The Nation Newspaper

Category: Equities

  • GTBank, ASL expand operations to East Africa

    Guaranty Trust Bank (GTBank) Plc and Airline Services & Logistics Plc at the weekend announced the expansion of their business operations to East Africa as Nigerian companies look to emerging African markets to support domestic growth.

    In separate notices to the investing public, ASL and GTBank stated that they have finalized arrangements to commence operations in a number of African countries. ASL indicated that it has decided to expand its business into oil and gas catering and provision of in-flight catering in Rwanda.

    In line with this, ASL stated that it has entered into a joint venture agreement with third parties to set up ASL Rwanda and ASL Oil & Gas Logistics Limited as a special purpose vehicle for the Rwandan operations.

    GTBank, which had in July indicated acquisition bid for Kenyan banking group-Fina Bank Limited, stated that it has concluded the acquisition and obtained all necessary regulatory approvals. GTBank is the most capitalised financial services stock at the Nigerian stock market with market capitalization of about N795 billion on board today.

    According to the bank, it has executed the share sale and purchase agreement with shareholders of Fina Bank, thus concluding the transaction. Consequently, Fina Bank Limited, Kenya and its subsidiaries-Fina Bank Limited, Uganda and Fina Bank Limited Rwanda will now be renamed and rebranded as subsidiaries of GTbank.

    GTbank noted that the acquisition would enable it to enter East Africa through a multi-country and scalable platform, thus expanding its international presence in Sub-Saharan Africa.

    It pointed out that this acquisition was in line with its structured expansion programme aimed at enabling the bank to tap into the vast business opportunities that exist in the East African region.

    The news of the expansions suited the bullish market situation at the Nigerian Stock Exchange (NSE) as equities appeared set for its biggest gain since the 2008 recession. The All Share Index (ASI), the common value-based index that tracks all equities on the NSE, rallied 1.69 per cent last week to push its year-to-date return to 43.28 per cent. The ASI closed the week at 40,231.68 points as against its opening index of 39,562.75 points for the week. Aggregate market value of all quoted equities also rose by 1.69 per cent to close at N12.875 trillion.

    Total turnover stood at 1.28 billion shares worth N6.90 billion in 10,761 deals. Financial services sector led the activity chart with 749.66 million shares valued at N3.22 billion in 5,541 deals; accounting for 58.68 per cent of total turnover. The information and communication technology sector followed with a turnover of 270.48 million shares worth N137.14 million in 99 deals. Conglomerates sector placed third with 124.84 million shares worth N626.9 million in 1,041 deals.

    Trading in the top three equities namely, Mass Telecommunication Innovations Nigeria Plc, Unity Bank Plc and Transnational Corporation of Nigeria Plc accounted for 601.67 million shares worth N775.88 million in 1,341 deals, contributing 47.1 per cent of total turnover.

  • What stands Dangote Cement out?

    What stands Dangote Cement out?

    Dangote Cement (Dancem) Plc combines size with value. With above-average return and more than a quarter of Nigerian stock market capitalisation, Dancem is unarguably the single most influential stock that has shaped the bullish market outlook at the equities market. Capital Market Editor, Taofik Salako reports that its size and position place Dancem on the watch-list of discerning investors.

    Nigerian equities market opens today with average year-to-date return of 37.96 per cent. This is obviously the most impressive return by any class of regulated and tradable investments in Nigeria. With inflation rate currently at a single-digit rate of 7.8 per cent and the baseline interest rate, as indicated by the Monetary Policy Rate (MPR), at 12 per cent, every average investor in Nigerian stock market can still boast of double-digit inflation-adjusted return on investment. Average return on equities in most cases more than doubled average return by fixed-income securities. The current market situation places equities in good stead to set another record, after it delivered a full-year return of 35.45 per cent in 2012.

    The bullish overall market situation underlines widespread price appreciation as well as the impressive performance of several market-determining stocks. The major boosts for market performance come from the sterling performances of building materials stocks, oil and gas stocks and to some extent, fast moving consumer goods companies. With banking and insurance subsectors, the two populous and most active subgroups at the Nigerian Stock Exchange (NSE), trailing with below average return of 19.47 per cent and 24.57 per cent, non-financial stocks have been the main drivers of the market performance. Dangote Cement leads these influential stocks.

    Dangote Cement opens today with a market capitalisation of N3.331 trillion, about 26.9 per cent of total equity market capitalisation of N12.390 trillion and the highest by any quoted company. The second highest capitalised stock, Nigerian Breweries, controls about 10 per cent of market capitalisation while Nestle Nigeria accounts for about 7.5 per cent. This implies that the pricing trend of Dancem will most often has a ripple effect on the overall pricing trend at the stock market. The pole position of Dancem as a leader of the primary stocks behind the bullish rally is evident in its above-average performance, which helped to moderate the negative impact of stagnant and depreciating stocks.

    At current market price of N195.50 per share, Dancem opens trading today with a year-to-date return of 52.62 per cent. This is higher than average return of 33.81 per cent for the 30 most capitalised stocks at the NSE. Dancem had traded at a high of N210.01 this year, indicating that it had sustained its momentum in spite of profit-taking trend that had characterised transactions in recent period. NSE indicated that Dancem’s share price had doubled from a low of N102 per share in the past 52 weeks. Since share pricing trend primarily rests on the fundamentals of the company, the company’s upwardly pricing trend appears to illustrate its operational and fundamental position.

