The Nation Newspaper

Tag: investors

  • Eight companies to raise N180b as core investors stake more funds

    Eight companies to raise N180b as core investors stake more funds

    The new issue market promises to be quite active in the second half as eight companies have initiated plans to raise about N180 billion as core investors signalled they would be providing additional funds to support their companies.

    Regulatory filings and investment banking data obtained by The Nation indicated that not less than eight companies have started plans to raise new funds, with nearly 60 per cent already at the initial regulatory approval stage.

    The largest chunk of the new funds, according to the data, will be raised through equity issues, while some 15 per cent of the value may be through debt issues.

    Also, about three-quarters of the new issues are expected to be in form of rights issue, a supplementary equity issuance under which shares are pre-allotted to existing shareholders. All the companies undertaking rights issue have substantial majority core investors, who are expected to provide in most instances more than a quarter of the new equity funds.

    Rights issue gives the first right of refusal to existing shareholders and thus preserve existing shareholding structure. It however ,provides window for new investors to buy into the company through rights trading on the secondary market.

    Chief executive officer, Finawell Capital Limited, Mr. Tunde Oyekunle, said the preference for rights issue might not be unconnected with the lingering apathy and erosion of investors’ confidence that arose from market downturn in 2007, which has continued to haunt the primary market.

    He said some companies are also mindful of the shareholding dilution that may likely come from public offers while management of some companies feel existing shareholders will understand management strategy and trust their investment with them than new shareholders.

    “Most companies are embarking on rights issues due to the certainty that they can raise the required funds from existing investors, particularly the institutional shareholders and some large bloc holders who may be fully committed to retain their shareholding positions in the companies. Those shareholders will definitely have a buy in into such rights issues before they are floated. Another reason is that public offers may not necessarily get patronage or commitment from new investors due to the current state of the market,” said Sewa Wusu, economist and head of research and investment advisory at Sterling Capital Markets Limited.

    Lt. Gen. Theophilus Danjuma (rtd ), the chairman and major core investor in May & Baker Nigeria, is taking the lead in the recapitalisation of the healthcare company. Danjuma, a multi-billionaire, holds the largest equity stake of 24.38 per cent in May & Baker Nigeria through his company, T.Y Holdings Limited.

    There are strong indications that Danjuma, who had earlier extended N2 billion bail-out to the company, might consider providing additional equity funds beyond his pre-allotted shares to bolster the success of the rights issue.

    He told other shareholders last month that the board of the company had decided to opt for rights issue and delay the offer till now to enable all shareholders pick their rights in line with the company’s commitment to equitable and fair treatment of shareholders who had stood by the company through thick and thin.

    Shareholders had earlier in 2014 approved a resolution authorizing the company to raise additional N3.2 billion. The shareholders also empowered the directors to decide on absorption of excess monies from the new capital issue.

    The new capital issue would be for the “purposes of enhancing the company’s working capital and financing the development of the company’s businesses”.

    To create headroom for the new capital issue, shareholders also increased the authorised share capital of May and Baker Nigeria from N1 billion, consisting of 2.0 billion ordinary shares of 50 kobo each, to N1.90 billion, consisting of 3.8 billion ordinary shares of 50 kobo each, by creating additional 1.80 billion ordinary shares of 50 kobo each. May & Baker currently has 980 million issued shares outstanding on the Nigerian Stock Exchange (NSE).

    Flour Mills of Nigeria Plc, Nigeria’s most capitalised and largest flour-milling company, plans to raise about N40 billion from existing shareholders as the flour miller seeks to consolidate recent investments and support ongoing corporate restructuring with long-term funds.

    A regulatory filing indicated that the board of directors of Flour Mills has called shareholders to an extraordinary general meeting next month to discuss and approve resolutions on increase in authorised share capital of the company and a rights issue.

    The board of director is proposing increase in authorised share capital of the company from N2 billion to N2.5 billion through the creation of additional 1.0 billion ordinary shares of 50 kobo each.

    The company then plans to raise up to N40 billion in new equity funds from existing shareholders. In the event of under-subscription, the board is seeking shareholders’ mandate to allocate unsubscribed rights’ shares to interested investors.

    Shareholders are also expected to empower the board of directors to use net proceeds of the rights issue to meet the funding requirements of the company.

    As banks continue to preempt future changes in capital requirements, deposit money banks are expected to be among the major players in the new issue market in the second half. Two of Nigeria’s strategically important banks (SIBs), Stanbic IBTC Holdings Plc and Skye Bank Plc, are raising new equity funds in the second half.

    Stanbic IBTC Holdings Plc, the holding company for Stanbic IBTC Bank and other subsidiaries, plans to raise N20.4 billion from its shareholders. A regulatory filing indicated that Stanbic IBTC Holdings would be issuing 800 million ordinary shares of 50 kobo each to existing shareholders at N25.50 per share. The rights issue will be pre-allotted to shareholders in the book of the company on the basis of two new ordinary shares for every 25 ordinary shares held by the close of business yesterday.

    Skye Bank Plc plans to raise about N30 billion in new equity funds in the third quarter. It had earlier indicated it could raise as much as N50 billion, an amount still within the range of the latest offer value of N30 billion in the event of a provision for absorption of excess monies.

