Get all the latest information on businesses and companies in Nigerian Stock Exchange.

IMF’s Report on Investments In Africa

Here is an article in the latest edition of IMF’s Finance and Development magazine on the increasing investments in Africa:

The Rise of Africa’s Frontier Markets - F&D Sept 2008 (39)

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Mutual Funds In Nigeria

In recent years, there has been a significant increase in the number of mutual funds in Nigeria. ARM and IBTC were the pioneers in the mutual funds industry in Nigeria. My research shows that these two firms displayed the highest level of professionalism. They replied to emails promptly and provided the very detailed information on the requirements to invest in the stocks.

The report below provides the basic information on the available funds – their contact information, minimum required to invest in the mutual funds, the investment distribution. There was very little information available on 2 of the funds, First Bank’s Heritage Fund and Skye Bank’s Shelter Fund. A lot of information was sourced from the fund managers’ websites, online forums, and email exchanges with the companies.

My research shows that the mutual funds industry in Nigeria is still in its infancy and this is displayed by the lack of basic information about most of the funds (by their managers) and the lack of professionalism.

The ARM Discovery Fund had the lowest amount required to invest in it (N10,000). The average minimum required to invest in most of the other funds was N50,000. A lot of the funds did not provide any information on their management fees. ARM charges a management fee of 1.5% while Kakawa does not charge any first line management fee. However, Kakawa gets 50% of the excess return over the guaranteed investment rate.

READ/DOWNLOAD THE REPORT HERE: Mutual Funds In Nigeria (48)

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Flow of private equity in Africa

Report on the flow of private equity into Africa:

Private equity inflows into Africa look to be on the increase, an industry body said on Thursday, with investors — increasingly including those from within the continent — keen on frontier markets such as Nigeria, Ghana and Zambia.

African Venture Capital Association (AVCA) managing director Mawuli Ababio said the industry was expanding outside the more established market of South Africa, with resource-rich African states in particular likely to benefit.

He said 2007 Africa private equity funds probably came to around $2.3 billion, little changed from 2006 — when it almost trebled from a year ago, according to the Organisation For Economic Cooperation and Development — with growth slowed by global financial worries and turmoil.

But capital raised in 2008 is likely to be higher, he said, with several new funds trying to raise sums of between $500 million and $1 billion each — although it was too soon to be certain they would meet funding targets.

"From what we have seen so far this year, we should exceed that level," Ababio told Reuters in a telephone interview from Johannesburg.

"Private equity is going to the established stable economies of Ghana, Tanzania, Uganda, Zambia and until recently Kenya — although that is picking up again. Then of course you have Nigeria."

Violence after disputed elections in Kenya in December took the shine off what had until then been seen as one of Africa’s success stories — a sudden reminder of the risks of investing in the world’s poorest continent. But the Kenyan currency has recovered to gain more than 2 percent versus the U.S. dollar since the start of the year with the formation of a coalition government.

Reaping the benefits of record oil prices, Nigeria is not only attracting more private equity inflows but its central bank-backed Africa Finance Corporation is also seen as an potential investor in other countries with some $1.2 billion to spend.

Ababio said diamond-rich Botswana’s roughly $5 billion pension fund was also increasing its African private equity exposure.

With private equity already accounting for two to three percent of South African gross domestic product — well below developed economy levels but much higher than the almost negligible proportion in other African economies — players there were also moving beyond their borders.

"To my mind, it is infrastructure and utilities that should provide the next big deals," Ababio said.

"The next big thing is going to be Ghana … You have recent oil discoveries and that gives you an economy with a lot of things people are looking for."

Also in line was Zimbabwe. South Africa’s northern neighbour has long been written off as one of the world’s least appealing economies as it suffered hyperinflation and international isolation but investors are increasingly positioning themselves to take advantage if President Robert Mugabe is ousted from power.

Other players were moving into the Democratic Republic of Congo’s mining sector, taking advantage of the post-war growth in a string of West Africa’s poorest countries from Liberia to Sierra Leone or jumping into unloved economies such as Ethiopia.

While Asian investors such as China and Malaysia have ploughed significant capital into Africa in their quest for natural resources, relatively little has flowed into private equity — but that was likely to grow, Ababio said.

