₦airaland Forum

EMMAACHILE:
The Nigerian Stock Exchange (NSE) on July 11th, 2007 placed the share price of Japaul Oil and Maritime Services Plc on technical suspension, following the receipt of an application to raise funds from the market via an hybrid offer.
The Company is expected to raise 1,007,488,188 Ordinary Shares at N3.95 via a Public Offerring and 291,549,045 at N2.50 via a Rights Issue.

Expecting the offer anytime Next month.

Isn't is absolutely wierd that a company would do a public offer at a price that's almost 50% off the market price of its stock? That's like management announcing to the whole world that it thinks its share price is severely overvalued Or could it be that the market price was manipulated prior to the offer and is therefore totally uncorrelated with the company's fundamentals? I'm seriously wary of companies like this on the exchange

Thanks RoughCut

The latest information on that link however dates back to 1999 -- that's quite a long time. Do you have current information?

EMMAACHILE:
UNDERVALUED STOCKS
LIVESTOCK FEEDS
Just restructured its mills and just returned back to profitability. It is one of the stocks to watch out for.
Market Price: N5.00
EPS: 1.32
PE Ratio: 3.79
Liquidity: Medium
Fair/Intrinsic Value: N15.00
Expected Appreciation: 200%
Assigned PE Ratio: 11.36
Sector: Agriculture

Emmaachile, where did you get info on livestock feeds? This is one company that I've found it extremely difficult to get any information on. The most I've read about the company is that they used the N300m raised from the rights issue to pay off their debt to some other company (or bank), and that they were planning to refurbish their mills. Do you have any other info on the company -- for instance, who owns it, what the latest results are, etc. Please post here or mail to me at windywendy121@hotmail.com.

thanks.

Whao, I'm impressed that the founder of the company took time out of his (what I must imagine is a very busy) schedule to address the issues raised. That's very impressive.

From his responses, It's obvious that I was armed with incomplete while I was doing some of my analysis, and therefore made some wrong conclusions. However I got all of the information from the placement memo and didn't think that I had to go back to IBTC to get clarification. Anyway, based on the explanations, I feel more comfortable about the projections. Also, thanks to Taiwo for throwing more light on what would happen to the Class B pref. shareholders in the event of a listing --  though, it would have been very helpful if this was stated in the placement memo. I also didn't know that class A and B pref. shareholders are in the same class. My apologies to all who might have been misled by those aspects of my analysis  

Is it true that diamond bank is in merger talks with firstinland bank?

Is goldlink really doing a private placement? please send me too the placement memo or whatever other documents you may have at windywendy121@hotmail.com thanks. We can then read and analyze

hbrednic:
DSR's worst nightmare will be there Brasillian sugar suppliers new romance with bio diessel.

Can you please shed more light on this? I know that DSR imports its raw sugar from Brazil, but what has bio diesel got to do with it?

wanaj0:
Na rumour so you can never be sure. It sounds plausible though. WAPCo is now Lafarge WAPCo. They can do the same with Ashaka and combine their businesses. Then Lafarge will be the one quoted I assume.

Obajana uses gas. Ashaka uses coal. Coal is cheaper than gas.

As per the cash reserves, N1bn was only the interest income!!!!!! At a conservative 10% interest rate that is about N10bn cash!!!!!! That's not small money.

Not seeing there full report so cannot explain why the profit dropped. A number of things can be responsible. Pension fund liability? Deferred tax payment? Major capital investment for expansion etc. So until the details are out, it will be too early to make a final call.

What I know however is that in terms of competition, Ashaka is not well placed due to limited capacity.

Thanks Wanaj0, this is good info. You're right, N10b cash is a lot of money. One wonders however why they would be sitting on that kind of money instead of putting it to work for them, especially with a lot of competition entering their space.

Didn't know that wapco is now Lafarge wapco.

@ wanaj0: are you sure about the merger rumors (anyways, you've said they're rumors . . .). It does sound interesting! So what will the new company be called and which one will remain quoted? Also, is the 20% expansion for the merged company or just for ashaka?

