₦airaland Forum

For those interested: Wed 13 February: The Independent


Why Some Banks May Reconstruct Their Shares


By Kingsley Ighomwenghian,Senior Correspondent

The year 2007 is several weeks gone by, but the echoes of the many events that made those 12 months pleasantly memorable, especially for the Nigerian economy and particularly the capital market, would continue to be subject of discussion at several forums for some time to come.

One of such was the spate of capital raising efforts undertaken by players in the nation’s banking industry, which yielded almost N1.5 trillion, most of which was to enable the banks compete favourably for space and size. So interesting was the scenario for most observers that most of the public offerings during the 12- month period were hugely over subscribed, resulting in returned moneys to several investors- both local and foreign. Such was the success level that there is the now popular thinking today that most of the banks may sooner than later have to engage in share reconstruction as their registers have become bogus. The argument for this remains unchanged, that it would enable improved management of the register of shareholders of these banks, apart from enhancing the earning capacity of the banks.

Many of the banks, including those that have reconstructed their shares may have to repeat the exercise. The registers became bogus after the directors of these banks, overwhelmed by the level of success of their offerings and their desire to keep most of the funds raked into their vaults. The volume of shares outstanding in the register of the banks is now so high that many of their shareholders, especially those who are now used to dividend and bonus shares may no longer get scrip issues under the present arrangement.

Analysts at Meristem Securities Limited, in a recent report to clients agree. The report noted: "We are of the opinion that a general share reconstruction scheme is inevitable and indeed imminent for banks in order to make their earnings more attractive to investors and maintain excellent share performance in the stock market."

As They Stand Today

First Bank

If there was a board that was surprised at the level of subscription, it was that of 114-year old First Bank, which undertook what was tagged: "Elephant Offer" for N100 billion through a combination of public subscription and right issue. At the end of the exercise, the bank, in a statement last December, said that "the rights issue, with proceeds of circa N65 billion, was over 140 per cent subscribed while the public offer, with proceeds of circa N400 billion, was over 750 per cent subscribed, making it the largest subscription in the Nigerian capital market history."

What the bank did not say is that the exercise increased its shares in issue to about 19.89 billion ordinary shares. This means that for First Bank to recommend a dividend of 100 kobo per shares, this year (assuming the new shareholders would share in the dividend payout at the end of its year ended March 31), must record a net profit in excess of N19 billion. According to the un-audited nine-month result released in January, profit after tax rose from N14.82 billion or 74.9 per cent to N25.92 billion, an indication that the bank is set to surpass its offer forecast for the 2007/2008 financial year.

This may be one factor that gives analysts at Sterling Capital the confidence to assure their clients that banking stocks, just like their cousins in the insurance sub-sector, "would remain the toast of investors in view of expected strong performance. Nigerian banks in particular are expanding rapidly in West Africa as well as Europe and America, while many are being listed on foreign stock exchanges. Hence in addition to the growing opportunities in the domestic market, performance will be boosted by foreign subsidiaries, coupled with the associated linkage and scale benefits. The insurance sector is now set for further capitalisation to strengthen its underwriting capacity and position it to play in the very lucrative energy and maritime sectors, which have hitherto been the exclusive preserve of foreign firms."

Oceanic Bank International

If that of First Bank is high, the Oceanic Bank is expected to have a swell time managing its register of 22.222 billion ordinary shares from a pre-offer figure of 11.642 billion units. The volume outstanding in the name of the bank rose to that extent also, at the end of its very successful offering almost a year ago, which significantly raised its capital base to an all high of N222.48 billion in contrast to N37.67 billion as at the preceding financial year.

The import of this is that the bank would need more than N22.222 billion net profit to pay a dividend per share of 100 kobo to shareholders, this may not be unconnected with the decision by the bank to exclude those who bought in during its last public offering from partaking of its 102 kobo per share dividend recommended at the end of its full year on September 30, 2007.

