essentialone:


Please mention an example when it happened in Nigeria that dividend proposed was changed by shareholders.

Agbalowomeri:


That they haven't doesn't mean they can't na. So it will always be "proposed" until approved by shareholders

Actually, there's been a few.

At her AGM some years ago, the shareholders of REGENCY ALLIANCE INSURANCE (REGAL INS) voted for the cancellation of an already proposed 3k dividend by the company's BODs so the funds can be ploughed back and utilized for some business purposes.
...it was eventually approved!

@ Essential, Agba is right... the shareholders have the final say!
But that should be in an ideal situation. The Nigeria market terrain has its peculiarities and can sometimes present a situation that's not ideal, leaving shareholders with less of an option.

Regards

Coolcash1:
International Breweries loss for the year now magnified to N70billion…phew! This stock has no business selling above N1.

https://doclib.ngxgroup.com/Financial_NewsDocs/40765_INTERNATIONAL_BREWERIES_PLC.-_QUARTER_5_-_FINANCIAL_STATEMENT_FOR_2023_FINANCIAL_STATEMENTS_MARCH_2024.pdf

Couple of friends and I had a wild laugh reading this post.

Wish many of us can see beyond the SPL... can proficiently extrapolate from and understand certain lines in a coys financial print.

It is well

chillykelly86:
https://nairametrics.com/2024/03/29/recapitalization-bankers-oppose-cbns-exclusion-of-retained-earnings-in-calculating-minimum-capital/

This article highlights some of the things I mentioned earlier.
Notice the part the reads; "With the exception of Sterling Bank, none would require additional capital raising if retained earnings were recognized as part of share capital."
I did state (in a previous post) that incorporating the RE component would reduce the difference between what is required and what they have and imply little or no capital raise, when in reality, the banks actually need more funding... otherwise, the economy "might have to pay for it" sooner or later.

Also notice the part that reads; "It seems that the Central Bank is prioritizing direct capital injections into banks rather than relying on accounting entries to satisfy recapitalization requirements."
This is very true!

I also agree with the writer's assertion that; "Although the Central Bank has permitted mergers and acquisitions, this suggests it anticipates that some banks might struggle to meet the new capital requirements"
This is the part I dislike about the whole exercise. It smacks off of biase on the part of the apex bank. (think @ Frangel also mentioned this)
Not fair that a bank like UNITY and her likes would have to "dine from the same table" as GTCO, ZENITH, ACCESS etc.

Enough of the recap policy talk.
As always, the focus should be on how to tap from the opportunities it will present/create.
We'll see how the market reacts to the policy in the course of time.

It is well

chillykelly86:


Thanks OGG for weighing in on this.

I think we all agree on the need for recapitalization. The bone of contention is proper valuation of the existing business. Forex revaluation gains should be credited to a reserve in Equity and not to retained earnings. Retained earnings should be 100% shareholders funds.

Recapitalization is a serious business that may involve entry of new investors. I don't know what informed their decision to limit it to share capital and share premium. I expect shareholders' associations to reject this. They could have said minimum shareholders' funds #2 trillion or whatever reasonable amount they feel will compel all banks to raise money or embark on M&A.

Whatever happens though, there's money to be made. We should get more clarity with time.

My Pleasure!

Actually, earnings from Fx revaluation gains can also be booked to distributable reserve like RE.

I do understand and appreciate the clamour to incorporate RE position as part of issued/paid-up capital, but I think the CBN may have decided on this clearly unorthodox approach of relying more on fresh capital injection to insure the safety of banks capital base.

The good thing is that we all agree that the planned recapitalization exercise would create an opportunity for the discerning minds.

Regards

Frangel:

Bonus shares can be issued from retained earnings. Scrip dividend.

I know.

I had to highlight the share premium A/c as a would-be mode of increasing issued/paid-up capital via bonuses because of the exclusion of the RE component, before stating that the apex bank may have also excluded bonuses because it takes away from one of the 2 recognized share capital component (share premium) while adding to the other. (paid-up
capital)

It is well

Frangel:

Good points. But your answer in the first paragraph shouldn't be the burden of the banks. They have no control of the reserves, etc. More on the macro economic level.

The bank are private enterprises, even though regulated. Regulations on single obligor, dividend distribution, etc already exist. This recap approach tends to place burdens on efficient banks and is unfavorable to existing investors.

Imagine that Zenith with about N1.9trillion s/holders fund is burdened to look for fresh N230billion to inject. The dilutive effect alone? The policy has discounted the sacrifice and efforts over the years to build a successful business. But a Unity Bank, that should have lost its licence long ago, with negative N190billion position needs just fresh N184billion to retain licence (and continued protection).

Is CBN encouraging/protecting failure? They should rather wake up and do more regulation. Allow the banks to grow to fit and do bigger-ticket transactions. Not capitalization by fiat.

I was smiling reading this.
Not for a lack of logic and reasonableness in your post, but because it would seem you've assumed the Nigerian state to be an ideal one.

I understand you completely. But just know that this country can be a painfully funny place.
This is why I call it a portfolio country... where one needs to consistently apply wisdom and discernment by looking to "bet for or against the system" to grow.
Ideally, this should not have been the way to go but there are just too many structural deficiencies here, especially from the fiscal end.

Nigeria is nothing but a portfolio country and it needs you to FOCUS more on your portfolio to benefit from her!
We just need to seek to take advantage of the opportunities that this recap exercise would present/create.

It is well

ositadima1:


Excuse me, but is your definition of security premium account different from the one I know, which is the excess amount received when a company issues new shares at a price higher than the face value? Also, in my understanding, retained earnings are mostly the excess money accumulated from past earnings. I don't see connection between the two accounts.

In my opinion, if the CBN is insisting on not allowing the use of retained earnings (based on my understanding), then banks should better embark on legal action. You cannot dictate how earnings should be used; they can be used at the company's discretion, including to buy shares if they want.

The definition of share premium is in order but that's not the crux of the matter.
The concern is on how a bonus issue relates to it and why it (bonuses) was also excluded by the apex bank.
Bonuses (which is one way of increasing a coys issued/paid-up capital) can actually be paid from the share premium A/c.
So a bonus issue would have brought about a reduction in the banks share premium even with an increase in paid-up capital.
By implication, it (a bonus) supports one of the 2 approved/recognized capital components by the CBN but takes away from the other, hence a possible reason for its exclusion.