About the cash reserves, N1b does not sound like a lot of money for a very capital intensive business like cement manufacturing. That's less than $8m. Can it really finance any major expansion?

As per the energy source, remember that obajana generates its own source of energy. Is Ashaka's cheaper than obajana's? Also assuming the coal is a cost advantage, then why did profit dip in FY2006 even though turnover increased?

If you have answers to the above questions pls share, i'll also be taking a close look at ashaka to see if it'll make an interesting investment.

abocana:
hi guys, can anyone tell me when dangote flour mills and obajala cement will come to the public.

I will like to know,if dangote flour will appreaciate like dangote sugar in the near future.

Thanks very much guys.

My broker informed me that dangote flour will be out about July 9 and will last for only 2 weeks. I hear obajana is slated for December.

As to your question of whether dangote flour will appreciate like DSR . . . Hmmmm, wouldn't we all like to know the answer to this question with regard to all stocks  Perhaps BIGBOYLARY can look into his crystal  ball as usual and tell you what he sees 

wanaj0:
Price rose because of the dividend 150k and 1 for 6 bonus. Ashaka has a lot of cash in its reserves so is able to make dividend paymen t even if it makes a loss. My major concern is lack of any expansion plan. There was talk of a 20% expansion plan. For a while ASHAKA has not being growing its sales. Turnover was only increasing slightly due to price increases. Actually, volumes was on the decline.

I did not invest in Ashaka, but for those who did, now would be the perfect time to start thinking of selling. For a company that's not expanding and in whose market more competitors with deep pockets are entering (think flour mills and obajana and I also read of a greek company -- don't remember their name now -- thinking of entering that cement manufacturing space), I think their market share is seriously threatened. Unless they have solid plans to expand in the really near future, I expect their performance would deteriorate over the near term. Selling when the price peaks (i.e. before being marked down for bonus and dividend) would be a good deal, as the price rise might continue due to bonus sentiments.

The bonus shares will increase the number of shares outstanding. This means that even if they maintain Profit at the current level, earnings per share would be lower. However in a situation where profit is already dipping, it's an even worse state of affairs. So please get out before you get stuck and start biting your fingers . . . (unless of course the company comes out with some solid plan to stay competitive in the new dispensation)

easimoni:
@Wanaj0, the fact that the CEO took so much pain to answer your questions really impresses me. The ability to respond to customer concerns is something that is sorely lacking in most Nigerian businesses. I wish these guys the best.

Hey Easimoni and Wanaj0, are you investing? If yes, can you tell us what you like about the company? I'm still open to investing if I find a compelling reason to   

For the technology savvy among us, how complicated is the technology that uses biometric data (such as finger prints and facial marks) to identify people? I'm aware that such technology is widely used at least in a couple of embassies that i've visited in order to obtain visas and also at some airports, and has been around for a while. So I'm wondering why it is something that will constitute a competitive advantage.

If it's not something that any tech savvy company can easily implement, then CR definitely has a clear advantage in this regard. If however it's something that can easily be copied and implemented, I'm assuming that a global IT consulting company like accenture will be able to easily implement it in the other credit bureau they're associated with? Perhaps i'm wrong. Anyone who's knowledgeable in this regard please shed more light. Thanks!

The projections are solely CR management's responsibility and IBTC has no responsibility whatsoever for them, so the fact that CR might have explained the projections to IBTC does not in any way give me comfort. As per the reporting accountants, I really don't trust those guys. For me, the projections are KEY as that's the basis on which I determine whether or not the investment is sound.