     

    Stronger fundamentals

     

    Emerging results have shown improved sales efficiency and cost management in the operations of Dancem. Interim report and accounts of Dangote Cement for the nine-month period ended September 30, 2013 showed that turnover rose to N288.98 billion as against N224.49 billion recorded in comparable period of 2012. Gross profit increased from N135.81 billion to N189.38 billion. Profit before tax stood at N151.73 billion compared with N106.43 billion in corresponding period of 2012. With tax gains, net profit increased to N156.13 billion as against N107.06 billion in the previous comparable period. Sales of Dangote cement had increased by 29.5 per cent in Nigeria to 9.95 million tonnes, more than 62 per cent of the estimated 16 million tonnes of cement sold in the country in nine-month period September 30, 2013.

    The third-quarter earnings report placed Dancem in better stead to surpass its full-year performance for 2012. Key extracts of audited report and accounts for the year ended December 31, 2012 had shown that market share rose steadily during the year, averaging an estimated 57.1 per cent in 2012 compared with the 50.5 per cent achieved in 2011. The company recorded a profit after tax of N151.93 billion in 2012 as against N121.4 billion in 2011, representing an increase of 25 per cent. It subsequently paid a dividend per share of N3. Current net earnings position already indicates headroom for dividend growth.

     

    Analysts’ rating

     

    The PEARL Awards Project, an independent not-for-profit capital market research organisation, has awarded Dancem its most prestigious award of “PEARL of the NSE” for two consecutive years. In adjudging Dancem as the most outstanding stock at the NSE in 2013, PEARL Awards noted that the rating reflected the company’s verifiable performance indices. The PEARL Awards is endorsed by the Securities and Exchange Commission (SEC), Nigeria’s apex capital market regulator. Having been nominated in almost all the categories and winning more than any other stock in the award categories, the choice of Dancem as the most outstanding stock represented the totality of its profit and loss and balance sheet performances. It had won awards in three other categories including being the winner in the building materials category. Dancem was declared as the winner of the highest profit margin ratio award in the market excellence category while it also won as the company with the highest dividend growth in the capital market.

    President, PEARL Awards Project, Mr. Tayo Orekoya, said the emergence of Dancem as the most outstanding stock for the second consecutive year was a reflection of the company’s fundamental performance.

    According to him, the criteria for the awards are based on verifiable facts and figures, which are usually publicly available in the organisation’s annual stock market publication and brochures.

    “We are very proud to be associated with Dangote Cement and with Dangote Group generally. For the second year running, Dangote Cement is winning the Pearl overall award, emerging as the PEARL of the Nigerian Stock Exchange. This is indeed a thing of joy and a thing to be very proud of,” Orekoya said.

     

    Growth outlook

     

    Chief Executive officer, Dangote Cement Plc, Devakumar Edwin said there is greater potential for the company in the years ahead. According to him, the company’s expansion plan and capacity upgrade significantly increase its sales output and market share not only in the Nigerian cement industry but in Africa.

    Already, Dancem is Nigeria’s leading cement producer with three plants in Nigeria and 13 plants across other African countries. It has moved a step closer to its aim of becoming Africa’s leading supplier of cement with ongoing plans to launch its cement plants in Senegal and South Africa.

    “Our plant in Senegal will soon be producing cement and our South African venture, Sephaku Cement, is well on track to open in the early part of 2014. These two plants will be our first production ventures outside Nigeria as we aim to become Africa’s leading supplier of cement,” Edwin stated in latest review of the company.

    According to him, Dancem ultimate aim is to be able to produce more than 50 million metric tonnes per annum (mta) by the end of 2016. In Ethiopia, Dancem is building a 2.5 million mta plant at Mugher, with production expected early in 2015. In Tanzania, it has begun work on a 3.0 million mta gas-fired plant at Mtwara that is expected to become operational in October 2015. In Zambia, work is underway on a 1.5 million mta plant at Ndola, with cement production expected in mid-2014. In Cameroun, building work is progressing on a 1.5 million mta grinding plant, which is expected to be completed in the first half of 2014. In Congo, Dancem is building an integrated plant of 1.5 million mta, which is expected to begin production in the second quarter of 2016. It also plans to build a 1.5 million mta plant in South Sudan, to become operational in 2016, as well as a 1.5 million mta integrated facility in Kenya.

    In the meantime, Edwin said the group has concluded plans to build import facilities to receive and bag bulk cement produced in Nigeria and Senegal, which will enable the group to synchronise its operations across the major production and distribution centres. Dancem’s Obajana plant in Kogi State, Nigeria, is the largest cement plant in Sub-Saharan Africa with 10.25 million mta across three lines and a further 3.0 million mta currently under construction. Its new 6.0 million mta Ibese plant in Ogun State was inaugurated in February 2012. Building is underway to add 6.0 million mta to the installed capacity of the Ibese plant. Dancem’s Gboko plant in Benue State boasts of 4.0 million mta capacity.

    Dancem is expanding into a growing market. Nigeria has growing demand for cement and other related materials. The largest country in Africa, with some 170 million population and in critical need of development of infrastructure, the need for capital projects especially in housing and roads has continued to grow year-on-year. With steady Gross Domestic Products (GDP) growth, the outlook for the building and construction industry remains bright as it is generally accepted that the level of GDP per capita positively correlates with the level of construction activity. Many initiatives by government and private sector such as the mortgage refinancing scheme are expected to further expand demand for building and construction materials, chiefly cement. This medium-to-long-term outlook appears to be the underlining factor behind Dancem’s pricing trend.

