₦airaland Forum

Read between the lines. I'm holding him to a higher analytical standard because I respect his intellect. He knows he's wrong on the numbers here; just won't accept it.

handsomebolanle:
No need for the insult. You could have simply made your point clear.

Cheers

Stop disgracing yourself in public na. You may be a stubborn he-goat but you can read numbers. Common sense and implied valuation vs Presco show that Ellah is clearly overpaying for the ARPN plantation -- with no synergies to make up for the upfront overpayment.

By contrast, Presco probably does have the scale and market position to create value from the asset even if acquired at a premium. We go see how de tin goes.

ositadima1:
Lol, will they buy it cheaper?

I’m asking because @HesInMe keeps arguing, without any presentable evidence, that EllahLakes is buying it at a huge premium.

Or is this just one of your sarcastic jokes?

See? Unlike those other dreamers yonder, Presco's tested management states clear operational and strategic rationales for this acquisition:

"Nsadop and Boki are strategically located estates that complement our existing operations and expand the scale required to power our mills and refineries at higher capacity,” the chief executive of Presco, Mr Reji George, said.

“This move is not only about expanding land, it is about strengthening our leadership, securing long-term supply, and reinforcing our belief in the future of Nigeria’s agribusiness sector.”

chimex38:
PRESCO on the beat
https://businesspost.ng/economy/presco-acquires-10000-hectare-nsadop-boki-plantations-after-100m-deal/

I know... It hurts. You've been suckered by Chuka's slick marketing about a boundless future. Now you see the numbers in full colour.

Take heart. Happens to all of us.

ositadima1:
Was palm oil priced the same way ten years ago? Was the dollar ₦1,500 back then? Is that all you can come up with? In your village, is land worth the same as it was ten years ago? I don’t have much time, which is why I asked you to show your estimates so you can clearly audit them yourself.

Lol. You can lead a horse to water, but you can't make him drink.

ositadima1:
Okay, you’ve said nothing of substance, my friend. Let’s leave it at that, all assertions and no weight.

Do we really need to go any further? I know if I show you a perfect woman, you'll still argue that her hips are rotated 0.2 degrees, but we can see the writing on the wall: ARPN is nominally valued at roughly the same price per hectare as Presco -- without Presco's significant yield expansion and unit margin differential. As Cathie Wood would say, Presco is riding on two colliding S curves.

ARPN's valuation is like paying for Presco at today's valuation -- 10 years ago.

ositadima1:
Lol, I don’t think I’ll be doing your homework for you. If you claim it’s a premium, then justify it with hard numbers. What’s your valuation compared to the price they’re paying? If all you have is a string of words with no data, then we really need to question how you’re reaching your conclusions.

Why you dey fall my hand? Presco has nearly double the plantation size you credit them for; has average maturity of 8-10 years vs. ARPN's ~4 years (so much higher yield); and makes 99% of sales from value-added crude oil and refined products, which are significantly more profitable, compared with ARPN's mostly fresh fruit sales. Knowing this, do you still think ARPN was good value?

I'll just let your suggestion about Ellah's "operational depth" stand unaddressed.

ositadima1:
This is not a clear or objective argument; it is like someone speaking from a pre-existing negative bias. And in that second point, why should I be the one justifying your argument with numbers?

Let’s consider some simplified comparisons. Presco has a market capitalization of about ₦1.45 trillion with roughly 26,566 hectares of planted oil-palm. Okomu is valued at about ₦1.03 trillion with around 19,011 hectares planted. ARPN, the asset Ellah is acquiring, is valued at approximately ₦155 billion and has about 6,280 hectares of planted oil-palm. When you compute the implied per-hectare valuation, Presco comes out at roughly ₦54.6 million per hectare and Okomu at about ₦54.2 million per hectare. ARPN, at Ellah’s valuation, is around ₦24.7 million per hectare.

It’s a simplified calculation, yes, but it clearly shows that ARPN is cheaper on a per-hectare basis. If you have a different valuation model, then you should present it.