Yes Frank, I noted the mistakes in the cashflow statement as well! Anyway about the the credit reports, it's unlikely that banks will be wanting to obtain credit reports for corporate entities, especially well established ones. Infact the banks run after such clients as they consider it a privilege to grant such clients credit. So the most likely target for credit bureaus will be individuals. I agree with you that repeat business can be generated on each individual. But let's do the math as implied by CR's projections:

CR Services is projecting that  they'll have 15 banks as customers by 2009 at the latest and issue 900k credit reports among all banks. From my math, that comes to about 250 different credit reports per day per bank -- i.e. each day, one bank will request credit reports for 250 different customers (assuming we have 20 working days per month) -- That's 250 different customers on monday, 250 different ones on Tuesday, etc until Friday for each bank. Even if all customers are patronizing the same 15 banks, this scenario seems highly unlikely to me. Unless they're issuing credit cards, I don't see this happening. I'm close to a number of people that work in retail banks here, and as big as some of those banks are, they usually don't have 250 different customers walk in on a daily basis requesting one form of credit or the other that'll require the use of a credit bureau's services. Also, let's assume that due to the novelty of credit cards, the demand is such that the projections are realistic. In that case, I expect demand to taper off over time as more and more people adopt the use of these cards, and not increase exponentially as has been projected in the reports.

Anyway, these are just my thoughts.

Based on reading through both the private placement memos and the IBTC analyst report and from enquiries I've made, here are my thoughts about CR services:

What I like:
1. The market is out there and is potentially large, especially with major card issuers like VISA and Mastercard coming into the country. These companies make more money by partnering with Banks to issue credit cards, and I foresee a situation where a lot of Nigerians will be using those plastic cards in the very near future.  Plus, it is likely that many banks will sign on to more than one credit bureau.

2. CR services seems to have a technology that is different from the rest of the credit bureaus in the country -- they use biometric technology, which they claim gives them a competitive advantage. What is unclear however is whether or not this is a sustainable competitive advantage. If it's not patented, I believe it can easily be replicated by any other credit bureau. Anyway, I'm going to assume that in Nigeria, patents won't work, so this advantage is not really sustainable in the long run (strictly my opinion).

What I don't like:
1. Their projections seem unrealistic. So far they claim to have information on about 500k individuals and corporates in their database and yet they're projecting to issue at least 900k credit reports among their 15 bank clients in the very near future. I guess I'm not comfortable about the fact that they've made no mention of how they intend to populate the data base with enough info that banks will actually find useful and want to use.

2. The whole connection between CR Services Nigeria and their USA counterpart and technical partner is just a smoke screen. It's basically a one-man show, with the main shareholder of the Nigerian subsidiary also being the owner of the US parent. Moreover, the US parent has been in operation for sometime here and I couldn't find anything spectacular about the company's products or services. Also, the so-called parent company takes a % of the turnover of the Nigerian subsidiary, takes a % of profits and in addition charges technical services fees! That's not cool, especially since it's just a start up and one person owns both companies. Doesn't sound like good business sense to me.

3. There are other competitors, like the one mentioned above, with deeper pockets. The story in the link posted by JoshO above is true. I'm aware that accenture, which is more global and more technologically savvy and has deeper pockets than CR services is involved in one of the credit bureaus. When I was in Nigeria in December, I also gathered that IFC was partnering with the same credit bureau that accenture  is involved with. And just as the story states, the other banks mentioned are promoters (sorry Wanaj0).

4. The shares being offered are preferred shares and there's no mention of what will happen to holders of those shares in the event of a stock market listing. Will the shares be converted to ordinary shares? I"m not too keen on buying preference shares, especially when they're class B and are not convertible to ordinary shares, and most especially when the holder of the Class A preference shares is also the owner of the company! It's like the guy has just taken measures to protech himself in the event that things don't work out -- Class A preferred shares, share of turnover, share of profits and technical service fees. I'm not impressed with this structure at all.

5. I think I can get stocks on the market right now that will give me at least the same projected returns in the same time horizon (at least 3years) with much less risk and a more certain exit! So CR private placement is a No No for me.

OTHER MINOR ISSUES: Based on the cashflow and balance sheet projections, it doesn't look like this company has plans to invest in fixed assets over the next 4 years. Infact, they plan to invest more in current assets (debtors and prepayments) than in fixed assets. This makes me wonder if they have plans to expand. I would think their business model would necessitate the need to continously update their architecture as technological advances are made and clients' demand increases, and that they would need to expand in order to service more clients across the nation. 4 years seems like a long time not to make any fixed asset investments.