  • Investors scramble for low-priced banking stocks

    Investors appeared to be increasingly scouting for bargain deals within the lower segment of the banking subsector as low-priced banking stocks continued to dominate transactions at the Nigerian Stock Exchange (NSE).

    Transactions on the trio of FCMB Group, Skye Bank and Unity Bank- three relatively low-priced banking stocks, accounted for 43.6 per cent of aggregate turnover volume at the NSE yesterday. Financial services sector, which included banking, insurance and other allied financial services segments, altogether accounted for more than 82 per cent of total turnover volume.

    The market pricing sentiment tilted to the upside with average daily gain of 0.64 per cent, reflecting the fluctuation that had seen the market alternating between the bullish and bearish sentiment in the past three days.

    Aggregate market value of all equities increased from N12.523 trillion to N12.603 trillion while the All Share Index (ASI) rose by 0.64 per cent from 39,130.37 points to close at 39,383.33 points. The increase nudged average year-to-date return at the stock market to 40.26 per cent.

    With 30 advancers to 26 decliners, the market situation was helped by substantial gains by several highly capitalised stocks. Guinness Nigeria topped the gainers’ list with a gain of N4.99 to close at N240. Nigerian Breweries followed with a gain of N3.99 to close at N165. Mobil Oil Nigeria added N1.95 to close at N117. Dangote Cement rose by N1.74 to close at N211.74. Lafarge Cement Wapco Nigeria chalked up N1.50 to close at N107. International Breweries gained N1.49 to close at N29.88. Union Dicon Salt rose by N1.02 to close at N11.06. UAC of Nigeria gathered 70 kobo to close at N65.20. Flour Mills of Nigeria added 55 kobo to close at N86.56 while Presco gained 50 kobo to close at N37.50 per share.

    Total turnover stood at 424.88 million shares worth N3.73 billion in 4,803 deals. Financial services sector accounted for 350.06 million shares valued at N2.34 billion in 2,494 deals. FCMB Group was the most active stock with a turnover of 110.87 million shares valued at N354.79 million in 105 deals. Skye Bank followed with a turnover of 39.80 million shares worth N172.58 million in 102 deals while Unity Bank was the third most active stock with a turnover of 34.49 million shares valued at N17.64 million in 107 deals.

    On the downside, Unilever Nigeria led the losers with a drop of N2.61 to close at N52. PZ Cussons Nigeria dropped by N1.69 to close at N34.76. Ashaka Cement lost 39 kobo to close at N19.80. Union Bank of Nigeria slipped by 29 kobo to close at N9.11 while National Salt Company of Nigeria dropped by 17 kobo to close at N13.32 per share.

     

  • BN Holdings, Transcorp to pay dividends

    FBN Holdings Plc, the holding company for First Bank of Nigeria (FBN) Limited and other financial services companies, and Transnational Corporation of Nigeria (Transcorp) Plc have confirmed that they will pay dividends for the year ending December 31, 2013.

    Regulatory filings submitted to the Nigerian Stock Exchange (NSE) obtained by The Nation at the weekend indicated that the two companies have started definitive moves to ensure payment of dividends for the year.

    The confirmations of the dividend payment indicated the confidence of the boards of directors on the third quarter earnings and the last quarter of the year.

    The board of FBN Holdings stated that it had undertaken the group-wide audit of the third-quarter earnings of its subsidiaries to ensure that it receives dividends from its subsidiaries for onward distribution to shareholders.

    According to the board, FBN Holdings has chosen to audit the financial statements to ensure that the holding company, a non-operating entity sharing the same December year-end with its subsidiaries, receives dividend income from its subsidiaries within the year and as such enable FBN Holdings to pay dividend to shareholders for the year ended December 31, 2013.

    FBN Holdings indicated that it has concluded the audit process and submitted its audited financial statements to the Central Bank of Nigeria (CBN) for approval, noting that once it receives the CBN’s approval for the audited financial statements, it will submit the third quarter accounts to the NSE.

    FBN Holdings stated that it expected to receive the CBN’s approval anytime within the next 12 days. It, therefore, requested the NSE to grant it a two-week extension of the submission deadline for its third quarter earnings of December 13, 2013.

    Also, the board of Transcorp has resolved that the conglomerate would pay dividends for the business year.

    At their board meeting, directors of the conglomerate unanimously resolved that they will recommend to the shareholders of the company the payment of dividends at the end of the financial year ending December 31, 2013.

    The dividend consideration, according to the board, was based on the impressive third quarter report for the nine-month period ended September 30, 2013 and in further consideration of the fact that since the listing of the company’s shares on the NSE in December 2006, the public who bought into the conglomerate has not earned any dividends.

    The board, however, stated that the quantum of the dividend recommended herein shall be determined at the end of the year, subject to the final audited accounts and required regulatory approvals or consent.

    Meanwhile, the Asset Management Corporation of Nigeria (AMCON) has indicated that it will redeem its N1.70 trillion zero-coupon Series 1 bonds due in December 31, 2013 at par value on December 30, 2013.

    The corporation noted that the redemption is in accordance with Clause 15 and Condition 11.1 of the Amended and Related Trust Deed and terms of the Series 1 pricing supplement.

    Meanwhile turnover at the NSE last week stood at 2.77 billion shares worth N18.67 billion in 24,007 deals. The financial services industry led the activity chart with 1.89 billion shares valued at N8.83 billion in 12,359 deals; thus contributing 68.43 per cent of total turnover.