Your first point also doesn’t logically support your conclusion. The CEO not being an agriculture professional is not a disqualifying factor for running an agricultural company, that is simply not how corporate execution works. The more relevant questions would be whether Ellah has operational depth, whether it has the execution capacity to integrate a much larger entity, and whether it has the political and local-stakeholder leverage required in the plantation business. Those are the real issues, not the CEO’s academic background

I like you. You think you're smart. Lol.

I did not say one cannot create value via acquisition. I just noted that it is an important but unanswered question in Ellah's specific case, which has three characteristics that don't augur well for success.

First, history is not on their side. The proposed acquisition is gargantuan relative to the size of Ellah's existing business. Even at well managed firms, large acquisitions typically fail. Ellah is run by a banker with no agric expertise.

Second, Ellah is paying a high price for its main target: ARPN's oil palm plantation, which it values at N155bn. Publicly traded Presco and Okomu offer better comps than land in the bush for estimating the true market value of the plantation, measured on a price per planted hectare basis (adjusted for some yield metric, like average age). I'm confident you can do the math yourself.

Finally, the combination does not enjoy any significant synergies. Ellah has no existing business of note to offer significant cost savings or revenue enhancements when combined with ARPN. It is such synergies that make value creation possible -- with prayer and pouring libations -- when you pay a premium for an asset.

Honestly, the better way to see this deal is as a liquidity event for ARPN's owners, not value creation for Ellah's.

ositadima1:
So if an asset is bought at a premium, you can’t create value from it? Where did you learn that?

But the bigger question is how you even arrived at your ‘premium’ claim. I want to check something, since the acquisition of ARPN is part of what that ₦235 billion covers.

ARPN reportedly has about 22,000 hectares (I need verification), with roughly 6,500 already planted with palm fruit, 60% of which is matured and fruiting.

Let’s even ignore all that and focus only on the land. Assume the land is bare, no palm trees, no cassava, no processing facilities. One hectare is about 15 plots in Nigeria. That’s roughly 330,000 plots. If one plot costs ₦500k, that alone gives you about ₦165 billion worth of land.

Piggery is also a huge business, high survival rate, cheap to maintain, and the meat is nutritious. Do some research on piggery in China; it’s actually one of their main sources of meat.

So tell us na: How does Ellah intend to create value from an asset they buy at a premium?

SonofElElyonRet:
What part didn't you comprehend?

Yes. What part did you miss?

SonofElElyonRet:
Did you watch the interview?

What's the point? Nobody ever asks him the fundamental question related to the proposed acquisition: How does Ellah intend to create value from an asset they buy at a premium?

nosa2:
https://ngxforum.com/thread/47/ellah-lakes-plc-ellahlakes?page=1&scrollTo=448

Interesting interview from Ellah Lakes. Shared my thoughts there as well

Lol. Tell me na. I only buy small-small so I won't disturb your entry.

nosa2:
If you have a 5 to 6 year horizon then there is a stock I am looking to buy soon. After I buy I will disclose it. I could disclose it here or on my site. Sha just keep an eye out.

I don't know if it'll get to N19 or N25 in the short run. I just know that if it gets to N19, I'm going to double my position. Because if I look out 5-7 years, I see the African consumer rising, and trade, payments, and wealth management alongside, and few Nigerian banks are better positioned to ride that tsunami than Access.

But if one's horizon is shorter, the disappointment is understandable.

nosa2:
It is incredibly unlikely that Access Bank will get to N19. You are more likely to buy back at N25 than to buy back at N19.

Lol. No disrespect -- I acknowledge your initiative -- but look how far you've evolved conceptually.

Before:

Think of market fragility like checking if a bridge is about to collapse (outcome)...
If you see all 5 problems at once, your market is about to collapse! (outcome)...
This model catches those signals before the crash happens, like a smoke detector before the fire (outcomes).

Now:

It's just "descriptive."

ositadima1:
The model does not forecast specific outcomes. It compresses the current market state into a single score based on several theories about how markets behave during stress.

The score itself is descriptive, but I interpret elevated scores as a potential signal of higher future risk, the same way RSI readings suggest conditions that often precede certain moves.