IBTC Chartered Bank

The bank, which last year became a subsidiary of South African giant Standard Bank, following the acquisition of 50.1 per cent, currently has 18.75 billion shares in issue.

Intercontinental Bank

The bank, the first to hit the $1 billion capital base mark, successfully raised its shareholders’ funds from N53.9 billion, following the conclusion of a very successful offer by way of rights and for subscription to the public to raise a net proceeds of N47.6 billion from the primary market is still been awaited. Helped by this huge success of its offer, the bank’s capital base rose to about N133.9 billion.

Zenith Bank

With about 11.58 billion shares in issue, the bank is currently in the market for fresh N130 billion through an offer of 1.763 billion ordinary shares of 50 kobo each for subscription at N38.90, in addition to 1.654 billion ordinary shares of 50 kobo each, offered to existing shareholders of the bank at N36.90 each. As if to indicate that the offer is over-subscribed, the bank some weeks ago held an extra-ordinary general meeting seeking shareholders’ nod for an increase in its authorized share capital. This is in a bid to allot some of the shares from the over-subscription. An additional five billion shares to its existing volume would raise its total to about 16 or 17 billion ordinary shares.

Ecobank Nigeria

This also the situation with Ecobank Nigeria, which three years ago did a share split, offering a new share for every one held by existing shareholders.

The bank, before now was the one with the biggest share outstanding, of over 21 billion shares in issue, before it was overtaken by Oceanic Bank.

The imperative for a reconstruction of the bank’s shares was emphasised some months ago by Sunny Nwosu, national co-coordinator, Independent Shareholders Association of Nigeria who argued: "The volume of shares in issue (of Ecobank Nigeria) is not good enough." A reconstruction, he believed, would enhance the earnings capacity of the shares and the directors’ capacity to offer better dividend regularly. The exercise, he told a gathering would also ensure better capital appreciation for shareholders as a result of growth in Ecobank Nigeria’s share price. The bank is currently in merger talks with Sterling Bank Plc and according to sources, both banks are making steady progress, aside from the fact that this, unlike the previous one is not regulatory induced.

Sterling Bank

Sterling Bank’s board may have agreed on the need to reconstruct its shares since, according to Mr. Babatunde Dabiri, immediate past managing director/chief executive, it is in line with the scheme of merger during the consolidation exercise.

He told shareholders during the annual general meeting last year that the reconstruction exercise will make the 21 billion ordinary shares outstanding in the name of the bank better managed. This, he said, would also ensure worthwhile returns on investment and for the bank to pay better dividend on its shares.

The reconstruction, Dabiri continued, is necessary at this time when Sterling Bank needs "to raise more money in order to remain competitive and survive" in an environment where competition is daily becoming fiercer.

As if to assure them further, he stressed: "If you want to strengthen the value of you shares, you have got to do certain things. A majority of the shares of the bank are held by (members of) the board, they will not destroy their bank. We are not crazy. It is in your interest that we do it (the share capital reconstruction exercise)."

Spring Bank

Immediately after the conclusion of its merger, the first major activities of the then directors of Spring Bank was an extra-ordinary general meeting in Lagos, which approved the bid to reconstruct its 42.11 billion units of post-merger shares. The meeting approved consolidation of the shares into 5.26 billion shares of N1.00 each. The shareholders further approved that the consolidated shares be subdivided into 10.52 ordinary shares of 50 kobo each and that the reconstructed shares be allotted in the ratio of one for every four held by them as at that date.

The reconstructed 10.52 ordinary shares of 50 kobo each were to be revalued in accordance with the ratio of reconstruction, subject to regulatory consents, and be listed on the Nigerian Stock Exchange.

