The Nation Newspaper

Category: Investors

  • Stock Exchange strengthens Investors’ Protection Fund

    The Nigerian Stock Exchange (NSE) has strengthened the governance of its Investors’ Protection Fund (IPF) with a new framework that outlines a broad-based board and competencies.

    The NSE had in 2012 inaugurated its IPF, in line with the Investment and Securities Act (ISA).

    Part XIV of the ISA requires the Exchange to establish and maintain an investors’ protection fund to compensate investors with genuine claims of pecuniary loss against dealing member firms resulting from insolvency, bankruptcy or negligence of a dealing member firm of a securities exchange or capital trade points; and defalcation committed by a dealing member firm or any of its directors, officers, employees or representatives in relation to securities, money or any property entrusted to, or received by the dealing member firm in its course of business as a capital market operator.

    A new governance and management framework approved by the Securities and Exchange Commission (SEC) on December 5, 2018 for the NSE IPF indicated that the fund will be managed by a nine-member board, drawn from major stakeholders in the capital market.

    According to the new framework, the board shall consist of a maximum of nine members including a representative each from dealing member firms, NSE, Central Securities Clearing System Plc, SEC, Institute of Capital Market Registrars, one person representing institutional investors, one person with proven integrity and knowledgeable in the capital market matters, one person representing registered shareholders association and one person who shall be a legal practitioner knowledgeable in capital market matters.

    Under the new rules, the board members shall be appointed by the Exchange, subject to the approval of SEC, for an initial term of four years, renewable for a further term of four years only.

    The board is IPF’s highest organ. It is responsible for the management of the IPF and shall hold, manage and apply the fund in accordance with the provisions of the IPF rules and the ISA.

    To manage the fund, the board is empowered to engage such number of staff as it may deem necessary for the efficient performance of its functions, set up sub-committees to assist in the discharge of its functions, in particular for the purpose of determining the eligibility of an investor to receive compensation and the amount payable; and appoint a management sub-committee.

    The board may also by resolution delegate to any sub-committee appointed by it all or any of its powers. Any power, authority or discretion so delegated by the board shall be exercised by members forming a majority of the sub-committee as if that power, authority or discretion had been conferred on a majority of the members of the sub- committee.

    The board may remove any member of a sub-committee and may fill any vacancy while a decision of the sub-committee of the board shall  have no effect until it is ratified by the board.

     

  • NSE, judges meet over capital market cases

    TO improve investors’ confidence in the market, officials of the Nigerian Stock Exchange (NSE) and judges of the Investments and Securities Tribunal (IST) will meet this weekend to discuss processes and implications of capital market cases.

    A circular on the meeting indicated that the judges and senior executives at the Exchange will discuss results of proceedings and explore ways to foster a better relationship between the organisations.

    The meeting, scheduled for Friday at the Exchange in Lagos, is the second high-level interface between the IST and NSE, after the tribunal visited the NSE last May.

    The IST, which has adjudicatory powers equivalent to that of the Federal High Court, is a special-purpose litigation court for the capital market. Under the capital market dispute resolution framework, the IST stands as the final arbiter in the enclosed cycle of market stakeholders and its decisions are only subject to review by courts of higher jurisdictions.

    The IST was established under Section 274 of the Investment and Securities Act (ISA). Section 289 of the ISA stipulates that a person aggrieved by any action or decision of SEC, may institute an action at the IST or appeal against such decisions within the period stipulated under the act provided that the aggrieved person shall give to SEC 14 days notice in writing of his intention to institute an action or appeal against its decision.

    IST was constituted and inaugurated on December 19, 2002 as part of the Federal Government’s reforms of the financial sector. It is a dedicated, specialised and fast-track civil court for the resolution of disputes arising from investments and securities transactions.

    The ISA stipulates that all matters before the tribunal are to be disposed of within 90 days.

    The NSE-IST parley comes on the heels of increased collaborations by  capital market authorities and law enforcement agencies to reduce and forestall financial crimes and ensure stronger enforcement regime in the market.

    Capital market regulators and law enforcement agencies operate a two-pronged strategy involving restitution and prosecution to secure full restoration for investor and deter corrupt practices through criminal prosecution and recovery of illegal proceeds.

