. So, the Caribbean has one of the best performing stock exchange and the fastest growing economy, and you see some opportunities in that. Can you tell me why that makes sense?
Jasmin: Yes absolutely! Traditionally speaking in most frontier markets public equity in the capital markets has a hard time accessing over time as we’ve seen the opportunity is there especially for owing [0:01:47.6 PH]. They’re more concerned about getting their house in order instead of focusing on establishing the financial services sector and Guyana is no exception.
With that said though the Jamaican Stock Exchange and Jamaican Capital Markets are vibrant, and as you said one of the fastest growing in the world and so with that I see it as an opportunity for international institutional investors. For public equity we are looking to allow them to get exposure down into Guyana through some funds that we intend to take public here on the Jamaican Junior Stock Market Exchange.
Davis: That’s very interesting I like the approach. So, what you’re basically doing is you’re enabling that external capital that would not have otherwise been able to access those opportunities within Guyana through you’re medium through your fund they will be able to access it better. What about the register market which is the Jamaica Exchange?
Jasmin: Correct, so we plan on listing numerous IPO’s directly through our own broker dealer or through an affiliate so it will be having you’re residential development, infrastructure development, oilfield service companies, and each junior exchange company will then act like a small private equity fund using public equity.
Guyana is a new country that needs a lot of smart money and a lot of strategic partners and we’ll help build, and develop capacities in joint-venture with the local Guyanians. What I’m doing is I’m bringing public equity cornerstone investment from international partners to work with my local partners to be able to develop new companies, overall within the traditional private equity portfolio lifecycle of five to seven years building out each individual private equity portfolio company.
Davis: Is there a plan like an exit in some of those companies?
Jasmin: So, right now I perceive in five to seven years Guyana will get its financial house in order and we’ll end up IPO’ing on their own Stock Exchange where the private equity fund’s shares will be converted into free trading shares that will transition the private equity fund into a Guyanese based ETF.
Jasmin: In order to raise additional capital we would look to issue subsequent share classes for each IPO vehicle much like the Sagicor X fund to raise additional funds for follow on investments and growth capitalizations.
Davis: So, you mentioned Sagicor X funds but you also mentioned private equity and using that in sort of like a transitional way. Can you tell me a little bit more about your investment like money or the specific strategy that you’re using and how that incorporates the Sagicor select?
Jasmin: Much like the Sagicor Select Fund has a portfolio or basket of equities you would have a much smaller basket of private equities. So, instead of thirty to fifty public equity stocks that they hold they’ll be three traditional companies that lead a certain investment criteria, and mandate per listing fund wise.
Davis: For example like a residential real-estate IPO you’d have like three different companies?
Jasmin: In the real estate fund, they are referred to as project and be tied to specific transaction.
Davis: Right in real-estate and those compromised that particular fund?
Jasmin: Yes that IPO.
Davis: That’s very interesting.
Jasmin: It’s not just on the real-estate side it’s also on the service companies whether, it’s the oilfield service companies, franchises are going to be coming Guyana with a need to establish and buy your franchise licenses and hit your unit roll out commitments. Those are the kinds of things that take three franchises that are world-renown for someone to invest into. International partners that are already operating hundreds of units around the world with those franchises and that would help the fund with price discovery and valuations analysis at conception.
Then as we develop the trading history and quotas of the actual new company looking for as well as Guyana’s transparency and let shareholders exactly what we’re doing. So, that way in five to seven years we’re expected to follow them by listing on the Guyanese stock exchange. They’ll already have a track record and have already been running like a public company from a corporate governance standpoint, like an existing publically traded company and so it will be very a easy transition.
Davis: Could you tell me just a little bit more of the current feel is in Guyana? What is the sentiment around the new discovery of oil? What is kind of the economic perception of the ordinary Guyanese since you’ve been there for thirty two months?
Jasmin: Absolutely! Everyone has a lot of pre-conceived notion and doesn’t necessarily understand the gravitas of what’s going on. Over the past thirty months exploration and development and getting to production you know it’s sort of been like a tsunami. So, right before the tsunami hits all the water comes out and you can walk out a mile as it’s sucking up all the water before it flows over, and that is what the past 30 months have been as Guyana has worked to get it’s house and affairs in order.
Some of the economy and various markets have slow down so the velocity of money will slow down you know some people have been struggling a bit unfortunately, and so it’s made them jaded. But at the end of the day the real investment opportunities which your audience cares about has to be more aware of everything. We still don’t even have a McDonalds in Guyana so with that that there is a lot of opportunities for growth, and it’s not just focusing on oil sector we’re where everyone else in Guyana is focused think that’s the holy grail, but we are focused on the domino effect.
Davis: It’s a domino effect?
Jasmin: It’s the domino effect meaning it’s also a big part of the price of power, like all Caribbean countries power is extremely expensive, but with the amount of produced natural gas that has been found and discovered there is an opportunity now to bring the price of power down from .62/kwh GYD to .10–12 cents USD a kilo/watt hour, then there is sense of what will happen.
Guyana is the breadbasket of the Caribbean. Did you know 50% of fruits and vegetables every day get thrown away and they can’t afford to process them, can them, store them, refrigerate them and then ship them out. So, under this new Guyana that is going to be developed and emerging those kinds of things will become a reality, and that is where it investors, private companies, will have a lot of opportunity to come into the market and help shape and form the market and enter into Joint Venture partnerships earlier establishing themselves as sector leaders.
Davis: I actually get elated because one of the things is we at Caribbean Value Investor try to do is search for opportunities particularly in what we consider undervalued industries. It would seem to me that if we were looking for an entrance into Guyana and we didn’t necessarily have a road then perhaps your establishment you’re IPO offering would be that gateway through which you could actually give exposure to Guyana to those opportunities.
Jasmin: Yes, both the domestic Jamaican market as well as the regional market but then we’re also looking at the international market which is great for Jamaica, because as you know Michael Lee Chin and Senator Aubyn Hill are both involved in the Economic Growth Counsel are looking to radically transition Jamaica into the financial services hub in the region. We feel this is a very viable and active solution that we have brought here and if Jamaica doesn’t step then Guyana is going to come regardless so we need to work to make that reality together, so that Jamaica can be a part of that relationship.
Davis: So, there is a reaction of interest in Jamaica in terms of even the diaspora being willing to reinvest in Jamaica. A part of what we do as our business is to actually connect persons who are seeking to invest in Jamaica with the approved financial institutions. We’ve seen an increasing number of persons expressing an interest whether it’s:
· A trade show
· Alumni association
That are based overseas the different communities are known at expressing that good, we hear we see the Jamaica Stock Exchange on the NASDAQ. We see them on the floor of the New York Stock Exchange. What is going on in our country at home and how can we give back?
Jasmin: Absolutely, and it’s not just the Jamaican diaspora it’s the Guyanese diaspora it’s the Caribbean diaspora.
Davis: Pretty much!
Jasmin: And they all want to participate as well so you know once we’re trading with the diaspora can gain access pretty easily, publicly trading and to start the institutional investors and allocate one or two percent of their allocation portfolio to emerging and frontier markets are able to move assets into Jamaica.
Davis: Absolutely it depends on your concept you have. I can literally see there are many benefits that will come and not just for your local or regional investors but certainly for international business seeking to gain access or seeking to acquire interests in this new paradigm not just in Jamaica or Guyana but pretty much the entire Caribbean as an entity.
Jasmin: Without a doubt.
Davis: Mr. Jasmin thank you for your time.
Jasmin: Thank you for having me. I appreciate it. Cheers.