On RE, your definition underscores the many points I highlighted in my 1st post. True, RE are excess accumulated earnings but any jack will agree that in recent times, a sizable proportion of those earnings can be deemed unsustainable (mainly arbitrage gains from Fx), and that may have also occasioned the need to exclude the RE component.
Again, that unsustainability heightens when you consider the fact that a good % of these earnings were largely from non-traditional banking plays.

Lots to say but I really don't have strength for long epistle.

Frangel:


I often wonder why we think we have to declare by fiat a very high minimum capital to be employed in our banks and this amount is referenced to the US$.
If the Naira strengthens significantly, shouldn't there be a downward review?

Generally, a business should inject capital to the extent of its strategic plans and capacity to employ same efficiently.
After the last round of recapitalization by the banks, they had so much more than they had plans and capacity to efficiently deploy. What followed? Many were readily offering credit is diverse forms: 'Margin' facilities were practically hawked, NSE abracadabra, etc.

A key problem with Nigeria's financial ecosystem (especially with banks) is effective regulations and supervision. Not these fire brigade one-measure-fits-all approach.

One straightforward answer to the part in bold would be because Nigeria's reserve is in dollars and historically, there's always a "strain" with managing it due to the persistently lopsided outflow-inflow imbalances occasioned by a largely unproductive import-driven economy.
That means your Naira consistently comes under pressure and when it does, your banks will need to "close the gap" created by that pressure.

Your statement with the 2nd paragraph is in order, but a bank is not just a business. ...it's capital/liquidity state is much more pivotal to an economy hence the need to, where necessary, take certain stringent steps which may even be unfamiliar ones.

Pls note that am not taken sides with the CBN. ...I am not against the inclusion of RE as a mode of boosting issued share capital.
Am only saying that I understand that the situation requires a bit of an unfamiliar approach to avoid certain fragments of assets that are deemed unsustainable and which the RE and a few other share capital component houses.

Regards

ositadima1:



If Airtel Africa is buying back its own shares from retained earnings, why can't banks raise bonus issues and convert a portion of their retained earnings into paid-up capital and share premium capital?

My understanding is that there were regulations on overall capitalization, but now the CBN is focused on paid-up capital and share premium capital. I do not perceive any reduction in capitalization; instead, it would be a restructuring by decreasing one account and increasing another.

Not sure anyone has asserted that there'll be a reduction in capitalization.
A reduction in share capital component would've been from the share premium A/c if a bonus issue were allowed as a mode of increasing their issued share capital.

Frangel:
Sometimes, our policy makers come up with positions that look somehow. Why will the CBN discount retained earnings of banks as part of their capital? I can understand some other/statutory reserves, but not retained earnings. Retained earnings form part of the interest of shareholders, which has been left to help grow the banks faster. This policy would require total fresh injection of over N4trillion as capital (long-term) for the existing banks to retain their licences/status as at date. Does this recapitalisation drive guarantee attainment of the utopia of a US$1trillion-economy?

My opinion sha.

chillykelly86:


I totally agree with you on this. They could still have set a higher recapitalization threshold but excluding retained earnings may lead to shortchanged existing shareholders. The retained earnings are shareholders' funds. Its just like someone waking up one day and saying your savings in a bank are not part of your net worth.

Honestly, your concerns are valid!
But look at it this way; If the component of RE (retained earnings) is included, the proportion of equity financing needed to boost the banks share capital to acceptable levels in line with current economic realities will be insufficient.

Some class of share capital particularly RE, could imply incorporating certain fragments of "risky asset" that are deemed unsustainable. (ref: that from the recent spate of Fx revaluation gains)
RE can be an indirect beneficiary of these sought of gains.
While this takes nothing away from the RE position of shareholders (that's sacrosanct), it would in this instance, be better not to incorporate it.

Again, by excluding these components, the CBN can seek to find the right balance on the "dislocation" between Naira asset pricing and the present economic reality. DBMs are key to finding that balance!
These key points underscores the need for banks to raise enough funds. ...they really need to and like I once said, it's actually long overdue.

To give this a bit of context; compare the Fx-N differential/PPP between the last time we had a banking sector recapitalization in 2006 (during the Soludo era) and now.
...a brief;
2006: Minimum cap requirement was N25B @ N130+/$... which is approx $193M.
2024: Proposed minimum cap requirement of N500B @ N1,300+/$ (a 9x multiple from 2006)... will be less $380M.
So the actual raise in capital base will essentially be by a multiple of 2x (380/193) when infact our currency has depreciated by over 9x (i.e 1-1300/1300) within the same timeframe.

Notice how I had only used N500B, the min cap requirement for DBMs with international spread (mainly the stronger banks) for this example. Now imagine if we zoom in on the smaller banks.
This should put to bed the debate in some quarters on whether the proposed minimum capital is too big. But for anything, I think it's even a bit small. Now imagine if the CBN allows for the incorporation of other components aside paid-up capital and share premium.
That would reduce the difference between what is required and what they have and imply little or no capital raise, when in reality, the banks actually need more funding... otherwise, the economy "might have to pay for it" sooner or later.

There's a reason no Nigerian bank is among the top 10 largest banks in the African continent. So much for the self acclaimed "African giant"!
As at 2023, the 10th on the list, South Africa's Investec Bank has a capital base of near $30B. Not sure if all the quoted banks in Nigeria can match that!
Top on the list is also South Africa's Standard Bank (group) with a capital base of $172.9B. (South Africa dominates the list with no fewer than 5 banks in the top 10)
Part of the reason for the unworthy cap base of Nigeria banks can be attributed to the many years of underpricing of banking equities. But then again, we know it's broadly a deliberate "set-up" so certain cooperate criminals in the financial services industry and their cronies can continue to thrive.
Now banking coys are surging in price. Perhaps the wide gap between RV & MV could close as they embark on their journey to real price discovery but whether that will be sustained or if it's just another flash in the pan occasioned by the planned recap exercise will be a different kettle of fish.

