The Nation Newspaper

Category: Equities

  • When ‘ll the bulls take the risks?

    When ‘ll the bulls take the risks?

    Insurance stocks are still generally in recession. With 69 per cent of insurance stocks stagnant at nominal value and just only 10 per cent trading above 100 kobo, insurers appear to be in the grips of the bears. What will tickle the insurance bulls? Taofik Salako reports that the bottomed prices reflect the risks and opportunities in stock market’s largest subgroup

     In the past 18 months, equity investors have been with broadening smiles. Nigerian equities recorded average return of 35.4 per cent in 2012. The full-year return in 2012 implied accretion of some N2.44 trillion in capital gains to investors during the 12-month period. The market opens today with a year-to-date average return of 31.51 per cent. Average market return is denoted by the All Share Index (ASI) of the Nigerian Stock Exchange (NSE), a value-based index that tracks all equities on the Exchange. Besides its primary importance as benchmark for the NSE, ASI doubles as country index and relates average value at the stock market.

    Sectoral indices at the NSE generally show positive returns. The NSE Insurance Index opens today with a year-to-date return of 18.10 per cent. The NSE Banking Index indicates average return of 22.4 per cent. The NSE Industrial Goods Index reflects gains by highly capitalised stocks with a return of 57.07 per cent. The NSE Consumer Goods Index opens today with a return of 23.82 per cent while the NSE Oil and Gas Index shows a modest return of 15.67 per cent.

    Besides its relative low level compared with the market’s overall return, the insurance index belies the general state of insurance stocks. Unlike the ASI that tracks all equities, many sectoral indices, like the insurance index, are constituted by selected stocks on the basis of market capitalisation and activity. Out of the 29 insurance stocks, 20 insurers have stagnated at their nominal value of 50 kobo while three others were almost down to their nominal value. Only three insurance stocks are trading between 100 kobo and 200 kobo.

    Given their historic pricing trends in January 2008, the extent of the recession in the Nigerian insurance sector looms larger than the global economic and financial crises. Insurance stocks have literally fallen off the cliffs. In the early 2008, nearly all insurance stocks were trading in three digits, in multiples of their nominal values and considerably in competitive prices with other related stocks. Prestige Assurance and Wapic Insurance-two sectoral leaders by share prices, opened February 2008 with four-digit values at N11.40 and N10.60 respectively. Today, Prestige Assurance is stuck at 56 kobo per share while Wapic Insurance opens today at 89 kobo. Other insurance companies relate the same story. Aiico Insurance opened February 2008 at N3.43, Continental Reinsurance set out at N5.15, Cornerstone Insurance was N6.19, Crusader Insurance traded at N7.85, Custodian and Allied Insurance was N6.50, Great Nigeria Insurance opened at N3.80, Guinea Insurance’s price on board was N4.30, Lasaco Assurance was valued at N4.88, International Energy Insurance opened at N5.94 while Law Union and Rock Insurance was traded at N6.10. Other market considerations then included Linkage Assurance, N4.80; Mutual Benefits Assurance, N4.96; NEM Insurance, 4.35; Niger Insurance, N8.70; Oasis Insurance, N4.63; Royal Exchange Assurance of Nigeria, N5.43, Sovereign Trust Insurance, N4.56 while Unic Insurance opened February 2008 at N5.51 per share.

    But contrary to the largely diversify and generally upward pricing trend in early 2008, insurance stocks open today with almost a generic depressive outlook.

     

    Poor investment, bad recovery

     

    Without major natural or artificial disasters that could have shaken risks-bearing companies to their net assets, the current outlook of the insurance sector was not unconnected with the 2008 stock market recession. Heavily exposed to the equities market, unyielding depression in shares prices directly built up losses and provisions in the profit and loss accounts and balance sheets of insurance companies. On the other end, share prices of insurance companies were generally worst hit by the recession as a hangover of negative industry perception, streak of impaired portfolio-induced losses and reticent management combined to single out insurance sector as the highpoint of the bear market.

    With huge funds raised during the capital market boom, and following the trails of squandering banks, insurance companies had turned mainly to the capital market to invest their bubble-induced assets. Small and medium insurance companies, which had metamorphosed into big companies with outstanding shares and equity funds larger than size of business, left the conservative nature of risk assessment and provision-the core expertise of insurers, and turned into speculators. Unmindful of the unscrupulous linkage then between banks’ deposits and the bubble share prices in the market, insurance companies were caught napping when the financial services regulators pulled the plugs.

    With most insurance companies struggling with losses, they were also left out of the big gains in the market recovery. Many analysts in the know have located the portfolio risks of insurance companies in their asset allocations and choice of stocks. While overexposure to equities had built in significant losses during the market recession, several insurance firms invested largely in banking stocks and private placements, two categories of securities that had left investors with open wounds. Three banks were nationalized and their previous equity investments wiped out while some four banks were acquired in transactions that saw significant dilutions of their equities. Several private placements have backed down on promises to list their shares on the stock market, technically locking down investors’ funds.

    Beyond the depression

     

    However, the general depression in the insurance sector appears to have been orchestrated by psychological investing or class phobia- a segregation that tends to view an entire group within the same window irrespective of individual potential. While the historic fundamentals of most insurance companies were discouraging, emerging fundamentals of several insurers show good potential, especially when viewed against the bottom-rock share prices. For instance, on the back of a dividend per share of 11 kobo for the 2012 business year, Mansard Insurance recorded 36 per cent increase in net profit in the first quarter ended March 31, 2013. Profit after tax rose from N426.89 million to N579.37 million.

    While investors need to tread cautiously, the relatively low turnover-to-net assets ratios of most insurance companies and low share prices present attractive combinations for discerning investors. On one hand, there is significant headroom for underwriting capacity and growth. On the other hand, there is still much growth potential in the Nigerian insurance industry. From government to the National Insurance Commission (NAICOM) and to operators, insurance stakeholders have recently taken major steps to enliven the performance of the industry. The passage of the Nigeria Content Development Act and other laws on compulsory insurance by government has opened up tremendous business opportunities for insurance companies. The Local Content Act requires that all insurance risks associated with oil and gas sector including prospecting, exploration, drilling, constructions, shipping, distribution, marketing and transportation must be insured in Nigeria with registered Nigerian insurance company. This law alone represents immense opportunity for well-capitalised and stable insurance companies.

    Besides, NAICOM has also in recent period taken many far-reaching and proactive steps to standardize insurance operations and enforce conformity with best practices. NAICOM has introduced new accounting standards with more stringent provisions to ensure that insurance profit and loss accounts and balance sheet showed the true state of affairs. Insurers are also expected to make timely rendition of accounts, making their returns more predictable. With the broad provisions of the Insurance Act and related NAICOM guidelines, the tough stand of the insurance regulator has greatly improved the operating environment. The industry regulator is also leading the charge for compliance with existing compulsory insurance laws.

