This Corporate News Compilation for the week ended February 24th, 2018 is brought to you by Bluechip Technology Ltd Nigeria.
- Main One is stepping up its dominance as the local company of choice for hosting data. The company’s subsidiary MDXi revealed last week that it is commencing the phase 2 of its expansion plans to build additional 300 racks for its data centre operation, estimated to gulp N2.5 billion. MDXI launched the phase 1 300 rack 2015 to cater for the increasing need for hosting data locally. Phase 1 cost the company about $35 million in 2015 and from what we gather, they are running out of data space for new customers. In case you don’t know how big this is, think of all the major Banks in Nigeria and where they need to host their data. This is a major money spinner and it is incredible to think MainOne is still privately held. When will they also go public??
- A few weeks back we mentioned a company named Capricorn and their Android Powered POS terminal for effecting payments. It seems they have a major competitor. Last week, Global Accelerex, a CBN licensed payment terminal service provider unveiled NEXGO N5, the “first single unit Android point of sale (PoS) terminal to be certified for payment acceptance in Nigeria.” The device they claim runs on Lollipop 5.0 operating system (OS) and “performs four times faster than any other payment terminal around.” They also claim it has a better battery and can run without charging for about 5 days. Whilst I am not sure who their target market is (Capricorn has made inroads into Power), they claim the terminal accepts not just Visa and Master but AmEx which I find quite interesting.
- Another week another major deal. Pay TV platform, Kwesé, announced that it has acquired a significant stake in iflix Africa. This is a landmark deal as it means iflix will now be included as part of Kwese’s content distribution offerings across millions of viewers in Africa. iflix is already in 4 of Africa’s most lucrative markets, Nigeria, Kenya, Ghana and South Africa and is looking unstoppable. Content is king but owning the delivery routes is the kingdom. One cannot but admire the tenacity of Strive Masiyiwa and what he is accomplishing with Econet. These guys are gunning for eyeballs both mobile, online and offline.
4. A few weeks ago, the CEO of the Nigerian Stock Exchange was asked about when he expects MTN to list on the exchange. In an uncanny response, he directed the reporters to MTN, challenging the telecoms giant to “man up” and provide details about its planned listing. While MTN is yet to “man up”, reports from Ghana provided perhaps the closest indication of how much MTN intends to raise and when.
According to reports, MTN could raise a total of US$1bn when it lists on both the Nigeria and Ghana stock exchanges later this year. Listing in Nigeria is supposedly set for June 2018. According to Kofi Yamoah, CEO of Ghana Stock Exchange (GSE), “MTN Ghana will officially introduce 35% of its capital into the GSE by the end of Q1 2018.” Though MTN is yet to divulge details of the offer, several media reports have stated that the company could list at least 30% of its stake in MTN Nigeria, at an estimated value of $500 million. Standard Bank Group and Citigroup are reported to be advisers to the offer.
MTN Nigeria (MTNN) is 75.81% owned by MTN International (Mauritius) Limited (MTNI); 18.7% held by Nigerian shareholders through special purpose vehicles; 2.78% owned by Mobile Telephone Networks NIC B.V and 2.71% owned by Shanduka Telecommunication (Mauritius) Limited.
- And by the way, MTNN rival in Nigeria, Bharti Airtel International, (BAIN), a subsidiary of India-based, Bharti Airtel, also reported that it is exploring a potential Initial Public Offering, (IPO), for the business. The Company is looking to list its African operations in an “internationally recognized stock exchange”. Airtel came to Africa in 2010 after it took over Kuwait’s Zain African operations in a $10 billion deal. Airtel Chairman, Sunil Bharti Mittal, reportedly admitted that the company’s rushed entry into Africa in 2010, was one of the biggest regrets of his professional life.
Apparently, Airtel most profitable operations of its African sojourn remains Nigeria. In its latest financial statement, for the quarter ending December 2017, Airtel reported revenues of $738 million, a 5% YOY increase. Nigeria basically led the way.
- Reports from the media confirmed Teleology Holdings as the preferred bidder for the shares of 9Mobile Nigeria. According to our sources, a letter from Barclays Africa (who is midwifing the deal) was sent to Teleology confirming their selection as the preferred bidder. The company will now need to pay a non-refundable $50m within 21 days from the date of the letter or forfeit its position as the preferred bidder.
As we approach the end of the 9Mobile/Etisalat era, attention will shift to Teleology and what they can do to turn around 9mobile. For a start, they will need to inject over $1 billion (N360b) into the company to plug its liquidity hole. Etisalat Dubai already helped when the converted their N1.2tr shareholder loans into equity, reducing its debt profile to about N340b and its negative retained earnings to about N215 billion (as at June 2017) respectively. This is without factoring in overdue payments to suppliers and technical partners.
