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Focus on the opportunities and competition this logistics firm faces this season

For many years, Red Star Express Plc has been facilitating the overall business/commercial activities in the country and other countries.

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Red Star, Red Star drives company’s expansion with Azman Air Services partnership
It is a well known fact that since time immemorial, logistics has been an integral aspect of all business and commercial activities. It entails the movement of raw materials, goods/services and important documents from one location to another; especially where they are most needed for final usage or industrial processing. In Nigeria for instance, there are numerous companies whose main preoccupation is all all logistics. An example is Red Star Express Plc which, for many years, has been facilitating the overall business/commercial activities in the country. This firm is our company focus the week.
The Nairametrics’ company focus is a weekly column dedicated to the profiling of some of the smaller securities that are listed on the Nigerian Stock Exchange, NSE. The column is important, in that it enables current and prospective investors to keep abreast with their portfolios and the opportunities that abound in the capital market.
In view of the yuletide season which is fast approaching, this article is examining the opportunities that Red Star Express Plc could take advantage of, as well as the competition it would have to grapple with in the process. But before we delve right into that, let us first learn more about the company’s history, its business model, challenges, opportunities, expansion efforts, as well as its recent struggles to maintain profitability.

Corporate overview of the company 

Headquartered in Nigeria’s commercial hub, Lagos, Red Star Express was incorporated in 1992, initially as a limited liability company. Its main business operation entailed (and still does entail) the provision of integrated logistics and freighting services.
The company’s operation covers both local and international markets where it delivers parcels that are often classified as “private” and “dangerous”. The transportation of these parcels is often done by air, sea, and road.
Over the years, Red Star Express Plc has diversified its operations by including other forms of logistics solutions to its list of services. These include E-commerce solutions, warehousing, mailroom and document management, as well as general haulage, etc.
Information available on the company’s website says that it has a workforce of about 1,700 all of whom work in some 166 offices across Nigeria. The company also has a fleet size of 700 vehicles and operates in about 220 countries asides Nigeria.
On November 14th, 2007, Red Star Express Plc listed its shares on the main board of the Nigerian Stock Exchange. Today, it has a market capitalization of N2.5 billion and a share price of N4.40.

About the company’s ownership structure 

Red Star Express Plc’s substantial shareholding structure as at 2018 is such that only three entities – Stanbic Nominees Limited, Koguna Mohammed Hassan, and Koguna Babura Insurance Brokers Limited –own majority shareholdings.
Stanbic Nominees Limited owns a total shareholding of 151, 257, 636 units which represent 25.7% of all the shareholdings in the company. This is followed by Koguna Mohammed Hassan which holds some 109,419,912 units at 18.6%. Lastly, Koguna Babura Insurance Brokers Limited owns 84,966,028 units which represent 14.4%.

The company’s substantial shareholders

A look at the company’s subsidiaries

Red Star Express Plc’s business model is structured into the following: courier services, freight services, logistics, and support services.

To this end, it has four subsidiaries namely: Red Star Freight Limited, Red Star Logistics Limited, Red Star Support Services, and Red Star Express.

Who is the company’s target market?

According to information made available to the public, Red Star Express’ logistics and freighting services are targeted at different market segments, including companies and individual customers. It facilitates the delivery of parcels and documents to private companies.
Red Star Express also offers packaging and clearing/removal, as well as warehousing services to all companies. In the same vein, it handles the transportation of dangerous/sensitive materials on behalf of companies.
The company also serves the pharmaceutical industry by delivering important medical materials. It offers human capital and asset capital services for companies in the banking, and oil & gas sector. But asides industries, Red Star Express Plc’s courier services also target regular Nigerians. This is because it does door-to-door delivery services. In the same vein, it offers home and office relocation assistance.

The competition

Much like is the case with any business in Nigeria today, Red Star Express Plc is faced with its own share of competitors whom it must do everything possible to outperform.
These competitors are basically logistics firms such as GIG Logistics, the logistics arm of ABC Transport Plc, Total Logistics Executive Ryd Limited, Metro Ferry, Mediterranean Shipping Company Nigeria Limited, Ekili Haulage, Global Apex Logistics Limited, Integrated Warehousing Services Limited, etc.