    The market remained skewed in favour of low-priced stocks with the trio of Unity Bank Plc, Transcorp and E-Tranzact International Plc accounting for 1.50 billion shares worth N2.49 billion in 2,686 deals, representing 54.4 per cent of total turnover during the week.

    The market closed on a positive note in spite of frequent profit-taking transactions that characterised transactions. The All Share Index (ASI) inched up by 0.24 per cent to close the week at 38,831.59 points while aggregate market capitalisation of all equities appreciated by 0.29 per cent to close at N12.427 trillion.

  • Omatek targets N3.34b profit in five years

    Omatek Plc will sustain its return to profitability and grow the bottom-line to about N3.34 billion by 2017, the management of the company has said.

    The profit projection was part of the highlights of the presentation by the board and management of the computer company to the investing public at the Nigerian Stock Exchange (NSE) at the weekend.

    Group Managing Director, Omatek Plc, Florence Seriki, said the company, which recorded its first positive bottom-line in recent years last year, will build on its profitability and gradually extend the bottom-line to about N3.34 billion over a five-year period.

    According to her, total net earnings, otherwise designated as total comprehensive income, will increase from N236.82 million recorded in 2012 to N353.23 million in 2013. This is expected to double to N710.46 million in 2014 and subsequently to N1.265 billion, N2.02 billion and N3.34 billion in 2015, 2016 and 2017 respectively.

    She said the company has put in place various initiatives to drive its repositioning exercise and help consolidate on the performance and profitability.

    “Today, our story is different. We have much to look to as a publicly quoted company, on the basis of the value we are bringing to our investors and on the high potential we have to dominate the market,” Seriki said.

    According to her, Omatek has been able to weather operating challenges by introducing several factory initiatives to enhance volume and meet minimum order requirement from first class manufacturers in Asia.

    She outlined that the company had launched several consumer schemes for the purchasing of laptops by states, government establishments, tertiary and private secondary schools, corporate organisations and schools.

    “The strategy has been very successful in Nigeria and working in Ghana. While improving on current working strategy, we shall improve on it and replicate in the countries embracing Omatek Group’s brand across Africa, Europe and Asia,” Seriki said.

    She however stressed the need for the company to source cheaper offshore funds to meet its working capital and compete with the price base of other foreign competitors which have access to low-interest funding.

    She said the company has approached the Bank of Industry (BoI) and Central Bank of Nigeria (CBN) for single-digit funding in order to compete with foreign companies.

    She lamented that Nigerian banks have not been able to understand the transaction dynamics of the company by accommodating its pioneering structure and supply chain management with a view to understand the right kind of funding structure required for the company’s factory and the distribution channels.

    “We do not import finished products and our distribution company cannot establish letter of credits for their finished products as ordered by their clients. They pay the factory for finished products and the factory in turn can only purchase what is out of stock. The factory cannot also await orders from the distribution company before replenishing its raw materials inventory because of the lead and transit time required,” Seriki noted.

  • What stands Dangote Cement out?

    What stands Dangote Cement out?

    Dangote Cement (Dancem) Plc combines size with value. With above-average return and more than a quarter of Nigerian stock market capitalisation, Dancem is unarguably the single most influential stock that has shaped the bullish market outlook at the equities market. Capital Market Editor, Taofik Salako reports that its size and position place Dancem on the watch-list of discerning investors.

    Nigerian equities market opens today with average year-to-date return of 37.96 per cent. This is obviously the most impressive return by any class of regulated and tradable investments in Nigeria. With inflation rate currently at a single-digit rate of 7.8 per cent and the baseline interest rate, as indicated by the Monetary Policy Rate (MPR), at 12 per cent, every average investor in Nigerian stock market can still boast of double-digit inflation-adjusted return on investment. Average return on equities in most cases more than doubled average return by fixed-income securities. The current market situation places equities in good stead to set another record, after it delivered a full-year return of 35.45 per cent in 2012.

    The bullish overall market situation underlines widespread price appreciation as well as the impressive performance of several market-determining stocks. The major boosts for market performance come from the sterling performances of building materials stocks, oil and gas stocks and to some extent, fast moving consumer goods companies. With banking and insurance subsectors, the two populous and most active subgroups at the Nigerian Stock Exchange (NSE), trailing with below average return of 19.47 per cent and 24.57 per cent, non-financial stocks have been the main drivers of the market performance. Dangote Cement leads these influential stocks.

    Dangote Cement opens today with a market capitalisation of N3.331 trillion, about 26.9 per cent of total equity market capitalisation of N12.390 trillion and the highest by any quoted company. The second highest capitalised stock, Nigerian Breweries, controls about 10 per cent of market capitalisation while Nestle Nigeria accounts for about 7.5 per cent. This implies that the pricing trend of Dancem will most often has a ripple effect on the overall pricing trend at the stock market. The pole position of Dancem as a leader of the primary stocks behind the bullish rally is evident in its above-average performance, which helped to moderate the negative impact of stagnant and depreciating stocks.

    At current market price of N195.50 per share, Dancem opens trading today with a year-to-date return of 52.62 per cent. This is higher than average return of 33.81 per cent for the 30 most capitalised stocks at the NSE. Dancem had traded at a high of N210.01 this year, indicating that it had sustained its momentum in spite of profit-taking trend that had characterised transactions in recent period. NSE indicated that Dancem’s share price had doubled from a low of N102 per share in the past 52 weeks. Since share pricing trend primarily rests on the fundamentals of the company, the company’s upwardly pricing trend appears to illustrate its operational and fundamental position.