    Group Managing Director, Skye Bank Plc, Mr. Timothy Oguntayo said the bank would be raising some N30 billion tier 1 capital, referring to new equity funds, in the third quarter.

    While Skye Bank is still finalising the details of the equity issue, there are indications that the supplementary issue will include an element of rights issue.

    Presco Plc, a palm oil plantation and processing company, has commenced the process to raise some N3 billion new equity funds from its major core investor and other minority shareholders to reorganise its highly leveraged capital structure.

    Sa Siat nv, which holds 60 per cent majority equity stake in Presco, will provide nearly two-thirds of the rights funds. First Inland Bank/Fidelity Finance Company (TRDG), which holds 8.0 per cent equity stake, is expected to provide the second largest chunk of the funds. Presco has some 9,415 shareholders with the largest group of shareholders holding small units within the range of 1000 to 10,000 shares.

    Sterling Bank Plc, which had raised some N19 billion new equity funds through special placement late last year, and Wema Bank Plc, are also said to be considering further capital raising. Wema Bank Plc also plans to raise $100 million in tier II capital,

     

     

     

     

     

     

  • Investors waiting for sustainable foreign exchange policy, says StanChart

    •Nigeria likely to remain in the JPMorgan GBI-EM Index

    The overwhelming majority of investors are still on the sideline waiting for tangible government direction and emergence of a more sustainable and liquid foreign exchange metrics before committing further funds to Nigerian securities, Standard Chartered Bank has said.

    In its latest assessment of the Nigerian fixed-income market, Standard Chartered Bank stated that the greater flow of foreign investments into Nigerian government bonds would depend on the normalization of foreign exchange conditions. StanChart believes such normalization and further realignment of foreign exchange rate will likely take place soon.

    Standard Chartered Bank, in the “on the ground global research” report signed off by Samir Gadio, Head, Africa Strategy, FICC Research, said stakeholders will likely seek to preserve Nigeria’s inclusion in the JPMorgan Government Bond Index-Emerging Markets Indices (JP Morgan GBI-EM Index) noting that Nigeria’s potential exclusion from the GBI-EM indices is an avoidable outcome. There have been fears in some quarters that the country may be excluded from the index on the account of illiquidity and tepid Naira-Dollar exchange.

    The JP Morgan GBI-EM Index serves as benchmarks for local currency bonds issued by emerging market governments. The index was launched in June 2005 and is the first comprehensive global local emerging markets index. The JP Morgan GBI-EM Index is widely regarded as reference point for foreign investors seeking to diversify their portfolios by investing in sovereign bonds issued by emerging market countries.

    Nigeria celebrated its admission to the JP Morgan GBI-EM Index on October 1, 2012. Nigeria was the second African country after South Africa to be included in the widely followed index.

    Analysts at CardinalStone Partners Limited said Nigeria is at a risk of capital flight involving about $3.9 billion as possible reactions and impact of the previous downgrade and eventual removal on the local bond market could lead to significant capital flight.

    Analysts noted that the total value of investor money benchmarked against the whole JP Morgan GBI-EM suite of indices is about $217 billion. The GBI – EM Global Diversified Index is the most frequently used local emerging market index and Nigeria accounts for 1.8 per cent of its value, about $3.9 billion.

    “Hence, Nigeria’s removal from the Index would trigger capital flight at a time when the country needs to attract capital inflow. Bond yields will also spike in reaction to the significant exit by funds which mirror the composition of the index and may subsequently lead to the exit of Nigeria from the Barclay’s Bond Index as well,” CardinalStone Partners stated.

    StanChart said it expected Nigerian bonds to remain in the GBI-EM indices provided reforms are undertaken to normalise exchange rate conditions and move towards a price-driven foreign exchange trading platform in the coming months.

    “From the government and Central Bank of Nigeria’s standpoint, it represents a significant setback in the development of domestic financial markets and undermines the country’s external credibility. For the index provider, it may test the credentials of the GBI-EM inclusion process, while exclusion on account of foreign exchange liquidity-related factors is largely unknown territory. International investors would also likely prefer Nigeria’s GBI-EM eligibility to be reaffirmed,” StanChart stated.

    According to the bank, as the public policy focus shifts back to the economy, Nigerian authorities will probably pay more attention to the needs of corporates and onshore market participants, and streamline the FX market operating environment.

    “We see the authorities potentially reintroducing a more flexible price-driven foreign exchange trading platform and moving away from the order-matching system in the foreseeable future. This is likely to be accompanied by an upward adjustment to the exchange rate,” StanChart stated.

    It noted significant foreign outflows in late 2014 and early 2015, pointing out that the investors’ interest in the Nigerian bonds remained slow.

    “Assuming these conditions are met, we expect decent foreign portfolio inflows to resume,” StanChart said while calling for flexible price-driven foreign exchange.

    The report pointed out that Nigerian government bonds may benefit moderately from the index provider’s decision, as market sentiment turns more constructive early this week. However, it believed the extension of the GBI-EM review period has already been largely priced in. Nigerian bonds appear to have found a new level in sub-14 per cent yield territory in recent weeks.