    The Economic and Financial Crimes Commission (EFCC) is investigating some 35 fraud cases at the capital market as the anti-corruption agency and capital market authorities pursue a two-pronged strategy aimed at discouraging corrupt practices at the market. Already, EFCC is pursuing about five cases in court, in collaboration with the capital market authorities.

    While the NSE-through its Disciplinary Committee and Securities and Exchange Commission (SEC)-through its Administrative Proceedings Committee (APC) run active investigative mechanism that seeks to uncover malpractices, sanctions indicted operators and restitutes affected investors, they both lack prosecutorial powers.

    Investment and Securities Tribunal (IST) Chairman/Chief Executive Officer Mr Isiaka Idoko-Akoh had during the May visit assured that the tribunal stands ready to ensure that no investor loses money in the market due to share practices or abuse of the market processes.

    He pointed out that that IST was established to adjudicate on matters relating to capital market disputes, urging investors to embrace the tribunal instead of going to normal court that could last for a long period before passing judgement.

    He called on all stakeholders to join in creating awareness, public enlightenment and training so that people can understand the workings of IST.

    According to him, quick dispute resolution will improve investor’s confidence, which will lead to increase in quantum of business in the capital market.

    Idoko-Akoh, however, urged companies to adhere to the principles of good corporate governance to reduce trade disputes.

    He added that adherence to good corporate governance by companies would reduce trade disputes and fraud in the market.

    He urged stakeholders to support the tribunal, noting that good remuneration for the management and staff of the tribunal will enhance efficient service delivery.

     

  • SUNU Assurances shops for MD

    SUNU Assurances Nigeria Plc has a deadline of 78 days to appoint a substantive managing director, in line with insurance sector’s corporate governance code.

    SUNU Assurances on Monday confirmed the resignation of its Managing Director, Mr, Morufu Apampa with effect from November 30. It appointed the Executive Director (ED) for Technical and Operation, Mr Samuel Ogbodu as the Acting MD.

    The Corporate Governance Code for the Insurance Sector, under the auspices of the National Insurance Commission (NAICOM), stipulates a maximum of 90 days between the resignation of a managing director and appointment of a new substantive one.

    The company’s Board of Directors promised to appoint a new managing director soon.

    In 2016, the SUNU Assurances Group acquired 60 per cent equity of the former Equity Assurance Plc and renamed the company SUNU Assurances Nigeria Plc.

    SUNU Assurances operates in not less than 12 Franco-phone African countries and the acquisition of Equity Assurance was a major entry strategy to get into the Anglo-phone countries.

     

     

  • Flour Mills unfolds plan after low Q2

    After a decline in performance in the first half, Flour Mills of Nigeria has outlined plan to improve its performance.

    The company’s interim report and accounts for the six-month period ended September 30, 2018 showed that group turnover dropped from N298.44 billion in September 2017 to N269.74 billion in September 2018.

    Gross profit declined from N35.51 billion to N32.12 billion. Operating profit dropped to N19.24 billion as against N29.47 billion in corresponding period of last year.

    Profit before tax dropped from N13.48 billion to N8.30 billion. Profit after tax dipped to N5.07 billion in 2018 as against N9.36 billion in 2017. Earnings per share reduced from N3.17 to N1.25.

    The latest results contrasted  with the improved performance recorded in the last audited report of the flour-milling gaint.

    Flour Mills had grown its net profit by 54 per cent to N13.6 billion in the past year, riding on the back of strong sales and improved cost management.

    Key extracts of the audited report and accounts of Flour Mills of Nigeria for the year ended March 31, 2018 had shown that profit after tax rose from N8.84 billion in 2017 to N13.62 billion in 2018. Profit before tax had risen from N10.47 billion to N16.54 billion. Group turnover increased from N524.46 billion in 2017 to N542.67 billion in 2018. Earnings per share thus improved from N3.03 in 2017 to N4.83 in 2018. The company paid a dividend per share of N1 to shareholders as cash dividend for the 2018 business year, the same amount distributed for the 2017 business year.

    Flour Mills of Nigeria Group Managing Director Mr. Paul Gbededo said the company was focusing on growing its turnover and market share as well as diversifing its products to boost performance.

