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

Technical Suspensions Lifted

Technical Suspsensions on Standard Alliance Insurance, Custodian and Allied Insurance, and Great Nigerian Insurance companies have been lifted following the completion of thier public offerings.

Share/Save

Company Results

The following companies have released their results:

John Holt (1st Qtr), Guiness (3rd Qtr), Glaxo Smithkline (1st Qtr), Morison Industries (1st Qtr), and CAP Plc (1st Qtr).

Share/Save

Results for Linkage Assurance, NEM Insurance and Custodian and Allied Insurance

FIRST QTR RESULTS ENDED MARCH 31, 2008
NEM INSURANCE PLC, FIRST QUARTER ACCOUNT FOR THE PERIOD ENDED 31ST MARCH 2008

FIRST QTR RESULTS ENDED MARCH 31, 2008
CUSTODIAN AND ALLIED INSURANCE PLC, FIRST QUARTER RESULT ENDED MARCH 2008

3RD QTR SEPT 2007
LINKAGE ASSURANCE PLC. 3RD QUARTER ENDED 30/09/07.

Share/Save

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

Share/Save

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.”

Share/Save

BGL’s Stock Recommendations

Attached is the latest stock recommendations from BGL securities. Their top recommendations are BankPHB, UBA, UAC Properties and Guiness. They provide some analysis of these stocks - forecast EPS, forward PE, divident yield and target price.

BGL Stock Recommendation

Additional Stock Recommendations

Share/Save

Public Offer Mania

I have been a fan of the public offers of the different companies in Nigeria for a while. A lot of them have been success stories. Examples include Zenith Bank, Oceanic Bank, GT Bank, and First Bank. A lot of banks had to go to the market to be able to raise funds to meet and exceed the N25billion capitalization value.

But in recent months, a lot of these banks are coming back to the market. We have had First Bank and Oceanic. Now, Fidelity, FCMB and AfriBank are back in the market with fresh public offers. To add more salt to injury, Zenith and BankPHB are to raise fresh funds soon.

I am beginning to be suspicious of these constant public offers. It leads to abuse. Why do these companies need to return to the market? In a way, it seems it has become something of a status symbol with these companies - who can raise the most amount? Who has the highest value and capitalization? And I dont think that should be the case. I hope something is done about it. Else it will lead to serious abuse and lack of accountability.

Share/Save

Beginner’s Guide To Investing In Nigeria

Found the minibook, A Beginner’s Guide to Investing in Nigeria, on the Proshareng website.

Share/Save

Why investors should take advantage of IPOs, private placements

Here is a very good article on the benefits of investing in IPOs and Private Placements in Nigeria as published in the Punch Newspapers.

Why investors should take advantage of IPOs, private placements
Published: Sunday, 9 Sep 2007

The capital market is akin to any other market by providing an avenue to facilitate exchange. Unlike commodity markets, however, the item of exchange in the capital market is long-term funds. The capital market intermediates the surplus unit of the economy (i.e. households and firms that are savers) with the deficit unit of the economy (governments, households and firms that borrow). The surplus unit is, therefore, those investing and the deficit unit is that which needs to utilise funds for capital projects of various nature. The consideration for the exchange of funds includes dividend, interests, options etc.

The capital market is composed of the primary and secondary markets. The primary market is a market where fresh long-term funds are mobilised using instruments such as equity (ordinary shares), debenture, government bonds, hybrid securities etc. Funds are mobilised in the primary market through various means. Funds could be mobilised through private placement whereby shares are issued “privately” to investors especially institutional investors or to the general public through Initial Public Offering (first time offering), Offer for Subscription or Offer for Sale.

The existence of the secondary market (stock exchange) facilitates activities in the primary market. The stock exchange provides a market place to allow for exchange of existing securities (those subscribed for in the primary market) among investors. It affords those who have invested in the primary market to relinquish their holdings when necessary. In short, the stock exchange provides liquidity and hence, gives encouragement to make subscriptions in the primary market. It is also opined that activities in the secondary market affect timing of new issues in the primary market.

Capital markets all over the world are highly regulated with the primary focus on investors’ protection. For instance, all securities offered to the public by means of offer for subscription, sale etc have to be registered with the regulatory authority – Securities and Exchange Commission. Similarly, the secondary arm of the market is highly regulated by both the Securities and Exchange Commission and the Nigerian Stock Exchange. Companies’ securities, for instance, may only trade on the exchange after the company has met rigorous requirements of the Exchange, known as Listing Requirements.

The strength and vibrancy of the capital market have tremendous effects on the economy. The capital market signifies the productive capacity of the economy as it indicates the extent of long-term capital that can be mobilised for production and development.

The Nigerian capital market (both primary and secondary), has witnessed a lot of transformation and growth in recent years. Various companies in different industries have raised several billions of naira through the market. The recent recapitalisation of banks and insurance companies has further deepened the market. Several offers (both IPO and offer for subscription) have been concluded in the past 52 weeks and the secondary market has equally witnessed increased activities, recording transaction value in excess of N1tn from January to date, with the All Share Index, which indicates price appreciation in the market, hitting 51,000 points mark.