    JP Morgan had last Friday extended Nigeria’s Index Watch status in the GBI-EM indices, providing the country with more room for policy reforms. Nigeria’s status review will now be be finalised in the coming months or before year-end at the latest. JP Morgan indicated in its notice that Nigeria’s index eligibility at the end of the extension period would be conditional upon a consistent record of a functioning and transparent foreign exchange market. Specifically, JP Morgan highlights adequate foreign exchange liquidity and two-way flow trading to ensure that benchmarked investors can transact with minimal constraints. JP Morgan had placed Nigeria on Negative watch in the GBI-EM indices in January, citing difficulties for offshore investors to replicate Nigeria’s allocation in the benchmark.

    “This extension of the review period is broadly in line with market expectations,” StanChart noted.

    JP Morgan had placed Nigeria on “index watch negative” due to what the global financial company described as lack of liquidity induced by regulatory policies of the Central Bank of Nigeria (CBN).

    JP Morgan hinged Nigeria’s downgrade to “index watch negative” on recent policies by the CBN, which limited liquidity in the spot foreign exchange market and local treasury liquidity market. The CBN had on December 17, 2014 reduced the net open position (NOP) of commercial banks from one per cent to zero per cent of shareholders fund, before subsequently revising it to 0.1 per cent in January 2015.

    JP Morgan stated that this measure effectively resulted in a lack of liquidity in the spot foreign exchange market and domestic bond market thus hindering the ability of foreign investors to replicate Nigeria’s exposure to the GBI-EM Index.

  • Investors jostle for Vono Products as merger plan boosts valuation

    The share price of Vono Products Plc has risen by more than 86 per cent in the past three weeks as investors scrambled for shares of the foam-manufacturing company after a report that it could be merged with Vitafoam Nigeria Plc.

    Vono Products’ share price had maintained the lead on the price gainers’ list in the last two weeks of May, playing a contrarian stock in a market characterized largely by bearish sentiments. Vono Products’ share price had appreciated by 29.79 per cent in the week ended May 22 while the average market position at the stock market was negative at -0.49 per cent. By the week ended May 29, Vono Products also recorded the highest percentage gain of 38.52 per cent as against modest market’s average gain of 0.11 per cent.

    While the Nigerian equity market opened last week with average day-on-day decline of 0.77 per cent, Vono Products’ share price rose by 4.73 per cent on Monday, the highest percentage gain by any stock, to close at N1.77, 88.3 per cent increase on its share price of 94 kobo three weeks ago. It maintained a stable price and closed last week at N1.75 per share, 86.2 per cent above its three-week’s opening price of 94 kobo.

    It opened this week unchanged at N1.75 per share as investors held on to their shares in anticipation of the merger.

    “Investors are going after Vono Products because of the proposed merger between the company and Vitafoam Nigeria, the trend you saw early was due to early movers from investors that believed the valuation then stands in favour of Vono Products and now, it’s becoming more of public knowledge and investors are holding on to see final details,” Sewa Wusu, investment advisor and head of research at Sterling Capital Markets Limited, said.

    The Nation had reported exclusively that Vitafoam Nigeria, which holds slight majority equity stake in Vonou Products, has launched a bid to absorb the operations of its age-long competitor as the bedding and forma-manufacturing companies seek to unlock synergies.

    A regulatory document obtained by The Nation indicated that Vitafoam Nigeria, which had in August 2010 acquired majority shareholding in Vono Products, has started pre-merger processes to absorb the operations of Vono Products.

    Vitafoam Nigeria was said to be in the process of filing the requisite documents for the scheme of merger with the Securities and Exchange Commission (SEC). SEC, the apex capital market regulator, is statutorily empowered to vet mergers and acquisitions and other primary transactions.

    Both Vitafoam Nigeria and Vono Products, which are quoted on the Nigerian Stock Exchange (NSE), had notified the management of the Exchange about the impending merger. The business combination may however lead to the delisting of Vono Products, leaving Vitafoam Nigeria as the only quoted foam-manufacturing company.

    With vast assets and similar business lines, Vitafoam Nigeria is seeking to absorb Vono Products to reduce operation costs and enhance the synergies inherent in the expanded business.

    Vitafoam Nigeria currently holds 47.5 per cent in Vono Product after the former had increased its majority equity stake during a rights issue in 2012.

    Market analysts said investors believed underlying assets of Vono Products would lead to favourable share-exchange ratio for shareholders of Vono Products. Vono Products opened yesterday with a market capitalization of N997.66 million with 563.65 million shares at N1.77 per share. Vitafoam Nigeria, which has declared a bonus share of one for five shares for its shareholders, has 982.8 million shares worth N5.11 billion at opening price of N5.20 per share.

    Vitafoam Nigeria had in August 2010 acquired majority shareholding in Vono Products and took over the board and management of the company. Vitafoam Nigeria then held 24.96 per cent equity stake in Vono, giving it the majority but less than outright controlling equity stake. Other significant investors in Vono then were Enterprise Bank and BGL which held 5.56 per cent and 7.37 per cent respectively.

    Vono Products in 2012 launched a N840 million rights issue to strengthen its operations and pursue expansion programme as part of efforts to emplace the company on the path of sustainable profitability.

    Vono offered 525 million ordinary shares of 50 kobo each at N1.60 per share to pre-qualified shareholders on the basis of seven new shares for every four shares held as at October 31, 2011. Vitafoam Nigeria took advantage of the rights issue to increase its majority equity stake to 47.5 per cent.