Anyway, thanks to all who have contributed to the thread! Let's be on the lookout for more private placements 

easimoni:
Why in the world would you do that?

Hehehehe  I was just wondering the same thing myself. But who know, he may be investing for his grand children to inherit . . . _{hopefully transcorp will have started operations by the time they turn 18, otherwise then they'll have to wait for their own grand children, and on and on the waiting goes}

Frank, i've just sent you the memo.

For all interested, i've created another thread here https://www.nairaland.com/nigeria/topic-60586.0.html so that we can do some thorough analyses on this CR deal. See you there . . .

For those who are interested and have perused the placement memo, can we your views on the deal on this thread? Let the analyses begin

BIGBOYLARY:
@shigidi

JOS BREWERIES will be a good buy anyday i can bet my money on it, the 2004 recapitalisation exercise can be said to be 100 per cent successful, under the watchful eyes of Albert Kattiems-team and with the exit of Guinness Nigeria Plc from the management of JIB its going to explode.
At the height of its success, it singly built the most successful integrated farms in Nigeria - the BARC Farms Limited, and the Pioneer Milling Company.
Incorporated in 1975 and the company posted heavy profits with high dividends, am hook on it.

BigBoy, I suggest you check your facts before posting oh! Yes indeed, Jos Brew completed the public offer in 2004 and received all of the offer monies early that year. But for FY 2004 and FY 2005 they made significant losses. So what did they do with the money they raised? The shares for which they did the offer just got listed in 2007 due to internal wranglings within the company. In the interim, employees were on and off on strike protesting non-payment of salaries and the factory was closed down for an extended period of time. Even the MD himself came out and said that the company was making losses and therefore couldn't afford to pay back-owed salaries, blah blah blah. In order to save the company from total collapse, the Plateau state government bought a lot of the shares just to inject some money into the company. As of today, it is not clear that  production has resumed (unless of course you know something that I don't know). There was some rumor that a foreign investor was trying to buy into the company -- but that's basically that, A RUMOR. As far as i'm concerned, Albert Kattiems and his team have been the bane of the company's existence, so they're no reason to invest in the company, and neither is the exit of Guinness any reason to invest either. Now if you can confirm that some foreign investors are indeed looking to buy into the company (and that this is not just some rumor touted in order to shore up the share price so that those who warehoused it can dump on unsuspecting investors), then by all means go ahead and buy. Otherwise I wouldn't advice you to bet your money on  a stock like that. The company is virtually grounded and has been that way for a while now.

OK guys, I tried to post the placement memorandum for CR services but got an error message saying the file is too large. If you're interested, send me a short email at windywendy121@hotmail.com and i'll forward you the placement memo. I actually started to read it but stopped when I got to the revenue projections -- seemed very unrealistic to me, but then again, i'm not based in nigeria and may have lost touch with what's really on ground.

The company basically generates revenues based on initial one-time subscriptions and then by selling credit reports, providing technical support to banks using their software, smart card issuance revenues, etc. The most substantial of these is the revenues to be generated from credit reports. In projecting these revenues, they have assumed that they'll have 15 banks signed up by 2008 to 2011, which I think is reasonable, because they already have 10 and 2 more are in the offing. Where I however am struggling is that they assume that by 2009 they'll issue 900,000 credit reports. From simple math, this comes to 60,000 credit reports per bank per year and 5,000 credit reports per bank per month. Assuming we have 20 working days in one month, this comes to 250 credit reports per bank per day.

For those who are familiar with the banking environment in Nigeria, is it really possible that on every single working day in a year, 250 different people will walk into a bank to apply for one form of credit or the other that the bank will take seriously enough to request a credit report? Perhaps if the banks are issuing credit cards that might be the case. Then the question becomes -- will banks be issuing credit cards in the near future (say 2009)? Hmmmm, the more I look at this deal the less I'm liking it . . .