Global emerging private equity is also booming despite problems in developed economies, on course for a record year according to the Emerging Markets Private Equity Association — which also sees Africa growing.

"It seems the message is Africa’s moment has finally come," said EMPEA head of research Jennifer Choi from Washington, DC.

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AP’s Presentation

Click here for the Fact Behind The Figures presentation by AP.

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FCMB Fact Behind The Figures

Here is a Fact Behind The Figures presentation by FCMB’s MD, Ladi Balogun.

Some highlights:

-The company believes that the sub-Saharan region is well placed to withstand the worsening global environment.
-CBN has directed all banks to streamline their financial year ends to December 31st. This will heighten competition and favours the dynamic and differentiated banks like FCMB.
-Bank is focussed on value opportunities with high growth margins such as investment banking, consumer banking and trade and cash management.
-Bank will attempt to increase bank accounts since there is a low bank penetration - there are only 16 million bank accounts in Nigeria.
-Bank will be investing over N700m to deploy an improved technology platform by October ‘08.
-Only 3% non-performing loans on book compared to the industry average of 7.3%.
-Bank to launch the FCMB Pan African Hedge Fund.

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Wassup with this blog?

It’s been a while since anything substantial has been posted on this blog - at least 4 weeks.

Part of the reason was that I was out of the country with limited access to the Internet.

Henceforth, the major emphasis of this blog will be to provide information on businesses and companies listed on the Nigerian Stock Exchange. You can expect to get the latest news on this companies and analysis prepared by the top stock brokers in Nigeria. 

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Meristem’s Analysis of Dangote Sugar

Below is an analysis of Dangote Sugar by Meristem Securities. A copy of the analysis is also attached. Analysis of other companies can also be found on Meristem’s site.

UPDATES ON DANGOTE SUGAR REFINERY PLC

EXECUTIVE SUMMARY AND INVESTMENT RATIONALE
Dangote Sugar Refinery Plc is a market leader in the Nigerian Sugar industry with operations spanning over 7 years. The company imports and refines raw sugar using an in-house developed technology to refine and package fortified and unfortified Vitamin A white sugar. Dangote Sugar has an installed capacity of 1.44million metric tons of a world class facility designed by Tate & Lyle (the largest sugar refiner in Europe), for the production of refined sugar in Nigeria.

The company currently operates at near 75 per cent of its installed capacity and controls about 70 per cent of the Nigerian sugar market (by sales revenue). Concerted strategic efforts are being made to grow revenue base by expansion to North and West African regions. This strategic move will expectedly enhance optimization of installed capacity and subsequently increase current production frontier by about 79 per cent in the next couple of years to 2.5M metric tons p.a.

Dangote Sugar has recorded impressive performance in the last 3 quarters of 2007 with an average growth of 75.9 per cent and 35.1 per cent in profit before tax (PBT) and profit after tax (PAT), despite the consistent dip in sales revenue by an average of 4 per cent during the same period. Current trend in performance suggests the need for the company to grow its industrial clientele base as well as its retail domestic market in order to sustain and possibly surpass its market share.

Our forecasts for the year ended December 31, 2007 put sales revenue and PAT at N84.80bn and N24.04bn. This implies a earnings per share of N2.40 for the FYE December 31, 2007 and assuming a payout ratio of 70 per cent, we project a cumulative dividend per share of N1.68k. This suggests that the management can still cough out a final dividend of 48k/Share.

Key risk attached to our analysis and valuation is the new major competitor, BUA Group of companies, the owners of BUA Sugar Refinery with an installed capacity of about 720,000 metric tons p.a, which is scheduled to commence operations by April 2007. Similarly, Dangote Sugar is also highly exposed to changes in regulations ranging from protectionist policy of prohibitive tariff on imports to NAFDAC’s regulation on Vitamin A fortification.

Our valuation suggests that the stock trades at a fair price. However, we only anticipate a strong rally provided the management declares a generous scrip issue in addition to the final dividend.

Dangote Sugar

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Why your stock documents gets lost

An article by Meshack Idehen of the Saturday Punch on why stock documents get lost.
Most times, investors buy shares without share certificates to show for their investments for many years. At other times, their dividend warrants never get to them.There could also be problems of investment swaps, where the name of an investor does not tally with his addresses and vice versa. At other times, it could be outright misspelling of names.

