For those who are interested and have perused the placement memo, can we your views on the deal on this thread? Let the analyses begin

Hi Wendy, I have not got a copy of the memo, can you email it to me at gbengaijotan@yahoo.co.uk

wendy, hook a brother up at easimoni2004@yahoo.com

@windywendy -mega gist!

am catching on pretty first,
please e-mail copy of memo to oxytech_2000@yahoo.com

What memo are we talking about here ?

I sure would love to know maself donelpee@yahoo.com

Kindly mail me the memo too, timor2001@hotmail.com - Ta!

@wendy
Pls hook me up at chikamso@yahoo.com Thanks a bunch

Well how do you evaluate a company with little history. You are only buying potential. Preference shares for that matter with little exit plan.

Based on projections, yes they have a good business plan. They have promising projections. If targets are met then they are seriously undervalued.

However, there are other issues to consider. Firstly it will affect my liquidity. Will be tying down a lot of money if things don't go well. Secondly the promoters have little to lose. Most got their shareholding in kind!!!!! So, if things don't go well, they just move on. Thirdly there is no track record. Not sure the promoters have run any business in Nigeria before. How prepared are they for the Nigerioan environment.

That siad, for high risk investors who are ready to forego capital appreciation then it is worth considering.

@windywendy,
Can you please place the memo on this thread for the benefit of all. This will save the energy of sending it individuals mail.
Cheer

agba1:

@windywendy,
Can you please place the memo on this thread for the benefit of all. This will save the energy of sending it individuals mail.
Cheer

She already tried that. The file was too big.

windywendy pls send me the business case

@Wendy,
Can you please hook me up with the memo @ cupidkenny@yahoo.com.Thanks

I wouldn't mind getting a mail too. My email addy's: idea1612@yahoo.com

Hello Wendy,
I dont have the documents on this could you please mail it to me on fonenact@gmail.com.
Cheers.

Hello Wendy

I think I had a "typo" error on my mail address it is fobenact@gmail.com.
Will expect the documents please.
Cheers.

All,
a nice gentleman posted the memo on the first bank thread. Enjoy.

I think this could be a winner if you have N1.65M and can sit on it for 3+ yrs. I'd like for them to show the resumes of the management team in more detail.

Let the debate begin!

Is this the same as this http://odili.net/news/source/2007/jun/22/608.html or a competitor ?

If it's a competitor, then can't be cheering news for CR and their Private Placement!

joshO:

Is this the same as this http://odili.net/news/source/2007/jun/22/608.html or a competitor ?

If it's a competitor, then can't be cheering news for CR and their Private Placement!

It is a competitor. The competitor is being promoted by UBA with Accenture as the consultant. It is not TRUE that the other banks are promoters. They will likely just sign on with them. Moreover, they will not be on teh ground till next year according to my sources.

I still believe that CR should have the headstart. It however depend on how efficient they are. I hope the management is savvy enough.

Based on reading through both the private placement memos and the IBTC analyst report and from enquiries I've made, here are my thoughts about CR services:

What I like:
1. The market is out there and is potentially large, especially with major card issuers like VISA and Mastercard coming into the country. These companies make more money by partnering with Banks to issue credit cards, and I foresee a situation where a lot of Nigerians will be using those plastic cards in the very near future.  Plus, it is likely that many banks will sign on to more than one credit bureau.

2. CR services seems to have a technology that is different from the rest of the credit bureaus in the country -- they use biometric technology, which they claim gives them a competitive advantage. What is unclear however is whether or not this is a sustainable competitive advantage. If it's not patented, I believe it can easily be replicated by any other credit bureau. Anyway, I'm going to assume that in Nigeria, patents won't work, so this advantage is not really sustainable in the long run (strictly my opinion).

What I don't like:
1. Their projections seem unrealistic. So far they claim to have information on about 500k individuals and corporates in their database and yet they're projecting to issue at least 900k credit reports among their 15 bank clients in the very near future. I guess I'm not comfortable about the fact that they've made no mention of how they intend to populate the data base with enough info that banks will actually find useful and want to use.

2. The whole connection between CR Services Nigeria and their USA counterpart and technical partner is just a smoke screen. It's basically a one-man show, with the main shareholder of the Nigerian subsidiary also being the owner of the US parent. Moreover, the US parent has been in operation for sometime here and I couldn't find anything spectacular about the company's products or services. Also, the so-called parent company takes a % of the turnover of the Nigerian subsidiary, takes a % of profits and in addition charges technical services fees! That's not cool, especially since it's just a start up and one person owns both companies. Doesn't sound like good business sense to me.

3. There are other competitors, like the one mentioned above, with deeper pockets. The story in the link posted by JoshO above is true. I'm aware that accenture, which is more global and more technologically savvy and has deeper pockets than CR services is involved in one of the credit bureaus. When I was in Nigeria in December, I also gathered that IFC was partnering with the same credit bureau that accenture  is involved with. And just as the story states, the other banks mentioned are promoters (sorry Wanaj0).