On a side note, I align with those who also see the recap policy as a strategic move by the CBN to continually tighten system liquidity (justified by the recent high rates in the FI market) and reduce Fx volatility by closing the gap btw capital flight and Fx inflow.
Perhaps the Naira could strengthen a bit more from current level and hopefully find a balance around it... which should help with the long desired exchange rate clarity and spur confidence towards Naira assets.

Overall, I think the policy spells good for the economy and by extension, the market.
Aside banking coys, some select asset names will do well!

CAVEAT: The entirety of this post is merely the view of the writer. ...no part of it should be inferred as an investment advice/guide.
Due diligence still applies as always.

It is well

ositadima1:


But bonus share issue capitalizes part of retained earnings by converting it into paid-up share capital. Is this correct?

Bonus issues in this instance, would have a relationship to the banks share premium A/c than their retrained earnings position.

In practice, a bonus issue should've been an allowable option as it has a direct impact in expanding a coys contributed/paid-up capital via her share premium A/c.
The problem is that if you decide to go that route, you would indirectly be reducing the value of the total share capital (issued), given that the apex banks approved mode of increasing capital base is using paid-up capital + share premium only.

I think the CBN might be looking to ensure that the banks incorporates less of 'risky capital' by utilizing only the subscribed or paid-up portion of their current capital base in view of present economic reality.

Depending on their share capital structure, any equity financing has to be using their called-up capital and/or issued capital via rights OR using their unissued capital (where it hasn't been cancelled) via private placements.

There's also the option of mergers and/or acquisition.

If you go by the part in bold, then I think ETI is safe and may not need to raise funds, while UBA followed by FCMB and FIDELITY (in decreasing order) will probably be needing more capital among the quoted banking coys in view of their operational license.

Regards

Agbalowomeri:


My love abeg leave OGG alone

No one is holding anyone.

Like I said; We should all learn to be tolerant of others and not give too much attention to trivial matters.

Time to focus on more important things.

yMcy56:

Thanks boss.
We're just emulating you our Ogas
Thanks for doing much for us too.
Well appreciated!
....and pls don't take any perceived negative comments to heart.....just continue doing your good works sir.
May God reward your selfless services bountifully IJN.

My Pleasure!

We should all learn to be tolerant of others and not give too much attention to trivial matters.

onegentleguy:


On the part in bold, broadly yes.

But there's also plan B.

A few banks may decide to go the route of a bonus issue, which is another means of issuing share capital and increasing their paid-up/paid-in capital, instead of a rights issue.
There's also a possibility that some banks might decide on both a plan A and B (ref: rights issue and bonus issue)

The way to guage the probability that a bank could do a plan B (either alone or coupled with a plan A) would be to look at the anatomy of her SCS and juxtapose it with her SPA and FF/OS
For instance, FCMB, STANBIC IBTC and ETI could decide to do a bonus issue. (note the use of the term "could")

There was a reason I initially recommended STERLING BANK @ N1.4+ and still went ahead to include it in my 1st outline/recommendations and investment guide (not series 2) @ N3+ after it had already achieved a massive 126% CGY.
Well, Mr STERLING would later rally to N7+ printing an astronomical 415% and 110% CGY from the initial entry peg of N1.4+ and N3.4 respectively.
Aside fundamentals and technicals, the decision to adopt a holding coy structure was going to be a favourable one for the bank.
There was also a reason I fell in love with GTCO @ N17+ prior to that time.
Recall I kept screaming that the bank was a buy at the time but perhaps some persons were waiting for the price to drop to 80k.

Saying that I also like JAIZ BANK, another asset that was recommended in the 1st outline @ N1.4--1.5, should already be taken for granted.
Congratulations to all those who sold @ N4 booking an impressive 185% CGY.
...I still like JAIZ BANK and a few other banking names. (gave reasons and clue in many of my previous post)

But of course, I also love a few other asset names!

For those who've got the outline/recommendations and investment guide--Series 2, hang in there and be happy to hold. Some are already a bit up and rallying... others will follow suit in time!

It is well

Update...

Following my post above, someone brought to my attention a section of the CBN recent circular that reads in part;
"For existing banks, the capital requirement specified above shall be paid-in capital (paid-up + share premium only). Bonus issues, other reserves and additional tier 1 capital shall not be allowed or recognized for the purpose of meeting the new minimum capital requirements"

I honestly didn't notice that part.
So my assertion of the possibility of a bonus issue as a mode of increasing paid-up capital will not hold.
..it's likely gonna be RI and/or PP all the way.

Cc: @ Chipa

It is well

yMcy56:
MORE CORPORATE ACTIONS....
UACN
Final Dividend: 0.22k
Qualification Date: 6th June, 2024
Payment Date: 21st June, 2024
https://doclib.ngxgroup.com/Financial_NewsDocs/40736_UAC__OF_NIGERIA_PLC.-CORPORATE_ACTION_ANNOUNCEMENT_CORPORATE_ACTIONS_MARCH_2024.pdf

MRS
Final Dividend: N2.36k
Qualification Date: 28th June, 2024
Payment Date: 2nd August, 2024
https://doclib.ngxgroup.com/Financial_NewsDocs/40731_MRS_OIL_NIGERIA_PLC.-CORPORATE_DISCLOSURE_CORPORATE_ACTIONS_MARCH_2024.pdf