    “More recently, our focus is on volume growth, market share and diversification of existing product lines whilst improving efficiencies in supply chain and manufacturing sites. Optimisation of our balance sheet and reduction of financing costs remains a priority,” Gbedebo said.

    According to him, the bond issues by the company was part of strategy to replace short term bank loans with longer-tenored, lower priced funding.

    He said the bond issue would help the company to achieve its strategic objective of sustaining its market leadership position.

    He pointed out that the group’s backward integration programmes, which started in 2012, through its agro-allied business initiatives, were primarily aimed to support the group’s core food business.

    He noted that with five decades of operations in Nigeria, Flour Mills has continued to pursue strategic business opportunities, such as capacity expansion to sustain a leading position as Nigeria’s largest and oldest integrated food business, with a broad product portfolio and a robust pan-Nigerian distribution network.

    Flour Mills was incorporated September 29, 1960 as a private limited liability company. It became a public limited liability company in 1978.

     

  • Stakeholders hail SEC’s rules on green bond

    Securities and Exchange Commission (SEC) has officially launched its Green Bonds Issuance Rules amid commendations from stakeholders.

    The Nation had in October 2018 reported the inclusion of the rules and regulations on green bond issuance and management in the Nigerian capital market regulatory framework.

    Acting Director-General, Securities and Exchange Commission (SEC), Ms Mary Uduk at the formal launch of the rules yesterday in Abuja, said the release of the green bond rules is a significant step in complementing efforts of the government, regulators and the financial services industry to direct financial capital to more sustainable economic activity.

    “As Nigeria strives to harness the resources of non-oil sectors to anchor the transition to a more resilient economy, there is the urgent need to close the country’s infrastructure gap with investments in sustainable finance initiatives,” Uduk said.

    Director, Financial Markets, FSD Africa, Dr Evans Osano commented SEC for its professionalism and quick turnaround in the preparation of the guidelines.

    According to him, the new guidelines were prepared in line with leading international guidelines and standards providing confidence to domestic and international investors.

    “It also provides certainty to issuers of green bonds in Nigeria. FSD Africa is pleased to have supported this process which is a milestone for the Nigeria green bonds market,” Osano said.

    Africa Markets Programme Manager, Climate Bonds Initiative, Mr. Olumide Lala, noted that the launch of  the rules brings much needed clarity and guidance on the issuance of green bonds.

    According to him, adopting the tenets of the green bond principles and climate bonds standard makes it easier to attract foreign investment where needed.

    The Federal Government had in July 2018 listed its maiden N10.69 billion green bond on the stock market. The five-year bond carries a coupon rate of 13.48 per cent. Nigeria’s first sovereign green bond was oversubscribed by about N100 million as investors staked N10.791 billion on the N10.69 billion maiden bond. The Debt Management Office (DMO) had in December 2017 launched Nigeria’s maiden sovereign green bond as part of efforts to diversify government revenue and deepen the domestic capital market.

    At the close of the offer, total subscription stood at N10.791 billion compared with the offer size of N10.69 billion. Among the investors who subscribed to the green bond were banks, pension funds, asset managers and retail investors.

    The issuance of the green bond and listing were sequel to Nigeria’s endorsement of the Paris Agreement on Climate Change on September 21, 2016. The Paris Agreement aims to strengthen the global response to the threat of climate change.

    The green bond regulatory framework defined a green bond as any type of debt instrument, the proceeds of which would be exclusively applied to finance or re-finance in part or in full new and or existing projects that have positive environmental impact.

    The rules indicated that green bonds would be used exclusively to finance renewable and sustainable energy, clean transportation, sustainable water management, climate change adaptation, energy efficiency, sustainable waste management, sustainable land use, biodiversity conservation and any other categories as may be approved by SEC from time to time.

    The regulations highlighted some special conditions that any issuer of green bond must fulfill in addition to the general registration requirements for debt issuances as stated in the Rules and Regulations of the Commission for States, Local Governments, Corporate and Supranational agencies.

    According to the rules, an issuer of a green bond shall also file a feasibility study and report stating clearly, the measurable benefits of the proposed green project or assets such as green house gas reduction, reduction of water use and reduction of harmful emissions.

    The issuer must also file a prospectus which shall include project categories, project selection criteria, decision-making procedures, environmental benefits, use and management of the proceeds as well as a letter from the issuer committing to invest proceeds of the bond in green projects or assets.