    Insurers are also realigning to pool scales and built competitive edges. Custodian & Allied Insurance Plc recently took over the assets and liabilities of Crusader Nigeria Plc. The enlarged entity is now known as Custodian & Allied Plc. Also, Mansard Insurance recently acquired the entire issued share capital of Procare Health Plan Nigeria Limited, a health management organization (HMO) company as it continued to consolidate its health insurance business. Mansard indicated it intended to recapitalize and run Procare as its subsidiary in the health maintenance industry.

    Although insurance industry is still highly fragmented with some 51 insurance companies, well-managed quoted insurance companies stand to benefit both in the event of industry consolidation or market-driven competitiveness that places premium on security of insurance rather than lower rates. With estimated penetration of some seven per cent, Nigeria’s large population and expansive economy also put insurers on good footings. It is these medium to long term outlooks that should concern discerning investors. While immediate liquidity may be a challenge, relatively good and stable returns and appreciable long-term capital appreciation will compensate for the waiting period.

  • NASD to start trading on unlisted securities July 2

    Investors who are interested in buying and selling equities of unquoted companies such as MTN Nigeria Limited, West African Milk Company (Wamco), Fan Milk Plc, Nigerian Bottling Company and Citibank Nigeria among others, will have a more organised and transparent trading platform to trade their shares on July 2 with the commencement of operations of the NASD.

    Formerly known as the National Association of Securities Dealers, NASD Plc is a registered over-the-counter (OTC) trading platform for unquoted securities including equities and bonds. NASD is owned by several investment and financial institutions as well as strategic investors. The Nigerian Stock Exchange (NSE) holds 6.86 per cent equity stake in the NASD, which is registered by the Securities and Exchange Commission (SEC) as an organised trading platform for unlisted securities.

    At a press briefing at the weekend, managing director, NASD Plc, Mr. Bola Ajomale, said arrangements had been concluded for the formal launching of market on July 1 while trading will commence on July 2, 2013.

    He said the emergence of NASD will give investors the opportunity to buy and sell unquoted securities in an organised and transparent market, which will enhance the liquidity of shares not listed on the NSE.

    According to him, all investment instruments approved by SEC could be traded on its platform including shares of unlisted multinational companies.

    “We will open up with equities and bonds many of which are currently being traded on the black or grey market in the first phase,” Ajomale said.

    He added after the initial formative period, the NASD will move to trading on commercial papers and other complex instruments such as derivatives and options.

    He pointed out that as an OTC markt, the NASD would not have a trading floor like traditional Exchange but rather trading will be done through the internet and a hosted platform leased from the NSE.”

    He added that the company had developed an integrated market system made up of the Central Securities Clearing System, six settlement banks and some registrars to ensure smooth operations while 40 brokers have been registered to trade on the market.

    “Our vision is to create a market that is accessible throughout West Africa. We intend to become the hub of first call for capital formation in West Africa and we are guided by the principles of Integrity, Performance and transparency in all our dealings with every point of contact- be they investors, issuers, regulators business partners and especially your good selves,” Ajomale said.

    He enthused that NASD would fuel economic growth in the West African sub-region by developing and operating active markets that adhere to the highest standards of performance and principles of integrity while also creating value for its stakeholders and the investing public.

    According to him, by offering more liquidity in investment instruments to the Nigerian capital market, NASD will play a crucial role in the ability of Nigeria to sustain a real growth rate of above 7.0 per cent per annum and ensure that desired capital intensive projects can get cheaper and faster access to funding.

    On the modus operandi or trading, Ajomale said that there would be no circuit breaker on pricing of equities as they would be priced based on performance and available information in the market.

     

  • Is it time to move to Vitafoam?

    With historic prices setting up several stocks for price correction and thinning out underlying returns, the search for high yield may be to switch to relatively low-priced stocks. Taofik Salako highlights the variables that may put Vitafoam Nigeria into consideration in portfolio rebalancing

     

    Amid the excitement in the stock market, Vitafoam Nigeria has been a less enthusiastic stock. While the stock market recorded average full-year return of 35.4 per cent in 2012, Vitafoam Nigeria posted impressive return of -27.67 per cent. Even with the recent bearishness at the market, average year-to-date return for the market opens today at 29.86 per cent while Vitafoam opens with a below-average return of 18.85 per cent. The pricing trend has even been exciting this year. Vitafoam’s share price has seen continuous depreciation in recent years, in spite of somewhat impressive unbroken dividend yields. The company’s price ceiling caved in from a high of N7.50 in 2010 to N6.75 in 2011. Its highest price in the past two years has been N5.54. In key value measure, Vitafoam has been underperforming the entire stock market.

     

    Aligning the fundamentals

     

    Vitafoam has struggled with sluggish sales and high interest expense in recent years. Audited report and accounts of the leading foam manufacturing company for the year ended September 30, 2012 had shown that it remained under extreme pressures from its lopsided loan-dominated finance structure. With 52 per cent increase in interest expense to N542 million in 2012, net earnings distributable to shareholders slipped to N557 million, forcing the company to retain its cash payout of 30 kobo per share for the third consecutive year. However, probable future dividend outlook trailed the marginal decline in earnings per share. While the company bridged marginal decline in sales with relatively substantial reduction in cost of sales to boost gross profit by 18 per cent, finance charges muffled the gain and threw pre and post-tax profits into the negative. Debt-to-equity ratio remained above 100 per cent. The balance sheet structure partly reflected in the declines in profit margin and returns, although these remained marginal.

    Vitafoam’s profit and loss items tended largely towards the negative in 2012 as the company struggled with sluggish sales and fast-paced finance costs. While it mitigated weak sales by reducing related costs of sales, margins and returns were depressed by the stifling midline, directly related to huge increase in finance costs. Gross profit margin improved from 30 per cent to 35.5 per cent. However, pre-tax profit margin slipped from 5.7 per cent to 5.6 per cent. Return on total assets declined from N8.9 per cent to 7.8 per cent while return on equity dropped from 20.2 per cent to 18.1 per cent.

    Total sales stood at N14.48 billion in 2012, a slight decrease from N14.52 billion recorded in 2011. Cost of sales meanwhile, dropped by 8.2 per cent from N10.17 billion to N9.34 billion, lifting up gross profit by 18 per cent from N4.35 billion to N5.14 billion. Total operating expenses increased by 16 per cent from N3.35 billion to N3.91 billion. Administrative expenses rose from N2.51 billion to N2.96 billion while distributive costs increased from N840.1 million to N945.2 million.