     

    Stronger fundamentals

     

    Emerging results have shown improved sales efficiency and cost management in the operations of Dancem. Interim report and accounts of Dangote Cement for the nine-month period ended September 30, 2013 showed that turnover rose to N288.98 billion as against N224.49 billion recorded in comparable period of 2012. Gross profit increased from N135.81 billion to N189.38 billion. Profit before tax stood at N151.73 billion compared with N106.43 billion in corresponding period of 2012. With tax gains, net profit increased to N156.13 billion as against N107.06 billion in the previous comparable period. Sales of Dangote cement had increased by 29.5 per cent in Nigeria to 9.95 million tonnes, more than 62 per cent of the estimated 16 million tonnes of cement sold in the country in nine-month period September 30, 2013.

    The third-quarter earnings report placed Dancem in better stead to surpass its full-year performance for 2012. Key extracts of audited report and accounts for the year ended December 31, 2012 had shown that market share rose steadily during the year, averaging an estimated 57.1 per cent in 2012 compared with the 50.5 per cent achieved in 2011. The company recorded a profit after tax of N151.93 billion in 2012 as against N121.4 billion in 2011, representing an increase of 25 per cent. It subsequently paid a dividend per share of N3. Current net earnings position already indicates headroom for dividend growth.

     

    Analysts’ rating

     

    The PEARL Awards Project, an independent not-for-profit capital market research organisation, has awarded Dancem its most prestigious award of “PEARL of the NSE” for two consecutive years. In adjudging Dancem as the most outstanding stock at the NSE in 2013, PEARL Awards noted that the rating reflected the company’s verifiable performance indices. The PEARL Awards is endorsed by the Securities and Exchange Commission (SEC), Nigeria’s apex capital market regulator. Having been nominated in almost all the categories and winning more than any other stock in the award categories, the choice of Dancem as the most outstanding stock represented the totality of its profit and loss and balance sheet performances. It had won awards in three other categories including being the winner in the building materials category. Dancem was declared as the winner of the highest profit margin ratio award in the market excellence category while it also won as the company with the highest dividend growth in the capital market.

    President, PEARL Awards Project, Mr. Tayo Orekoya, said the emergence of Dancem as the most outstanding stock for the second consecutive year was a reflection of the company’s fundamental performance.

    According to him, the criteria for the awards are based on verifiable facts and figures, which are usually publicly available in the organisation’s annual stock market publication and brochures.

    “We are very proud to be associated with Dangote Cement and with Dangote Group generally. For the second year running, Dangote Cement is winning the Pearl overall award, emerging as the PEARL of the Nigerian Stock Exchange. This is indeed a thing of joy and a thing to be very proud of,” Orekoya said.

     

    Growth outlook

     

    Chief Executive officer, Dangote Cement Plc, Devakumar Edwin said there is greater potential for the company in the years ahead. According to him, the company’s expansion plan and capacity upgrade significantly increase its sales output and market share not only in the Nigerian cement industry but in Africa.

    Already, Dancem is Nigeria’s leading cement producer with three plants in Nigeria and 13 plants across other African countries. It has moved a step closer to its aim of becoming Africa’s leading supplier of cement with ongoing plans to launch its cement plants in Senegal and South Africa.

    “Our plant in Senegal will soon be producing cement and our South African venture, Sephaku Cement, is well on track to open in the early part of 2014. These two plants will be our first production ventures outside Nigeria as we aim to become Africa’s leading supplier of cement,” Edwin stated in latest review of the company.

    According to him, Dancem ultimate aim is to be able to produce more than 50 million metric tonnes per annum (mta) by the end of 2016. In Ethiopia, Dancem is building a 2.5 million mta plant at Mugher, with production expected early in 2015. In Tanzania, it has begun work on a 3.0 million mta gas-fired plant at Mtwara that is expected to become operational in October 2015. In Zambia, work is underway on a 1.5 million mta plant at Ndola, with cement production expected in mid-2014. In Cameroun, building work is progressing on a 1.5 million mta grinding plant, which is expected to be completed in the first half of 2014. In Congo, Dancem is building an integrated plant of 1.5 million mta, which is expected to begin production in the second quarter of 2016. It also plans to build a 1.5 million mta plant in South Sudan, to become operational in 2016, as well as a 1.5 million mta integrated facility in Kenya.

    In the meantime, Edwin said the group has concluded plans to build import facilities to receive and bag bulk cement produced in Nigeria and Senegal, which will enable the group to synchronise its operations across the major production and distribution centres. Dancem’s Obajana plant in Kogi State, Nigeria, is the largest cement plant in Sub-Saharan Africa with 10.25 million mta across three lines and a further 3.0 million mta currently under construction. Its new 6.0 million mta Ibese plant in Ogun State was inaugurated in February 2012. Building is underway to add 6.0 million mta to the installed capacity of the Ibese plant. Dancem’s Gboko plant in Benue State boasts of 4.0 million mta capacity.