    With the rights issue, Vono Products had raised the prospects of continuing as a stand-alone subsidiary. The company had indicated that it would use the net proceeds of the rights issue to strengthen its operations and pursue expansion programme.

    Specifically, the net proceeds were to be used to upgrade the factory, buy new plants and machineries and boost its working capital among others. The additional capital was meant to reduce the company’s dependence on banks for funding to finance its operations.

    Both Vono Products and Vitafoam Nigeria have continued to struggle with sluggish sales and depressed margins. First quarter report for the period ended December 31, 2014 showed that Vono Products grew sales to N215.15 million in December 2014 as against N193.16 million in comparable period of 2013. The company made a profit before tax of N570,000 as against loss of N4.52 million in 2013. After taxes, net loss stood

  • Investors ready for Akwa Ibom

    Akwa Ibom State Governor-elect Mr. Udom Gabriel Emmanuel has said his friends and associates abroad have expressed their readiness to invest in the state.

    Emmanuel, who thanked people of the state for voting for him, reiterated his pledge to eradicate unemployment in the state.

    The governor-elect, who spoke to reporters at his hometown, Awa Iman in Onna Local Government Area, said he would not renege in his promise to build industries and create jobs for youths in the state.

    He pledged to work for the well-being of the common man and to run a government whose dividends and achievements will be seen and felt by all.

    Emmanuel assured the people of the state that he would bring developments to all nooks and crannies of the state and that he was would serve as governor to the about five million Akwa Ibom people irrespective of party affiliations.

    “The political party is only a vehicle to attain political authority and once election is over, the entire people become the elected officer’s priority,” he said, adding that the administration would not discriminate in the policy of creating wealth for the state.

  • Financial expert advises investors on how to mitigate risks

    A financial expert and the chief marketing officer of Flobal Trust Limited, Mr. Abayomi Adeyeri, has advised investors to develop the habit of continuous savings and investments, and to avail themselves of the services of professional investment managers in order to achieve sustainable living standards during and after their active career.

    Adeyeri, a former regional head and senior management member of Ecobank Nigeria Limited, cautioned that savings and investment should not be handled haphazardly, but should be managed through a planned programme of ideas, resources and actions based on individual peculiarities. Mr. Adeyeri was delivering a paper at the first Warri Business Seminar, held in Warri, Delta State.

    According to him, investments involve risks which are greatly reduced when investors seek advice from professional investment managers and also show commitment towards continuous savings and investments. He noted that investment risks can also be mitigated by diversifying one’s portfolio across several investment options including money market instruments such as treasury bills; capital market instruments such as shares and real estate investments, among others.

    While acknowledging that there are risks involved in non-fixed investments such as shares, Adeyeri opined that diversification and use of professional managers would ensure that investors reap the greatest benefit associated with such high-risk investments.

    He, however cautioned that investors should always carry out due diligence to confirm the status of any investment company they want to deal with, noting that they can directly verify the status of any investment company by making enquiry at the Securities and Exchange Commission (SEC) or check the website of the Commission. SEC is the apex regulator for the capital market.

    According to him, the status check on any professional manager or investment firm should include verification of whether the person or company has flouted any extant law guiding capital market operations.

    He advised income earners to develop the habit of paying themselves first by setting aside a pre-determined portion of their income, at least 20 per cent, for continuous savings and investments.

    He pointed out that everybody needs to have a financial plan that will specify savings and investment objectives and draw up specific action plan to achieve these objectives. In drawing up a financial plan, the objectives could include a home, a car, a comfortable retirement, children education, new business, periods of unemployment and caring for parents and extended family among others depending on individual priorities and stage in life.

    “If you do not know where you are going, you may end up where you do not plan, design your roadmap to your financial plan and know what you want to save for and when. You must also know your current financial situation by figuring out what you own and what you owe. By so doing, you will be creating a “net worth statement”, showing your assets and liabilities,” Adeyeri said.

    He outlined the steps to achieving effective savings and investment to include preparation of adequate financial plan, keeping track of monthly incomes and expenses, payment of any high interest debt and avoidance of impulse buying, observing the “pay yourself first” rule by putting a monthly standing order for direct deduction of income for investment and living below one’s income in order to create regular pool of funds for savings.

    Besides organized investments such as money and capital market investments,               Adeyeri said people can work their way to sustainable wealth and financial freedom by developing a nose for peculiar environmental challenges within their localities and converting these challenges to opportunities for income earning by providing solutions as an entrepreneur.

    He urged people not to be afraid of taking the big step forward to financial freedom, noting that idea is the most important capital needed for financial freedom. According to him, with a good idea backed by feasible plan, there are always many options of raising initial capital to start a business or investment including capital from personal savings, capital from family and friends, capital from cooperatives, partnership and sale of part of the company by issuing shares to prospective investors.

    Flobal Trust Limited is licensed by the Securities and Exchange Commission (SEC) as a corporate investment and financial advisory firm. Incorporated in August 2007, the Effurun, Warri, Delta State-based firm has nearly a decade experience providing tailor-made financial services and products to a diversified client base that includes high net worth individuals, small and medium scale businesses, and large institutions.

