₦airaland Forum

RoughCut:
In actual fact from the plethora of IPO/PO's on offer at the moment i would include in my list in order of preference

Bank PHP and or Diamond(Yet to see prospectus to make a definitive judgement but based on current from looking juicy)

FCMB and

the dark horse

WEMA(risky because not sure where the price will end up before they go on TS but will make a judgement when i see the prospectus but it has a lot of value!) May be not advisable if you don't already own the stock

Before the prospectus for FCMB was released the PO was done and dusted but now having read between the lines not too sure now so the moral is READ BETWEEN THE LINES and the proverbial small prints

My concern with FCMB is totally different from yours.

FCMB is acquiring CSL. That means the profit of CSL automatically add to the profit of the old FCMB. So if they made N2.7B in Q1, that means without any changes, improvements etc you are talking of profit of N10.8b. Add that to the possibility of growing profit in susbsequent quarters. Add that to the contribution from CSL. So you can see that the N15bn is not far fetched.

My concern was actually the reduction in the assets as at full year as compared to the Q1 status.

RoughCut:
FCMB has decided they will capitalize any over-subscription for their current offer that means they will absorb any oversubscription

http://www.thisdayonline.com/nview.php?id=94398

Now all of a sudden the figures seem to have gone peer-shaped. According to the prospectus at the end of the current offer the shares outstanding will be in the region of 14B and there will be an additional 900M shares listed in support of the $100M GDR component. Now if we assume they are allowed to capitalize 25% of the over-subscription(will be more according to the news) that is roughly an additional N1.125B and at the current offer price that would result in an additional 1.6B listed shares and the projected PAT in the prospectus is N15B (too agressive for me though from N5B in 2007) so i don't think i would even bother estimating the adjusted EPS and PE ratios so not looking rosy as it would first appear

Unless they are threatening to release a spectacular extra-ordinaire of a result like Oceanic is threatening to do the figures don't do it for me so i think i will be issuing a BUY order for Bank PHP and buy the PO at the same time( that is a N35 stock in the next 6 months!) that way i can spread my bets and cash in on the post-suspension bull run and any future potential upside as a result of buying into the PO

Over subscription means more money for them to generate more profit. Good thing about the FCMB offer is that the proceeds will be utilised in such a way to reap benefits within 12 months. They are not going for all that opening of new branches nonsense that will take average of 3 years to make profit. That's why I tend to see the ambitious profit forcast as being achievable. The interim result already hint towards that.

EMMAACHILE:
Bids yesterday at the exchange on 2 tier banks
First Inland in excess of 80 million units
Wema in excess of 40 million units
Int. Brew in excess of 4 million units
Japaul in excess of 4 million units


Nem Insurance is on net offer of about 11 million units likely becaue of the merger and rights issue recently alloted to investors. Most people are selling after getting enough capital appreciation from the right's offer price.
Dont think it is punishment for existing shareholers as Wanaj has said.

Most people are yet to get the rights certificate for NEM. Don't even talk about merger shares. Did you see the merger document? When banks were merging did you not see the scheme of merger documents?

Problem is the insurance industry is not well regulated. This is evident in the consolidation exercise. With scanty info available, investors are looking the other way. Look at UNIC, year 2006 result is yet to be released!!!!!

I am scared stiff of those insurance companies. Interim results but full year result not yet released. News of merger and no one saw the merger documents. No confirmation of oustanding shares. If you increase PAT by 1,000% but the issued shares increased by 5,000% is that beneficial to the shareholders. Im love the way NSE is punishing them big time. Look at NEM from a high of >6.00 to about 2.00 now!

BAGCO is a good company. However you cannot put a BUY on it until you see the offer documents.

Wire and Cable is a good company that died due to a lot of factors. While it is commendable to have new investors you need to thread with caution. Wait until someone neutral confirm the investment plans. I know for sure that a a time, Doyin Okupe and co were to be the core investors. They were said to have poured money into the company. At the end it was all story. Except you are a Strong risk taker, I will ask you to look for a less risky stock.

On Oceanic, I bailed out at 33.00. Whatever result they declare, 33.00 is a fair price for it as far as I am concerned.

yodiyokun:
Well it closed at 17.98 and traded as low as 17.31. I will place an order for it at 17.50 lets see if I get lucky.