Given the size of the amounts raised in the primary market in the recent past and the offers, which will open before the year ends, we have decided to review a couple of public offers made in the last 52 weeks in terms of the size, returns from past offers and the effect on the capital market.

Details of recent public offers:

Year 2007 has witnessed quite a number of big ticket public offerings, which includes offer for subscription of major banks like Oceanic Bank (N55.4bn), UBA (N53.4bn) and the recently concluded N100bn mega offer by First Bank. Funds were raised in the market through Rights Issues, Initial Public Offerings and Offer for Subscription. Apart from First Bank and UBA, which made combined Rights Issue and Public Offer (Hybrid offer), DEAP Capital Management Plc, which had an Initial Public Offering, also made a hybrid offer applying to raise a total sum of N924m.

A sizeable percentage of the companies (31.25 per cent) that have raised funds to date opted for Rights Issue. These include companies like Universities Press Plc (N269.6 m), Fan Milk Plc-an unquoted company (N699.8m), Guinea Insurance (N2.81bn), Eterna Oil (N1.49bn) and Cement Companies of Northern Nigeria (N1.56bn). Some offerings in the year came in special forms. For example, Guaranty Trust Bank, through an offer for subscription, raised a sum of N31.5bn using a dollar denominated instrument – Global Depository Receipt – issued in the local market. Also, the private placement of Livestock Feeds to raise N346.8 m opened for two days (August 1 – 2, 2007) and that of Diamond Bank Plc was a foreign direct investment by Actis Capital, a private equity firm, with an equivalent naira value of N17.2bn opened from April 24-26, 2007.

About N400bn has been raised by 16 companies in the capital market over the past eight months from January 2007 to date, compared to N344.0bn raised by 37 different companies in 2006. In 2007, 97 per cent of the total funds raised (N328.3bn) went into the banking sector relative to 34 per cent or N116.9bn that went into the sector in the prior period.

While the recorded figure of N339.3bn is based on the application of the companies raising funds, the actual amounts raised is no doubt far in excess of this figure given the current norm of huge ”oversubscriptions”. Moreover, several public offers are still pending and at various stages of processing. Approved public offers pending is in excess of N65bn. Several offers are still going through the process of approval.

The market is still awaiting companies like Japaul Oil which intends to raise N5bn from the market as well as Ecobank Transnational Incorporated, which has plans to raise a sum of N12.6bn in the Nigerian market and concurrently in Togo and Cote d‘ Ivorie. Also, Dangote Flour Mills, Gold Link Insurance, Cornerstone Insurance (Private Placement), International Breweries, Champion Breweries, Nigerdock, NAHCO and Niger Insurance Plc will be approaching the primary market. Similarly, banks like Fidelity Bank, First City Monumental Bank and Sterling Bank are at different stages of processing for their public offers.

Value from past offers:

Public Offers, from past statistics, have proven to give high returns to investors. Sovereign Trust for instance, has recorded 245 per cent capital appreciation over 80k private placement price within a period of 12 months. Similarly, Lasaco and Mutual Benefits returned 281 per cent and 440 per cent capital appreciation respectively over 11 months period. Apart from insurance companies whose prospects reflect the positive post-capitalisation outlook of the industry, other companies including banks have equally recorded very high returns. For instance, May and Baker Plc, which is in the pharmaceutical industry, recorded a capital appreciation of 176 per cent over the offer price of N4.00 in a 12-month holding period. Banks like Zenith and Intercontinental also recorded similar returns. (See Table 3 for more details).

The huge returns reaped by investors from primary issues can be attributed to the fact that private placements and public offers are usually made at a discount to current market prices (and in some cases to the intrinsic value) of the shares of the company in question. Besides, coming to the market signals to investors the future prospects of a firm since it shows that the firm has investment opportunities at hand. This is, however, unlike the notion in advanced capital markets that companies issuing equity are less optimistic of the future and that if they were; they should have raised the required funds for investment through the issue of debt. Given the fact that companies do not usually raise long-term debt in Nigeria, the issue of equity could actually signal good prospects.

Implications for the capital market:

Activities in the primary market indicate emerging economic potential as the funds raised in the market are to be channeled into economic and development activities. Huge public offers are supposed to translate into increased investment in the economy and they suggest improved economic outlook because firms will raise funds when they expect such to be used to earn returns above the cost of the funds. The multiplier effect of this includes increased productivity in the economy, more employment opportunities for Nigerians and higher return to investors.

While the capital market mobilises capital, it also reallocates capital. Funds from non-performing sectors or companies are mobilised and invested in promising companies or sectors. Therefore, during public offers, it is not unusual to find investors selling off some of their holdings in the secondary market to participate in the primary market.