Results....
https://doclib.ngxgroup.com/Financial_NewsDocs/40733_JULIUS_BERGER_NIGERIA_PLC-_QUARTER_5_-_FINANCIAL_STATEMENT_FOR_2023_FINANCIAL_STATEMENTS_MARCH_2024.pdf
https://doclib.ngxgroup.com/Financial_NewsDocs/40732_CWG_PLC-_QUARTER_5_-_FINANCIAL_STATEMENT_FOR_2023_FINANCIAL_STATEMENTS_MARCH_2024.pdf
https://doclib.ngxgroup.com/Financial_NewsDocs/40729_LIVINGTRUST_MORTGAGE_BANK_PLC-_QUARTER_5_-_FINANCIAL_STATEMENT_FOR_2023_FINANCIAL_STATEMENTS_MARCH_2024.pdf
https://doclib.ngxgroup.com/Financial_NewsDocs/40726_NIGERIAN_AVIATION_HANDLING_COMPANY_PLC-_QUARTER_5_-_FINANCIAL_STATEMENT_FOR_2023_FINANCIAL_STATEMENTS_MARCH_2024.pdf
https://doclib.ngxgroup.com/Financial_NewsDocs/40723_MRS_OIL_NIGERIA_PLC.-_QUARTER_5_-_FINANCIAL_STATEMENT_FOR_2023_FINANCIAL_STATEMENTS_MARCH_2024.pdf
https://doclib.ngxgroup.com/Financial_NewsDocs/40717_JAPAUL_GOLD_AND_VENTURES_PLC-_QUARTER_5_-_FINANCIAL_STATEMENT_FOR_2023_FINANCIAL_STATEMENTS_MARCH_2024.pdf

Nice job you're doing in keeping the forum abreast with recent developments/reports in the market.
...you are doing well!
More power to your elbow!

It is well

onegentleguy:

...
I recall advising folks to accumulate CHAMS, highlighting its solid inherent value following an extensive analysis at the time the company was still trading for 20k.
...well, the coy already prints a CGY of approx 240% with CMP closing @ 68k on Tuesday.

Does it have the potential to deliver more?
There is indeed a near 1 probability!

Fundamentally, CHAMS is primed to trade above N1 in the short to mid term, with FVE/CIV pegged @ N1.37... using a mix of valuation model that assigns a conservative approach (just 5% QoQ GM to H1, 2023) but attaches a RPM 10% above current surrounding figure.

Technically though, there may be bumps along the way as certain key indicators slow down to build up/reproduce a fresh momentum for another push up.
But it's safe to say that a period of HL and HH is likely in the near term.

By the way, congratulations to all those who aligned with STERLING BANK and LIVESTOCK FEEDS @ N1.4 and 92k respectively following our guide here.
Both names already delivered ROI of over 160% and near 130% before the slight pull back in price.

Anyone can still earn a great return from taking position now, but like I always tell folks; It's always best to key in early.
I repeatedly called for a buy in CHAMS @ 20k.

What to do now?
Pls follow your instinct.

The good thing is; there are still a few coys we also highlighted here that are yet to record appreciable returns, including some select names in a certain sector which though has printed a bit of gains, still has a lot of POTENTIAL TO DELIVER MORE!

CAVEAT: NOT to be interpreted as any sought of recommendation. The need for due diligence should still take higher precedence ahead of this post.
Saleh

Ginalex:
@Mcy56 my reason for buying CHAMS...

E99E:


What era? Must you comment on what you dont know? Cant you read and ignore and leave for others to pick one or two clues. Enough of these unnecessary second opinions

I honestly felt that a reply is unnecessary.

Pls take a look at the post above where the same fellow was apparently, grateful for a revisited post I made.
Well not that he said something bad but imagine if someone had used a similar line on the post above like he did now.
Would he have reacted in the same manner?
There are many others I could dig up as references with the replica IDs/monikers but then again, I feel its totally unnecessary.

How convenient it is for one to quickly jump at a post when it feels like they haven't benefited directly from it. It doesn't matter if others might find it useful.

I sometimes see these sought of disposition targeted at select individuals from some folks who should've been eminent members here, but it doesn't bother me. ...I am as cool as a cucumber and will remain that way.

There are quite some great fellows here! But there are also a few who keep "bothering" themselves over NOTHING. ...its really very funny!

Anyway, @ Ginalex pls no offense taken.
...I honestly wouldn't have taken offense even if you didn't mention it.
Do take care

chipa:

Read through the release from CBN. For the new minimal capital base the only recognize capital is paid capital and share premium. Retained capital, shareholder fund and other retained capital are not recognize. That means all banks are coming to the market to raise funds.
To be Frank with you there will be a lot of pumbing of bank share price. So try to be in the banks so that when they are pumping the bank share price your funds in the share will also be pumped up. This is my 2 Kobo advice.

On the part in bold, broadly yes.

But there's also plan B.

A few banks may decide to go the route of a bonus issue, which is another means of issuing share capital and increasing their paid-up/paid-in capital, instead of a rights issue.
There's also a possibility that some banks might decide on both a plan A and B (ref: rights issue and bonus issue)

The way to guage the probability that a bank could do a plan B (either alone or coupled with a plan A) would be to look at the anatomy of her SCS and juxtapose it with her SPA and FF/OS
For instance, FCMB, STANBIC IBTC and ETI could decide to do a bonus issue. (note the use of the term "could")

There was a reason I initially recommended STERLING BANK @ N1.4+ and still went ahead to include it in my 1st outline/recommendations and investment guide (not series 2) @ N3+ after it had already achieved a massive 126% CGY.
Well, Mr STERLING would later rally to N7+ printing an astronomical 415% and 110% CGY from the initial entry peg of N1.4+ and N3.4 respectively.
Aside fundamentals and technicals, the decision to adopt a holding coy structure was going to be a favourable one for the bank.
There was also a reason I fell in love with GTCO @ N17+ prior to that time.
Recall I kept screaming that the bank was a buy at the time but perhaps some persons were waiting for the price to drop to 80k.

Saying that I also like JAIZ BANK, another asset that was recommended in the 1st outline @ N1.4--1.5, should already be taken for granted.
Congratulations to all those who sold @ N4 booking an impressive 185% CGY.
...I still like JAIZ BANK and a few other banking coys. (gave reasons and clue in many of my previous post)

But of course, I also love a few other asset names!

For those who've got the outline/recommendations and investment guide--Series 2, hang in there and be happy to hold. Some are already a bit up and rallying... others will follow suit in time!

It is well

BREAKING...

@cenbank unveils new minimum capital requirements for banks, gives a 2 yr timeframe for recapitalization.

International Spread: N500B
National Spread: N200B
Regional: N50B
Merchant Banks: N50B
Non-Interest Banks (National): N20B
Non-interest (Regional): N10B

Deadline:.March, 2026.