Dosent the GDR affect the no of outsstanding shares?

As per the Actis investment, they still have almost 6 months to put it to good use since their yr end is in April.

Nothing really special about GDR. UBA started a GDR many years ago.

Yes it leads to increase in outstanding shares just like a PO or rights. Note also that you also have more funds (CAPITAL) to work it.

Will jsut buy tomorrow. 17.00-19.00 does not amke much difference to me in the scheme of things.

Geees:
By the way question for all
wITH ALL THESE BANKS GOING TOWARDS GDR's what is the likelihood of making good returns judging form the effect of GDR's on a strong bank like GTB,
Are we not opening up to credit crunches?

Thanks Yodiyokun,
Then we'll just live with Dangote that way

GTB's problem has nothing to do with GDR. There is liquidity problem in the market. So most stocks have suffered losses.

BTW, anyone checking Chellarams for me

yodiyokun:
I also think Diamond is undervalued, I really don't understand why the share price is below N20, honestly to me it is ridiculous.

Someone mentioned their result been released? nayone have a link.

I have been thinking of buying Diamond for a while now,

Are their numbers on Nigeriansecurties correct, especially the outstanding shares. I need to do some number crunching.

Costain has lost me as a follower. Their offer will definitely dilute the EPS and honestly, I really do not see them generating so much profits to make them as attractive as they are today.

In a market that is facing liquidity (learnt that no PFA funds for now), <20.00 is good enough for Diamond. 6 montsh result is PAT of N5.8bn. I expect the last two quaters to be better since they will ahve teh ACTIS fund to invest. Oustanding shares 9.4bn is one of teh smallest in the industry. This is inclusive of the ones issued to ACTIS.

Will give a BUY order tomorrow! Was waiting for it to drop to <17.00 before but now, delay may be dangerous.

Getting suspicious of this Costain offer. Will wait till the prospectus though. Not planning to pay dividend until the next two years. Jerked up the price from <1.50 to over 18.00 this year alone. Had 400m shares before now issuing additional 700m shares.

This kind of offer are the ones I tend to avoid. Just like NAHCO, why join the party with minutes to the end??

shigidi:
@ wanajo, please i have two questions for you;
1) with BAGCO going public ,do you feel there is any point still taking position in flour mills, or should one take position in both?HuhHuh??
2)i have been thinking about buying a stock with december year end such as, wapco, beta glass or dangote sugar, and then by march i will use the profit from these coys. to take a stake in flour mills. do you think this is a good idea?Huh?
and which of these would you recommend;
1.wapco @ 64n
2.beta glass @ 14n
3.dangote sugar @ 35n.
4.longman @ 14n.
and finally, which other good stocks would you recommend for good long term or medium term value.
thank you very much. please reply

Will recommend Dangote based on fundamentals. But you will need to beg the man to stop this quarterly dividend payment!!!!!!

BAGCO is solid but we need to wait for the prospectus. Go for Flour Mills. They are also a well diversified company.

Longman is attractive. Not so enamoured with Beta Glass. If NAFDAC should go ahead with the threat then beta Glass is toast.

shigidi:
@ easimoni,
you see what i told you about costain they are applying for about 700 million shares. that will drastically reduce the eps and i don't see it making such a mad amount of profit to maintain its current eps.
bank phb or fcmb are looking like much better offers.
BTW, diamond banks results look pretty solid today, that might be another solid offer.

Not sure again if Diamond will go for an offer now. Learnt they are planning a GDR. That said, Diamond currently holds a lot of value.

dollarmani:
Your comments about Dangote is the more reason why we should expect a shocker. A 4 for 1 is all it needs to take it to its rightfull place

Bonus with 10bn issued shares is a no no!!!! Dangote wants dividend. he is collecting N2.8bn every quarter. he is not bothered about the price on the NSE since he si not willing to sell nor is he planning for an offer!

Diamond will surprise people. Selling WEMA to buy Diamond now.

yet to see Costain prospectus but I will go with FCMB. Cosntruction is not a high margin sector. I know they are diversifying into Furniture but still, not convince about the margins. Hype is what is pushing them up.