    With 51.7 per cent in interest expenses from N357 million in 2011 to N542 million in 2012 and substantial decline in non-core business incomes, profit before tax dipped slightly by 1.2 per cent from N824 million to N813 million. After taxes, profit distributable to shareholders also slipped by 1.8 per cent from N567 million to N557 million. Earnings per share took cue from net profit after tax at 67.9 kobo in 2012 as against 69.1 kobo in 2011. Net assets per share improved from N3.42 to N3.76, an increase of about 10 per cent.

    The company retained its cash dividend per share of 30 kobo for the third consecutive year, earmarking N246 million for distribution to shareholders. Dividend cover however, weakened slightly to 2.27 times as against 2.3 times in previous year. With dividend yield of around eight per cent, the cash payout represented substantial returns for discerning investors, who had taken positions ahead of the earnings release.

     

    Emerging outlook

     

    But emerging operational performance in the current business year indicates considerable improvements in the earnings outlook. Interim report for the second quarter ended March 31, 2013 showed that turnover rose by 15.3 per cent while pre and post-tax profits grew by 21 per cent and 17 per cent. Six-month sales stood at N8.79 billion in 2013 as against N7.62 billion in corresponding period of 2012. Gross profit rose by 15.6 per cent from N2.28 billion to N2.63 billion. Operating profit stood at N834.8 million in 2013 compared with N674.4 million in 2012, representing an increase of 24 per cent. Profit before tax increased from N484.1 million to N585.3 million. After taxes, net profit improved from N348.7 million in second quarter of previous year to N407.9 million in the comparable period of the ongoing year.

    The underlying fundamentals indicated stronger outlook for the company, which rubbed off positively on the prospective yield of the company. While gross profit margin was steady at 29.92 per cent, operating profit margin improved from 8.8 per cent in 2012 to 9.5 per cent in 2013. Profit before tax margin also firmed up to 6.66 per cent in 2013 compared with 6.35 per cent in 2012.

    Earnings per share closed the first six months of the ongoing year at 50 kobo in contrast with 43 kobo recorded in comparable period o 2012. The basic earnings outlook underlines above-average return for the company. With the opening price of N4.35 today, earnings yield stands at 11.49 per cent now compared with 9.89 per cent relative to the previous year’s figure. Besides, the last dividend payout of 30 kobo implies a dividend yield of 6.9 per cent against the current price. Net assets per share stands at N3.98, showing slim gap between the six-month net assets and the current market price.

    With average dividend yields for several stocks below five per cent and earnings substantially diluted by high share prices, Vitafoam appears to present good opportunity to lock in values against the overall market downtrend.

     

  • What prospects for May & Baker?

    Amidst the lull in the stock market, May & Baker Nigeria Plc has shown strong resilience. With a 14-day capital gain of 36.2 per cent, the company has out-performed the average market’s return of -1.4 per cent. Taofik Salako reports on the underlying variables

     

     

    The stock market is witnessing a slowdown this month. With average monthly gain of 12.70 per cent in May and five-month average return of 34.60 per cent by the end of May, substantial capital gains and global variables have orchestrated profit-taking transactions. The All Share Index (ASI), the common value-based index that tracks prices of all listed equities on the Nigerian Stock Exchange (NSE), opens today with a month-to-date return of -1.44 per cent. Besides its primary importance as the general benchmark index for the stock market, the ASI doubles as Nigeria’s country index and as such reflects the mingling variables of the Nigerian market with the global marketplace. In simple value terms, investors have lost about N108 billion so far this month. Aggregate market capitalisation of all equities opens today at N11.967 trillion as against its opening value of N12.075 trillion. Last week was particularly testy with the market losing N888 billion within the last three trading days.

    May & Baker Nigeria has proved to be the contrarian stock amidst the downtrend. With a month-to-date return of 36.2 per cent so far this month, investors in the healthcare company have earned N784 million in capital gain in the past two weeks. May and Baker opens today at N3.01 per share as against its value-on-board of N2.21 for June. With this, its market capitalisation increased from June’s opening value of N2.166 billion to open today at N2.950 billion, indicating one of the largest upswings in the market within the period. Investors appeared to be looking beyond the immediate to the potential value of the healthcare company.

     

    Investing for future

     

    On the verge of a major breakthrough as a World Health Organisation (WHO)-prequalified pharmaceutical company as well as the activation of its partnership with the Federal Government for local production of vaccines, May & Baker Nigeria’s stock market performance appears to underline investors’ confidence that it could surmount its financial leverage and capital inadequacy as well as harness its expansive capacity to deliver better returns in the period ahead.

    May & Baker Nigeria has invested significantly in manufacturing capacity and research and development in recent years. The completion and commissioning of a World Health Organisation (WHO) prequalified pharmaceutical factory known as the PharmaCentre in 2011 had more than doubled May & Baker Nigeria’s pharmaceutical manufacturing operations. The PharmaCentre is currently undergoing the process for WHO pre-qualification, which will make its products to be internationally accepted, a situation no Nigerian pharmaceutical company currently enjoys. The WHO prequalification will help the nation become self-sufficient in the manufacture of essential medicines and invariably have multiplier effects on the economy notable among, which will be job creation and increased foreign exchange earnings.

    Besides, May & Baker’s subsidiary, BioVaccines Nigeria Limited, a joint venture with the Federal Government, reached advanced stage in perfecting the renewal of the joint venture agreement with the Federal Government on the local manufacturing of vaccines and it is expected to shortly commence local production of vaccines after the agreement.

     

    Still a slow start

     

    Audited report and accounts of May & Baker for the year ended December 31, 2012 showed muted impact of the capacity expansion but its cost burden was evident. Key extracts of the audited report, which was prepared and approved in compliance with the International Financial Reporting Standards (IFRS), showed that turnover continued to rise on the back of recent expansion. Total sales closed 2012 at N5.7 billion as against N4.8 billion recorded in 2011. Gross profit also increased from N1.9 billion in 2011 to N2.1 billion in 2012. Profit for the year stood at N75.9 million in 2012 as against net profit of N222.2 million recorded in 2011.

    The decline in the bottom-line was largely due to depreciation and financing expenses related to the new manufacturing plant that had not begun. Managing director, May & Baker Nigeria, Mr Nnamdi Okafor, highlighted that provisions for depreciation on the over N4 billion new pharmaceutical plant as well huge finance costs, high interest rates and teething challenges with product transfer to the new factory, which severely hampered factory output and revenue realisation also affected the bottom-line in 2012.