It is well

onegentleguy:


Recall the post above?
Apparently, item No 3 has been cut off from the equation, thus changing the dynamics of items No 4, 5 and 6.
Perhaps the part in bold may well play out.

Here's what you should know;

The absence of a share allotment amidst an unbundling/spin-off of the power arm should it materialize, defies the basic logic of equity investing.
...it's like asserting that what was clearly a SUBSET to a SUPERSET can become a DISJOINT SET or even the superset itself without an established process of dissolution.

TRANSCORP POWER was a subset of TRANSCORP PLC and not a disjoint set or a superset of the latter.
Well, so we thought!

Perhaps the plan is to have you settle for what could well be a small part of the ACCRUALS (accrued earnings) from TRANSCORP POWER post listing. ...and if that is the case, then you do not need a soothsayer to tell you that Mr. ToE would want to have a complete grip of the proposed power arm (possibly 80--90% or at the very least 2/3 of total OS) to control or "maneuver" those future accruals.

Nigeria is indeed a funny place!

My projection;

• Attention may well shift to TRANSCORP POWER in the near term. (value accretive potential in view)

• For good reason, TRANSCORP PLC remains a hold in the short term as "there just might be some available juice to sip from it".
But am not so sure if that "juice" can last for so long. "The pack could be emptied at some point"... specially when you remember that energy revenue (from transcorp power) contributes a substantial proportion of TRANSCORP PLC's AsQ/Y, CGPR, CROIC, ROCE, and EM.

Should I buy, sell or hold TRANSCORP PLC?
Again, a lot depends on ones investment personality, with special emphasis on whether they're a trader, investor or both.
It's imperative to note that my initial recommendation of TRANSCORP PLC was at N1.14 and subsequently at below N2.

TRANSCORP PLC? ...I'll search for reward having a traders mindset.
TRANSCORP POWER? ...I'll look out for value having an investors mindset.

@ ToE & co may have shortchanged minority investors, but at this point I care less about that. ...it's now strictly business for us!
But that's just me so you might also want to follow your instinct.

DISCLOSURE: This post was made to guide all, particularly those who sent mails and messages asking for my view on the proposed listing of TRANSCORP POWER.
...it is however NOT an investment advice.

CAVEAT: The need for due diligence should still take higher precedence ahead of this post.

Regards

I've done some inquest-based analysis and estimates on this TRANSCORP PLC and TRANSCORP POWER brouhaha, and I believe I have an idea of what would likely play out.

When supersets become subsets, it's only a matter of time before they become disjoint sets.
Nigeria is truly a funny place.
...indeed there was a country!

For those still sending me mails and messages, I already said that TRANSCORP PLC remains a hold despite what appears to be a play of some sought of financial engineering shenanigan.
It's important to understand the illustration I gave on "sipping from the juice" while it last.
Again, a lot would depend on ones investment personality and goals.

Going forward, I already said I'll prefer to search for reward having a traders mindset for TRANSCORP PLC and look out for value having an investors mindset for TRANSCORP POWER.

But then again, it is still NOT an investment advice.
Due diligence still applies as always.

I am done talking about TRANSCORP PLC/POWER.
Last I checked, there are nearly a 100 quoted companies on the NGX.

Regards

onegentleguy:


Probable scenarios on TRANSCORP;

1) Certain crop of persons with links to the core investor/majority holder and those with insider information on the outcome of her last BOD meeting may have been mopping up the shares on the floor.
The coys recent technicals (ref: PV action) is suggestive of this fact.
This could be the reason for the high volatility in price of the asset as they tactfully push it down in spasms to engage in staggered but strategic accumulation until they achieve their set out target.

2) Then comes the unbundling of her energy business arm from the group and
listing of TRANSCORP ENERGY as a separate entity.

3) Allotment of an estimated % proportion to all stakeholders of TRANSCORP. (ref: UBA >> UCAP/AFPRUD way)
However, the % equity distribution to qualified minority holders will be very small, most probably a calculated attempt to ensure that TRANSCORP ENERGY's free float on listing, maintains a wide deviation from would-be OS, with NCI and "others" having the lion's share.

4) If truly the intention is to remain a listed entity, the share price will then be proped up (artificial skip) the "geregu way" (as we saw when geregu power was listed) to attract... and fulfill....

5) The core investor/majority holder will then proceed with a PP/RI post listing, to increase the coys OS.
Well of course for himself and/or his cronies by taking up an appreciable proportion of the PP/RI in other to remain in "charge" of affairs in the coy.

6) You may eventually be bought over in future (MTO in view) depending on how items No 4, 5 & 6 play out.

N.B: This is only a plausibility, not a certainty! ...so iit may or may not play out.

Whatever happens though, I continue to think that the current holders of TRANSCORP will benefit from it! Though much of what should accrue as great future benefit might end up been diverted. (if 4, 5 & 6 play out)

Interestingly, TRANSCORP POWER LTD dolled out a total cash dividend of N214 per share to its shareholders in 2022. And yes you heard me right... N214 !!
By the way, that's a near 70% increase from what was declared in the previous calendar yr.

Should I hold on to my TRANSCORP?

A lot depends on ones entry price. If you were among the early birds who keyed in below N1 or @ N1--2+, it might be ok to lock in your capital together with a good proportion of ROI and redirect the funds to other great asset. Then you can hold the balance.
Whatever happens, you should be good!

Many folks will recall I issued a buy recommendation on TRANSCORP, 1st @ N1.14 following several analysis.
I later gave it an outperform rating @ below N2 when many folks had doubts about the assets value accretive potential post release of her Q1, 2022 financial print.

As always, it pays to be among the early birds!

CAVEAT: NOT to be inferred as an investment advice. The need for due diligence should still take higher precedence ahead of this post.

It is well

Recall the post above?
Apparently, item No 3 has been cut off from the equation, thus changing the dynamics of items No 4, 5 and 6.
Perhaps the part in bold may well play out.

Here's what you should know;

The absence of a share allotment amidst an unbundling/spin-off of the power arm should it materialize, defies the basic logic of equity investing.
...it's like asserting that what was clearly a SUBSET to a SUPERSET can become a DISJOINT SET or even the superset itself without an established process of dissolution.