It’s a tool for framing risk, not predicting exact events.

You're getting defensive nah. I get its probabilistic nature, but isn't there, almost by definition, a sense of imminence associated with fragility? I was only trying to nudge you to put some numbers behind that imminence. As you previously wrote:

Market fragility Model - Simple Explanation

Think of market fragility like checking if a bridge is about to collapse. You don't wait for it to fall, you look for warning signs like cracks, rust, and stress points.

If it takes 10 years for most bridges to collapse after major cracks and stress points appear (fragility score >90), what use are those observations?

ositadima1:
No, it doesn’t work like that. I think I’ve already talked to you about the probabilistic nature of the market, nobody can time it accurately (with consistency), not me and not you. What we can do is use tools to indicate when the risk of a market crash is elevated.

I believe it’s the same with your fundamental analysis or whatever method you trust. It can inform you, but it is never be a crystal ball. But if you claim otherwise, then I challenge you to make at least five separate predictions about any stock or the ASI with specific time constraints, and if even one fails to materialize within the allotted time, then we can say your method is a dud. Are you game?

So my model is just a tool, not a crystal ball. It’s based on academic and well-known concepts. Having a tool is always better than having none. I also know implementation can sometimes be wrong, which is why I continue to monitor, modify, and correct when necessary. It’s not a magic formula, there is no magic formula anywhere.

So if your score hits 90, you expect an imminent market collapse, say 20+% in a week? And if this doesn't happen, you'll know it's a dud?

ositadima1:
Lol, if it gets to the 90s, I’ll close out my trading stocks and let only my investment stocks run, the dividend-paying ones I’ve held for a long time. I might even consider closing some of those too.

So in a nutshell, it tells me how bad things have become compared to last 6 months. Is that explanation good enough for you?

Honest question (don't get defensive): How will you know that this score is useful?

ositadima1:
Market Fragility Score for the Week Ended.

Decline in aggregate market trading activity was the major driver.

Come on. The planned use of funds is published in their offer prospectus as per usual. Whatever one thinks of Ellah's potential, we should all be compulsively fact-focused as investors.

Neither blind haters nor effusive bootlickers welcome.

SonofElElyonRet:
oh . They don't even need all of the N250b for the acquisition? That's some cheering news

I wish them much success, but the more interesting question is what happens if Ellah falls far short of the N155bn it needs to buy the oil palm plantation it is betting on to "arrive."

You're making my point. It's not a serious investment strategy. It's like buying a lottery ticket: If it works, awesome; if not, whatever.

ositadima1:
From what I’ve read here, his entire portfolio was already over ₦300 million as far back as 2023, yet he kept only ₦170k in that stock (NCR) ....

Someone tell me about MANSARD abeg.

They also don't talk about their losses (and opportunity costs). That's the problem.

ositadima1:
Yeah, some people tell stories to feel good, I do that sometimes. But you can still make outsized returns by using strategies and models; that’s a fact. The market has hidden patterns you can exploit to make money. So yes, on average, people do make money. I’m living proof, and there are many others here who don’t talk about their wins at all, so you never hear about them.

Very insightful.

nosa2:
It's not luck

It's mostly dumb luck.

All these feel-good, find-the-needle-in-the-haystack investment stories don't acknowledge how poorly the strategy works on the average -- those stocks where the strategy fails, and fails badly. Most investors are better off just buying the index.

ositadima1:
I don’t think it’s 100% luck, but he’s clearly exaggerating in his post. The points he made are solid, just not strong enough, which is why he hasn’t been adding to his position all this while. It’s like having a strong feeling that Manchester City will beat Fulham based on certain indicators, but you’re still not fully sure, so you bet responsibly, lol.

https://punchng.com/fg-begins-50-oil-blocks-bid-round-eyes-10bn/

Do these move oil exploration company stocks (Aradel, Oando, Seplat)?

No worry. My bonds and CPs are earning 23+% while I siddon look.