Giving that the bank plans to raise fresh capital soon after the need to determine the level of its financial health now being undertaken by the Sulleyman Ndanusa-led management, the bank may need to soon reconstruct its shares to make them nimble. The bank is expected to intimate investors of the true position of things in the coming weeks, as auditors have concluded work on the books of the legacy banks and are now consolidating the group account. Ndanusa told hinted a fortnight ago that some of the legacy banks have before now no audited account as far as 2005.

cheexy:
No doubt, u go get controlling shares sef. Have a great weekend ahead

@aktopgun
I have asked a friend to buy the book. Thanks again

Off to bed

I no want to cotrol, jus folo u chop small, small ehn

If I can compress the file small enough I go giv u ebook for abela

aktopgun:
u are correct. it is trending negative

Dat being the case. doesnt it mean it will take a few days to start seeing a positive reversal on other indicators inclusive?

Cheexy: Dem dey kampe o. I hope u don reserve my seat for your coy? I no gree nothin less

Cheexy: How now? You jus fashi my side na. wetin i do u

aktopgun:
for red star?

DSR

Topgun: I read that the MACD histogram gives a better indication, and going by what I see its trending negative, please set me str8.

Topgun: Does it work for you that I post the charts that I'm interested in and you provide the commentary with your replies? I have Betaglass, Dunlop, Livestock, Ikeja Hotels (already posted earlier) and ABC.

What sayest thou?

aktopgun:
@omoba

on redstar, i don't like spinning tops at the resistance area jare. it would suggest a reversal of sorts to the uptrend, ie buyers not so sure they want to go any higher with this one.

all the other indicators are trending up as u said but i tend to finalise with the candles because they have one element other indicators don't, market psychology.

of course u know i could be completely wrong

Nice 1. T10 suggests a lock in /cash out scenario for today, but I wanted to see what gives today. I might just cash out on Tuesday/wednesday. I've been hoping the market would recognize its inherent value sooner than later. I got in at N8

SavvyL: We got each other's backs.

SavvyLanre:
Meanwhile, i no understand that UBA though, Even after Oga Pumping talk, i no gree sell o - i love fundalmentally good stocks too much to risk it for anything else. So i sold Ubn, (and Baba Wanaj0 - never pay my school fees )

I understand your position somewhat, but I agree more with Pumping. Reason being: Despite differences in investment objectives and risk averseness. We all know the market constantly fluctuates and in this instance we know that that banking stock are currently in hibernation. Would rather your money go into hibernation than move it into other fundamentally sound, but upward trending stocks?

I guess if you are prepared to wait until the banks come out of hibernation, all well and good. But I reckon in my opinion, that you stand to maximize your gains by shifting your portfolio based on the performance capabilities of the stock.

My thoughts though!

TopG: Na u biko! I dey try learn from you as u dey tak interpret. If you go back a few posts I posted some charts which need your learned eye.

aktopgun:
looks like DSR's good results are going to pay off soon, a move in price upwards is coming in the next few days i would suggest

@pumice et roughcut, little test for u guys (please indulge me, not trying to act like say i be anything special, just a game): please look at the charts for DSR and say why u think i have made my above comment on a possible coming upward movement in price. it is a good learning exercise i think. cheers guys

i'll give you to hints:
a) its less obviuos on the 1yr chart
b) its not in the candles

guess u probably know the answer by now. . lets see

p.s this is not a recommendation to buy or sell DSR. it is merely for discussion and analytic purposes

Togun: I hail o. Would the ansa have anything to do with the low volume traded and the fact that it closed closer to the high of the day?

easimoni:
LOL! Chei, na the answer be that true true! Youare truly the one - the special one.

C mi c trouble o c as Loma tak mi do mugu with Jack and Jill

The One:
@loma

Jack and Jill went up a hill to fetch a pail of water
Jack fell down and broke his head and Jill came tumbling after

The One: talk tru small she na my decode help u decode am ehn U sef get sharp brain. u do well

Loma: I must meet you in person You definitely must be loads of fun to be around. I don tak u do my bes friend kia, kia. mak i go dey get my recommended dosage of laughter

pumping777:
Make I help small.

Water

Now we sabi who bi engineer I don learn new name for wata today. How I tak do for the rest?

loma:
Now to more serious things!