     

    Refinancing the business

     

    Recapitalisation is a key issue for May & Baker Nigeria. With the construction and finance of its expansive Ota manufacturing complex affected by the capital market meltdown, the company had little choice than to suspend the development of the new manufacturing complex or turn to bank loans to finance an obvious long-term project. It chose to go ahead with the project, but with the unavoidable mismatch. The attendant high interests and pressures on earnings now pose threats to profitability. While the soft loan from T.Y Holdings Limited, a holding company of Chairman, May & Baker Nigeria Plc, Lt. Gen Theophilus Danjuma (rtd), has significantly reduced the financial leverage of the company, it remains substantially leveraged and financially delinquent.

    Already, the company is considering raising additional capital to support its business expansion and steady itself against competition. Danjuma (rtd) confirmed recently that the company has started considering various ways of raising new capital and would soon choose the most appropriate means to bolster the capital base of the company.

    According to him, it has become expedient for the company to recapitalise to muster enough liquidity to face the challenges of the business environment.

     

    Beyond the present

     

    Beyond the immense opportunities in the WHO prequalification of the company’s manufacturing plant, the imminent renewal of the joint venture agreement between the Federal Government and May & Baker for the local production and distribution of vaccines in Nigeria holds huge prospects for large earnings. The renewal is expected to impact significantly on the prospects of May & Baker Nigeria’s subsidiary, BioVaccines Nigeria Limited. Vaccination is a multi-billion Naira budget for Nigeria, which imports virtually all its vaccines. With several rounds of vaccinations for children and women, BioVaccines Nigeria has a ready market to tap into. The take-off of BioVaccines’ operations will create new income stream and impact on the group performance.

    Besides, for expanding companies, the capacity utilisation in the Nigerian pharmaceutical industry is still low and there is enormous room for growth. With estimated industry value of some N200 billion, capacity utilisation by the plethora of domestic drug manufacturers is around 40 per cent while Nigeria relies heavily on importation. Federal Government’s policy stand that favours local production as indicated by the Local Content Act and recent fiscal adjustments should impact positively on farsighted domestic manufacturers.

    The board and management of May & Baker are also optimistic about the prospects of the group. Okafor said the group expects better results in 2013 based on increased output from its new pharmaceutical manufacturing plant and ongoing business restructuring efforts. According to him, the company also expects to reduce finance costs as a result of a recent access to soft loan provided by Danjuma, which is expected to significantly raise the profitability of the company in 2013.

    He pointed out that its world-class new plant, otherwise known as The PharmaCentre, has raised May & Baker’s production capacity by over 60 per cent.

    Danjuma said the company has rolled out a new five-year strategic plan that would seek to harness all opportunities to increase the group’s earnings and returns to shareholders. He outlined that the company has projected turnover of N9.6 billion for 2013 based on expected increased output from its new manufacturing plant, business restructuring efforts and expected reduction in financing costs following the soft loan received from T.Y Holdings during the last quarter of last year.

    According to him, profit is also expected to increase in 2013 as the company continues to optimise production and cost efficiencies.

    “Our company is well-positioned for the future with a lot of potentials from the strategic investment we have made in Ota and other attractive business prospects in our sight. As we vigourously pursue our new five-year strategic plan with all the opportunities it presents, we can only hope for better performance and stronger earnings capacity going forward,” Danjuma said.

    With the key stakeholders rallying for recapitalisation of the company, investors appear to be taking early positions in the May & Baker Nigeria.

     

  • Equities lose N888b in three days

    Nigerian equities lost N888 billion in the last three trading days of last week as the global capital market rocketed from concerns about likely adverse impact of fiscal cuts by the United States of America (USA) and further relapse in sticky economies of Europe and America.

    Aggregate market capitalisation of all quoted equities on the Nigerian Stock Exchange (NSE), which had peaked at N12.855 trillion last Tuesday, dropped successively to close weekend at N11.967 trillion, indicating a loss of N888 billion within the last three days.

    The main index at the NSE, the All Share Index (ASI), also nosed down from its recent high of 40,012.66 points on Tuesday to close the week at 37,249.93 points.

    The market’s decline was largely orchestrated by profit-taking transactions on highly capitalised stocks, especially the hitherto extremely bullish fast moving consumer goods and industrial stocks.

    The downturn came on the heels of global downshift in world’s equities’ market amidst worries about the outlooks for advanced economies. The International Monetary Fund (IMF) cut its outlook for USA’s economic growth in 2014 from 3.0 per cent published in April to 2.7 per cent, citing what it described as “excessively rapid and ill-designed” fiscal cuts. The IMF warned that fiscal reductions in the areas of education, science and infrastructure could reduce potential growth.

    Nigerian equity market has a strong linkage with the international financial markets. Latest update shows that foreign investors accounted for 64.48 per cent of total transaction value at the NSE in April, the last available data, a substantial increase on 52.78 per cent they recorded in March when they displaced domestic investors as the most influential investment block.

    Altogether, the Nigerian equity market recorded weekly average return of -5.85 per cent last week as the losses within the last three trading days upset earlier gains. Aggregate market value of equities, which opened the week at N12.640 trillion, closed at N11.967 trillion while the ASI dropped from its week’s index on board of 39,564.79 points to close at 37,249.93 points.

    All other indices at the NSE reflected the pervasive downtrend. The NSE 30 Index, which tracks the 30 most capitalised companies, dropped by 5.86 per cent. The NSE Consumer Goods Index slipped by 7.05 per cent. The NSE Banking Index dropped by 7.23 per cent. Insurance index indicated average loss of 2.87 per cent. The NSE Oil and Gas Index declined by 5.82 per cent while the NSE Industrial Goods Index dropped by 6.59 per cent.

    Total turnover stood at 3.73 billion shares worth of N75.874 billion in 39,060 deals. Financial services sector accounted for a turnover of 1.70 billion shares valued at N14.7 billion traded in 19,826 deals. The trio of Transnational Corporation of Nigeria Plc, IHS Plc and Dangote Cement Plc accounted for 1.35 billion shares worth N48.72 billion in 1,692 deals, representing 36.19 per cent of aggregate turnover.

    Meanwhile, shareholders of Total Nigeria Plc have been assured of a better package in 2013 despite the challenges surrounding the sector.

    Speaking at the 35th annual general meeting (AGM) of the company on Friday in Lagos, chairman, Total Nigeria Plc, Mr Momar Nguer assured shareholders that the company is well positioned to overcome the challenges of the business environment.

    “We expect 2013 will be a year that will provide us with the opportunities for growth and investment and within which we shall consolidate on our past achievements, take advantage of the projected growth the Nigerian economy will offer and deliver value to our shareholder and other stakeholders. “We also envisaged that the year will not be without its own challenges but your company is well positioned to overcome the challenges of the business environment as she has the human capital and experience to do so,” Nguer said.