CAPL, made a lot of money selling assets. So, don't base your long term projection on last year and this years result.

Flour Mills is good but I will root for BAGCO. The margin is wonderful.

Longman is good but not for the long term. They are so susceptible to changes in government education policy (that changes too frequently for me)

BETA glass is returning back to profitability but the competition is high and the market environment is changing. Will not hold them for the long term.

Dangote Sugar is currently fairly priced. Will go for it for the long term. Just hope Dangote will stop this quarterly dividend payment. It is affecting the price too much!!!!


Wema, definitely not for the LONG term. It is a prme candidate for acquisition.

I don't BUY mostr offers. I don't get carried away with the hype. Being in the market LONG enough not to make emotional decisions.

If reports in Business day is anything to go buy, First Bank will only absorb N250bn

Well, well, well!!!!! Many things happening at the same time.

For those who don't have WEMA yet, please don't join the train when it has left the stop! Move on to something else. While the Q1 result was impressive, note that the same thing happened last year. Details of how bad the loans are no one knows. Moreover, you have the issue of technical suspension, share dilution etc to cope with.

For those advising WEMA not to go to the market quickly, if they don't they will cease to exist. They have one of the lowest shareholders fund. They are a good target for acquisition. Hence shoring up the shareholders fund will be a priority.

WEMA is on a loan recovery spree. Expect to see them dragging many companies to court soon.

For those who have sold, just move on to better things. There are better stocks out there. So don't get fixated with WEMA. Take positions in other stocks.

On my lovely Chellarams, join me to just celebrate. Bought some 2 yrs ago at about 1.71. Got a bonus of 1 for 1, consistent 15k dividend and price now 5.77. Good thing is the staedy growth. Strong business model. Still a trading company mainly with strong Indian backing. They are expected to do an offer (PO/Rights). This being on the card for a while.

One thing that is obvious is that most people make decisions based on emotions. That is a recipe for disaster. The market does not consider your feelings so you get punished badly.

I also see that quite a number of people are over diversified. I think at this point, people need to structure their portfolio to determine what they are going for. Growth, income etc and balance that with the risk they are willing to take. When you are overdiversified, your portfolio can only make AVERAGE returns.

For FBN, right from the onset, IBTC got it right that the forecast was very pessimistic. First Bank makes a greater part of their profit in Q4. So expect a PAT > N30bn. Note also that they are yet to receive the money from their offer. Guess that is what is pushing Zenith.

Zenith may be consumed by the passion/ambition of being the biggest. I fear for them. Moreove, it is still seeing as a bank of the OVIA's. Also, succession will be a problem. I hope all goes well for them. Definitely, they are up there now.

Nigerian German, what is left to say. Being singing about them since!!! June last year it was 4.00. August this year it was 12.6. This is a 20.00/25.00 stock. Not a liquid stock but very solid!

Trans Express, that is the next NAHCO on the block!!!!!! Very illiquid stock. Not available. Placed order for over 4 months now. They are set for a rights and a public offer. They are repositioning. Guess they are watching what Red Star Express will do before making a move. Please if you get to buy, even if it is 10 units, please get some!

BAGCO is a good company depending on the price that they will come out. Profit margin is good. You just need to check Flour Mills report and Dangote Flour prospectus and you will see that the bag/sack comapnies have the highest margins.

Diamond still looking attractive. IBTC still over valued. ETI good but don't expect that much capital appreciation. They just resolved some boardroom issues as per share ownership. Ecobank Nigeria is a no go area for me.

On insurance, be careful!!!!!! Those guys know next to nothing about corporate gorvernance. Mergers without scheme of merger document. Most are releasing interim results while the full year result is no where to be found. Share oustanding is like a secret. I am wary of them and the market is penalising them accordingly. Add this to the uncertainty in the consolidation process itself. When will it end??

November is always the month to take positions. Half year and 9 month result of most blue chips will be out now. GTB is due. let's see what they come up with!

As per Union Bank, don't know why someone should own shares of such a backward company!!!! FBN 6 months is out while UBN full year is yet to be found! Everything about them is archaic. Maybe Access should really acquire them.

RoughCut:
I think that's what they are psyching us up for i wont be caught out again!