Agbalowomeri:
Market will frustrate you with pace

Gladly. If anything, the problem I'm having is that the downturn has not been more violent. I like it when the gamblers are flushed out and blood is on the street.

Agbalowomeri:
You sef don hang inside market

For those of us betting on Naija's long term fundamentals, some red is good. Bleeding begets life.

Agbalowomeri:
Three more months of red

They're just taking up their rights issue, right? Siat owns ~60% of Presco; $100mn/N237bn = ~60%.

mallamOmonile1:
https://businesspost.ng/economy/belgian-agro-industrial-firm-to-invest-100m-in-presco/

You can apply either directly at NGX Invest online or through one of the authorized brokers (most brokers are) and banks. If you apply through your broker, you pay the money to them (they may charge a fee, see below).

Per the Rights Circular:

"Existing Shareholders can participate in the Rights Issue through any of the electronic application channels: NGX Invest Platform. The NGX Invest Platform can be accessed at https://invest.ngxgroup.com/ and is available to all shareholders to participate in the Rights Issue and authorized Receiving Agents listed on page 54 of this Rights Circular to submit applications on behalf of shareholders. Details of your allotment are set out on all the electronic application channels and also on the Rights Application Form provided on pages 55 to 56 of the Rights Circular. Shareholders who elect to complete a Rights Application Form can submit same to a Receiving Agent who will be required to submit an electronic application on the behalf of the existing Shareholders.

"Application Forms may be obtained free of charge from banks, stockbrokers, post offices, local government authorities and other designated distribution outlets. Completed Application Forms must be submitted to any of the under listed Receiving Agents duly registered as capital market operators by the SEC and to whom brokerage will be paid at the rate of ₦0.20 per ₦100 worth of shares allotted in respect of the Application Forms bearing their official stamps....

"The Company and Issuing Houses cannot accept responsibility for the conduct of any of the [Receiving Agents] listed below. Investors are therefore advised to conduct their own enquiries before choosing an agent to act on their behalf. Evidence of lodgement of funds at any of the Receiving Agents listed below, in the absence of corresponding evidence of receipt by the Issuing Houses, cannot give rise to a liability on the part of the Issuing Houses under any circumstances."

gabscity:
Good evening everyone.

I plan to take up my PRESCO RI on Monday.

I have downloaded the PDf form from First Registrar, however I dont have where to pay into.

Please anyone who have done theirs should advise me.

Thanks.

Last comment on this: You're missing the forest for the trees. It's not just the outcome (whether the land rights are revoked or not) that matters; the process (what looked like a military-style asset appropriation by executive order) too is an important signal for investors.

People who hold high office ought to know how the modern economy works. Maintaining investor confidence can be just as important, even more so, than getting the policy right. Bad optics raise the equity risk premium investors demand and depress asset values (share prices) for all of us -- even those that do not own the target company.

Even if the government ultimately decides the land is better used for oil exploration, due process requires it to use a transparent administrative review to make that decision, perhaps including good-faith negotiations with, and the right of fair judicial review by, the asset holder. Such respect for property rights and institutions is what makes modern economies different from banana republics.

SonofElElyonRet:
Hypothetically speaking, you are saying Nigeria should've lost 2 oil wells if the story had been true Happy to know it ain't but full compensation, allocation of another suitable/similar parcel of land and enough time to harvest and relocate is what would've been fair . Not a country foregoing 2 oil wells!

Quit this nonsense. I don't own a single Presco stock (though I wish I did). But we all have a stake in Nigeria's attractiveness as a destination for private investment. These sorts of actions, which I'm glad to see the Edo government distancing itself from, hurt investor confidence and affect all of us -- shareholders or not. A rising tide lifts all boats.

SonofElElyonRet:
1. don't speak out of bias dude! Cos you own Presco shares.. go check the laws. Anyway, seems the governor didn't revoke the land but he has powers to do so. you saying oil wells are not more profitable than palm oil seems preposterous and even if I assume so for the purpose of argument (assuming but not conceding), oil wells will serve the public interest at the end of the day hence "overriding public interest" justification as provided by the law..