A look at the company’s board of directors

The company’s board of directors is comprised of nine members. They are:
  • 1. Suleiman Barau, the Chairman
  • 2. Mr Peter Olusola Obabori, Group Managing Director
  • 3. Mr Enobong Victor Ukwat, Executive Director
  • 4. Mr Badamosi Auwalu Babura, Executive Director
  • 5. Mr Isaac Orolugbagbe, Non-Executive Director,
  • 6. Mr Sule Umar Bichi, Non-Executive Director
  • 7. Mr Aminu Dangana, Non-Executive Director
  • 8. Mr Suleiman Lawan Koguna, Non-Executive Director
  • 9. Mrs Chioma Sideso, Non-Executive Director

 

A look at the company’s financial performance

Red Star Express Plc‘s recent financial statements aren’t exactly impressive. For instance, while revenue for the full-year 2018 ended March 31st, 2018 increased to N8.4 billion from N7.2 billion, profit after tax decreased from N426 million in 2017 to N347 million in 2018.
In its latest result for the period ended June 2018 (which is technically for its Q1 2019), profit continued to decrease. This is because even though revenue had increased from N2 billion in Q1 2018 to N2.3 billion in Q1 2019, profit after tax did decline to N111 million from N120 million.

So, can the company take advantage of the season?

It is apparent that Red Star Express Plc’s financials can do with some upgrade. To be fair, the company is already doing everything possible to effectuate the much needed change. Shareholders last year approved a proposal to raise capital.
Moreover, the company is steadily expanding into more West African markets, including the commencement of operation in the neighboring Benin Republic, and Burkina Faso.
Those aside, the possibility of Red Star Express being impacted positively by the special commercial activities of the festive season also abounds. But then again, the company will also have to grapple with the competition posed by other players in the market.
In conclusion, it is expected that all the efforts that have been made by the company will soon yield results and help position it for success, even as shareholders stand greater chances of receiving meaningful dividends.

Emmanuel is a professional writer and business journalist, with interests covering Banking & Finance, Mergers and Acquisitions, Corporate Profiles, Brand Communication, Fintech, and MSMEs. He initially joined Nairametrics as an all-round Business Analyst, but later began focusing on and covering the financial services sector. He has also held various leadership roles, including Senior Editor, QAQC Lead, and Deputy Managing Editor. Emmanuel holds an M.Sc in International Relations from the University of Ibadan, graduating with Distinction. He also graduated with a Second Class Honours (Upper Division) from the Department of Philosophy & Logic, University of Ibadan. If you have a scoop for him, you may contact him via his email- [email protected] You may also contact him through various social media platforms, preferably LinkedIn and Twitter.

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Why Treasury Bills at 2% is actually a good thing

While the current prevailing rate of 2% might not be good news for investors, the low rates could be better for the Nigerian economy.

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Implications of the new CBN stance on treasury bill sale to individuals, Nigerian Treasury Bills Market Witnessed Bullish Run on High Liquidity Last week

Latest stop rates from the Nigerian Treasury Bill auction held last week revealed some of the lowest rates for the nation’s T-Bills market in recent times. The 91-day bills had stop rates of 1% and the 182-day bills was also 1%. For the full year, the 364-day bills had an equally low rate of 2%. This is actually a good thing, as investors will become more creative, amongst other benefits.

If you were a frequent Treasury bills investor in the pre-COVID-19 era, you will most likely agree that one of the favorite markets for risk-averse investors, has taken a major dip over the past year. In 2019, the rate was as high as 13.029% – enough to give you a fighting chance with the equally high rate of inflation, as opposed to a savings account offering around 4%.

READ: FG liberalizes the Mining sector, grants 5 years tax concession to miners

However, while the current prevailing rate of 2% might not be good news for investors; theoretically, the low rates could be better for the Nigerian economy.

Double digits risk-free rates impede development

At the very basic level, having a risk-free investment that yields a guaranteed interest rate of about 15%, means that investors can put in their funds and fold their hands. Therefore, the option of making less risky investments become less alluring, as the lower rates can easily be mitigated by the relative safety of the principal (and return!) – something many businesses cannot boast of today.

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Put simply, why should business owners risk employing people and possibly make losses, when they can invest in Treasury bills? After all, they too are exposed to the same inflation rate.

Unsurprisingly, this has contributed its own fair share in impeding the growth of the nation. Think about the percentage of the income of Nigerian financial institutions like banks that are from Treasury Bills. Conservatively, Nigerian PFA’s also have a significant percentage of their funds in Treasury bills – doing little and gaining little. It is always about the “cheapest to deliver.”