    Some of its advisory products include Flobal Plural Account, a money market product, Flobal Corporate Advances PLUS, an asset product structured for oil and gas affiliated establishments and Flobal Individual Advances PLUS, a premier-packaged product for Flobal Trust customers.

     

  • Firm woos investors for tertiary institutions

    To enable investors make the best of investment opportunities available across the nation’s tertiary institutions, Campus Alive Initiative, a campus-based marketing communications and consultancy company, has listed a number of projects, which investors are being sought in some Nigerian universities.

    Speaking with reporters on some aspects of its consultancy, which include providing linkage programmes to help individuals and corporate organisations increase their bottom-lines, the firm’s Managing Director,  Oyinwola Don Babatope identified the projects to include hostels, space for outdoor adverts, banks, telcos, fast food, lecture halls, general supply of stationery, computers, diesel, petrol, among others

    Oyinwola added that since its incorporation, one of its subsidiaries, Campus Logistics has facilitated diverse investments for a good number of investors in the highlighted areas.

    “Through campus logistics, we give ideas that would make you smile to the bank; and this is what we have been helping our diverse clienteles to achieve over time. At the moment, we still have a list of universities looking for investors to come and invest in various projects within their campuses.

    “This is, therefore, a subtle invitation to discerning organisations, individuals and investors to catch in on these opportunities and make the best of them,” he stressed.

    Campus Alive Initiative Limited has been operating since 2005, providing campus services for different corporate organisations.

     

  • Investors scramble for banking stocks as equities gain N315b

    Banking stocks were the toasts of the investing public last week as the Nigerian equities rode on the back of increased demand to add N315 billion in new capital gains.

    With the release of the earnings reports and dividend recommendations of Guaranty Trust Bank and Zenith Bank, investors upped demand for banking stocks in anticipation of the earnings and dividends of the other stocks.

    Average gain in the banking sector was more than thrice the average gain the entire market just as banking stocks dominated the activity chart. The NSE Banking Index, the value-based index that tracks banking sector, recorded a week-on-week gain of 9.79 per cent, the highest by any group during the week.

    The All Share Index (ASI), the benchmark index that tracks prices of all quoted equities on the Nigerian Stock Exchange (NSE), indicated week-on-week gain of 3.14 per cent. The ASI rose from its opening index of 30,103.81 points to close the week at 31,049.37 points.

    Aggregate market value of all quoted equities closed weekend at N10.360 trillion as against N10.045 trillion recorded as opening value for the week, representing addition of capital gains of about N315 billion.

    The NSE 30 Index, which tracks the 30 most capitalized stocks on the NSE, returned average gain of 4.05 per cent during the week. Banking stocks constitute more than one third of the stocks under the NSE 30 Index. The NSE Industrial Goods Index recorded a modest gain of 1.92 per cent while the NSE Consumer Goods Index rose by 1.89 per cent. However, the NSE Oil and Gas Index dwindled by 2.0 per cent. The NSE Insurance Index dropped by 0.12 per cent while the NSE Lotus Islamic Index, which tracks stocks that comply with Islamic law, indicated a week-on-week decline of 1.75 per cent.

    Total turnover at the Nigerian Stock Exchange (NSE) last week stood at 2.13 billion shares worth N24.39 billion in 22,532 deals, representing considerable increase on a total of 1.68 billion shares valued at N21.32 billion that were traded in 21,062 deals two weeks ago.

    The turnover indicated increased demand for equities with the positive market situation leaving most equities on the gainers’ list. Price trend analysis showed that 40 equities appreciated while 30 stocks depreciated during the week.

    Financial services sector was the most active sector with a turnover of 1.8 billion shares valued at N14.19 billion traded in 14,424 deals; representing 84.24 per cent and 58.20 per cent of the total turnover volume and value respectively. Conglomerates sector followed with a turnover of 119.52 million shares worth N630.21 million in 1,216 deals. Consumer goods sectors placed third with a turnover of 100.12 million shares worth N6.6 billion in 3,307 deals.

    Banking stocks dominated activity chart as investors responded positively to the release of audited reports and accounts and dividend recommendations by leading banks. The trio of FBN Holdings Plc, Access Bank Plc and United Bank for Africa Plc were the most active stocks accounting for 966.58 million shares worth N6.79 billion in 5,901 deals. This represented 45 per cent and 27.8 per cent of the total turnover volume and value respectively.

    Besides equities, trading remained subdued in other securities. Exchange traded products (ETPs) recorded a turnover of 223,470 units valued at N3.41 million in 21 deals compared with a total of 184,927 units valued atN2.80 million traded in 29 deals two weeks ago.

    Also, a total of 426 units of Federal Government’s bond valued at N440, 065 were traded in two deals last week as against a total of 100 units valued at N103, 583 that was traded in a deal two weeks ago.

     

     

  • Investors lose interest in equities over polls shift

    Investors lose interest in equities over polls shift

    The postponement of the general elections has heightened anxiety and dampened investors’interest in  Nigerian equities, analysts have said.

    The presidential and national assembly elections initially scheduled for Saturday, February 14 were shifted to March 28; the governorship and Houses of Assembly elections scheduled for February 28 were shifted to April 11. In the first trading session after the shift, Nigerian equities on Monday lost N208 billion.

    Analysts said the postponed elections could trigger negative reactions from investors, adding that the consequent disruptions could worsen the negative streak in the stock market.