TRANSCORP POWER was a subset of TRANSCORP PLC and not a disjoint set or a superset of the latter.
Well, so we thought!

Perhaps the plan is to have you settle for what could well be a small part of the ACCRUALS (accrued earnings) from TRANSCORP POWER post listing. ...and if that is the case, then you do not need a soothsayer to tell you that Mr. ToE would want to have a complete grip of the proposed power arm (possibly 80--90% or at the very least 2/3 of total OS) to control or "maneuver" those future accruals.

Nigeria is indeed a funny place!

My projection;

• Attention may well shift to TRANSCORP POWER in the near term. (value accretive potential in view)

• For good reason, TRANSCORP PLC remains a hold in the short term as "there just might be some available juice to sip from it".
But am not so sure if that "juice" can last for so long. "The pack could be emptied at some point"...especially when you remember that energy revenue (from transcorp power) contributes a substantial proportion of TRANSCORP PLC's AsQ/Y, CGPR, CROIC, ROCE, and EM.

Should I buy, sell or hold TRANSCORP PLC?
Again, a lot depends on ones investment personality, with special emphasis on whether they're a trader, investor or both.
It's imperative to note that my initial recommendation of TRANSCORP PLC was at N1.14 and subsequently at below N2.

TRANSCORP PLC? ...I'll search for reward having a traders mindset.
TRANSCORP POWER? ...I'll look out for value having an investors mindset.

@ ToE & co may have shortchanged minority investors, but at this point I care less about that. ...it's now strictly business for us!
But that's just me so you might also want to follow your instinct.

DISCLOSURE: This post was made to guide all, particularly those who sent mails and messages asking for my view on the proposed listing of TRANSCORP POWER.
...it is however NOT an investment advice.

CAVEAT: The need for due diligence should still take higher precedence ahead of this post.

Regards

kolaish:
As for the naira/dollar discussion, it is relative and has much to do with where you are coming from, and your current position. For example, from 1st January 2023 till 30 January 2024, my portfolio in stocks appreciated by 384%. During same period (January 2023 - 30 January 2024) the dollar appreciated by less than 200% (from around N700/$ to N1,500/$).
So, with this narrative, I am better with my stock investment than being on dollar holding.

Moving forward, the dollar is now selling @ N1,600/$, and the highest price I see the dollar in January 2025 is N3,000/$, which is less than 100% appreciation. The crucial question to ask is, if one can make more than 100% appreciation in its portfolio between now and January 2025. As for me, I think I can make it. So, I don't need any dollar investment for now.

* dollar rate quoted is more of black market rate

Actually, the part in bold is less than 115% return.

You are doing well!

You know it's really funny how some persons seem to agree that certain select Naira assets are underpriced yet should be avoided, but forget that the Naira (though fairly priced at current Fx levels) already has more "asset-backed weighting".
They seem to forget or should we say properly interpret the relationship between a weakening Fx rate environment, Rising inflation/high interest rate and Naira asset pricing.

Even in the midst of every drawback, there are assets that will benefit from it. It's the reason an OPPORTUNITY will oftentimes "disguise itself" and hide behind an obstacle.

I don't have strength for long epistle.

In the end, some persons will make money off the current market correction while some will learn from it.
Those who subscribed to my outline/recommendations and investment guide--Series 2 know what they ought to do.

Regards.

onegentleguy:


On INTBREW;
Not much to say. A good wine they say...

As I told some folks; many will focus on the SPL and not take cognizance of the recurrent great improvement recorded in the company's SCF and BS position.
Some persons still don't know that a company can record a loss in NOPAT/PAT and still be grossly underpriced.
The key is in the ability to proficiently figure out why there was a loss and how it connects to the holding value/feasible reward in that asset. ...then you can relate your findings to the assets equity price to draw a sound judgement.

There are pros and cons with the expected share capital reduction exercise (ref: reduction in nominal value by a factor of 25x) in between the planned RI.
I know most folks will focus on the cons and fail to efficiently benchmark it against the undisputably much better pros. Am hoping that more persons will sell off their holdings, so price can drop a bit more.

The coys PV action (TA in view) will be a great guide. ...I like the current set-up/structure.
I will strongly advice you never to downplay the efficacy of using technical analysis.
As always; FA is great, but supplementing it with SA and especially TA is even better!

There's an extremely high probability that at least 88% of the things I foresee for that coy (INTBREW) will eventually play out.
...that asset will gift some folks (including you) a lot of money.

Get a trailer load.... HOLD!

CAVEAT: I recently had migraine and the doctor attributed it to too much analysis. This might just be the consequence of his postulation.
NOT to be inferred as any sought of investment advice!
Selah

yMcy56:

Well said.
I however have the opinion that NASCON will cover for SUGAR in this scenario.
Just speculations anyway.

Also, if we look at it from the Market's view, there's not much price shedding or dumping in FMN and Cadbury so far......
Maybe the market is considering the revenue much more than the FX loss.....or the FX loss is already priced in??

Yes to some extent you are right.
The way to the issue of Fx loss on coys that already declared their financial print is to see it as a one-off, but at the same time project how the degree/impact of probable future loses, if any, measures against the company's earnings capacity. Put differently, see how inherent but weighted risk compares to feasible reward. (earnings sustainability in view)
An EPA and/or AB/RI valuation model can be used.

Just the same way you would want to probe a coys earnings quality and set aside any huge gains (consider it a one-off) if and where the degree or measure of consistency of such gain is questionable or unsustainable.
The price of an asset is oftentimes the present value of its future cash flow so essentially, all you need do is see how the company's peculiar situation takes away from future cash flow generating capacity. ...then you can appropriately assign an intrinsic value to the asset. How?
3 KEY lines;
1) Revenue margin
2) Cost efficiency
3) Risk management

If the said coy have improved on or has set in motion an effective business management framework to improve on those 3 lines, then the assets projected EQ/EM, AsQ/AsY will still witness higher growth ahead of the draw-back from that one-off situation.
Of course there are a few other things you need to extrapolate from the company's financial statement to draw a proficient and efficient conclusion.