Public offers are good for the stock market because they improve the depth of the market and enhance liquidity because new/additional shares are available to trade on and investors can buy and sell more easily. However, the selling pressure during the offer period, arising from some investors liquidating their existing holdings to be able to participate in Primary market offerings, can bring about a dip in the secondary market.

A very simplistic investigation of this is the comparison of returns from the stock market before and after a high concentration of public offers. In 2006, the public offers were concentrated in the third quarter of the year; the return of the market in the subsequent quarter was just 1.95 per cent compared to 24.4 per cent of the preceding quarter. Similarly, the return of the market in 2007 has continued to dwindle, quarter after quarter as more and more public offers are handled in the primary market. Though this observation is simplistic and may of course be random, it may not be unconnected with the activities in the primary market through the market correction mechanism.

Public offers bring about market correction. Most often, companies‘ financial advisers recommend to their clients to raise funds from the market when they perceive that the company‘s stock is overvalued. They believe that at this time, investors will be encouraged to purchase the stock in the primary market at a discount. Since some investors will offload some of their existing holdings to participate in primary offerings, the selling pressure may work to correct securities prices, bringing the prices back to the correct level. Thus, the recent plethora of public offers might have affected the tempo of the market just as we had in 2005 when there were so many offers. The market correction mechanism of public offers is necessary when markets become overheated and it comes automatically.

In summary, public offers generally indicate, in most cases, that companies are more optimistic of deploying resources into very profitable use. This eventually translates into promising returns to investors especially in relation to post-listing capital gains. Several primary offers coming at the same time, especially when very large, may depress the secondary market but this is temporary and does not have any negative long run implications to investors.

We are therefore of the opinion that investors should always take advantage of good public offers/private placements as they represent gold mines in the capital market; while at the same time take advantage of the fairly low prices in the secondary market to increase their portfolios with value stocks with sound fundamentals and bright prospects.

Share/Save

Investor Delight - A Delightful Tool for Monitoring Your Stock Portfolio

I just discovered the site, Investor Delight, today. It is a wonderful site for monitoring your Naija stocks online. It is a very neat web 2.0 site. You can add and edit multiple portfolios. It also allows you to add your stockbroker names and their charges. When you add a new stock, you have the option of also adding the brokerage fees you paid. The system automatically calculates your gains/losses based on the current price and the purchase price for the stock.  

The major difference between Investor Delight and Karakata Online is that with Karakata, you can only add a stock once to your portfolio but with Investor Delight, you can add a stock multiple times. For example, with Karakata, say you initially bought Oceanic Bank at N5 and then bought it sometime later at N16.50, you can only add one instance of the stock. But with Investor Delight, you can add it multiple times.The site is really really impressive. Big up to the website admins.  

Share/Save

More info on the Access Bank offer.

Check out this Access Bank Powerpoint on their share offer. It seems that they have their acts together.

acccess-share-offer.ppt

Share/Save

Access Bank’s Share Reconstruction

I must admit, ever since I heard about Access Bank’s stock split late last year, I have been apprehensive about their recent return to the stock market to purchase more shares. But the article below on the ProShare blog provides some explanation on the benefits of the reconstruction. It seems that those who held on to their stock after the adjustment have actually seen an appreciation in their holdings. You can Access Bank Analyst Report. Read the article for yourself:

Pre-reconstruction in October 2006, Access Bank had approximately 13.96 billion shares outstanding and the stock was trading at approximately N3.00k. Upon completion of the 1 for 2 share reconstruction, the total number of outstanding shares decreased to $6.98 billion at an adjusted post reconstruction price of N5.98k.

To illustrate, an investor with 10,000 shares pre-construction, had their holdings adjusted to 5,000 shares, but at exactly the same valuation (See schedule in attached report above). The share reconstruction and the subsequent value of investors’ shares have been confusing to many investors, because the impact of the reverse split on investor’s holdings was not properly explained. Majority of Access Bank’s investors are unhappy about the reverse split and the run up in price prior to the announcement of the secondary offering.

However comparatively, it appears that the share prices of other banks that recently completed their secondary offerings surged shortly before and after the announcement of their intentions to raise new funds from the capital markets.The surge in the prices of these shares might have been an intentional mop up by the institutions, or by smart investors buying shares ahead of the offering to enable them sell into post offering up swing.

However, a review of the value of investors portfolio post reconstruction through the technical suspension by NSE in the trading of Access Bank shares on May 18, 2007, indicate that investors who held on to their shares post reconstruction experienced a significant appreciation in the value of their portfolio.

ILLUSTRATION:An investor with 10,000 shares pre-split at N3 paid N30, 000 (10,000 x 3 = N30, 000) originally for the shares. After the 1 for 2 reverse split, the investor received 5,000 share at N6 still valued at N30, 000 (5,000 shares x N6 = 30,000). If the investor did not sell the 5,000 shares received from the split, the shares are worth N96, 640, a gain of N66, 600 or 222% as of May 18, 2007. Even at the discounted offering price of N14.90, the portfolio gain is N44, 500 or 148.3% post reconstruction as indicated in the schedule in the report above.

Share/Save