Awww, thank you all, I'm really feeling loved right now . . .

I've missed you all as well.

By the way, there's a credit rating company, CR Services Ltd currently doing a private placement. I spoke to someone at IBTC yesterday who sent me the 56-page placement memo. At first glance, I didn't really like what I saw, as they're offering preference shares and there's no indication that shareholders who buy into this deal will have the option of converting their perference shares into ordinary shares in the event of an acquisition of the company or listing on the stock exchange. Also, there's no indication of when the company intends to list. But the company has signed up a good number of heavy banks, including Zenith, first bank and the like. I'll read the memo this weekend and post my thoughts in detail.

The placement closed "officially" on 6/14, but they're extending for another week or two at the most. Price per share is N16.5 and minimum application size is 100k units. (N1.65m minimum investment). I'm not in any way promoting this investment, but I'm excited at the prospects of a credit rating company is Nigeria 'because the potential market is huge. But at the same time, I'm not too keen on buying preference shares, unless they come with an option to convert to ordinary shares at some point.

Takers any one? Frank, easi, cheexy et al, what do you think? Or better yet, have you heard about the placement and what do you know about the company?

hbrednic:
@Kashif
if the foreign investment is in form of loan,you've better think 2wise.
find out the true face of the invest.

The foreign investment is in form of equity, and infact, the foreign investor has long been the sole agent of Mbenefit. The 25% equity stake is being alloted to the core investor via existing warehoused shares, so there'll be no increase in the number of shares outstanding.

Kashif:
@easimoni,

How far with Mutual Benefit please

Dude, what are you still doing with Mutual Benefit? Weren't you in on the discussion we were having on another thread where pple were advising those with this stock to get out at about 5 bucks if they have a short term focus?

Anyway, the company has some good long term prospects, so you might want to hold on to it if you haven't already sold. The current price decline is due to profit taking and will end at some point . . .

I sold mine at close to N5 and doubled my initial investment in less than 2months -- i've never believed in short term investing, but this is one i've done that worked!

By the way, it's good to be back on the board after a long time

babyosisi:
?

wendy I agree 100% with this statement.
While single parenthood should not be glorified such that people think it's ok to have kids unmarried,at the same time a man who has fathered a baby ought to raise it.
That is why I love America and the garnishing of wages for delinquent fathers.

Ehen, now you're talking

babyosisi:
I beg to differ.
Why didn't she close her legs.
When are we women going to take responsibility?
It has been proven time and time again that in cases where a woman in an unmarried situation decides to conceive,most of the time she is left to bear that burden alone so why do it?

I am not talking about divorced women but unmarried ,never married with no plans at marriage single mothers.
It ought to be discouraged at all levels.
If the woman insists on having kids with a manfriend,she ought to be prepared to raise it alone.
That is just the reality.
We ought to realise that pregnancy cannot tie down a man.

Osisi, I don't understand what you're talking about. What do you mean by why didn't she close her legs? How does this even to begin to address the issue?. The man and the woman had sex, a child resulted from the union. Whether or not they should have had sex becomes irrelevant after that! The fact is that they've both brought a child into the world and they're both responsible for taking care of that child.

When you say "It has been proven time and time again that in cases where a woman in an unmarried situation decides to conceive,most of the time she is left to bear that burden alone so why do it?" Are you saying that it's ok for a man to totally neglect his responsibility to the child that he fathered just because the woman "decided" to conceive? If the man is the father, then he has responsibilities towards that child, whether he wanted to become a father or not.

Of course, I'm not an advocate of single parenting, as it deprives a child of the joy of growing up with both parents. But when you make statements like "If the woman insists on having kids with a manfriend,she ought to be prepared to raise it alone.", that's just baffling, because NO ONE, whether man or woman, has any right to bring a child into the world and then abandon it for any reason.