    The issuer must also provide an independent assessment or certification issued by a professional certification authority or person approved or recognised by the Commission in addition to any other documents that may be required by the Commission.

    “The net proceeds shall only be utilised for the purpose stated in the approved offer documents and shall be tracked as stated in the approved internal policy of the Issuer which shall be disclosed in the offer documents,” the rules stated.

    The parties to the issue are expected to create an escrow account meant specifically for the net proceeds of the offer while the proceeds shall be domiciled with the custodian. While the trustees shall ensure that the proceeds are used for the purpose stated in the prospectus, the issuer and the trustees shall be the signatories to the escrow account.

    “The issuer shall invest proceeds in green projects within the given timeframe prescribed in the prospectus.

    Unallocated proceeds shall be invested in money market instruments with investment grade rating and this shall be disclosed in the offer documents,” according to the rules.

    According to the rules, where the issuer proposes to utilise a proportion of the issue proceeds of the issue of green bonds, towards refinancing of existing green assets, the issuer shall clearly provide in the offer document the details of the portfolio, assets and projects which are identified for such refinancing.

    The issuer is also expected to publish the utilisation of proceeds in at least two national dailies on an annual basis which shall contain the details of the key factors capturing the environmental impact of such investments and the same shall be disclosed in its annual report and website.

  • FSDH calls for tax incentives for mutual funds

    FSDH Group, one of Nigeria’s leading investment banking groups, has called on the Federal Government to implement deliberate policies to grow the collective investment segment of the Nigerian capital market.

    In a research report released yesterday, FSDH stated that mutual fund investment can create wealth for investors and funds pooled together can be used to finance critical infrastructure and expand business operations.

    The report, however, noted the need for government, capital market regulators and operators to make concerted efforts to deepen the market and encourage the adoption of collective investment schemes, otherwise known as mutual funds.

    According to the report, there is significant room for growth in mutual fund assets as the ratio of mutual funds to the country’s Gross Domestic Product (GDP) is estimated at 0.51 per cent.

    The report noted that governments and corporates may access the required long-term funds to finance critical infrastructure and business expansion through the growth of mutual funds.

    The report stated that with appropriate structures in place, mutual funds can also be used to revive the real estate sector, which is currently in depression. As fund managers mobilise funds and invest in bond funds, real estate funds and equity funds, they are providing long-term capital for developmental purposes. They also provide short-term working capital through investment in Money market funds.

    FSDH stated that the growth in investable funds has positive multiplier effects on the economy.

    “Government could offer tax incentives to investors who are committed to a regular investment plan in mutual funds. It should also create an enabling environment that will lead to job creation in the country in order to increase savings and investable funds. Regulators could promote innovative legislation to increase investment in mutual funds and expand investment channels to increase returns on the funds invested,” FSDH stated.

    The report added that the Fund Managers Association of Nigeria (FMAN) should continue to create public awareness on the benefits of mutual funds in order to generate interest from the investing public.

    A mutual fund is a pool of funds brought together by a professional fund manager from several investors to invest in selected underlying securities. The underlying securities can be one or a combination of the following: stocks, fixed income securities, real estate, and commodities. A mutual fund portfolio is structured and maintained to match different investment objectives. The type of mutual fund an individual invests in depends on their financial objectives and appetite for risk.

    Most mutual funds are open-ended investment schemes. This means that the fund manager can create additional units for new investors on demand. The fund manager is also able to provide active liquidity by redeeming units from existing investors who want to sell units for cash. Through this pool of funds, an investor creates wealth over a long period of time by making the money work for him through regular saving and investment.

    In addition to liquidity, mutual funds offer a range of benefits to investors including portfolio diversification and lower transaction costs. The existence of a Trustee and Custodian to a mutual fund ensures the safety of investments, as the Trustee ensures that the fund is managed in line with approved investment guidelines, and the Custodian holds the fund assets.

    Mutual fund investments are affordable for low-income investors, as some funds require an initial investment of only N5,000. The mutual fund assets in Nigeria have grown significantly in the last five years. This is an indication of the growing interest in this class of investment.