Coys like WAPCO, INTBREW, UNILEVER and CADBURY perfectly fits the bill! ...which is why they remain grossly underpriced irrespective of the draw-back from Fx-related loses.
The last 3 names has done the necessary things particularly the 3rd line.

I smile when I see how some persons interpret fundamentals. I recently read a post where someone asserted (clearly erroneously) that the planned share capital reduction exercise by INTBREW will bring about a dilution.
But I understand why he made the post and what he was trying to achieve. Like him, I also desire the same thing. (see parts in italics from post above)

It's no longer news that I love Mr TIME.
He always has a way of setting matters straight and putting things in their right perspective.
He's the only approved tool that the market uses to tell us that he alone is always right! (and not anyone of us)

It is well

Mankind2024:


I will say it again and again, Agbalowomeri is a spent analyst. This was how you have been scaring risk averse investors from joining the train of Transcorp, Zenith, GTCO and other equities with your Anticipated bear 🐻 that was killed by the raging bull when the ASI was static at 48k to 50k.
Your tool is outdated, you can never get the ASI @5% below d current level, which is expected 5% volatility, You still cannot call this a bear market.
A sustainable bear must drop the index by at least 20%.
At the declaration 📜 of dividends, the index will rally to 110K.
Your old strategy of Timing the Market would never work in this current dispensation.
Remember to incorporate 2 important factors which all the Timing tools would never addressed.
1. Inflation andCurrency floating
2. ***Local portfolio investors participation in the Market and uncertainty factor in Nigeria economy.
The above negate the effectiveness of your tools.
There would be no major events, other than predicted 5% market volatility (aka gbelo-gbebo)
Advanced Ichimoku strategy, Fibonachi retracement, Elliot wave, ARIMA model and the rest of these tools are currently ineffective and inefficient in NGX.
The best model for now, is follow the insider activities, follow the money bag, follow the speculation until the government provide a definitive solution to our economy woes.

Feel I should humbly let you know that some lines in some of your recent posts are unnecessary. (its not just about this one)
We all can always engage in a constructive manner without appearing to mock and/or attack others.
Its only responsible to welcome all divergent views and counter them if you will, by putting out logical but factual statements.

You are definitely not doing badly, but you can do better bro!
Regards

Agbalowomeri:


OGG you dey analyze ASI without breadth and volume. Are you a learner?

Of course Mkt breath and volume were incorporated in my analysis from the get go!
What I had put out here is just a simple breakdown. (including the chart)

If you analyze matters accordingly, you would see that even the NGSE Banking 10 you highlighted has maintained a strong bullish structure on the short term TF. What we have witnessed is nothing but a CORRECTION possibly the last phase to the base. Next impulse will likely reproduce a breakout and retest of 1st SH since the downward retracement from YtDH.
Not much time for long epistle.

You need to combine and effectively utilize certain key indicators ...check well.

Btw, I like to be called a learner. ...for that's what I am.

It is well

Agbalowomeri:


Next couple of days is critical for the banks. Either a rejection or a breakdown

Now you are beginning to sound probabilistic unlike then when you sounded quite certain.

Btw, you seem to be focusing only on the NGX Banking 10 and probably paying less attention to other KEY index.
Check the NGSE 30 (this better mirrors the ASI direction), NGSE Pension and ...
Even the NGSE Banking 10 you highlighted is doing something. A worst case scenario would be that of a bit more consolidation from current level (possibly in expectation of a confluence with the release of their YE financial print), but not a breakdown. ...check well.

As I stated then; certain select asset names would inversely correlate the index movement (outperform the market within the period in focus), while a few names will present another great entry opportunity for value investors.

It is well

onegentleguy:


You will be there smiling until you miss out on some select opportunities that the mkt presents.

Look well!

....or the duo of inflation and currency devaluation will infest and eat into that your cash bullion van.

It is well

BullBearMkt:

Agba, wetin be these colours now?

No mind Agba.
We told him the bearish short term sentiment is not yet confirmed.

He could've taken position in certain select key assets @ 19--30% below their CMPs.

Regards

onegentleguy:


I like that you're often realistic and factual in your view/input.
You are right about the possible short term bearish outlook.
The mkt made a LL and followed it up with a LH (< previous high) culminating in the double-top formation.
But it's still unconfirmed at this point. (see the simple chart impression below)

The dotted line below the lower trend channel can be considered an "alternative neckline", while the green line doubles as the neckline and psychological key SL.

Lots to say but here's my postulation;

A bounce at the alternative neckline but which reproduces a triple top formation could herald a stronger short term bearish reversal.
There's a 66.7% possibility that price action may break below the alternative neckline and a 33.3% prob of achieving the opposite.
With the former, I expect a bounce at the base of that rectangle/neckline unless the large caps/blue-chips lead the fall.

The trend in certain sectoral index is given a hint.

A reversal in short term trend will only likely be confirmed if and when PV action (must be supported by vol) drops below that neckline and key SL, bounces in-between that green and purple line but turns the green line into a "bullet proof fence".
...put differently, when psychological SL transitions into a psychological RL.

Below 81, 414 is actually when I will be concerned about the mkt. (though that again will depend on the assets that one holds)
Until then, there's absolutely nothing to fret about!

Some select asset names will inversely correlate the index movement (outperform the market within the period in focus), while others will present another great entry opportunity for value investors.
Those who subscribed to my outline and investment guide--Series 2 know what they ought to do.

It is well

UPDATE;

As expected, the ASI PV activity resisted the short term bearish sentiment and bounced off the base of that rectangle/neckline (key EMA region) with a bullish harami (see arrow) following a breakdown below the alternative neckline.
...1st part in italics played out quite well. (refer to my previous post above)

Interestingly, the index would go on to make a HH with a GAP UP above the previous YtDH and KRL after recapturing (breakout and retesting) it's previous KSL and "alternative neckline" with a strong engulfing candlestick. (ref: DTF in view)

We wait to see if that gap up is a runaway or exhaustion gap though the former appears to have a higher prob.
One thing is certain though; PV action is showing a "reawakening" of bullish sentiment across key short term TFs with no threat in sight for the mid and long term TFs. (note the 2nd part in italics)

The part in bold remains VALID!

It is well.