    Dancem is expanding into a growing market. Nigeria has growing demand for cement and other related materials. The largest country in Africa, with some 170 million population and in critical need of development of infrastructure, the need for capital projects especially in housing and roads has continued to grow year-on-year. With steady Gross Domestic Products (GDP) growth, the outlook for the building and construction industry remains bright as it is generally accepted that the level of GDP per capita positively correlates with the level of construction activity. Many initiatives by government and private sector such as the mortgage refinancing scheme are expected to further expand demand for building and construction materials, chiefly cement. This medium-to-long-term outlook appears to be the underlining factor behind Dancem’s pricing trend.

     

  • How will First Bank’s expansion impact returns?

    How will First Bank’s expansion impact returns?

    First Bank of Nigeria, listed under the name FBN Holdings Plc, holds strategic position in the Nigerian financial services sector, the Nigerian economy, West African region, Sub-Saharan Africa (SSA) and the continent generally. As Nigeria’s flagship bank, First Bank determines, to a large extent, not only the outlook for Nigeria but the regional and continental banking dynamics. Capital Market Editor, examines implications of First Bank’s recent regional expansionary initiatives.

    The banking sector generally is one of the axles on which the economy rotates. While the degree of influence of the banking sector differs from economy to economy, depending on the degree of sophistication and development of other segments of the financial industry, most emerging economies depend heavily on the banking sector. The current theory of “too big to fail” that features prominently in global regulatory framework underlines concerns about the impact of the banking sector, financial services industry, and the importance of the leading financial services companies. In Nigeria, like other African countries and emerging economies with less-developed non-bank financial market, the banking sector is the sector to track for the economic and investment outlook. To a very large extent, the Nigerian financial services industry, and the economy generally, depends on the banking sector.

    The financial services sector accounts for about 30 per cent of total market capitalisation of the Nigerian stock market. Quoted banks and bank-holding groups account for more than 94 per cent of the market capitalisation of the financial services sector, which includes commercial deposit money banks, bank-holding financial services groups, mortgage bankers, insurance companies, microfinance banks, asset management companies and allied financial services companies. FBN Holdings Plc, the holding company for First Bank of Nigeria Limited (FirstBank), accounts for 14 per cent of the entire financial services sector and 15 per cent of quoted banks and bank-holding companies. There are 56 financial services companies quoted on the Nigerian Stock Exchange (NSE) including 12 commercial deposit money banks, 29 insurance companies, two microfinance banks, four mortgage bankers and nine other financial services firms. Among the nine other financial services firms are the three bank-holding groups-FBN Holdings, FCMB Group and Stanbic IBTC Holdings.

     

    The big bank impact

     

    The overall technical importance of First Bank is better appreciated within the context of the general market situation. At opening value today, FBN Holdings is bigger than each other sector and sub-sector on the NSE with the exception of its financial services sector, consumer goods sector and industrial goods sectors. Technically, FBN Holdings, on its own, holds significant influence on the overall market situation than several other individual sectors such as agriculture, oil and gas, construction, information and communication technology and healthcare among others. With capitalisation more than three times the size of entire populous insurance subsector, FirstBank’s pricing trend will exert more influence on overall market situation than the collective trend in several subsectors.

    Fundamentally, FirstBank is Nigeria’s largest bank. With total assets of N3.3 trillion, customer deposits of N2.6 trillion and a strong capital adequacy ratio of 18.9 per cent, nearly twice the minimum 10 per cent requirement by the Central Bank of Nigeria (CBN), FirstBank ranks among the largest corporate and retail financial institutions in Sub-Saharan Africa. First-half report for the period ended June 30, 2013 underlined the fundamentals of the bank and the holding company. FBN Holdings grew its top-line to about N195 billion in the first half of this year, posting the largest revenue by any financial services group. Key extracts of the interim report and accounts of FBN Holdings, showed that gross earnings increased from N180.9 billion in first half 2012 to N194.9 billion in June 2013. The report showed improvements in all key indices, although the growths were marginal, the pervasive industry trend that has characterized earnings reports of banks in recent period. Profit before tax rose from N53.5 billion to N55.1 billion while profit after tax increased from N45.35 billion to N46.10 billion. The company expanded its balance sheet size to N3.4 trillion with total customer deposits of N2.6 trillion. Total customer loans and advances stood at N1.5 trillion. The group rested heavily on FirstBank, which recorded gross earnings of N186.1 billion and profit before tax of N49.9 billion in first half 2013. The bank’s aggregate balance sheet grew to N3.3 trillion by June 2013 as against N3.1 trillion recorded at the beginning of the year.

     

    Financial conglomerate

     

    Beyond the technical and fundamental figures, the structures and operations of FBN Holdings and FirstBank lend credence to its leading position. The most diversified financial services group in Nigeria, FBN Holdings operate products and services across commercial banking, investment banking, insurance and microfinance business in seven countries including its primary market and head office- Lagos, London, Paris, Johannesburg, Beijing, Abu Dhabi, and Democratic Republic of Congo. While the group rests primarily on FirstBank, other subsidiaries include FBN Capital, a leading investment banking and asset management company; FBN Life Assurance, a life insurance business; and FBN Microfinance Bank, which offers microfinance services. With some 1.3 million shareholders, FBN Holdings has the largest shareholders’ base.

    The recent announcement of FirstBank’s expansion into West Africa through the acquisition of some of the operations of International Commercial Bank (ICB) marked a milestone in the expansion of Nigerian financial services companies within the sub-region and Africa generally. While African expansion has been at the forefront of Nigerian bankers’ strategies since mid 2000’s, FirstBank had cautiously concentrated on organic growth and consolidation of its domestic base. The strategy had worked out perfectly. While several Nigerian banks that had opened or acquired foreign operations in many African countries were either acquired or liquidated in the following financial and economic meltdown, FirstBank had further consolidated its leadership.

