@ Egoldman, check it out here

http://www.nsepro.com/

The site is down as I speak (or type) but the results were posted earlier today.

Tmoni:

the elephant is about to hit the ceiling,

Whats your point about FBN? Whats ur reaction to the results that have just been issued? Abeg, share with us. Thank you!

FIRST BANK RESULTS THOUGH SURPASSED ITS PROJECTED PROFITABILITY, HAS LESS EFFICIENCY RATIO.
IT’S TURNOVER HAS BEEN GROWING FASTER THAN PAT MEANING NET PROFIT MARGIN HAS BEEN DECLINING FOR THE PAST THREE YEARS.
THE BONUS ISSUE OF 1 FOR 6 WILL FURTHER DILUTE ITS EARNINGS AND IF IT IS TRUE THAT IT IS GOING TO ABSORB 500 BILLION OVER-SUBSCRIPTION, THEN IN THE SHORT-MEDIUM TERM, INVESTORS WILL HAVE TO LOOK TO OTHER BANK STOCKS LIKE OCEANIC, ACCESS, GTBANK, UBA, INTERCONTINENTAL WHICH HAVE FASTER GROWTH RATES AND BETTER EFFICIENCY RATIOS.

@WINDYWENDY
QUOTE ON STANDARD ALLIANCE

windywendy:

I hope you're aware that standard alliance is planning to raise additional N20b in the near future. This is in addition to the convertible prefered shares that they issued sometime this year or late last year. If holders of the convertible shares decide to convert their shares to ordinary shares, this, coupled with the new shares that'll be issued with the planned PO will result in some serious earnings dilution. So you might want to check out their future earnings prospects very well before committing your hard-earned money.

WHY SHOULD A NEW INVESTOR BE WORRIED ABOUT DILUTION OF SHARES. I MEAN SPICIE CAN WAIT FOR THE UPCOMING PUBLIC OFFER OF STANDARD ALLIANCE AND INVEST FOR A MINIMUM OF ONE YEAR TO SEE GOOD RESULTS.

@SPICIE
JAPAUL OIL & MARITIME PO WILL BE BETWEEN AUGUST AND SEPTEMBER THIS YEAR PROBABLY AT N3.95K PER SHARE AND FOR THOSE ENTITLED TO RIGHTS OFFER AT N2.50K

windywendy:

You'll have to give us more information than this. What are your investment objectives, and how long are you willing to invest? I personally think that Zenith is right now overpriced due mainly to the bonus rumor going on.

Hello WindyWendy, Well lets say I had some units of Zenithbank, and I was waiting on NOSPETCO to refund my cash which took them about 3 months, I wanted to use the funds to buy into firstbank offer so since they did not pay me back on time, I sold part of my zenith to buy into the first bank offer. And promised myself to buy back into it once I get my refund from nospetco. But now that they have paid me, I am wondering if it is a good idea to buy back into zenith bank to keep my holdings, and also against the rumoured bonus and dividends.

what do you think?

Could anyone please indicate why the prices of some insurance stocks have been falling. e.g. Mutual Benefit, NEM, Crusader. I bought them about a month ago and its been dropping.

I am also about to buy some shares in Lasaco PLC. any advice?

Yeah insurance stocks have been falling for about a month now,
i hope the gurus out there can give us some insight.

@ ALL,

AS I OPEN MY CRYSTALL BALL I SAW THE FOLLOWING: Cement Company of Northern Nigeria (CCNN)

The world’s fourth largest supplier, Heidelberg cement (HC), has already indicated interest to inject about N971 million in form of equity into the company. Other key stakeholders that have indicated interest in injecting funds are Nasdal Bap Nigeria Limited (N184 million), Dantata Investment & Security company Limited (N129.5 million) and other Northern states.