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No society can effectively spur development with only safe investments, as it comes with its own benefits like creating more jobs, building the stock market, and ultimately strengthening the industries in the country.

‘Model’ economies have really low risk-free interest rates

Some of the largest economies like the US, Japan, and Germany are known to have some of the lowest rates for risk-free assets. Whilst their rates cannot also be isolated from their equally low borrowing costs, the facts are crystal clear.

From a demand and supply standpoint, at 15%, it means that what the government is willing to pay to get capital is high. This makes it even more expensive for the government to fund infrastructural development.

READ: Safest, regulated Cryptocurrency, Arcoin backed by U.S. Treasury securities

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From a private sector standpoint, it is by taking risks that angel investors emerge, companies get seed funding, and further development is enhanced. Without this development, very few jobs will be created. Interestingly, most of the countries with the highest amount of venture capitalist investments have some of the lowest rates for risk-free assets.

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How investments should be done

There is an old investment strategy known as “Carry Trade.” The way it works is simple – you borrow at a low-interest rate, convert the borrowed amount into another currency, and invest in assets that provide higher rates of return in that currency. If Treasury Bills offer such high rates, “foreign investments” of this nature will not aid in the overall development of the economy. As long as the exchange rate is stable, investors get to make a killing with no value-added. This is just one of the many lapses of investing in high risk-free assets.

READ: Crypto: Popular Hedge Fund, Grayscale record best quarter ever

With the rates low, people can now invest the way investment should be done. Investors will now be forced to be creative. Consequently, this will birth even further infrastructural developments. For example, with this rate sustained, mortgage-backed securities and other forms of infrastructural funding can now take place.

Though, it is not without its own limitations, keeping the free money low is always a better option.

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#ENDSARS Protests: Why this is different

The #ENDSARS is not just a protest about rogue police officers, it is larger than that and this is why.

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In June 2019, the Hong Kong Government revealed plans to implement a controversial law that allows the extradition of Hong Kong citizens to mainland China.  

As the government dithered, pockets of protests broke out, which triggered clashes with Policemen that most protesters viewed as excessive. Within days, protesters went from a few thousands to over 2 million, the largest in the history of Hong Kong.  

By the time the government decided to pull back the bill; the protesters, many of them young, were already demanding for more than just a withdrawal of the bill. They wanted the police investigated and prosecuted for using excessive force, amnesty for protesters, and a right to vote for all.  

The protests lasted for about 6 months only to be dissipated by social distancing requirements, due to the COVID-19 pandemic. Before then, protesters had grounded the economy, which drove the Hong Kong economy into a recession and $3 billion in stimulus.  

Nigeria is experiencing its own version of protests similar to that of Hong Kong, except that it does not have any money to inject as stimulus. The latest protests were triggered by anger over the alleged violent killings and extortion by the controversial anti-robbery unit of the police, known as SARS or FSARS.  

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For years, young Nigerians, mostly via social media, have called for the unit to be disbanded and rogue elements in the force brought to justice. Despite repeated promises by the government, they have failed to heed to their demands, triggering a new wave of protests that has now spread across the country. 

From demanding an end to SARS, prosecution of rogue police officers, and reforms; Protesters are more emboldened, threatening to continue if all their demands are not met. The government is scrambling to contain a situation that is escalating and could dangerously metamorphose into violent clashes with authorities, leading to loss of lives and destruction of properties 

There is also fear that this week’s protest could be sustained for more days, if not weeksYou only need to look at the economy of the Nigerian Youth to understand why this is such a critical moment. 

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According to data from the National Bureau of Statistics, Youth unemployment is at an all-time high of 34.9%, making up 64.3% of total unemployed Nigerians. University students have also been at home for months, due to the 7 months ASUU strike.  

Their parents are also facing tougher economic conditions with inflation rate galloping past 13%, after multiple devaluations and the removal of fuel subsidy. It was just a matter of time for them to find a rallying point to vent their frustration. 

There is still a window for the government to deescalate tensions, and it is not just by accepting the terms of protesters on paper and making bogus pronouncements. Nigerian youths want concrete actions and it starts by making immediate changes in the leadership of the Police – the rogue unit in particular. Officers suspected of murdering innocent Nigerians need to be made to face justice.  

The government also needs to urgently resolve its dispute with the Academic Staff Union of Universities (ASUU) on the Integrated Payroll and Personnel Information System (IPPIS). Students and young Nigerians also need to be offered grants and palliatives to help them cushion the effects of an economic crunch that is in no way their making.  