    The market opened with average year-to-date return of -13.48 per cent. Before the poll shift, the market had sustained appreciable rally to close the week with average week-on-week gain of 1.43 per cent.

    Analysts at Afrinvest Securities Limited, said the shift could lead to a decline in investors’ preference for Nigerian equities.

    Accordingly, the market may likely react negatively to the shift in the general elections by six weeks.

    Analysts noted that although the shift may lead to relaxation in the charged political atmosphere, “the poll-shift has further increased socio-political uncertainty, adding to the risk profile of the                          Nigerian stock market”.

    Analysts said they however, did not expect a knee-jerk negative response given the current market situation at the stock market where most equities are significantly trading below their intrinsic values.

    The Managing Director, Financial Derivatives Company (FDC) Limited, Bismarck Rewane, also cited political tension as one of the reasons that would keep the market largely down in the weeks ahead.

    In his latest outlook on the equities market, Rewane said the downturn in the equities market will continue as negative sentiment would continue to dominate.

    According to him, three factors will continue to influence pricing trend at the Nigerian stock market, including corporate earnings, the general elections and the interplay of bargain hunters and profit-takers.

    He noted that weak corporate earnings for the year ended December 31, 2014 and political tensions, would serve as dampeners for the market, while the significant undervaluation of the market would continue to attract discerning investors.

    Rewane said there would be increased volatility at the stock market as the tussle between bargain hunters and profit takers is also expected to be intensified.

    Like several other analysts, Rewane outlined that the first and second quarter of this year might be dominated by the negative sentiments, while the equities are expected to stage strong recovery on the back of increased demand and positioning in the third quarter, which could extend into a stable phase in the fourth quarter.

    Exotix, a global finance and investment firm with offices in major global financial centres and significant imprints in Africa, said the delay to the election is a short-term negative for investors because it delays the currency devaluation and the resumption of structural reform that should have followed the election. Exotix coordinates its global operations through five major offices in London, New York, Lagos, Dubai and Nairobi.

    “The oil price collapse makes further devaluation inevitable, but political considerations have likely put off the full impact of this until after the election.

    “This necessary “clearing of the decks” for dollar-based international investors has therefore been delayed, too. In addition to this, we believe that post-election politics, regardless of the winner, are likely to see structural reform come back on to the agenda-there is simply less oil cash flow patronage to compete for after the oil price collapse; again, this is now delayed along with the election,” Exotix stated.

    Exotix sees substantial value in the Nigerian market to attract investors, describing the nation’s current outlook as “an opportunity in despair”.

    “Oil price collapse, election uncertainty, devaluation, restrictive bank regulation, Niger Delta oil theft and force majeure, consumer spending slowdown and Boko Haram are all serious concerns, but they are also all in plain sight.

    “A post-election, post-devaluation scenario of a resumption of structural reform and less restrictive bank regulation, while Pollyanna-ish for some, is worth considering, in our view, with Nigeria’s trailing price-to-book near a five-year low,” Exotix stated.

    Calm the nerves of investors.

    Investors in Nigerian equities lost about N3.4 trillion in January, indicating average month-on-month loss of 14.70 per cent. Aggregate market value of all quoted equities on the Nigerian Stock Exchange (NSE) closed January 2015 at N9.847 trillion as against its opening value of N11.477 trillion for the month. This represented a loss of N3.38 trillion.

    The benchmark index at the stock market, the All Share Index (ASI)-a value-based common index that tracks prices of all shares on the NSE, closed the month at 29,562.07 points, indicating a year-to-date return of -14.70 per cent. Total turnover in January had stood at 8.0 billion shares valued at N94.86 billion in 85,133 deals.

    The performance in the first month raised the spectre of the previous year. Nigerian equities ranked among the worst-performing stocks globally in 2014 with average full-year decline of 16.14 per cent. Aggregate market value of all quoted equities closed 2014 at N11.477 trillion as against its opening value of N13.226 trillion for the year, indicating a loss of N1.75 trillion during the year.

     

     

     

    Analysts at Vetiva Capital Management Limited however said investors in Nigerian equities may earn an average double-digit return of about 16 per cent this year, in spite of the bearishness that started the year.

    Vetiva, in its outlook for 2015, stated that Nigerian equities have been significantly undervalued by the previous bearishness and would witness considerable recovery this year.

    Analysts at Vetiva noted that while the performance of the equities market will correlate with the global oil price trend, a mid-point analysis suggests that Nigerian equities can make potential average return of 16 per cent this year.

    Analysts pointed out that while valuations appear relatively cheap, sustained pressure on oil prices will likely continue to constrain investor re-entry into equities. Analysts thus anchored their 2015 return expectation for the All Share Index (ASI) of the NSE on oil price performance in the year.

    According to analysts, using 16 year data, a correlation factor of 72 per cent between Brent crude prices and the ASI was established. The assumption of Brent crude recovering to $70/bbl by year end indicates a 22 per cent recovery from 2014 end position; thus, factoring in 72 per cent correlation suggests that amidst much volatility, the ASI holds a potential 16 per cent return in 2015 to 40,201.56 points.