    Total Nigeria Plc posted a turnover of N217.84 billion in its 2012 operations, against N173.95 recorded in 2011 while profit after tax also increased from N3.81 billion in 2011 to N4.67 billion during the year under review. Based on the improved performance, the company directors are proposing a dividend of N2.72 billion, translating to 800 kobo per share to be distributed as final dividend for 2012 financial year. The company had earlier distributed N1.02 billion or 300 kobo per share as interim dividend.

     

  • Union Bank assures investors of better returns

    Union Bank assures investors of better returns

    UNION Bank of Nigeria Plc has assured investors of better returns.

    Group Managing Director/Chief Executive of the bank, Mr Emeka Emuwa, gave this assurance last Friday at the bank’s Facts behind the Figures at the Nigerian Stock Exchange (NSE).

    He noted that the bank’s capital adequacy ratio, which stands at 20 per cent is an improvement on that of 2011, which was 19 per cent but well above the 15 per cent regulatory requirement. This, he said, has put the bank in a better position in the financial industry.

    He said reliability is at the core of the bank’s strategy and transformation programme, adding that the lender is ready to give better returns to the investors. “As we build consistency, this will translate to returns for investors. We are out of the emergency room, stabilised and generally regaining our strength,” he said.

    The Union Bank boss said the lender will leverage on its network of 337 branches and its past heritage into the future by modernising its brand and operational base to meet the demands of its customers.

    According to him, with the board’s repositioning plan in place and the injection of $500 million in September 2012, by its core investors, Union Global Partner Limited (UGPL), the bank has stabilised and returned to profitability.

    On the insinuation about the likely exit of the core investors, he assured that with their 65 per cent shareholding, they will not exit the bank in the foreseeable future.

    “The UGPL recapitalised the bank. They are long-term investors and they are bringing value to the bank. Capital does not exit from the bank but may change ownership,” he said.

    The GMD said: “With a seven-pillar transformation programme in place in the year, leveraging on its business model, people and culture and its risk management amongst others, the bank is set to take its rightful place in the banking industry.

    “As part of the on-going Enterprise Transformation Programme, there is a new operating model for our branches. The new model is designed to allow branches to give dedicated focus to marketing and relationship management.

    “On the operational side, we will ensure the integrity of the bank’s accounting and financial reporting systems and that appropriate controls are in place, in particular, systems for monitoring risk, financial probity, and compliance with the law.

    “The corporate governance structure will be built around enhancing transparency and accountability. Steps had also been taken to increase the ratio of our market-facing staff in the new system. The organisational structure of the bank will be changed to reflect the new expectations. Our branches will be upgraded to be customer friendly in physical ambiance as well as working tools.”

    Union Bank’s balance sheet for the 2011 financial year through December, showed positive net assets of N197 billion compared with negative net assets of N115.7 billion a year earlier.

    Earlier, the Chief Executive Officer of the Exchange, Mr Oscar Onyema, commended the management of the bank for returning the institution to profitability and adhering to sound corporate governance in its operations.

  • Will FirstBank still be the first?

    FBN Holdings Plc, the holding company for First Bank of Nigeria (FBN) and its previous subsidiaries, achieved strong fundamental performance in 2012 and first quarter of the year. But the share price is still substantially undervalued. Taofik Salako reports that there is still potential for capital appreciation

    FBN Holdings opens today with a year-to-date return of 16.73 per cent, nearly half of Nigerian stock market’s overall average return of 33.02 per cent. FBN’s market consideration is also significantly below the banking subsector’s average index return of 28.45 per cent.

    The share pricing trend belies the impressive growths in key fundamental indicators showed by the full-year earnings reports for 2012 and the interim report for the first quarter of this year. But the underlying dynamics for FBN Holdings are crucial for determining market’s possible future direction and the latent potential for the bank’s future consideration.

    While the market situation exerts influence on FBN Holdings’ pricing trend, the performance trend of FBN Holdings is also a major factor in the interplay that determines overall market position. With a market capitalisation of about N600 billion, FBN Holdings today accounts for 5.0 per cent of total equity market capitalisation. It holds significant influence more than all subsectors on the NSE excluding the banking, food products, breweries, building materials and its other financial institutions subgroups.

    With capitalisation nearly four times the size of entire populous insurance subsector, its pricing trend will exert more influence on overall market situation than the collective trend in several subsectors.

    While the fundamental figures have shown remarkable improvements, the share pricing trend appears to be following similar pattern like the previous year. At the onset of the bank’s comeback bid in May 2012, it had posted a year-to-date return of 18.1 per cent. By August, the year-to-date return had increased to 46.6 per cent and the bank subsequently rallied some 30 percentage points within the last four months to close the year with 76.6 per cent capital gain. Will there be a repeat of the pattern throughout this year? The underlying fundamentals of the bank appear to support potential rally.

     

    Regaining momentum

     

    FBN Holdings quadrupled net profit in 2012, its first operational year after the unbundling of First Bank of Nigeria and its subsidiaries into a holding company structure. Audited report and accounts for the year ended December 31, 2012 showed that profit after tax increased by 306 per cent to N75.7 billion in 2012 as against N18.6 billion in 2011. Profit before tax had jumped by 158.5 per cent from N35.8 billion to N92.7 billion. The net bottom-line implied earnings per share of N2.33 for 2012 compared with 60 kobo in 2011. On the strength of the strong bottom-line performance, the board of directors of the company has recommend distribution of N32.6 billion as dividends to shareholders, representing a dividend per share of N1.

    The bottom-line performance rode on the back of 31 per cent increase in gross earnings, driven primarily by core commercial banking operations. Gross earnings closed 2012 at N359.8 billion with net interest income rising by 27.8 per cent from N176.2 billion to N225.2 billion. Non-interest income also grew by 20.1 per cent. The balance sheet of the company also emerged stronger with 11.4 per cent increase in total assets from N2.9 trillion to N3.2 trillion. Total customer deposits grew by 23 per cent to N2.4 trillion, with approximately 80 per cent of total deposits in the low-cost segment. Shareholders’ funds increased by 19 per cent to N438.8 billion.

     

    What value ?

    While market response to the company’s 2012 full-year earnings report was largely muted, it appears the market has failed to note the changing fundamentals and pricing dynamics of the top banks. As against the full-year report for 2012 when the top three banks were jostling for the leadership position of the industry based on favourable performance indicator peculiar to each bank, the first quarter reports for 2013 showed a consolidation in favour of FBN Holdings as industry’s largest and most profitable financial services company.