They have commence there Private placement and i think its a good buy as more investor are scrambling to invest into it but with the opening of President Umaru Musa Yar’Adua has ordered the immediate reopening of the N12 billion Ibeto cement plant in Rivers state, will this not affect the price of cements company on the stock market after the price slow down

Temmie10:

Yeah insurance stocks have been falling for about a month now,
i hope the gurus out there can give us some insight.

ty_ademolu:

Could anyone please indicate why the prices of some insurance stocks have been falling. e.g. Mutual Benefit, NEM, Crusader. I bought them about a month ago and its been dropping.

I am also about to buy some shares in Lasaco PLC. any advice?

If you had bought your insurance stock based on sound fundamentals and value , you should not worry , but if u had bought just for the sake of price appreciations and hype , then it not good .

EMMAACHILE:

@WINDYWENDY
QUOTE ON STANDARD ALLIANCE
WHY SHOULD A NEW INVESTOR BE WORRIED ABOUT DILUTION OF SHARES. I MEAN SPICIE CAN WAIT FOR THE UPCOMING PUBLIC OFFER OF STANDARD ALLIANCE AND INVEST FOR A MINIMUM OF ONE YEAR TO SEE GOOD RESULTS.

I'm not talking share dilution, I'm talking EARNINGS dilution. If a company is going to (for instance), increase its shares outstanding by a multiple of 2, it'll have to be able to double earnings in order to maintain the same EPS. It'll also have to double dividends to be able to maintain the same dividend per share. Since these are two important factors that drive share prices on the NSE, they're worth watching. Take a company like Nig. breweries for instance. There once was a time that company would give bonuses, etc. Now they have so many shares outstanding, that their returns to shareholders is not too meaningful, inspite of how profitable they are -- and to think it's a more profitable company than Guinness . . . . I think i've made my point. I also think first bank is headed in the same direction . . .

ty_ademolu:

Hello WindyWendy, Well lets say I had some units of Zenithbank, and I was waiting on NOSPETCO to refund my cash which took them about 3 months, I wanted to use the funds to buy into firstbank offer so since they did not pay me back on time, I sold part of my zenith to buy into the first bank offer. And promised myself to buy back into it once I get my refund from nospetco. But now that they have paid me, I am wondering if it is a good idea to buy back into zenith bank to keep my holdings, and also against the rumoured bonus and dividends.

what do you think?

Well, if your objective is to get the bonus (which isn't a sure thing, as it's just a rumor) and the dividends, then you can buy Zenith. But I'll advise that you don't get sentimentally attached to any stock -- it's always a dangerous proposition. You objective is (or should be) to make money, so search for undervalued stocks and invest in those. If in future, the price of Zenith becomes reasonable relative to earnings and growth, you can sell the stocks in your portfolio that you've made money on and move on to buy Zenith (or any other undervalued stock). You'll make more money that way.

aksance:

@WindyWendy

the N2.12bn is the extraordinary item charged against profits for 2006, so I added it to the reported figure of N0.74bn, abi??
the N2.052 is subtracted was the Proceeds from disposal of long term investments

please find below the link to the full prospectus:
http://www.accessbankplc.com/downloads/Prospectus.pdf

thanks a lot

Ok I see what you mean. For the 2006 extra-ordinary item, what you should be adding to PAT is the after-tax extra-ordinary item (because if the extraordinary charge wasn't included, taxes would have been higher, see . . .). So to estimate the after-tax extraordinary charge, take 1 minus the tax for the year divided by the PBT, and multiply this by the extraordinary charge -- i.e. [1 - (382/1119)]*2102. Add the result of this to the PAT to get the PAT adjusted for extraordinary charge. From my calcs, that comes to 1384.4. Adding this to the 737 gives 2121.4. Therefore the increase in PAT from 06 to 07 is about 187%. There is no need to subtract the proceeds of long term investments from the 07 PAT, as this is included only in the cashflow statement -- it is only the profits made (i.e. total proceeds less cost) from the disposal that is included in the PAT, as should rightly be.

Of course the PAT includes a lot of non-cash items, because of accounting standard requirements. So take a good look at note 6.25 to see the reconciliation of PBT to cash from operations. This note makes adjustments for all the non-cash items included in PBT, and shows that what the company actually declares as profits is less than the actual "cash profit" that came in from operations -- a good sign. You should look at the trend of this "cash profit" over time and see what's happening. The picture does look good for Access Bank. Another thing you could do is to compare these figures to the Bank's peers to see how the company is doing relative to other comparable companies.