A cursory dig on the technicals of DANGOTE SUGAR;

N80 now appears to be a short-term psychological RKL while the green colored moving average holds as a strong support zone.
Should we see a breakout (and close) above that RKL on the WTF, then price action will likely make a HH. (simple chart representation below)

This asset is "fueling up" for a great ride.

Upside potential maintains a near 1 probability!

#ds&nasconpotential

Agbalowomeri:
OGG the summary is:

Go home

You will be there smiling until you miss out on some select opportunities that the mkt presents.

Look well!

....or the duo of inflation and currency devaluation will infest and eat into that your cash bullion van.

It is well

BullBearMkt:
Short-Term Market Outlook Turning Bearish With NSE ASI Double Top
Market All-Share Index is showing a short-term possible double top. A break of the neckline on high volume will possibly drag the index to its mean. This is a bearish outlook; however, the overall market outlook, both medium- and long-term, remain bullish

NB: Time to cautiously buy stocks

PLAN YOUR TRADES AND TRADE YOUR PLANS

I like that you're often realistic and factual in your view/input.
You are right about the possible short term bearish outlook.
The mkt made a LL and followed it up with a LH (< previous high) culminating in the double-top formation.
But it's still unconfirmed at this point. (see the simple chart impression below)

The dotted line below the lower trend channel can be considered an "alternative neckline", while the green line doubles as the neckline and psychological key SL.

Lots to say but here's my postulation;

A bounce at the alternative neckline but which reproduces a triple top formation could herald a stronger short term bearish reversal.
There's a 66.7% possibility that price action may break below the alternative neckline and a 33.3% prob of achieving the opposite.
With the former, I expect a bounce at the base of that rectangle/neckline unless the large caps/blue-chips lead the fall.

The trend in certain sectorial index is given a hint.

A reversal in short term trend will only likely be confirmed if and when PV action (must be supported by vol) drops below that neckline and key SL, bounces in-between that green and purple line but turns the green line into a "bullet proof fence".
...put differently, when psychological SL transitions into a psychological RL.

Below 81, 414 is actually when I will be concerned about the mkt. (though that again will depend on the assets that one holds)
Until then, there's absolutely nothing to fret about!

Some select asset names will inversely correlate the index movement (outperform the market within the period in focus), while others will present another great entry opportunity for value investors.
Those who subscribed to my outline and investment guide--Series 2 know what they ought to do.

It is well

Streetinvestor2:
Bro just came back home to rest From church service to hospital to see a friends daughter on admission.

I was expecting you to say something on gsk as per the payment and WHT.I remember gsk was one of your strong recommendation in the past.i guess it was about that time I bought it after DD.Whr you expecting the 10% deduction from the money..And what do you think on IB results. It is one of your call out that current price said NO again to because of FA.Do you still see light at the end

This could be longer, but here's an honest brief;

@ Frangel was right (I read your engagements with him), but the truth is that there was more to the issues that surrounded GSK. (including but not limited to why they had to wind up their business operation)

Yes it's true that the winding up process (unlike that for a buy-out) necessitated the 10% WHT deduction.
It's important to understand the terms "winding up" and "buy-out" of a business entity.
They both have a few similarities and differences.
The KEY similarity is that in both processes, there's a distribution of proceeds to eligible creditors and shareholders post settlement of all pending/outstanding obligations.

With a winding up exercise though, assets are SOLD OUT and the company's affairs in the target country of operation is brought to a CLOSE.
...it is for this singular reason that a winding up exercise will often precede a dissolution. (a legal term for terminating the company's existence within/in that country)
Contrarily, in a buyout, assets are BOUGHT OVER (usually by the majority/core or PE investor) but the company's affairs remains OPEN and operational in that country.

Between the 2 process, the latter (buy-out) when pursued with equity and fairness, tends to be a bit more favourable/rewarding to minority shareholders for the singular reason that the former (winding up) will more often than not, put the company in an often distressing position where assets could be SOLD for less their true value, so she can immediately settle stakeholders and leave.

Yet another not-so-good part about a winding up process is how it tends to (oftentimes completely) set aside the carrying-value of intangible assets of the company.
For instance; GSK may have had some great GOODWILL lines (brand worthiness, HC/manpower etc) that would've otherwise accrued as value to shareholders if the company had taken the buy-out route rather than winding up. (intangibles like Goodwill is often factored in when extrapolating the EV of a coy)

Needless to highlight that the former process would of course imply a more prudent and viable business exit option for any forward thinking investor. (FDI in view)

GSK Nigeria found herself in something quite similar. ...they just had to go the winding up and assigned 3rd party distribution model route and rightly so!
Nigeria is a painfully funny place. There are stuffs to say but some things are better left unsaid.

Here's the part that should interest you though.
GSK will sure doll out an additional cash distribution.
I had given an estimate of what could be the plausible figure in some of my previous analysis. (see past post for guidance)

On INTBREW;
Not much to say. A good wine they say...

As I told some folks; many will focus on the SPL and not take cognizance of the recurrent great improvement recorded in the company's SCF and BS position.
Some persons still don't know that a company can record a loss in NOPAT/PAT and still be grossly underpriced.
The key is in the ability to proficiently figure out why there was a loss and how it connects to the holding value/feasible reward in that asset. ...then you can relate your findings to the assets equity price to draw a sound judgement.

There are pros and cons with the expected share capital reduction exercise (ref: reduction in nominal value by a factor of 25x) in between the planned RI.
I know most folks will focus on the cons and fail to efficiently benchmark it against the undisputably much better pros. Am hoping that more persons will sell off their holdings, so price can drop a bit more.
The coys PV action (TA in view) will be a great guide. ...I like the current set-up/structure.
I will strongly advice you never to downplay the efficacy of using technical analysis.
As always; FA is great, but supplementing it with SA and especially TA is even better!

There's an extremely high probability that at least 88% of the things I foresee for that coy (INTBREW) will eventually play out.
...that asset will gift some folks (including you) a lot of money.

Get a trailer load.... HOLD!

CAVEAT: I recently had migraine and the doctor attributed it to too much analysis. This might just be the consequence of his postulation.
NOT to be inferred as any sought of investment advice!

Selah