    Key performance indicators for the first quarter ended March 31, 2013 showed considerable growths for FBN Holdings. The three-month report showed that FBN Holdings’ profit before tax rose by 28.9 per cent while gross earnings increased by 13.5 per cent. The company’s total assets firmed up to N3.5 trillion, the largest in the financial services industry. Gross earnings stood at N99.5 billion as against N87.6 billion recorded in comparable period of 2012. Profit before tax rose from N24.4 billion to N31.4 billion. Profit after tax increased by 22 per cent to N24.4 billion in 2013 compared with N20.2 billion recorded in corresponding period of 2012. The balance sheet of the company also showed appreciable improvements with total balance sheet size improving from 2013’s opening value of N3.2 trillion to close the first quarter at N3.5 trillion, representing addition of N200 billion during the three months. Total customer deposits increased by N131.4 billion to N2.5 trillion as against N2.4 trillion recorded as opening value for the year.

    In all the key parameters- gross earnings, profit before tax, net profit after tax and total assets, FBN Holdings significantly exceeded both Zenith Bank Plc and Guaranty Trust Bank (GTBank), the two competing top-tier banks. Zenith recorded profit before tax of N28.88 billion on gross earnings of N86.98 billion during the period. Profit after tax stood at N23.41 billion. Zenith Bank’s total balance sheet size closed first quarter at N2.77 trillion. GTBank recorded gross earnings of N63.57 billion. Profits before and after tax stood at N28.49 billion and N22.56 billion respectively. GTBank’s total assets increased to N1.84 trillion by March 2013. Annualized, the first quarter report indicates strong possibility that FBN Holdings could consolidate its impressive performance in 2012 with another significant, though not as jumpy, performance in 2013. The import of this is yet to fully reflect on the pricing trend. While both GTBank and Zenith Bank open today at their highest prices, FBN Holdings is not only trading below its high but also significantly below market considerations of the other top three banks. GTBank opens today as highest-priced financial stock at N29.05. Zenith Bank follows with opening value of N22.75 per share.

     

    Sustaining the trend

    The board and management of FBN Holdings said the company would consolidate the first quarter performance. Chief executive officer, FBN Holdings, Bello Maccido said the first quarter report reflected the resilience of the financial services group, especially the flagship commercial banking business, which accounted for more than 94 per cent of group’s profit before tax. According to him, the group has continued to improve its cost efficiency through reduction of the rate of growth in its expenses and it hopes to consolidate this in the periods ahead as it explores further ways of optimising its revenue.

    He noted that though the investment banking and asset management business recorded improved performance over the period, it was impacted by slower than anticipated growth in assets under management and weak primary capital market activity. “Overall, we are focused on extracting and unlocking value from the exciting portfolio of businesses within the Group in coming periods,” Maccido said.

    Group Managing Director, FirstBank of Nigeria, Bisi Onasanya said the bank would continue to pursue a competitive pricing mechanism across products and services to mitigate the negative effect of certain regulatory measures.

    “We will also continue to explore avenues to optimise our efficiency while using initiatives such as mobile banking and other alternative delivery methods to reduce our cost to serve,” Onasanya said.

    He noted that some 409,000 new accounts were opened during eh first three months of the year, bringing total number of accounts to about 9.1 million. According to him, FirstBank has sustained progress in its electronic banking business and is repositioning the business in response to industry challenges.

    “To expand business volumes and enhance market penetration, First Bank has continued to drive growth in the value chain of key segments of the economy such as the oil and gas, telecommunications and manufacturing sectors,” Onasanya said.

    Besides the prospective realisation of the imports of emerging FBN Holdings’ fundamentals, peer valuation and competitive pricing hold strong potential for FBN Holdings’ future market consideration.

  • What consideration for Skye Bank?

    Skye Bank Plc appears to be base-forming after modest growths in 2012 and first quarter of 2013. Taofik Salako reports

     

    Skye Bank’s share price has shown modest growth in recent period in spite of strong fundamental performance. It opens today with a year-to-date return of 17.44 per cent, an increase on full-year return of 12 per cent recorded in 2012. With a recent high of N10.17 in 2011, Skye Bank’s price curve is, however, still substantially below its recent price ceiling.

    Besides, its returns-both in 2012 and so far this year, have been tracking market’s average returns. The All Share Index (ASI), the main index that tracks all equities on the Nigerian Stock Exchange (NSE), opens today with a year-to-date return of 31.44 per cent. Banking sector’s index carries a year-to-date return of 24.46 per cent.

     

    Improving fundamentals

    But the share pricing trend belies the fundamental performance of the bank in recent period. The audited report and accounts for the year ended December 31, 2012, prepared in line with the International Financial Reporting Standards (IFRS), showed modest growth in profitability as the bank rode on the back of expansive business base and increasingly efficient cost management to deliver returns to shareholders.

    The report showed that profit after tax leapt to N12.64 billion in 2012, representing an increase of 872.6 per cent on N1.30 billion recorded in 2011. Profit before tax had leapt by 480.9 per cent from N2.84 billion in 2011 to N16.51 billion in 2012. The bank also recorded significant improvement in the top-line as gross earnings rose by about 25 per cent from N102.36 billion to N127.73 billion.

    The bank’s balance sheet also showed impressive performance as the lender’s focus on quality growth brought down the relative level of non-performing loans to its lowest level. The bank’s assets quality improved considerably as non-performing loan/gross loans ratio surpassed industry’s target of 5.0 per cent at 4.95 per cent in 2012 as against 6.39 per cent. Deposit base expanded by 22.4 per cent at N790.09 billion in 2012 compared with N645.45 billion in 2011, reflecting the strong profile of the bank in the intensely competitive banking industry. Total assets crossed the N1 trillion mark to N1.07 trillion in 2012 as against N914.27 billion in 2011. Equity funds firmed up to N106.89 billion as against N100.11 billion in the previous year.

    Earnings per share increased to N1.01 in 2012 as against 20 kobo in 2011. On the basis of the impressive net earnings, the board of the bank has recommended an increase in cash dividend per share from 25 kobo paid for 2011 business year to 50 kobo for 2012. A dividend cover of 2.02 times for 2012 as against 0.80 times for 2011 underlines the ability of the bank to sustain its impressive dividend payouts.

     

    Consolidating growth

    Latest interim report also showed that the bank made good early strides in the current financial year as the bank pooled a pre-tax profit of N4.6 billion on the back of 25 per cent increase in the top-line in the first quarter. Interim report and accounts of Skye Bank for the first quarter ended March 31, 2013 showed that it recorded growths in the incomes and profitability, with revenue growth largely driven by an increase in its core banking operations.

    The report indicated that gross earnings rose by 24.6 per cent to N34.69 billion in first quarter 2013 as against N27.84 billion recorded in comparable period of 2012. Interest income had grown by 18.2 per cent from N23.04 billion to N27.22 billion, underlining the increasing market share in the banking industry. Profit before tax stood at N4.63 billion as against N4.09 billion in corresponding period while profit after tax rose from N3.48 billion to N3.71 billion.