4. The shares being offered are preferred shares and there's no mention of what will happen to holders of those shares in the event of a stock market listing. Will the shares be converted to ordinary shares? I"m not too keen on buying preference shares, especially when they're class B and are not convertible to ordinary shares, and most especially when the holder of the Class A preference shares is also the owner of the company! It's like the guy has just taken measures to protech himself in the event that things don't work out -- Class A preferred shares, share of turnover, share of profits and technical service fees. I'm not impressed with this structure at all.

5. I think I can get stocks on the market right now that will give me at least the same projected returns in the same time horizon (at least 3years) with much less risk and a more certain exit! So CR private placement is a No No for me.

OTHER MINOR ISSUES: Based on the cashflow and balance sheet projections, it doesn't look like this company has plans to invest in fixed assets over the next 4 years. Infact, they plan to invest more in current assets (debtors and prepayments) than in fixed assets. This makes me wonder if they have plans to expand. I would think their business model would necessitate the need to continously update their architecture as technological advances are made and clients' demand increases, and that they would need to expand in order to service more clients across the nation. 4 years seems like a long time not to make any fixed asset investments.


Anyway, thanks to all who have contributed to the thread! Let's be on the lookout for more private placements 

@ windywendy
I quite agree with your analysis.
However I just want to point out that the number of people in their database does not have to corelate with the number of credit reports. In many instances there will be repeat business generated on the same individual. For example if Dangote at different times approaches different banks each of the banks will request for different credit reports so this will result in far more credit reports than there are individual names on the database. The credit bureau would have to update the reports so they can just be whipping out the same report everytime a request is made on an individual.

Windy wendy

I LOVE YOU!


Yes I did not enter due to the competition from the competitoor owned by banks who are more likely to patronize their own subsidiary. Also the entry threshold was on the high side.

The other points you have noted are very good indeed

I just read thru the placement memorandum and I am sad to note that there are mistakes on the form . The Cash flow statement for 2006 and 2007 do not jive. The figures for cash flow for operating activities do not add up. Payments made to suppliers and employees was positive so except they are telling us that the payments made to suppliers were overshadowed by deposits made by suppliers (in this case such amounts should have been treated reclassified) then the document was not properly done.
I also noted that the the respective rights of the different classes of preference share holders and the ordinary share holders were not clearly stated.
It appears to me that the preference share holders share pari passu in the profits of the organisation. However in the event of liquidation they can only recoup the amount they contributed.
Overall I think that the document has too much gaps to be the basis of any reasonable investment.
Be guided

Yes Frank, I noted the mistakes in the cashflow statement as well! Anyway about the the credit reports, it's unlikely that banks will be wanting to obtain credit reports for corporate entities, especially well established ones. Infact the banks run after such clients as they consider it a privilege to grant such clients credit. So the most likely target for credit bureaus will be individuals. I agree with you that repeat business can be generated on each individual. But let's do the math as implied by CR's projections:

CR Services is projecting that  they'll have 15 banks as customers by 2009 at the latest and issue 900k credit reports among all banks. From my math, that comes to about 250 different credit reports per day per bank -- i.e. each day, one bank will request credit reports for 250 different customers (assuming we have 20 working days per month) -- That's 250 different customers on monday, 250 different ones on Tuesday, etc until Friday for each bank. Even if all customers are patronizing the same 15 banks, this scenario seems highly unlikely to me. Unless they're issuing credit cards, I don't see this happening. I'm close to a number of people that work in retail banks here, and as big as some of those banks are, they usually don't have 250 different customers walk in on a daily basis requesting one form of credit or the other that'll require the use of a credit bureau's services. Also, let's assume that due to the novelty of credit cards, the demand is such that the projections are realistic. In that case, I expect demand to taper off over time as more and more people adopt the use of these cards, and not increase exponentially as has been projected in the reports.

Anyway, these are just my thoughts.

I can authoritatively tell you that banks will be running reports on corporate bodies. I work in the credit risk department and I do know that at present we run some checks on them. You want to know your level of exposure , to even the most seemingly credit worthy people. Some one may be credit worthy but may have taken on too much debt for your comfort. So If you dont run the check there will be no way of knowing that. Even if you run the check and it is adverse, if you want to go ahead and give the credit, you will do so knowing the full extent of your risks and then take appropraite measures.

It may be possible. Some banks already  have like 250 branches or more . So it is possible. The customers may not all come from the banks. Other organisations will key in. Its just that the banks are the primary market. I am not concerned about their projections cos they would have had to explain them to IBTC and the reporting accountants ( even though they goofed with the CFS ). I am more concerned about the rights of the holders of the preference shares. There seems to be no guarantee that they will get any form of return. They are in effect ordinary shareholders in some other guise. However their position is worse off as they do even get to participate in residual profits after liquidation yet they are not assured of a preferential share of dividends.