    “Our scenario analysis indicate that at $100/bbl level, ASI would hold a potential 54 per cent return for the year, whilst at $20/bbl price level, the return potential is -47 per cent. Given that the market selloff in the final quarter of 2014 was broad based, we believe a market recovery in 2015 will equally be broad based,” Vetiva stated.

     

     

  • AU seeks investors for infrastructure repairs

    AU seeks investors for infrastructure repairs

    African nations plan to target more private investment in key regional projects to help address a lack of infrastructure that  is slowing growth and regional integration, a unit of the African Union (AU) said.

    Priority projects under the Programme for Infrastructure Development, which began in 2012, need $68 billion by 2020 and an additional $300 billion for those planned to 2040. The initiative, known as PIDA, has assisted in developing 16 priority trans-national projects so that they are now “bankable,” New Partnership for Africa’s Development Chief Executive Officer Ibrahim Mayaki said in an interview  in the Ethiopian capital, Addis Ababa.

    “Fundamentally we need to attract the private sector,” said Mayaki, a former prime minister of Niger. “They were not interested in Africa 10 years ago, but even if the risk is a bit higher the returns can be much higher than what they’re getting.”

    The investment drive seeks to address deficiencies that leave 62 percent of Africans without access to electricity, less than 10 percent able to use the Internet and only a quarter of the road network paved. The result is “expensive infrastructure services, constrained industrial productivity, limited participation in global trade and holding back the competitiveness of production,” according to Nepad, a technical body of the AU leading efforts to improve transport, power and communications.

    The union will be encouraged to focus on infrastructure and PIDA during Zimbabwe’s one-year chairmanship that began Friday, President Robert Mugabe said in an acceptance speech. “We need to continue and perhaps redouble our current collective efforts in this sector,” he said in Addis Ababa at the AU. “The road and power projects that we’re developing are a positive step in our quest to improve the African infrastructure.”

    The African Development Bank will conduct feasibility studies for the 16 projects African leaders agreed in June. The Abidjan-based lender plans to attract an initial $3 billion in equity capital for the programme using a fund known as Africa50. Well-prepared African infrastructure deals may be attractive to investors including U.S. pension’s funds looking for high returns, Mayaki said.

    The top five projects outlined by Nepad are the Ruzizi III hydropower plant between the Democratic Republic of Congo and Rwanda; expansion of the port in Dar es Salaam, Tanzania; construction of the Serenje to Nakonde road in Zambia; a gas pipeline from Nigeria to Algeria; and an upgrade of the railway from Senegal’s capital, Dakar, to Bamako, the capital of Mali.

    During its annual summit at its headquarters in Ethiopia last week, the African Union signed an accord with China for it to support efforts to improve transport links and industry as part of the organisation’s 50-year strategy to transform Africa by 2063.

    “This is a very grand and ambitious project but it’s also a feasible project,” Zhang Ming, China’s vice foreign minister, said at the Jan. 27 signing in Addis Ababa.

    The deal to improve rail, roads and aviation will enable China to access the resources it needs from Africa over the next decades, said Christie Viljoen, senior economist at NKC Independent Economists in Paarl, South Africa.

    “Any efforts to stimulate regional integration is surely aimed at enabling landlocked countries to export their commodities more easily,” she said in an e-mailed response to questions on Wednesday.

    State-funded Chinese rail projects in Nigeria, Kenya, Ethiopia and Djibouti are current examples of the type of work it’s pledged  to do with the AU, Zhang said. There are opportunities for all African nations and the continent, and other “international partners” can contribute, he said.

    A reliable indicator of China’s future commitment to Africa’s infrastructure development will come at next year’s meeting of the Forum on China-Africa Cooperation, said Deborah Brautigam, the Director of the China Africa Research Initiative at Johns Hopkins University.

    “For quite some time the Chinese banks have been interested in financing cross-regional infrastructure projects, but these are difficult to coordinate,” she said in an e-mailed response to questions last week. “The AU can’t take out loans obviously, but it can provide a venue for discussions of interested stakeholders, who might be able to work out a cross-regional project and apply for funds.”

  • Land title: Real estate investors’ headache

    Land title: Real estate investors’ headache

    Stakeholders are happy about the prospects of a good return on investment  in real estate this year, but the difficulty in regularising title documents may be a problem, reports MUYIWA LUCAS.

    Stakeholders are upbeat about the prediction of a huge Return On Investment (ROI) in real estate in the coming years. However, a recent report by the World Bank may just be enough caution for prospective investors.

    It said: “Nigeria is one of the most expensive and difficult places to register and acquire property for businesses in the world.”

    This revelation was contained in  a Word Bank Group, document, entitled, ‘Doing Business in Nigeria 2014’ under the section ‘Understanding Regulations for Small and Medium-Sized Enterprises.’

    According to the report, an investor in the country’s real estate sector has to go through 11 processes over 78 days, and also pay 15.8 per cent of the value of the property before a transfer of property can be achieved. This situation has made the country to be rated as one of the most difficult and expensive places to register property in the world.

    The report which based its submission on findings obtained from the 36 states and Federal Capital Territory, Abuja, held that the easiest place to register a property is Zamfara State, where the process takes just about nine processes, 31 days, and eight per cent of the property value. In Abia State, it takes 13 stages, 108 days, and 15.9 per cent of the property value.