The game plan was pretty obvious. Just shine your eye. Like I always say, WEMA will do well!!!!!

Anybody watching Chellarams? You better join the party!!!! One of teh lowest PE's on the NSE. Just released an impressive result yesterday. Being planning PO for two years now so I expect that they will go for it next year. Quite attractive company but very illiquid.

Panadol:
@wanaj0

BAGCO is a subsidiary of Flour Mills.

Yes BAGCO is a subsidiary of Flour Mills. With the IPO, Flour Mills alone will not get ALL the profit. Being one of teh business with high profit margins in the stable of Flour Mills, this will affect them going forward.

RoughCut:
Wrong move for Diamond bank GDR is not the most attractive investment at the moment with the dollar at an all-time low. GTB floated a GDR many many months ago and apart from the fact those who bought the opening  GDR were short-changed they actually paid higher than those who bought when it was eventually floated on the London stock exchange and it hasnt helped the share price either  still almost at the same level now  as it was then!

Diamond is interested in the funds. It may be 'cheaper' for them going that route. They may want to show international clout!

RoughCut:
cheers easimoni and i'm actually in space high above cloud 9.-)

Just keep your eyes open. They may go on Technical suspension soon.

easimoni:
IBTC estimates there is 700B in leveraged (big grammar for borrowed money) funds in the NSE. As longs as banks are extending loans to people buying POs, the market will remain deep.

You have money from margin facility and a lot of FDI. Most of the new offers are being taken up by foreign investors. Retail investors are not the one causing the oversubricption.

BAGCO super sack seems to be set for an IPO. Good for them but not so good for Flour Mills. BAGCO may actually be more profitable than Flour Mills. Price is 3.90. About 1.9B shares to be on sale. That should be one to watch out for.

Diamond seems to prefer a GDR instead of a PO. ACTIS just invested some funds there anyway.

walcolm:
when an entity is owned by x number of people, then that entity owes those x number of people. this differs from when you own a piece of property, a company is seen under the law the same way a human being is seen.

Asset-liability=capital

the 'capital' part of the equation is what financing is about. so whatever a company does to ensure that capital is a financing function

@pumping & wanaj0
like i insinuated, share buyback is not provided for at all in the rule books when it was written probably because it is old and no longer robust not that there is a clause that says 'share buyback shall be illegal in the nigerian financial market'

Hope you know the difference between capital and debt!!!!!!!! Company is not in anyway owing the shareholders.

If something is not provided for in the rule book, then doing it is illegal!!!!!! That should be easy to understand.

walcolm:
this is excellent. i'm happy the topic is something u're familiar with.

1. a company is a legal entity OWNED by x number of people (can you see where owing comes into the play)

but a company cannot own itself 100% so there must be some owners. if that company makes so much and pays off some of the owners, the value to the remaining owners increase (not anybody's fault, just the way the system). thats what shareholders value or wealth creation is about.

that way, owners or potential owners will be happy to put in more money anytime a company goes to ask for it, and that is what i meant by financing, a pro-active way of ensuring future sources of funding

@ pumping & wanaj0
readin the article right now

Sorry, you are confusing me here.

A company is OWNED by X number of shareholders. This is different from the company OWING people as you previously alluded to.

While there is benefit in share buy back, it has nothing to do with fannancing!

RoughCut:
That's the way to do it!

So i guess it's time to cash out when the share price is smelling N50 or higher and then re-enter by taking up my rights issue
Thanks to Jim Ovia and his strategists

Went on technical suspension today so no show for you!!

pumping777:
@walcolm

See this article. There is no provision for share buy back in Nigeria and SEC or CAMA are not planning to change things anytime soon.

http://allafrica.com/stories/200710260355.html

Guess we posted at the same time. You don dey read my mind now!!!!!!!!!!!!

walcolm:
@wanaj0

can you please quote me the sec rules in question?

you need an understanding of corporate finance to know how share buyback plays a role in financing a company. an analogy you can run with is; when you owe 10 people and you pay off 2 of the 10, you have indirectly (the KEYWORD) financed yourself

And how do the company owe their owners? How does equity turn to debt? Teach me more about corporate finance.

I work in a firm that buys back its share every year. It is part of the necessary disclosures in the finnacial statement and it has nothing to do with financing.