    So why has the bank now decided to spread its wings beyond the shores of Nigeria? According to the management of the bank, the acquisition of ICB operations in West Africa is the next stage of growth and provides a strong geographic and commercial base from which FirstBank can continue to grow progressively in Africa. With operations in Guinea, Gambia, Ghana and Sierra Leone, ICB provides FirstBank with a strong geographic platform for growth and an established customer base across the mid-corporate, small and medium enterprises (SME) and retail segments that complement the bank’s existing strategy in Nigeria. ICB has over 600 employees and 120,000 customer accounts spread across these four markets. ICB also operates in markets with major investments in key growth sectors on the continent, most notably the major mining industries that are prevalent in Guinea and Ghana and emerging in Sierra Leone as well as positioned for the commercial operations in the emerging oil and gas opportunities in Ghana and Guinea. It should be noted that FirstBank had in 2011 acquired BIC in the Democratic Republic of Congo, starting its progressive and case by case approach to inorganic growth opportunities. Since acquiring BIC, the bank has successfully managed an integration process that has incorporated BIC into FirstBank’s operations while delivering short term improvements in financial performance as well. This is the strategy that it will further deploy to harness and integrate the synergies and opportunities presented by the latest ICB acquisition.

    While many Nigerian banks are now actively expanding across the African continent and are implementing diverse business models as they seek to maximise growth, FirstBank’s approach customarily reflects its progressive approach. Its approach is rooted in the multi-local business model which ensures that the best of local culture and experience is mixed with the banking expertise the bank has built up over more than a century of operations. A multi-local business model is designed to ensure the markets where FirstBank is expanding retain the local culture and approach that make them an integral part of the local economy. By ensuring each FirstBank business across the continent adopts a locally led approach, while leveraging the international reach and experience of the parent company, the bank believes it can engender a long term sustainable approach to doing business in new markets, Africa in particular. “We are committed to developing a multi-local business model that broadens our geographic revenue base while providing enhanced service delivery to our new customers,” Group Managing Director, First Bank of Nigeria Limited, Mr. Bisi Onasanya reiterated on the confirmation of the acquisition of the ICB assets. According to him, the acquisition of ICBGFH assets in Ghana, Guinea, Gambia and Sierra Leone fulfilled the first stage of the bank’s ambitions to steadily build broader and more diverse footprints across Africa.

    The new acquisition would also strengthen FirstBank against increasingly tough domestic operating environment and secure new markets for stronger growth momentum. In its latest ‘Banking Industry Country Risk Assessment (BICRA)’ on Nigeria, Standards & Poor’s Ratings Services had outlined operating challenges confronting Nigerian banking industry amidst the lop-sided economic system and deficient infrastructure. “The Nigerian banking sector has undergone two major consolidation periods in the past 10 years. In our opinion, the second phase is close to an end, although the future of the three quasi-nationalized banks remains unclear. As the new industry landscape clears, we expect competition to increase and the sector to continue to organize itself into three distinct tiers. Most rated banks are in the upper and middle tiers. Positively, with 21 banks operating in the sector, we don’t believe there is any significant overcapacity because of inherently low leverage and retail penetration, as well as strong long-term economic growth fundamentals. We anticipate stiff competition, however, on at least two fronts: attracting low-cost retail deposits in a country with low banking penetration, and banking large corporates together with their staff, third-party suppliers, and distributors. We believe foreign banks will continue to attempt to enter the sector in 2013-2014, but barriers to entry remain high for banks without significant capital or scale,” the report outlined the industry stability outlook. Both the challenges and opportunities represent better prospects for FirstBank with its large domestic scale and built-up retail base as well as the new openings presented by the ICB acquisition.

    Onasanya said the ongoing domestic initiatives aimed at optimizing benefits of recent investments and countering pressures induced by regulatory changes would complement the bank’s expansionary drive to deliver greater earnings diversification and increase shareholders’ value through higher returns on equity among other benefits.

     

    Under-pricing the potential?

     

    However, the price of FBN Holdings appears to lag behind the gathering operational momentum. At opening price of N16.11 per share today, many analysts believe that FirstBank’s pricing trend is significantly below the current and future earnings potential. While it had traded at a high of N21.50, the current market price appears to be base-forming around the group’s low of N15.20 per share. The low price may conversely represent above-average yields for discerning investors that take opportunities of the time-lag to take positions ahead of the herd rush. With average year-to-date return of 38.61 per cent at the Nigerian equity market, several equities obviously are within their high band. But with several financial services stocks trading below average, the sector may well be next growth phase of the market. Investors only need to think and look beyond the immediate earnings to future earnings and sustainability.

  • Equities gain N3.48tr, 38.61% in 11 months

    •Equities retain 3.45% in November

    Investors in equities have earned about N3.48 trillion in capital gains over the past 11 months as the stock market survived a last-week downtrend to consolidate its bullish rally in November.

    Average return dropped by 0.83 per cent, while earlier gains left the market with a gain of 3.45 per cent last month.

    Aggregate market capitalisation of all quoted equities closed last month at N12.449 trillion as against this year’s opening value of N8.974 trillion, indicating an increase of N3.475 trillion or 38.72 per cent.