    Data from the Securities and Exchange Commission (SEC) on the Net Asset Value (NAV) of all registered mutual funds in Nigeria shows that the collective NAV grew by 349% between November 1, 2013 and  November 2, 2018. This translates to a Compound Annual Growth Rate (CAGR) of 35% between the periods.

     

  • FCMB Group doubles profit in Q3

    FCMB Group Plc recorded significant growth in the bottom-line in the third quarter, raising hopes of improved returns from the financial services holding group.

    Key extracts of the interim report and accounts of FCMB Group for the nine-month period ended September 30, 2018 showed that  gross earnings rose by 11.8 per cent to N132.87 billion in third quarter 2018 as against N118.82 billion in third quarter 2017. Profit before tax rode on the back of improved risks and costs management to double pre-tax profit from N6.84 billion in 2017 to N14.77 billion in third quarter 2018. While income tax expense jumped from N1.37 billion in 2017 to N3.43 billion in 2018, net profit after tax still doubled from N5.47 billion in 2017 to N11.34 billion in 2018. With this, earnings per share leapt from 28 kobo in third quarter 2017 to 57 kobo in third quarter 2018.

    FCMB Group comprises of eight subsidiaries including First City Monument Bank Limited, FCMB Capital Markets, CSL Stockbrokers Limited, CSL Trustees Limited, Legacy Pension Managers Limited, FCMB (UK) Limited, First City Asset Management Limited and Credit Direct Limited.

    The third quarter 2018 report represents considerable improvement on the earnings outlook of the group, after it struggled with constrained top-line and bottom-line in the year ended December 31, 2017.

    Headline figures, however, showed a top-down decline in actual figures. Gross earnings dropped from N176.35 billion in 2016 to N169.88 billion in 2017. Profit before tax declined from N16.25 billion to N11.46 billion. Profit after tax also dropped from N14.34 billion to N9.41 billion. Consequently, earnings per share dropped from 72 kobo in 2016 to N48 kobo in 2017.

    However, group deposits grew to N689.9 billion in 2017, an increase of five per cent on N657.6 billion recorded in 20167. The Group’s capital adequacy ratio also improved to 16.9 per cent in 2017 as against 16.7 per cent in 2016. Asset base also increased to N1.19 trillion in 2017 compared with N1.17 trillion in 2016. Non-interest income stood at N32 billion in 2017 while loans and advances totalled N649.8 billion during the year.

    The group paid N1.98 billion as cash dividend for the 2017 business year, representing a dividend per share of 10 kobo, the same amount paid for the 2016 business year.

     

  • Meristem Stockbrokers wins best stockbroker award

    Meristem Stockbrokers Limited won the best stockbroking firm award at the 2018 Banking and FinanciaIndustry (BAFI) Awards organised by the BusinessDay Media Limited.

    Meristem Stockbrokers received the “Stockbroker of the Year” Award at the BAFI Awards, coming barely two months after the brokerage firm was recognised as the “Digital Stockbroker of the Year” at the maiden edition of the Bull Awards organised by the Nigerian Stock Exchange (NSE).

    Managing Director, Meristem Stockbrokers Limited, Mr. Saheed Bashir said the award was a confirmation of the firm’s dedication and service to its clients.

    “It is a proof of the fact that we have been consistent in what we do and that we are doing well. This is the second industry award in less than two months,” Bashir said.

    According to him, by beating other stockbroking firms to emerge winner in the category, it shows Meristem’s consistent push for financial inclusion, innovative solutions, consumer satisfaction as a core value and creation of wealth for its clients in the brokerage industry.

     

     

  • Analysts outline risks, benefits of SAHCO IPO

    Sky Aviation Handling Company (SAHCO) Plc has potential to deliver 28.44 per cent capital appreciation of the current price of its Initial Public Offering (IPO) but investor also must consider downside risks that may impact the performance of the company.

    Analysts at Cordros Securities Limited stated that SAHCO has strong potential to sustain growth in the years ahead given its exposure to long-term expansion of air traffic, improvement in macro environment, relatively under-geared balance sheet and its competitiveness enhanced by IATA Safety Audit for Ground Operations (ISAGO) registration.

    According to the investment analysis, a valuation shows a target price of N5.97 per share for SAHCO in the immediate future, representing an upside of 28.44 per cent on its IPO price of N4.65 per share.