But the registrars who handle the documentation of these stocks in terms of verifications and certification usually blame shareholders for most of their woes.Speaking in defence of their practice, some of the registrars, while admitting the genuineness of shareholders’ problems, believe that most of the issues are blown out of proportion.

An executive at Zenith Registrars in Lagos, who spoke on the condition of anonymity, attributed registrars’ apparent inefficiency in handling these documentations to the volume of work involved.She said, ”Most of the complaints and allegations by shareholders and investors concerning the issues you have raised are true to some extent.

”We are confronted with these issues almost on a daily basis. However, I must confess to you that they are not our own making. Although there are valid claims of missing or lost share certificates and other investment documentations, these are not intentional actions by registrars of quoted companies.”And when you consider the huge number of names, addresses and issues of logistics that registrars have to deal with, then the situation would be more understandable.”

She defended further, ”Sometimes, there are situations where you have as many as 800,000 shareholding issues to deal with. Certainly, you cannot rule out human or other errors that could occur with managing such a huge number.”

Arguing along the same line, the Manager, Communication and Public Information, City Registrars, a subsidiary of Wema Group, Mr. Azzez Adeosun, said that registrars were doing their best.He said, “At City Registrar, we are very concerned about our shareholders and investors. We do not toy with their shares and investments certification.”

In his opinion, misspelling of names and addresses was not peculiar to registrars alone, as these could happen in any other establishment.As far as he was concerned, ”Some of these people (shareholders) are actually part of the problems. Some of them will move or change addresses and residences without informing us about their new addresses.

”Some get married and change the names with which they are known. Locating them with their former names or addresses becomes a big problem, as there is actually no way to reach them unless they come forward.” Accordingly, he advised, ”Let all shareholders and investors carry their registrars along as far as the change of their names and residential addresses are concerned. This would make locating them easy when there is a need to do so.”

Besides the shareholders, some of the registrars also blamed courier companies that are used to deliver the documents. But a visit to one of the courier companies in Lagos, Prudent Parcels Services Limited, was an eye-opener. For instance, First Bank Nigeria Plc uses this courier company to distribute its share certificates and other documents.

The room on the second floor of No 35 Lewis Street, Lagos, where their operations are carried out, was completely disorganised. Letters and documents, including share certificates to shareholders and investors strewed the room and there was apparently no regard for the security of those documents.In the course of moving the letters from one point to another, many of them end up not being delivered at all.

In the face of these problems, Zenith Registrars advised, ”A shareholder or investor who is having a problem with his shares documentation can take several steps to put things right. ”In the case of a wrongly spelt or wrongly written names, a shareholder can through a sworn declaration or affidavit in court, affirm his nomenclature, which can be forwarded to the registrar. It is an acceptable procedure.

”In the case of missing or lost certificates, the same procedure can also be applied. However, it is also very important that the shareholder presents a valid and constant address, where he could be reached in the event that a new certificate is issued after due diligence is conducted.”

On its part, City Registrars urged shareholders ”to remain calm and seek proper channels through which the issues can be resolved. They can choose to channel their complaints through their stockbrokers, who are experts in such matters, or seek the assistance of the Security and Exchange Commission.”In cases of wrongly written names, it is wise to secure an affidavit from the court, using the name you want to appear on the certificate in the affidavit that you will present to the registrars.”

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China Interested in UBA?

It was reported on Forbes website that the China Development Bank was interested in the United Bank for Africa (UBA). The story stated that they were willing to invest as much as $5billion. That would have been a significant development. But a few hours later, it was reported that it was a rumor.

I wonder what the truth is. If they are really interested in the bank, it will be a remarkable thing. Especially when you consider that they invested just as much in companies like Blackrock and Citigroup. It shows that the Nigerian economy is now gaining in reputation.

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Stock Updates

In the light of the increased public offers in the NSE, I will be posting information, news/gossips, and prospectus as I find them. For starters, here is the public offer form and the AIICO PO Prospectus for the AIICO PO which closes at the end of the year.

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