    The balance sheet position of the bank remained strong with total assets and deposits of N1.1 trillion and N803.6 billion respectively. Shareholders’ funds closed the first quarter at N105.72 billion.

     

    Outlook

    The recent report raised expectations that the bank would, in the current financial year ending December 31, 2013; surpass its performance in the previous year. Commenting on recent results, Group Managing Director, Skye Bank Plc, Mr Kehinde Durosinmi-Etti, said the earnings report underscored the commitment of the bank to its goal of quality and sustained growth and returns to shareholders.

    According to him, the improvement in the intrinsic profitability of the bank showed that the management clearly understands the competitive edges that the bank should build on as it steadily moves to its goal of a leading top-tier bank.

    He pointed out that the critical performance ratios in terms of returns, efficiency, non-performing loans and liquidity, were well within acceptable regulatory levels, noting that the directors of the bank were confident that its focus on defined growth segments and efficient use of its branches and various electronics platforms will put it in vantage position to meet its future plans.

    “We will further leverage on our expertise and comparative advantage in key growth areas including commercial banking, corporate banking, project finance, trade finance, public private partnership and public sector to unlock significant growth in incomes while we further reduce costs by building on our increasingly popular retail banking franchise. We see a whole lot of opportunities in the large commercial and corporate sectors, retail market and small and medium enterprises and we will fully explore these in the periods ahead,” Durosinmi-Etti said.

    He assured that the bank was on a good stead to sustaining the impressive performance in 2013 given the early indicators in the year.

    According to him, the first quarter results placed the bank in a good stead to sustaining its impressive year-on-year performance.

    “We are glad to announce our first quarter 2013 results with measured growth in key performance indices. Our improved risk management processes and various efficiency practices are a signpost towards an optimistic financial year. We remain confident that despite intense competition, we are on track to deliver on our set targets for the year,” Durosinmi-Etti said.

     

  • What hopes for mortgage stocks?

    There are two broad sides to the stock market-the bullish upside and the bearish downside. With a full-year average gain of 35.4 per cent in 2012 and a year-to-date return of 28.25 per cent so far this year, the bullish rally portrays the impressive gains by several stocks. But it also belies the groaning pains of several struggling investors. For in mortgage subsector, there has been no difference in 2011 or 2012 and there is less to cheer about in the continuing bullish run in 2013. Taofik Salako reports that mortgage stocks appear stuck in a murky foundation of poor fundamentals and business strategies.

     

     

    Investors in several equities have been counting their gains in billions. With total capital gains of N2.44 trillion or 35.4 per cent in 2012 and a superlative accretion of about N2.54 trillion or 28.25 per cent returns so far this year, equities are undoubtedly the most attractive and best-return securities in the Nigerian securities market. Compared with negative or negligible real return of his fixed-income an average equity investor still smiles with double-digit inflation-adjusted return. Inflation currently stands at 8.6 per cent while the benchmark interest rate-the Monetary Policy Rate (MPR), is 12.0 per cent. Either way, equities make more sense than other instruments.

    But the generally, positive overall market situation belies the risks, concentrated and scattered, that still dodge equities. The mortgage subsector is one of the Achilles’ heels of the market. In its seven years, the mortgage subgroup shows little subsisting gains for investors. With the earliest company listed in 2006, all other mortgage companies were listed around 2008, riding on the back of the extremely bullish market during the 2004-2007 equity booms. They had raised huge capital, restructured their balance sheets and wooed investors, who were fascinated by the tangible underlying assets and immense opportunities in the housing sector, with high hopes of ‘concrete’ returns in the characters of the solid structures that formed their underlying assets.

    Mortgage runs on a clear business principle: a home buyer or builder obtains finance from a financial institution to complete the real estate development. Besides the demand for initial equity contribution of varied size, the property in question also serves as collateral and the ownership only fully transferred to the owner upon complete payment of the loan and the conditions thereon. The underlying assets of mortgage companies are thus private and commercial housing developments. Savings and loans companies, otherwise known as primary mortgage institutions (PMI), therefore mobilise savings from customers, mostly prospective home owners, and distribute such deposits to needy customers. They also serve as veritable vehicles for implementation of the government’s housing initiatives such as National Housing Fund (NHF). As financial intermediation companies, PMIs are regulated by the Central Bank of Nigeria (CBN). Quoted mortgage companies are also regulated by the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE).

    With housing estate sprouting all over, the combination of the real estate boom and stock market boom had given many investors the beliefs of a one-for-two deal. This much was also evident in the historic emergence of the Real Estate Investment Trust (REIT), which also had its primary assets in real estate, on the stock market. But with post-listing results, mortgage companies appeared to have suffered a fatal failed start; they appear yet to recover from the trauma. This is related by the share prices and underlying fundamentals of the four mortgage companies.

     

    Losing on both sides

    Against the background of year-to-date return of 20 per cent in the banking subgroup, mortgage stocks are stuck mostly at their nominal values. Abbey Building Society, the three other stocks in the subgroup- Aso Savings and Loans Plc, Resort Savings and Loans and Union Homes Savings and Loans have stagnated at their nominal value of 50 kobo since 2011. Abbey Building Society itself replicates the stagnation in the subgroup. Its share price opened 2012 at N1.44 and closed at N1.37. It has stuck at N1.43 so far this year, underlining the negative return since 2011.

    The nominal share prices largely reflected the poor operational results of the mortgage companies. Audited and interim reports of nearly all the companies have shown considerable declines over the years. Three-year audited reports and accounts of Union Homes showed gradual built up in losses and erosion of the capital base since 2009, cumulating in a negative net assets of N2.59 billion in 2011, the last audited year available for the company. The Nigerian Stock Exchange (NSE) has tagged many mortgage companies for late rendition of periodic earnings reports.

     

    Union Homes

    Union Homes’ turnover increased from N5.52 billion in 2009 to N7.22 billion in 2010 and slumped to N5.86 billion in 2011. All through the years, the company recorded losses with loss before tax of N1.32 billion, N9.54 billion and N2.67 billion in 2009, 2010 and 2011 respectively. Net loss after tax stood at N1.67 billion, N6.55 billion and N2.39 billion in 2009, 2010 and 2011 respectively. The company’s total assets dwindled consecutively from N51.83 billion to N49.01 billion and N42.04 billion. Shareholders’ funds declined from N5.71 billion to N1.90 billion and turned into a deficit of N2.59 billion in 2011.