- The CBN appears to have recognized this challenge and announced that it is going to carry out “financial checks” on Teleology to see they have what it takes to turn 9 Mobile around. For a start, the CBN will do well to verify the source of funding for Teleology’s purchase consideration. If it is debt, then they need not waste time as we will be back to square one pretty soon. If it is equity, then there is some hope that a turnaround may truly occur.
From experience, takeovers typically turn out unsuccessful when the purchase consideration was funded purely via debt. Most investors ironically choose this route believing that the debt raised is purely a bridge which they hope to repay as soon as equity is raised. However that is not the case. In fact, what happens is that they believe they can cut cost and run the company more efficiently, and then use the cash savings to finance working capital and debt repayments. This method won’t work for 9Mobile.
- Still on takeovers, this time a debt-induced one AMCON through a court judgement took over Osigwe Foods And Agro-Industrial Company an FMCG distribution company located in Iju Road, Ikeja. The company was in 2010 included among the top 100 debtors to AMCON with over N5 billion in unpaid debt. The debt was owed to the trio of Unity, Union and Ecobank. Osigwe foods is owned by Chief Anselm Kayode Mohammed. We also understand that AMCON took-over his personal property in GRA Ikeja. AMCON is probably the largest conglomerate in corporate Nigeria.
- The Ondo State Government and Greenfield Assets Limited are set to inaugurate an egg powder plant in Emure- Ile, Owo, Ondo State. The plant is expected to have a processing capacity of 500,000 eggs per day, including 10 million broilers per annum farm with 4,000 birds per hour meat processing plant; a 600,000 layers farm for the production 100 million eggs per annum; and two 20 tons per hour Feed-mill.
According to media reports, The Chief Executive Officer of Greenfield Asset LTD, Dr. Paul Obanua, put the estimated value of the Nigerian poultry industry at “N300 billion ($850 million), which he said comprised of approximately 220 million birds that produced over 770,000 MT of eggs and 340,000 MT of poultry meat in 2017. Before now, Answer Industries Limited was the only Egg Powder processing company we had in Nigeria (from our findings).
Apparently, Egg powder is used in the production of oil-based emulsions. Oil-based emulsions are used in the production of medicine. The emulsions are also used in the production of food products such as chocolate, mayonnaise, and ice cream. Currently, Pharmaceutical firms, in particular, have had to import egg powder to augment for the production drugs. The foreign exchange crisis in 2016 has spiked their cost of production leading to losses and shutdown of operations. Answer Industries Ltd overwhelmed by the volume of orders it had received being unable to meet all orders.
10. Sotibe Nigeria Limited last week introduced, Dolait Yoghurt, a Yoghurt brand popular in francophone countries like Cameroun, Benin Republic. This follows last two weeks launch of Pinkberry Yoghurt by Eat N Go the operators of Dominos in Nigeria. Nigeria’s Yoghurt market is said to be dominated by the likes of Chi (Hollandia), FAN Milk (FAN Yogo) and Viju (Viju Yoghurt).
Other competitors, according to Vanguard are A. Gama & Company, makers of Gama yoghurt,Niger State, Acity Foods and Packaging, producers of A-S yoghurt, Enugu State, Alemi Foods Enterprises, producers of Alemi Yoghurt, Al-Halal Yoghurt Company, in Kano. An Euromonitor report places Chi with about 43% of the market as at 2017. We have also seen newer entrants such as Sweet Kiwi focus on the middle and upper-middle-class Nigerian market. Yoghurt is high up as one of the most popular drinks/beverage in Nigeria. You need to see the queue at Pinkberry on Sundays.
- Looks like scavenger’s aka Alumi, have found themselves a new major competitor. Hinckley Recycling, the first government-approved e-waste recycling facility located in Ojota Lagos, says it has commenced recycling operations for the safe and responsible processing of all electronic waste streams. Electronic Waste or E-Waste refers to dumped computers, disks, mobile phones and accessories, printers etc. According to the company, the global market for electrical and electronic equipment has continued to grow exponentially and expected to produce over 50 million tonnes of waste globally in 2018.” I read one report that estimates the value of e-waste at over $3.5b by 2020.
The company in a way explained why they want the scavengers out of this business. According to the company, “The informal sector consists of scavengers and scrap dealers buying electronic waste from households and companies’ premises. They recover value from the e-waste using crude methods, which result in harm to themselves and the environment. Hazardous fractions common in e-waste include mercury, lead and cadmium all of which can be fatal to human health.