    The World Bank report blamed the delays recorded in trying to register property on government bureaucracy, saying “the time is largely dependent on a single requirement: the state Governor’s consent, which accounts for 65 per cent of the total time required, on average. The delay varies from four days in Gombe to six months in Anambra, or Keffi.”

    But this is not all. Further findings revealed that apart from the search, consent, registration and stamp duty fees charged, legal fees account for almost half of the total cost to register property. It further stated that the registration fee varies from N2, 500 in Akwa Ibom State to five per cent of a property value in Bauchi, Kano, Sokoto and Taraba States.

    Several reasons can be adduced for this trend. According to lamudi.com.ng, an online real estate publication, several people are oblivious of some statutory laws that have been enacted and established by both the state and federal government aimed at regulating, guiding and governing all forms of land and landed properties’ transactions in the country.

    These regulations, it further explained, became necessary because land and landed properties’ transactions,-  ownership, sales, acquisition, lease, mortgage, alienation, assignment/conveyance, sublease, are a contractual relationship between two or more persons for exchange and release of interest they have on land and landed property in consideration for a compensation, which is usually of monetary value in nature.

    It is therefore, for the protection of all parties involved in any, or all of the above mentioned transactions and making such transactions legal and tenable in any court of law, that made the government to enact some statutory laws to guide, govern and protect all persons who find themselves embarking on any of these lands and landed properties’ transactions. They include the ones for revenue generation purposes.

    Some of these statutory laws governing land/property transactions,  include the Land Use Act; Land Instruments Registration Laws; Registration of Titles Acts; Rent Control and Recovery of Premises Acts; Tenancy Law of Lagos State; Tenement Rate Laws and Land Use Charge Law of Lagos State.

    The land instrument registration law, enacted to regulate registration of instruments that are executed prior to, and after the establishment of the Act in Nigeria, incorporates items such as an estate contract, a deed of appointment or discharge of trustee, containing expressly or impliedly a vesting declaration affecting any land. It seeks to guarantee genuine land title documents that have been investigated and registered by the Registrar of Titles in each state of the federation.

    This is compulsory for any holder of an interest in land, who wishes to transfer same to another person, to have registered such document at the appropriate Land Registry Office as it will assist purchasers of such land in determining if the owner/seller has the genuine land title document to sell the property and all encumbrances that are attached to the land.

    To authenticate the transfer of title, the owner is expected to apply for the Governor’s consent to the Deed of Assignment, which is being executed by both the seller and buyer in such a scenario.

    In the case of the Land Use Act, it basically vests the ownership of all the land in the country in the government, who in turn leases it to individuals or corporate bodies as appropriate for a period of 99 years.

    But experts and stakeholders have faulted these laws, blaming them for being responsible for the difficulty in securing mortgage for housing finance in the country. Experts have at various times expressed concern over the poor state of housing finance, especially by public institutions, which are put at about 10 per cent. Sadly, mortgage banks are said to contribute about two per cent to this, while contribution from banks and other institutions is insignificant. This is a worrisome trend given that in developed climes, housing finance is synonymous with mortgage system.

    The Principal Partner, Imole-Ayo Real Estate, kayode Oyedele, said with a faltering mortgage system, home ownership in the country is realised by almost 100 per cent savings from the owners’ purse. He said this is in contrast with what obtains in other countries, such as South Africa, where an estimated 40 per cent of housing finance is sourced from mortgage institutions. Financial experts and real estate developers, agree that the low mortgage contribution to  housing finance can be linked to the cumbersome and unfriendly land administration in the country.

    Lending his voice to the impact of mortgage financing on real estate, UACN Property Development Company (UPDC) Plc Managing Director, Hakeem Ogunniran, identified five drawbacks to housing finance. He said these  include cost, character, capacity, collateral and conditions. He is of the view that the problem with land registration and titling, is   more of a systemic issue than anything else, explaining that the system is people-driven and not process-driven.

    He suggested that there should be a “one-stop-shop” for perfecting titles which should be business-like.

    As a way forward, the Managing Director, Resort Savings and Loans Plc, Abimbola Olayinka, said the Land Use Act should be used to empower the people and not as an economic and political tool by states’ chief executives, adding that the Act should be expunged from the Constitution so that it could be easily tinkered with.

    Olayinka is of the opinion that land administrators should adopt what he called, “three-one-three strategy” for land registration. This means that land titles should be perfected in three days at one central place, and at the cost of three per cent of the value of the land.

    Real estate operators and players in the financial sector are of the view that eliminating the bottlenecks created by the land and property laws and regulations will go a long way in encouraging mortgages.

    They are quick to cite the Ghanaian example, which was said to be a “dysfunctional land administration, long and expensive procedures,” that lasted up to five years and involving six different agencies supervising the process, leading to inefficiency of the system.

    But following its reforms, property registration in the country was cut to 34 days and queues at the Lands Commission disappeared, making it possible for the mortgage sector to thrive. And following further improvement to the system, today, it takes 10 days to register a property in Ghana.

    A similar experience happened in Egypt, where  high fees and inefficient government agencies that hindered the process of real estate was eliminated by reducing property registration fees; simplifying the registration process, thus encouraging citizens and companies to obtain titles.

    Stakeholders are of the view that following the steps of such countries, would go a long way in ameliorating the mortgage finance problems in Nigeria.