You might want to take a good look at the forecasts in the P&L before investing. There are significant portions of the loans that are convertible into equity. In determining the EPS forecasts, the company has assumed that only portions of this loans will be converted at different times. To be on the conservative side, I would assume that all convertible portions will be converted and then re-compute EPS (and P/E ratio based on the offer price) on that basis. Also note that the company intends to absorb a certain level of over-subscription. So in the event of an oversubscription the actual # of shares that will be alloted will exceed the # currently on offer. All of these will have an impact on shareholder returns, and could potentially increase the holding period of your investment if you're looking to make meaningful returns. But whatever the case, this looks like a long-term investment. The company itself has given a 36month time-frame for the full benefits from investing the offer proceeds to kick in.

BTW, thanks for posting the prospectus.

Stock guru's, What do you guys think about Intercontinental Bank plc?

---

They claim
- Largest Bank in Nigeria by capital
- Fifth largest Bank in Africa
- 355th largest bank in the World
- 2nd fastest growing bank in the World (presumably fastest growing bank in Africa).
- Over the five years Profit has grown at an average of 63%.


They have
- High profile investors including Warren Buffet (through AIG) & First Rand of South Africa
- Fitch Rating (Credit Rating) of A, which I think is one of the highest amongst Nigerian Banks.
- Had a falling Return on Equity but claim that is due to major capital investments and expect it to turn around this year.

So

What is the feeling about Intercontinental. I haven't heard a lot of discussion about it in terms of its reputation and Stock performance.

It has a huge war chest, and with First Bank alledgedly raising N500bn where are these companies going to deploy their funds?

I can imagine the loan market for high quality clients (Telecos, Oil Coys) etc is now very competitive, where are the new additional returns going to be generated from?

@windywendy

thanks for not giving me fish but teaching me how to fish,

Another scenario for the gurus in the house, this time with First Bank:

Assuming the bank absorbs N500bn from the recent offer, coupled with the 1 to 6 bonus, and has a total of ~27.5bn shares outstanding, what is the attractiveness of this stock going forward? Here is an amateurish ‘back-of-the-envelope’ hypothesis:

• Expected 2008 PBT assuming 25% oversubscription N35.4bn (FBN full prospectus pp13)
          to be generated from N125bn from offer (125% subscription) + N76.8bn from current shareholder funds
• This leaves a balance of N375bn (500bn-125bn) from public offer
• Assuming a worst case scenario, if N375bn is invested at a conservative (?) rate of 10%pa (e.g. by making deposits like NNPC and other govt parastatals in smaller banks - is this possible??), it yields N37.5bn/year
• Assuming it takes 6months into FBN’s financial year for CBN/SEC et al to vet the funds, yield drops to 0.5*N37.5bn = N18.75bn in the 2008 earnings

• Hence, if the above assumptions hold, consolidated PBT is N35.4bn + N18.75bn = N54.15bn and PAT is N42.78bn (assuming 21% rate used in FBN prospectus)

• This further yields an adjusted EPS of N1.56 (based on 27.5bn shares) and a fair price of N31.11 (assuming a P/E of 20)

Implication: based on this worst case scenario, those of us that bought into the offer@N33 need to have >1 year investment horizon to benefit from capital appreciation (except the hype continues and P/E's >30 is still the norm)
Now to the gurus in d house,
• Have I missed something out?
• Is the assumption of getting a MINIMUM of 10% return on the N375bn ‘balance’ of the offer reasonable?

i dont think the proposed merger between eti and fbi is still on.because as it is,eti has already breached thew mou signed by acquiring additional liabilities and assets.eg the acquisition of allstate trust bank and now hallmark bank

Starchuks, I will not buy Sterling or Livestock feeds. Don't think the two are the BEST in tehir sectors. For the long term, I don't see Sterling being in existence. It is a good candidate for acquisition.