These hazardous fractions need to be extracted and related responsibly by a formal recycler such as Hinckley Recycling. Such hazardous waste can be found spread across Nigeria in back gardens, dumpsites, markets and companies’ premises.” This has Ambode written all over it. I wonder what will remain of the scavengers or Alumi as they are popularly referred to.
- Anita Erinne, remember that name? If you don’t well, let me introduce you to the “hatchet woman” of the FIRS. She is the Head of the Enforcement unit of the FIRS. She has sealed off several high profiles officers accused of tax evasion, including MRS Oil. Last week, Okomu Oil premises in Okomu Village near Benin in Ovia South West LGA was sealed off by her team for an alleged tax evasion.
Okomu oil has threatened to sue the FIRS for N5 billion over the “illegal sealing” of its premises. It claimed that FIRS had issued a “verbal apology for its actions” but it is demanding a written apology from Anita Erinne who refused to answer their phone calls. Please note that name, she might be knocking on your door very soon. Is this the most draconian FIRS we have seen in recent times? I hear it takes month’s to even get tax clearance certificate these days as the requirements are now more stringent.
13.The contract termination debacle between INTELS Nigeria Ltd and the Nigerian Ports Authority (NPA) appears to have been resolved following confirmation by the MD of NPA, Hadiza Bala Usman, to the members of the House of Rep Ad Hoc Committee who are probing into the matter. She revealed that INTELS had written to “apologise for not complying with TSA and the new sharing formula”.
She said as a result, INTELS has “paid the sum $28.1million into the Agency’s TSA account with a notice of additional $14.5million said to have been paid, but yet to be confirmed by the NPA.” Apparently, NPA has two layers of relationship with INTELS namely management agency where it collects revenues on behalf of NPA and keeps 28 percent and port infrastructure development on the basis of which INTELS constructed and manages the Onne Port in Rivers State. It’s incredible the amount of money lost to government inefficiencies in this country.
- Zinox last week provided further insight into why it acquired Konga. The company revealed Konga was a target mainly because of its superior logistics operations of its subsidiary, KOS Express and its mobile payment platform Konga Pay. Konga Pay has about 100k subscribers. Zinox hopes to leverage on its standing as one of the most integrated tech company in Africa to turn Konga into a behemoth that would not only conquer Nigeria but spread into other African countries. They still did not confirm how much they paid for Konga.
15. UBA revealed last week that it now has issued over 3 million Near Field Communication technology-enabled contactless cards to its customers. It did not however reveal how many of them are active users. UBA was one of the first to introduce contactless cards in 2015. The bank also claimed it has over 10 million debit and prepaid cards issued to its customers. A Nairametrics research on value of E-business for Nigerian banks showed UBA was top with about N30.4 billion in income out of the N132 billion generated by the industry. Of the Tier 1 Nigerian banks, UBA has the most branches outside of Nigeria making it one of the most reliable banks for trans African trade.
- The Banking sector was rattled last week after the CBN issued a circular on dividend payment for Nigerian Banks. The CBN had said, banks that did not meet the criteria for its Composite Risk Ratings (CRR) & Capital Adequacy Ratios will not be eligible to pay dividends. It also said banks that met its did not meet its CRR requirements but met CAR and NPL requirement cannot pay more than 75% of their profits as dividends.
The hullaballoo about the circular was due to fear that the likes of FBNH might be caught up in the restrictions. However, that’s actually not the case as all Tier 1 banks and most of the Tier 2 banks actually make the cut to pay dividends. In fact, most banks hardly pay over 50% of their profits as dividends so 75% was always a long shot.
- Sagamu Independent Power Plant Limited (SIPP), a Privately-owned Nigerian company, has signed an Engineering, Procurement and Construction (EPC) contract with China Energy Engineering Corporation Limited (Energy China) for the construction of 400 megawatts Sagamu IPP to be located in Sagamu Local Government Area of Ogun State. The project is expected to cost about $550 million.
The project is said to be a turnkey project. On funding, it appears SIPP was smart enough to tap funding from Energy China along with other International Chinese Banks. The project is expected to be delivered in two phases with the first a 250mw using open circle gas-fired turbines (OCGT).
Now here is the thing, they plan to send all of it to the National Grid. While do that when Lagos State Light Up Lagos is around the corner and Ogun State, their host state is also looking to get itself off the national grid. With the way the power sector is currently structured, I don’t know why anyone will generate power to send to the gird when you have off-takers willing to buy it off you.