Can you simplify the following

A research team proceeded towards the apex of a natural geologic protuberance, the purpose of their expedition being the procurement of a sample of fluid hydride of oxygen in a large vessel, the exact size of which was unspecified. One member of the team precipitously descended, sustaining severe damage to the upper cranial portion of his anatomical structure; subsequently the second member of the team performed a self rotational translation oriented in the same direction taken by the first team member.

Loma: Make I try small

A research team went to the top of a mountain in search of a sample of liquid hydride oxygen, using a large container. A member of the team fell suddenly down the mountain suffering severe damage to his brain. Subsequently, the second team member also had a fall, rolling down the mountain.

how i tak do? try, pass or fail??

Nice brain teaser

This is the pictorial to back up Samstone4's analysis of Transcorp:

samstone4:
@ Jideakin1 etc

The chart for Transcorp today.

Long story about pasting it here so will just summarise:

The candle is red which means the price closed lower than the opening price. It however closed higher than the close on the last trading day. Don't remember whether this is an Emperor Hirohito or a Bruce Lee! Or is princess Diana?

The 10 day moving average is cutting upwards across the 25 day average. The RSI, momentum and histograms are all trending upwards.

These all indicate an upwards trajectory for Transcorp but the red Bruce Lee today with a reasonable volume is a slowing down from its usual maximum gain.

Those in for cico with nervous disposition should sell but know that if the Moslem and Easter breaks had anything to do with the movement it could be a totally different direction on Tuesday.

My suggestion is watch it again on Tuesday and if it levels off or drops time for cicoers to bail.

This is a one stop service for Transcorp only. Hope AKT agrees.

Samstone4

windywendy:
Ikeja hotels, I used to have but have since sold. Forward P/E based on a projected PAT of 649 (which they projected in their prospectus) is 22, which is fair in comparison to the other valuations we're seeing in the sector. Infact considering that they've already done 632m PAT in their 9months of FY07, I'm thinking that a more realistic projected PAT will be about 800, bringing forward P/E to about 17. Although the caveat here, as easimoni has been pointing out, is that they might make a loss in their final quarter (I seriously doubt that though).

It's a very solid fundamental stock. I'm not sure it's good for cico, but if you're into anything other than cico, it's a BUY. From TA though, it looks like there was some heavy selling on Mar.3 and 4 and some heavy buying in the two days subsequent to that. Yesteday and today looks like the stock experienced some selling pressure. Results should be out around July (i'm guessing here) and if it's anything better than what they projected (and suspect it will be), the share price should head north -- esp. if there are good rewards to back up the results. Now seems a good time to buy, if you're in for the medium term. I don't foresee it falling any more significantly that it already has. As usual, caveat plenti.

E be like say I go commot now o. Happy investing everyone.

Windywendy gave her insightful take on Ikeja Hotel on the 11th March. Today is the 20th March. 9 days later the stock is still on the rise. It has broken to a new high and for now continues to rise. How long this rise will continue is anyones guess. The Gurus and Gurusis will advice as to whether its still wise to board since its consistent rise, but as the saying goes on this thread, its not wise to try and catch a moving bus!!!

For those interested in Redstar here is the chart, but it will require the interpretation of Roughcut and Topgun; From what I can gather, todays closing candle looks like a Spinning Top. MACD is trending positive,

Momentum is gradually trending up, so also is Chaikin Money Flow still looking positive. (Over to you Gurus and Gurusis)

Easi: looking forward to our meeting. Told Mr T10, he would have also liked to be there. Hope rain don stop o.

Naijadr:
you know the more we post about these issues the more they remain. Bivins many agree with u, but notice that pumping didnt deem it worthy of a lengthy post least we deviate again. Plus Napolean deal was 2 weeks+ ago, lets let sleeping dogs lie o

That said who is on the Dunlop train?
and who dropped off the ABC bus at Ore? anyone else dropping off at Benin?? Me na across River Niger I go follow am go o!