Will try and search the SEC report where the Lagos Zonal officer said that share buy back is not in their books.
http://allafrica.com/stories/200710260355.html

walcolm:
@wanajo

i don't agree with you that share buy back is not allowed in nigeria. where did you get that from?

share buy back is a standard financing practise all over the world. the fact that it is not yet being used regularly by companies in nigeria does not mean it is not allowed or illegal, it's almost like saying having diffrent classes of shares in a company is illegal

don't forget that the capital market in nigeria is still developing, GDR was not existing in nigeria until GTB blazed the trail. we don't trade shares futures and options etc yet in nigeria, so if somebody does it, will you say it is not allowed?

Check the SEC rules and see whether share buy back is allowed!!!!! Rules governs every market.

Don't see how share buy back is used to finance a company!!!!

RoughCut:
Which is exactly what i said by implying that they would have to use some sort of investment vehicles in which the company will be the major shareholder. Share buy back without using a conduit is illegal anywhere!

Share buy back is not illegal. In the strict sense of the word, when you do a share buy back, you reduce the number of oustanding shares. In the case that we are talking about, the outstanding shares is not reduced in anyway. In share buy back, you basically cancel such shares. This is not the case here. What you have is share being mopped up by a market maker etc.

Share buy back is not allowed in Nigeria. However, the companies can buy their own shares via their asset management companies, Pension fund companies etc. So it will not be a share buy back in the strict technical sense.

dollarmani:
Start first by identifying a broker and setting out a sum to invest initially. I think a hands on approcah is best to sustain interest and to drive your quest for knowledge. Once u state in the forum that u have done this and uo are trying to determine what to by. I can assure u , u will be inundated with ideas

Basically because it was on bid today and it gained 5% with little shares available. So with the result, this may continue for anotehr two three days.

Tmoni:
i still do not feel its time to rejoice over WEMA although i am very surprised at this trend today,

lets see how the week ends with

i would hold my units until it doubles for giving me this heart attack,
its defintely long term

Doubles to what price?

Well, I need money from WEMA for something else. With 1,195 deals, someone must be mopping up the shares. They better release an interim result fast. WEMA will surely do well but I see better options elsewhere instead of staying with WEMA. You must be prepared to do a lot of prayer and fasting anyway.

Well, if you are a technical trader, Zenith may be attractive to you.

Certificates for UBA bonus are out for those concerned.

MyPeace:
Wanajo

your talks have so much weight on my decision ooo. Though l count on Roughcut submssion, but whats your conclusion on FCMB? l had concluded plans to buy by next week, but l don't mind discontinuing.

please say something again.

Just understand the risk associated with buying FCMB.

I hope to buy FCMB also.

RoughCut:
Ha ha wanaj0 you must have read my mind! How did you do that?

My brother, you are talking about a sector where the Full PAT can be like a quarter of the 9 month figure just because of weather related issues!

Ask IBTC how they got their fingers burnt with Presco? They now sit on the board as if that was part of their core activity!!!!!

RoughCut:
The year end for WEMA is March 31 so by my estimation their interim 6-month result for YEnd March 2008 is due any time(at least they've pushed out the 'bad' news and that way we can project the PAT for the YEnd March 2008 so that should make up our minds for us. from some of the figures i have seen they have been amortizing their bad and non-performing loans for the last 4 years so i believe they have now cleaned up their 'classified accounts'(another phrase for bad loans on their books i think) by making a provision of N8B for doubtful assets and liabilities they acquired from National bank.
Anything short of market expectation they realise will be disastrous for the bank i hope somebody from WEMA bank is reading all the stuff we have been posting on this thread:-)

The problem has nothing to do with National Bank. The problem was with WEMA itself!!!!!!

If you are patient enough, WEMA will definitely come good.

The issue is whether you will wait for SURULERE when OLORUNSOGO is there!!!!!!

One thing that is becoming obvious on this WEMA issue is that a lot of people have not learnt to remove their emotions when making investment decisions. Sentiments still drive a lot of people.

BTW, anyone checked FCMB prospectus. Hope you noticed that Q1 assets was less than the FY 2007 assets. WHich shows that something is FISHY!!!!!!