    The main index at the Nigerian Stock Exchange (NSE), the All Share Index (ASI)-a common value-based index that tracks all quoted equities, indicated 11-month year-to-date return of 38.61 per cent. ASI closed November at 38,920.85 points as against its index-on-board of 28,078.81 points for the year.

    With N3.48 trillion and average year-to-date return of 38.61 per cent, equities appeared in good stead for another record successive performance. In value terms, 11-month capital gain of N3.48 trillion has already surpassed total gains of N2.44 trillion recorded for the entire 2012. Also, real benchmark return of 38.61 per cent is already some three percentage points above average full-year return of 35.45 per cent recorded in 2012.

    The stock market had closed the first half of 2013 with average return of about 28.8 per cent, equivalent to N2.45 trillion in capital gains. Aggregate market value of all equities on the NSE had closed the first half at N11.426 trillion while the ASI had closed the first half at 36,164.31 points.

    Meanwhile, turnover at the NSE stood at 2.17 billion shares worth N24.44 billion in 26,443 deals last week. The financial services sector topped the activity chart with 1.20 billion shares valued at N9.13 billion in 12,226 deals; representing 55.48 per cent of total turnover for the week. Conglomerates sector followed with a turnover of 505.33 million shares worth N2.48 billion in 2,628 deals; accounting for 23.31 per cent of total turnover. Oil and gas sector placed third with a turnover of 196.41 million shares worth N2.372 billion in 3,762 deals.

    Investors concentrated on low-priced stocks, otherwise known as penny stocks. The trio of Transnational Corporation of Nigeria Plc, Unity Bank Plc and Wapic Insurance Plc- each a penny stock in its category, accounted for 888.95 million shares worth N2.53 billion in 3,119 deals. This represented 41 per cent of aggregate turnover for the week.

  • Equities relapse amidst low trades

    More investors pus-hed to exit their positions and several investors held back on new deals in cautious market situation that was characterized by a tinge of profit-taking trend, which has underlined market transactions since Monday.

    Nigerian equities lost 0.21 per cent or about N27 billion of their market capitalisation yesterday, pushing average year-to-date return at the Nigerian Stock Exchange (NSE) to 38.64 per cent. Aggregate market value of all quoted equities dropped from N12.478 trillion to N12.451 trillion. The All Share Index (ASI), which serves as the barometer for the stock market, also slipped from 39,011.31 points to 38,928.65 points.

    While turnover fell below average, there were more losers than gainers. Forte Oil led 27 other stocks on the losers’ list with a loss of N5.72 to close at N108.73. UAC of Nigeria followed with a loss of N2 to close at N64. GlaxoSmithKline Consumer Nigeria lost N1 to close at N65. UPDC Real Estate Investment Trust (UPDCREIT) declined by 50 kobo to N10. Transnational Corporation of Nigeria (Transcorp) dropped by 41 kobo to N3.93. Guaranty Trust Bank dropped by 31 kobo to N27.30. Livestock Feeds lost 23 kobo to close at N4.41 while Red Star Express dropped by 21 kobo to N4.20 per share.

    Level of activity generally sank to a new low. Number of deals, turnover volume and turnover value dropped by 0.92 per cent, 30.16 per cent and 45.78 per cent respectively. Total turnover stood at 252.65 million shares valued at N2.58 billion in 4,718 deals. Wapic Insurance was the most active stock with a turnover of 55.65 million shares valued at N55.09 million in 214 deals. Ecobank Transnational Incorporated (ETI) followed with a turnover of 41.97 million shares valued at N633.77 million in 108 deals. Zenith Bank occupied a distant third with a turnover of 13.69 million shares valued at N290.41 million in 249 deals.

    Banking subsector accounted for 109.97 million shares worth N1.40 billion in 1,558 deals. Insurance subgroup was the second most active subsector with a turnover of 70.97 million shares worth N69.03 million in 214 deals.

    Meanwhile, Cadbury Nigeria consolidated its share price with a gain of N3 to close at N62.85. PZ Cussons Nigeria followed on the 23-stock gainers’ list with a gain of N1.40 to close at N37.50. Nigerian Breweries rose by 50 kobo to N168. Jos International Breweries added 35 kobo to close at N3.92. Dangote Sugar Refinery chalked up 31 kobo to close at N11.30 while International Breweries rose by 21 kobo to close at N22.21 per share.

  • Africa Prudential Registrars assures on quality investor services

    Africa Prudential Registrars (APR) Plc has assured that ongoing strategic initiatives would lead to paradigm shift in investors services and further reinforced the company’s leadership position in the share registration industry.

    The assurance came as APR received the International Quality Crown (IQC) Award in the Gold category from the Business Initiative Directions (BID) in London. The IQC Award acknowledges cutting edge companies from around the world for their firm commitment to excellence, innovation and leadership. BID is a leading global organization that promotes quality culture in top businesses.

    Speaking on the IQC award, managing director, Africa Prudential Registrars (APR) Plc, Mr. Peter Ashade, said the company was committed to creating a paradigm shift in investors services and the share registration business in Nigeria and Africa in general.

    According to him, over the years, the company has built a reputation for innovation and high quality of service; which has helped to maintain its leading position in Nigeria.

    “This award validates our ongoing efforts to provide unique offerings in the share registration and investor services business. We thank the BID for the honour and recognition,” Ashade said.

    APR has steadily recorded a positive return on investment for its numerous local and international investors, the most prominent of which is Heirs Holdings, the pan-African investment company with long term, strategic interests in key economic sectors that generate social wealth.