As per Livestocks feed, there is nothing fantastic about them!

@ Wanajo

The fact that Sterling is an acquisition target should make one consider holding its shares,
It will be sold at a premium if it does get acquired according to you

@Wanajo
I agree that Sterling bank is a good deal, since any acquisition makes it a win win situation, unless you are in a hurry to recoup your money

aksance:

Another scenario for the gurus in the house, this time with First Bank:

Assuming the bank absorbs N500bn from the recent offer, coupled with the 1 to 6 bonus, and has a total of ~27.5bn shares outstanding, what is the attractiveness of this stock going forward? Here is an amateurish ‘back-of-the-envelope’ hypothesis:

• Expected 2008 PBT assuming 25% oversubscription N35.4bn (FBN full prospectus pp13)
to be generated from N125bn from offer (125% subscription) + N76.8bn from current shareholder funds
• This leaves a balance of N375bn (500bn-125bn) from public offer
• Assuming a worst case scenario, if N375bn is invested at a conservative (?) rate of 10%pa (e.g. by making deposits like NNPC and other govt parastatals in smaller banks - is this possible??), it yields N37.5bn/year
• Assuming it takes 6months into FBN’s financial year for CBN/SEC et al to vet the funds, yield drops to 0.5*N37.5bn = N18.75bn in the 2008 earnings

• Hence, if the above assumptions hold, consolidated PBT is N35.4bn + N18.75bn = N54.15bn and PAT is N42.78bn (assuming 21% rate used in FBN prospectus)

• This further yields an adjusted EPS of N1.56 (based on 27.5bn shares) and a fair price of N31.11 (assuming a P/E of 20)

Implication: based on this worst case scenario, those of us that bought into the offer@N33 need to have >1 year investment horizon to benefit from capital appreciation (except the hype continues and P/E's >30 is still the norm)
Now to the gurus in d house,
• Have I missed something out?
• Is the assumption of getting a MINIMUM of 10% return on the N375bn ‘balance’ of the offer reasonable?

While i appreciate your calculation which is eye opening, u need to realise that Finance is not mathematics. 125% oversubscription does not mean PBT * 5 of 25% oversubscription. And u can be sure that if FBN indeed has 125% oversubscription, the PBT will be very diff from what u have calculated.

Nigerian banks are in a struggle where only the most profitable will survive. some will be swallowed, some wil be swallowers, it is now up to the management of FBN to decide how to flex muscle in the light of whatever is the exact fiure of the oversubscription. What they do will determine price but by me, FBN is a definite HOLD and as a matter of fact, BUY when the price becomes affordable again (probably after this rally cools down). If there is one bank whose share price can reach the 1 dollar mark in the future, this is it.

When will Zenith Bank declare dividends ohhh

They're just shooting upwards in share price, wont they cool the shareholders down a bit?

stock gurus, what do you guys think about firstinland bank?

Temmie10:

While i appreciate your calculation which is eye opening, u need to realise that Finance is not mathematics. 125% oversubscription does not mean PBT * 5 of 25% oversubscription. And u can be sure that if FBN indeed has 125% oversubscription, the PBT will be very diff from what u have calculated.

Nigerian banks are in a struggle where only the most profitable will survive. some will be swallowed, some wil be swallowers, it is now up to the management of FBN to decide how to flex muscle in the light of whatever is the exact fiure of the oversubscription. What they do will determine price but by me, FBN is a definite HOLD and as a matter of fact, BUY when the price becomes affordable again (probably after this rally cools down). If there is one bank whose share price can reach the 1 dollar mark in the future, this is it.

Oops! Kindly read the analysis before responding!! I never said that '125% oversubscription [means] PBT * 5 of 25% oversubscription'!!  

Agreed that finance is not maths, but we can use maths to make sense of finance. Otherwise no need for fundamental analysis!! I just used estimated the risk-free return (assumed to be 10%) on the amt of over-oversubscription (the N375bn over the 25% oversubscription included in FBN's prospectus) to estimate the worst-case scenario future value of FBN shares and will like gurus (read: accountants/people with knowledge of finance) to provide a critique.