Naijadr: I'm inclined to agree with you somewhat, but sometimes certain things need to be said. You will be amazed at how easily some of us are swayed by falsehood and unfounded, ungrounded thinking. All that is required is for someone "they like" to say something and they follow, follow blindly.

pumping777:
Bears dey worry? Make una no worry o. Avoid panic!!!!

Panic buying has turned to panic selling. You need to strategize when selling to minimize and eliminate any loss in fact. It feels even worse to sell at the point of a turnaround in a bear market. Some of these stocks will not fall much lower than current levels so this is not the time to sell. Na just panic selling dey drive some prices down.

The market has been bad but with a well balanced portfolio (and I'm not talking blue chips), overall you can still be in the black. I'm talking of stocks like SCOA, ABCTrans and AGLeventis that have defied gravity. You can use this to net off your losses and reposition your portfolio.

With the recent bearish run, more stocks are emerging as very attractive and one thing you don't want is to miss out on obvious fundamentally sound stocks at such low prices because you bought some wacky stocks that have now lost 20%.

Most of these stocks will soon stabilize in prices because they have been falling for over 3 weeks. I sounded alarm then about a correction but was told to leave folks to enjoy their loot. That is BTW sha. I also got caught in one stock that failed CICO woefully.

My take has always been to wait for this stocks to bottom out and trying selling during a mini bull run that must surely follow for the particular stock after bottoming out. I adviced the guy trying to sell Japaul last week just the same. Since then Japaul has done 15% and he would have cut his losses by 10-15% if he sold today.

For all, I'm sure the lesson has been learnt. No one makes an announcement about when the bears will enter the market.

Anyone looking at Diamond dipping? I warned the house ke. GDR conversion will worry.

Happy investing.

pumping777:
At least me tell una to sell your bank stocks and chop good money elsewhere. Oya, see the UBA I sold at N51 and Diamond at almost N22 about 2 or 3 weeks ago. I did not make a profit then but at least I used the money to enter Ikeja Hotels, CIleasing (already out), Lawunion (already out), Chellarams and Beta Glass and I'm looking good.

If I go back and buy those bank stocks now, I have still made reverse profit even if I did not trade with the money.

One way to have some hope of beating the NSE is to be devoid of any sentiments.

See the bold texts, I remember the original posts and the many others posted by Pumping. If anyone has integrity aplenty he has it!! If anyone can be accused of being his brothers' keeper, Pumping fits the bill. If anyone is guilty of contributing selflessly to this thread, he is guilty as charged.

[size=16pt]Case Closed!!![/size]

loma:
Does this look like SavvyLanre?

Loma: U no go kill pherson so

E bi lik say u dey H-town, abi? I go dey yonder 4 april hook easi, so we all fit hook now, include Femo? wetin be ya mail?

aktopgun:
omoba, nice one man. nice one.

Topgun: Thanks 4d compliment. All is well with Tobechukwu.

Highlander:
You sound as if you have an ulterior motive!!! How many times do you need to say that?

Highlander: If you go back a few posts you will see that the same question was still being asked over again. So Cj2008 is not flogging a dead horse

peribiz:
@dejavoe.
Yes, I am in Lagos, Nigeria fully now. My company PECT GLOBAL LTD. is currently offering direct access to global stocks and currencies. You can now trade any stock listed on the NYSE (New York Stock Exchange) LSE (London Stock Exchange) NASDAQ, etc. We provide access to over 50 electronic exchanges around the globe. Our services is first of its kind in Nigeria currently.

I talked about pennystock because it is quite easy to make over 1000% trading on pennystocks globally. For instance only August 28 last year JAVA traded for $5.02 but it has shut up to $16.66 now. That is over 300%.
Our stocks platform offers leverage just like forex for up to 1: 4. This implies that if you have an opening account balance of $500, your buy power would be $2000. And that means you can buy stocks as much as $2000.

Among other benefits is access to information about the company you intend to invest in, unlike NSE, there is ready information for any stocks you want to buy globally.