    “We have valued SAHCO using a pure-Discounted Cash Flow (DCF) valuation methodology, evaluating the company’s assets across its ramp and cargo handling business, in addition to future investments. Our positive investment case for SAHCO centres on the fact that the company represents a long-term play on air traffic and aviation industry growth and benefits from high barriers to entry,” Cordros Securities stated.

    The report, however, identified key downside risks to include weaker-than-expected macroeconomic performance, susceptibility of operations to labour action, revenue downside from potential insolvency of some airline customers and regulatory risk.

    SAHCO is offering 406.074 million ordinary shares of 50 kobo each through an IPO at N4.65 per share. The IPO is an offer for sale, implying that the net proceeds of the IPO will go to the existing majority core investor in SAHCO, which is divesting partially to allow retail minority ownerships. Application list for the N1.9 IPO closes on December 19, 2018.

    SAHCO was privatised by the Federal Government in 2009. Sifax Group acquired the entire share capital of the company. The Share Sale Purchase Agreement (SSPA) however,, mandates the majority core investor to divest 49 per cent of the shares of the company to the general Nigerian investing public.

    The report noted that SAHCO has become somewhat of the ‘poster-child’ for privatisation, stemming from its incredible turnaround in performance in a short period since the government’s divestment.

    According to the report, management of SAHCO has stated its intention of sustaining the company’s impressive post-privatisation performance, listing key strategic goals to include expansion of revenue, cost control and reduction, customer satisfaction and stability and sustainability.

    The report pointed out that SAHCO has a positive long-term growth outlook citing the transformation in the Nigerian market, which appears to be promising for SAHCO.

    According to the report, Nigeria’s aviation market is the third largest in Africa. Although relatively cyclical, the sector has a recorded a 10-year GDP CAGR of 9.0 per cent, almost double the national GDP CAGR of 5.0 per cent. Nigeria has huge potential to become an aviation hub for Africa, using its natural advantages such as its central location on the continent, huge population and a growing middle class.

    “As the second largest aviation ground handling service provider in Nigeria, SAHCO is well positioned to benefit from the expected long-term expansion of air traffic growth and demand for travel to, from and over Nigeria and the West African region. With respect to Nigeria air traffic trends, growth is expected to rebound after a more depressed period reflective of macroeconomic development,” the report stated.

    The Nigerian Bureau of Statistics (NBS) expects air traffic growth of 20 per cent for 2018 compared to 2017, on the back of improving business confidence, positive policy reforms – ease of doing business, visa on arrival – as well as development of infrastructure.

    “In our view, the Nigerian market is transitioning, from an economic standpoint – following three challenging years – and 2018 and beyond appear to be promising years for SAHCO to take advantage of. Firstly, we see economic growth benefitting from higher government and private sector spending, both riding on improved revenues from crude oil. Secondly, improved oil earnings should further improve FX liquidity and sustain stability, after the volatile era,” Cordros stated.

  • Stock Exchange lifts suspension on Great Nigeria Insurance

    The Nigerian Stock Exchange (NSE) on Monday lifted suspension on trading in the shares of Great Nigeria Insurance (GNI) Plc, after the insurance company submitted its relevant financial statements to the Exchange.

    The NSE had on July 5, 2017 suspended trading in shares of GNI and other companies for failing to adhere to best corporate governance and extant post-listing requirements that require quoted companies to submit their periodic financial statements and reports within stipulated timelines.

    Post-listing rules at the NSE require quoted companies to submit their audited earnings reports, not later than 90 calendar days, or three months, after the expiration of the period. The rules also require quoted companies to submit interim report not later than 30 calendar days after the end of the relevant period.

    Not less than 83 per cent of quoted companies use the 12-month Gregorian calendar year as their business year. The business year thus terminates on December 31. While March 31 is usually the deadline for submission of annual report for companies with Gregorian calendar business year, the deadline for the quarterly report is a month after the quarter.

    The NSE stated that GNI, “which was amongst the companies suspended has submitted its outstanding financial statements to the Exchange” citing the rules that state that “the suspension of trading in the issuer’s securities shall be lifted upon submission of the relevant accounts provided the Exchange is satisfied that the accounts comply with all applicable rules of the Exchange”.