     

    Aso Saving

    Also, audited report and accounts of Aso Savings for the year ended March 31, 2012 showed that gross earnings dropped from N11.01 billion in 2011 to N10.79 billion in 2012. Profit before tax slumped to N301 million as against N1.90 billion while net profit after tax dwindled from N1.21 billion in 2011 to N129.30 billion in 2012. However, while net assets dropped marginally from N3.01 billion to N3.14 billion, the company still had total assets of N86.24 billion.

     

    Resort Saving and Loans

    Resort Savings and Loans showed a less worrisome outlook, though profit remained substantially lower than previous performance. Interim report and accounts of the mortgage banker for the period ended September 30, 2012 showed that gross earnings improved to N964.45 million in 2012 as against N945.93 million recorded in comparable period of 2011. Profits before and after tax stood at N90.76 million and N63.53 million compared with N211.52 million and N148.06 million recorded respectively in the comparable period of 2011. However, the third quarter report represented significant improvement on the full-year report for 2011, when the company posted net loss of N979.43 million. Audited report for the year ended December 31, 2011 had shown pre-tax loss of N939.43 million while gross earnings stood at N1.21 billion. The third quarter report showed that the company moved farther away from the brinks and built up equity funds far above new capital requirement of N5 billion for national mortgage banker. Net assets stood at N5.73 billion in third quarter 2012 as against N4.03 billion in third quarter 2011 and N2.87 billion recorded as closing figure for 2011.

     

    Building on weak foundation

    The deteriorating fundamentals of mortgage companies underlined the adverse effects of wrong investment strategies and poor corporate governance. Stashed with new funds, the mortgage bankers had embarked on spending sprees, diverting funds from their core real estate and housing investments to personal investments and the stock market. Mortgage companies were reported to be carrying several bad loans from the huge funds poured into the stock market bubble between 2007 and 2008 and were trapped in unrealizable assets as recession set in mid 2008.

    A report by one of the mortgage companies described how former directors and other insiders built up nearly N4 billion in outstanding non-performing loans, more than three-quarter of the company’s total balance sheet size. The former directors, who resigned in 2011, their family members and related companies took various loans through various instruments such as mortgage, overdraft, term loan, lease, staff loan and subsequently turned away from servicing the loans. The report showed that the former directors and their cronies were indebtedness to the tune of N3.99 billion when the company’s total assets and shareholders’ funds were N5.24 billion and N2.87 billion respectively. Out of the 25 insider credits totaling N3.99 billion, only one loan of N15.44 million, less than 0.4 per cent of total insider credits, was performing.

    In the largest instances of the insider loans, the former directors awarded several loans to another quoted company where they served as directors. The report indicated that about N2.81 billion non-performing loans were related to that company, which engages in fund management, capital market operations, financial advisory and portfolio management. The immediate past chairman of the company reportedly took several personal loans with about N42 million outstanding as non-performing on three facilities.

     

    Bad capital, new capital

    Still struggling with poor market perception, mortgage banks now face the challenge of recapitalisation. Most mortgages banks need to raise new equity funds to meet new minimum capital requirement under the new Central Bank of Nigeria (CBN)’s policy framework for mortgage banks.

    Under the new CBN’s framework for mortgage banks, they will be classified into national and state mortgage banks, with the geographic demarcation as benchmark for minimum capital requirement. National mortgage banks are authorized to operate in all states of the Federation while state mortgage banks are restricted to their registered state. National mortgage banks are required to have minimum capital base of N5 billion while state mortgage banks are required to have N2.5 billion.

    Both Resort Savings & Loans and Aso Savings are already in the process of raising funds. The NSE late last month approved combined floatation of initial public offering (IPO) and rights issue for Resort Savings. Under the hybrid offer, Resort Savings will be issuing more than 3.333 billion ordinary shares of 50 kobo each at a price of 51 kobo through the IPO. It will also simultaneously issue 3.6 billion ordinary shares of 50 kobo each at the nominal value to existing shareholders. Altogether, Resort Savings hopes to raise about N3.5 billion.

    Aso Savings and Loans had earlier floated a rights issue of 11.05 billion ordinary shares of 50 kobo each at 60k per share.

    Besides concerns about their historical fundamental performances, the capital raising efforts of the mortgage banks could be hampered by both the general lackluster state of the inactive primary segment of the capital market. There is also the issue of large outstanding share capital of mortgage banks relative to their assets base, which could encumber new fund raising without addressing issues of share reconstruction and valuation. Resort has 11.33 billion ordinary shares of 50 kobo each. Aso Savings has the second sectoral outstanding shares of 8.68 billion shares, nominally valued at N4.34 billion. Union Homes has 7.81 billion outstanding shares while Abbey Building Society has the least outstanding shares issue of 4.2 billion shares.

    Undoubtedly, the mortgage industry has a robust outlook. With estimated housing deficit of about 17 million and growing demand for private and commercial developments, mortgage bankers have latent untapped opportunity in Nigeria’s large population and wide gap in shelter. But the challenges for the mortgage bankers are appropriate products and investment strategies that could unlock these opportunities. Before then, they need to convince investors they have found the winning formulas.

     

  • MasterCard defies debt crisis

    MasterCard defies debt crisis

    MasterCard Inc.,which is under pressure from France to cut card payment fees, said European consumers are increasingly using credit and debit cards for purchases, dismissing the region’s sovereign debt crisis, Bloomberg report has said.

    “Our business in Europe has been growing really well. The sovereign debt issue isn’t affecting consumer confidence in the way that it might,” Ann Cairns, president of international markets at the company, said in an interview in Dubai.

    MasterCard Inc said it is expanding even as Europe’s financial crisis enters unprecedented territory after Euro-area finance ministers yesterday agreed to a tax on Cypriot bank deposits.

    The Purchase, New York-based company said, it’s benefiting from strong consumer spending in the Nordic countries, the Netherlands, Germany and Eastern Europe. At the same time, consumers are also turning away from cash in favor of plastic.

    Mastercard is expanding even as Europe’s crisis enters unprecedented territory after the region’s finance ministers agreed March 16 to a tax on Cypriot bank deposits. Officials unveiled a 10 billion-euro ($13 billion) rescue plan for the country, the fifth since the debt crisis broke out in 2009.

    Gross dollar volume in Europe, or the value of transactions processed by MasterCard, climbed 9.3 per cent to $1.1 trillion on a local currency basis last year, according to the company’s annual statement. Mastercard expects an 11 per cent to 14 per cent net revenue compound annual growth rate this year, Cairns said, without giving more detail on its expectations for Europe.

    Europe’s 17-nation economy will follow last year’s 0.6 per cent contraction by shrinking 0.3 percent in 2013, the first back-to-back decline since the euro’s debut in 1999, according to forecasts from the European Commission.