Also the commissions are negligible - $0.03 per share.

Among the hottest pennystocks in the world now is SOYO currently listed in OTCBB (Over the counter bulletin board). It is currently $0.72 and it has been projected to hit $2.00 as their AGM approaches in March 27 2008.

You could hit 100% if you catch in on this opportunity.

If you are interested in trading global stocks where you can monitor your investment from you living room and close your trades anytime, then simply download this form, fill it and visit our office @ 55 Opebi Road Ikeja Lagos.
Call: 08033854195
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NB:If you read the recent stockswatch newspaper, you will get details there.

Peribiz: How long have you been doing this for? How much have you made doing this? Can you post any document to prove your track record/gains? Why should we trust your supposed expertise?

imiegba1:
Gurus and Guguru in the house can some one throw some light on the direction Eternaoil is going any news will be appreciated

Imiegba1: As another guguru in da house and based upon what I have learned from our Gurus and Gurusis, this is what I can glean from the available data on Eternaoil.

It has been on the rise since the 20th of February!!! This translates to 18 consecutive days of gains!! (Somebody done chop!) This cannot continue without a reversal. CICOers will either swoop in to take profit or those holding the stock throughout the period of these gains might decide to disembark at some point. Where that point is I don't know!!

This charts show that money is still chasing the stock: Chaikin Money Flow, MACD is trending positive, as for the candles we go leave that one for Topgun.

I hope this helps some.

Topgun you get mail o. I don hail u.

Easi baba: Thanks for responding.

Greentree: You sef no dey hia word Na u I go first throway inside kwarantee kia kia o.

loma:
I am thinking there should be a quarrantine period for new members before they begin to post!

Loma: You sef, I like u 3much ni ke. I second your motion. I go be chief kwarantee oficer Na me biko.

nkc:
omoba,
look at yur post, on d down side, u will see report to moderator, try it, mybe it works

NKC: Me I no dey report to anibodi o, we (Loma be execute de thief, executive, me i be wassh dem kleen)don esetablish kwarantee wey we go tak saniteyes all new membershit before dem go come post any shit yawa.

wawa:
Na windywendy and yodiyokun go love love section go invite them.

AKT
Do you need parasiticide?
I will be generous with some.

Wawa: if na yoke, tak ya time well, well o why u wan com tak my position wey dem dash me so? I beg no mess with the kwaratee team.

Seun: I beg take me do moderator Sharp Sharp I go delete all offensive, insulting, abusive, unproductive, non- educating posts.

Please accept my application double quick

Temmie10: Wich 1 now U just fashi my side ni ke, no worry I de await our return match to trash u well, well. U can count on it.

FO2: We don revoke your sunday, sunday pass! E don expire. So quick, quick report for normal duty with immediate effect and automatic alacrity

Tiwantiwa: U be true son of the soil. U speak well. God bless u plenty put.

loma:
Broke, a bank closed its doors to shut out a rush of its depositors. One man stood in front of the large glass doors and yelled for all to hear, "They ought to throw the bank president in jail. They ought to take the whole board of trustees and hang them from the nearest tree. Every person who works in the bank should be tarred and feathered and run out of town!" A policeman asks, "Is your money in that bank?" The man says, "If I had money in that bank, would I be taking it this lightly?"

Loma: Keep it coming You are a necessary ingredient to making light of serious matters More grease to your elbows and keep them jokes coming.

hg:
Hi,once again.
Please can somebody tell me what CICO means?
I am a new comer!
Regards to ALL.

CICO: Cycle in, Cycle out = short term quick trades from (0 - 3mths). You quickly get in and get out. Hope this helps

Deleted: double post

Topgun: Looking at Airservices from a different perspective, see how using 10 and 20 EMA changes the picture? Which is reliable? Have you found the 20/50 EMA's better?

I got into Redstar at N8, so yet to make my mark. If its going to take till kingdom come, I might jump ship.