Let's even assume that the woman insists on having a child, does that relieve the man of the responsibilities that come with  fathering a child? If he doesn't want a child, he should simply not have sex with her -- afterall it's not compulsory. But as long as he's sleeping with her, there's always going to be the possibility of a child resulting from the union, and he should be prepared to take responsibility in the event that it materializes. If you want to classify that as "tying down a man" then that's up to you.

Again let's even assume that she got pregnant against his wishes. How does this relate to the child that has been brought into the world?? Does he now "punish" the child by abandoning it because of the "sins" of the mother? How irresponsible! Ultimately, it's the child who suffers the most damage.

The fact remains when two people bring a child into this world, BOTH are responsible for taking care of that child. The man and woman involved may not want to have a relationship with eachother, but they have parental responsibilities towards that child which BOTH of them must fulfil. I will hesistate to blame the single mother because at least she's playing her role as a parent. Where's the father? Who does he expect to fill the void he has created in the life of the child that he fathered and abandoned?

I think the bigger question here is: what kind of man would father a child and then abandon it? At least the single mum is playing her role as a mother. Where is the father?! From a lot of cases I've seen the biggest reason for single parents is the irresponsibility on the part of the father (I'm referring to those kids who are solely being raised by their mums).

Any grown man having sex should be prepared for the possibility that he might father a child, and it is his responsibility as the father to take care of that child. No one, not even the mother, can legally prevent him from being a part of that child's life.

So the next time you see a single mum solely raising a child, the question to ask is: where is the father who abandoned the child? It's not the single mother who's being irresponsible, it's the father who abandoned the child that is irresponsible.

Omoba3:
@ Windywendy and Frank - I appreciate your candour. My broker presented it to me as a short term buy and sees it appreciating based on their fundamentals and financial report, so there you go.

What fundamentals? I'm interested. Can you please scan the balance sheet, P&L and Cashflow statement so that we can do an analysis and see if your broker is right? If he's right, then i'm in _{who no like beta thin} If you can put it on the site that'll be good otherwise mail me at windywendy121@hotmail.

frankiriri:
Well lets not.
_{[/sub]tries to resist the temptation but loses[sub]}
At least they had the all mighty NITEL in the kitty. Who can argue with such an asset (laughs)

Oh you mean the sleeping giant?? How many nitel lines did you have in your house that were working?? Even the one in my grand father's house had stopped working for like 10 or so years _{Ok i'm exaggerating}. But by the way, did you hear that MTN (or some south african company) is bidding for MTEL? where will that leave transcorp?

Omoba3:
@ Windywedy and Frank - What's your take on Wema bank in the short to medium term

I don't know too much about wema bank but the first things I look for when I want to invest in a bank in today's banking environment is innovativeness (which to a large extent depends on management quality), technology infrastructure (which makes customers' lives easier and could therefore potentially attract new clients), visibility (at least to the foreign world) and branch network. I don't see too much of these in Wema. Furthermore, I'm not comfortable with the affiliation with Odu'a group. So I would hesistate to invest in Wema unless I have real info that could help me make money in the short term. I personally don't see them as a good long term buy, and I wouldn't really buy in the short to medium term either. I'm just not comfortable with the company.

frankiriri:
Some brokers advised people to buy Nigeria Cable and Wire even when the company has not been in operations for a year. ;

Does this surprise you?? What then would you say of transcorp being allowed to do an IPO and professionals actually recommending it to investors?? _{Anyway, let's not go there}

frankiriri:
Its not enough for them to indicate that it is speculative. They should state the basis for their speculation so that people can judge for themselves. Me thinks that they are just applying the greater fools theory here. They beleive that the stock is in demand and even though they cannot justify it they want to profit from any increment in price that may result. So you buy in the believe that at some point in future a 'greater fool' will buy from you at an even higher price.

Oh and we're back to the greater fools theory . Anyway, different investors have different investment styles. I personally wouldn't touch Afroil with a foot long pole, but some other person who's into speculative buying may buy it and make tons of money (or lose tons of money if he's the "greater fool"