The projections are solely CR management's responsibility and IBTC has no responsibility whatsoever for them, so the fact that CR might have explained the projections to IBTC does not in any way give me comfort. As per the reporting accountants, I really don't trust those guys. For me, the projections are KEY as that's the basis on which I determine whether or not the investment is sound.

This is what I got from the CEO of CR

Dear XXXXXX:

>>>
You asked: What is the nature of the investment of the banks in the
credit
bureau?
<<<

I assume you are referring to some banks' investment in the CRC. If so,
I
would assume that the nature of their investment is both for capital
appreciation and to utilize the services that would eventually be
provided
by the CRC.

>>>
You stated/asked: It is a bit confusing that the same banks will invest
in
two different companies in competition with one another?
>>>

Well, a bank may choose to hedge its bet. And some banks understand
that
Nigeria can accommodate more than one credit bureau and choose to
invest in
both.

>>>
If the banks did not form CRC then how are they investors in CRC?
<<<

They are investors in the same way that CreditRegistry is inviting some
banks to invest in it. I urge you, however, to use your own sources to
find
out the origin of the CRC - as I have already mentioned it was promoted
by
UBA with Accenture's assistance. In order to gain credibility they
needed to
bring other banks on board since a bank does not a credit bureau make.
Note
that in their situation other banks may be suspicious that it is a
UBA-owned
credit bureau, a situation that does not arise with our credit bureau
which
is an independent credit bureau.

>>>
What nature of investment are you expecting them to have in CR
registry?
<<<

Frankly, it is not critically important that banks invest in
CreditRegistry
although we did send investment invitation to banks and other
institutional
and private investors. In developed economies credit bureaus are
independent
of banks to avoid conflict of interest issues. Another reason why
CreditRegistry in particular does not want banks to dominate its equity
shareholding is because it is NOT in the best interest of private
investors
like you; if banks dominate they may attempt to control/reduce the
pricing
of our products because they are initially the largest consumers of our
products and services - this means that CreditRegistry may be unable to
optimize revenue/profits/dividends.

Also, banks and creditors are particularly interested in obtaining
information that would assist them in making informed credit granting
decisions regarding prospective borrowers; therefore they will utilize
our
services whether or not they invest as long our credit reports and
credit
scores effectively assist them in achieving their risk management
objectives. There are banks that will subscribe to our services but may
not
subscribe to the CRC, and possibly vice versa. Therefore, to obtain
universal data coverage, virtually all banks may have to utilize both
credit
bureaus as happens in other markets where there are more than once
credit
bureau.

One key CreditRegistry advantage is that we are currently the only
credit
bureau in the world with a tested and proven consumer identification
platform based on fingerprint and facial recognition. With Nigeria
lacking
any reliable or robust national ID system virtually all banks will need
to
use our services in the foreseeable future. Our head start in this area
is a
critical advantage and we are definitely passionate and committed to
innovating beyond the traditional ways of doing things.

It is my hope that the preceding have addressed your questions and
concerns.
If not, it would be my pleasure to expound on areas that you need
clarification on.

Best regards!

Taiwo Ayedun | Chief Executive Officer | CreditRegistry Corporation |
+1
(425) 269-5005
Nigeria: +234 (1) 818-4775 (Office) | +234 (1) 776-9587 (Direct) | +234
(803) 330-1552 (Mobile)
Web: http://www.creditregistry.com | Email: taiwoa@creditregistry.com

@Wanaj0, the fact that the CEO took so much pain to answer your questions really impresses me. The ability to respond to customer concerns is something that is sorely lacking in most Nigerian businesses. I wish these guys the best.

For the technology savvy among us, how complicated is the technology that uses biometric data (such as finger prints and facial marks) to identify people? I'm aware that such technology is widely used at least in a couple of embassies that i've visited in order to obtain visas and also at some airports, and has been around for a while. So I'm wondering why it is something that will constitute a competitive advantage.

If it's not something that any tech savvy company can easily implement, then CR definitely has a clear advantage in this regard. If however it's something that can easily be copied and implemented, I'm assuming that a global IT consulting company like accenture will be able to easily implement it in the other credit bureau they're associated with? Perhaps i'm wrong. Anyone who's knowledgeable in this regard please shed more light. Thanks!

easimoni:

@Wanaj0, the fact that the CEO took so much pain to answer your questions really impresses me. The ability to respond to customer concerns is something that is sorely lacking in most Nigerian businesses. I wish these guys the best.

Hey Easimoni and Wanaj0, are you investing? If yes, can you tell us what you like about the company? I'm still open to investing if I find a compelling reason to