Proceeds from the Nigerian Youth Investment Funds should be disbursed immediately to those who have applied. The government also needs to introduce student loan schemes for millions of Nigerian youths, who can’t afford to pay for quality university education.  

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The National Assembly also needs to introduce laws that protect young Nigerians from police brutality, status profiling and wrongful arrest. Investments in mega tech hubs across the country, establishment of recreation zones in major cities must be carried out by State Governments, to keep them engaged in activities that can better their lives.  

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No investor, local or foreign will put money in any country where its youths are in long-drawn protest with the governmentAs the economic cost of the protests for the last few days continues to mountthe negative effects could be more dire than a deeper recession. 

#ENDSARS does not just represent a protest against rogue Police officers; it is a symptom of the poor state of the economy, which for months has only gotten worse. Fortunately, the agitation can still be managed but time is running out.  

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Thrive Agric: “Where is my money?”

AgriTech firms make promises of mouth-watering returns, but what they do not reveal loud enough is just how risky the investment is.

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Fund a farmer, make a profit! Thus, says Thrive Agric, a popular AgriTech company that crowdsources funds from investors in exchange for a profit. The business model appears simple and easy for any basic investor to understand.

When you invest through them, they pool your funds along with other investors and then invest the collective sums in farms across the country. When the farmers harvest, they sell the farm produce at a profit, receive the cash, and split among investors who contributed to the pool. The company keeps a commission for itself. It all makes business sense, except for one thorny challenge – It is highly risky.

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Last week, a Twitter user posted a tweet demanding a refund of his investment in Thrive Agric – almost a million naira. The company lamented that they could not pay him, because they had experienced losses due to the COVID-19 pandemic. The investor was taking none of the excuses, resulting in a name and shame on twitter that has since gone viral.

READ: Nigeria’s Broadband subscriptions peak at 82.7m – Prof. Danbatta

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AgriTech Investments as they have come to be known has gained popularity as a viable investment option for Nigerians, who are still afraid of investing in the stock market. The largely unregulated sector leverages technology, an easy and relatable business model, and the promise of a mouth-watering return to yield-hungry investors. What they however do not reveal loud enough is just how risky the investment is.

Farming in a country like Nigeria is a highly risky venture that relies on a value chain that is fragmented, full of middlemen, and largely inefficient. Nigeria’s average yield per hectare is one of the lowest in the world, largely due to lack of farming inputs such as fertilizer, irrigation, and insecurity.

READ: We wanted to help users pay themselves first – Piggyvest

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AgriTech firms like Thrive Agric face these risks when they pool money from investors and pass on to farmers. Though part of their role in the investment scheme includes monitoring how the funds are utilized by farmers, they have no control over several risk factors such as the impact of COVID-19, which they alluded to as the challenges for not being able to pay investors.

Perhaps, if they disclose the inherent risks in the business, investors will be better informed and size up their risk against the returns. A cursory look at the company’s website reveals there is nowhere that it is mentioned that there is a risk of not getting all or part of your money when you invest. It probably would ruin the pitch if they did.

READ: Livestock Feeds: How this company survived over half a century producing animal feed

This is why when you visit their website and that of their competitors like Farmcrowdy (who pioneered this business) what you see are testimonials of just how well the investments are doing. You could argue that they had not defaulted in any of their previous rounds, so there was no need to say otherwise.

However, alerting investors about the inherent risks in a crowdsource investment scheme is not only responsible but a matter of best practice and compliance. The Security and Exchange Commission (SEC), noted this in its draft Exposure on Proposed News Rules guiding crowdfunding. Section 9a (iv) states that the crowdfunding company is expected to share a general risk warning on participating in funding through the company’s platform.

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READ: Where to invest your N5m to N500m safely and securely

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It also requires in Section 14 that they must publish on their website that “Investing through an online portal is risky and Issuers raising funds through the portal include new or rapidly growing ventures,” and that “Investment in the businesses hosted on the portal is very speculative and carries high risks; Investors may lose their entire investment and must be in a position to bear this risk without undue hardship.” This proposed compliance requirement is not been done by most AgriTech firms.

If this had been published on its website and duly communicated to its potential investors, we may have avoided the embarrassing and reputation damaging question that any fund manager wants to avoid – “Where is my money?”, especially if they don’t have it.

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