You r right, though, FBN is the big one, but for me, EPS is king, not shareholders funds or PAT

hello all

do you have any clue of where Firstinland bank is heading to?

Boboayuze:

@Wanajo
I agree that Sterling bank is a good deal, since any acquisition makes it a win win situation, unless you are in a hurry to recoup your money

Temmie10:

@ Wanajo

The fact that Sterling is an acquisition target should make one consider holding its shares,
It will be sold at a premium if it does get acquired according to you

Depending on the terms of the acquisition. The major shareholder (player) can shortchanged you. There are so many things that comes to play in mergers and acquisitions.

Personally, going forward, I believe the Sterling and other fringe players will soon disappear

@ askance, nince try at guessing what FBN will do with all that money. I've wondered the same thing myself. The number you calculated that concerns me is the 27.5B shares. If the absorb that many shares, they'll be hard pressed to make N1.20 EPS. I'm not sure they'll be allowed to invest shareholders funds in fixed deposit accounts (someone pls correct me) and generate extra earnings.

With so many shares, it's hard to see the price going anywhere.

aksance:

Oops! Kindly read the analysis before responding!! I never said that '125% oversubscription [means] PBT * 5 of 25% oversubscription'!!

Agreed that finance is not maths, but we can use maths to make sense of finance. Otherwise no need for fundamental analysis!! I just used estimated the risk-free return (assumed to be 10%) on the amt of over-oversubscription (the N375bn over the 25% oversubscription included in FBN's prospectus) to estimate the worst-case scenario future value of FBN shares and will like gurus (read: accountants/people with knowledge of finance) to provide a critique.

You r right, though, FBN is the big one, but for me, EPS is king, not shareholders funds or PAT

Any company that expects to operate on 10% risk free return (esp a bank) should pack their bags and close shop, they are better off on the money market.

Having said that, EPS is a good yardstick even though it depends hugely on the company's earnings in relation to shares, so you cannot throw away shareholders funds and PAT exactly, thats where our beloved bonuses from the elephant come from.
in an emerging economy, these circumstances will play out funny because there is a struggle for the big ones to emerge.
And that goes beyong just investment ratios. Did the ratios show you that Access was going to grow phenomenally i the last quarter. PAT growing by 725% against all expectations.
If we live by eps alone, we will miss the biggest windfalls. All our analysis, eps, dy, pe should always be balanced with a view to sound company management, investor sentient (yes, investor sentiment esp in a market like Nigeria), a company's long term profile and sustainability.

do you mean you are happy with Intercontinental absorbing 700% but FBN cannot do something similar. Note that one of the reasons that FBN was bought into so heavily durin the offer was because the market was beginning to correct. IF nervousness comes to market again, FBN will still be on the upside, laws of demand and supply will come to play and there goes your eps again.

i like your analysis, thing is we have to consider everything. Companies are not equations, they are businesses. The formulas help us but we cannot separate them from the business environment.

it is up to FBN mgmt to show that they nderstand the banking terrain in Nigeria and invest the extra cash (which was anticipated) wisely

steeviee:

hello all

do you have any clue of where Firstinland bank is heading to?

I have asked my brokers the same question but they had no answer for me, they are waiting on the company results which is long overdue. A few people are wondering why it is taking so long and hence some have dumped the shares in jitters.

@ all, does any1 know when wema s full year result will be out?

steeviee:

stock gurus, what do you guys think about firstinland bank?

looks like firstinland is looking for a merger!! check this out:
http://www.businessdayonline.com/?c=54&a=15067

shigidi:

@ all, does anyone know when wema s full year result will be out?

Wema result for which year? Result for YE March 2006 is yet to be released. That should tell you the likely time for the release of the 2007 result. Maybe by November 2007.

@ Wanaj0,
No give me heart-attack o! Wema must come out very soon. It should be in the next few weeks with rumours of a PO approaching. Also, the "koko" is that they have submitted the results for audting.